May 5, 2014: The U.S. recently announced a $5 million reward for information leading to the arrest of Chinese businessman Li Fangwei. What makes this man so valuable to American prosecutors is the fact that Li controls a network of companies that form the single largest organization Iran uses to illegally import weapons (especially missile) components and export oil and other contraband. Since 2006 Li Fangwei has conducted 165 known smuggling operations for Iran, worth $8.5 million. The items obtained were crucial for the functioning of Iran’s ballistic missile program. It took years of discovering and investigating smuggling efforts, connecting them to various Chinese companies and then realizing that many of these operations were organized by Li Fangwei. China refuses to arrest Li Fangwei because according to Chinese law Li Fangwei has committed no crime and Iran is considered a major trading partner and supplier of desperately needed oil. Li Fangwei has been careful not to travel anywhere the United States might be able to arrest him. In fact, Li Fangwei spends most of his time in eastern China, looking after the many businesses he owns. The smuggling is a very small part of his business activity, most of which appears to be legitimate.

Because of decades of economic sanctions Iran has come to depend on China to help smuggle forbidden items into Iran. China opposes the sanctions but goes through the motions of observing them. Despite official sanction support China has always been the ultimate source of many forbidden military and nuclear research items for Iran. This includes Western gear, especially stuff from the United States that the rapidly growing Chinese economy has legitimate buyers for. These American items are usually obtained by Chinese trading companies, who serve as a one-stop-shopping source for many countries. The trading companies break American laws when they ship some types of restricted (by American regulations) gear to embargoed nations. This is done using forged documents and bribes that mask these operations, often for years or indefinitely. These Chinese exporters have little fear of punishment at home because the Chinese government refuses to discipline its wayward firms. But these trading/smuggling companies can be hurt in other ways. That’s because U.S. regulators can reach just about every other country (even China) using the enormous U.S. presence in the international banking system. But the Chinese traders consider occasional fines and business interruption a cost-of-doing-business and pass these extra costs onto customers like Iran. Thus as the sanctions on Iran grow more formidable, prices Iran must pay go up and the Chinese profits increase even more.

This kind of smuggling employs techniques that Iran has used successfully for a long time. Many Western suppliers would simply charge a much higher price to cover the risk of being found out and prosecuted. There are, as the Iranians know well, a lot of Western suppliers who are willing to take the risk. But as the risk of getting caught, and the penalties, increased more and more many Westerners abandoned this lucrative business to the Chinese.

The war on Iranian arms smuggling has been intensifying since September 11, 2001. Most countries cooperate, but not all. Because of the years of pressure on smugglers in other nations China has become the largest remaining source of smuggled missile and nuclear technology as well as conventional weapons for Iran. Ever since the U.S. embargo was imposed in 1979 (after Iran broke diplomatic protocol by seizing the American embassy), Iran has sought, with some success, to offer big money to smugglers who can beat the embargo and get needed industrial and military equipment. This is a risky business, and American and European prisons are full of Iranians, and other nationals, who tried, and often failed, to procure forbidden goods. The smuggling operations are currently under more scrutiny, and attack, because of Iran's growing nuclear weapons program. But the Iranians simply offer more money and more smugglers step up to keep the goodies coming.