According to an investigation by the Turkish Customs Directorate, released on May 12, 2006, Step, S.A., an Istanbul trading firm, served as the hub of a smuggling network that procured internationally controlled dual-use equipment for Iran’s nuclear and missile programs. The equipment, said to have included massive heat-resistant aluminum containers for nuclear materials and components for missile guidance systems, was manufactured in Western Europe, in some cases by subsidiaries of U.S. companies. Step, S.A., which was established and operated by Iranian nationals, was said by the report to have obtained the controlled goods by falsifying export license end-user certificates to state that the commodities were to be used in Turkey; it then illicitly exported them from Turkey to Iran, again falsifying export control documents. [1]

On November 12, 2005, one of the firm’s smuggling efforts was the target of a joint operation by the U.S. Central Intelligence Agency and Turkish National Intelligence Organization, which seized three containers made from heat-resistant aluminum, each weighing more than 30 tons, at the Gurbulak border crossing, on Turkey’s border with Iran. The containers had been fabricated by the Italian firm Fond S.P.A. and were sent from Milan in two trucks operated by the Turkish transportation company Coban Tur. At the border, customs documents stated that the items were destined for Shadi Oil Industries in Iran, thought to be a front for the Iranian nuclear program. [2]

The Turkish Atomic Energy Agency sub-sequently classified the containers as dual-use items used in uranium enrichment. Although it is difficult to be certain in the absence of additional information, it appears that they may have been part of a system to manage the introduction of unenriched uranium in gaseous form into a gas centrifuge enrichment plant or to hold enriched uranium gas as it was produced at the facility. Uranium enrichment can be employed to improve natural uranium to make it suitable for use as fuel in modern nuclear power plants, but can also be used to upgrade the uranium further to make it suitable for nuclear weapons. Iran is developing a uranium enrichment capability, which it asserts is intended to produce nuclear power plant fuel. However, Iran has created suspicions about its intentions because it kept this program hidden from the International Atomic Energy Agency (IAEA) for 18 years, in violation of Iran’s obligations under the nuclear Nonproliferation Treaty to permit the agency to monitor all nuclear activities within its borders. On September 24, 2005, the IAEA determined that Iran was in non-compliance with its IAEA inspection obligations and, on February 4, 2006, the agency referred the matter to the UN Security Council.

Based on findings in the May 12, 2006, investigation by Turkish customs officials, it appears that at the time of the November 12 seizure, U.S. and Turkish officials did not understand the full extent of Step’s activities, and on November 29, Step was able to import into Turkey, through the Ambarli border crossing, at least one additional aluminum container of the type seized in Gurbulak. This vessel was manufactured in Hungary by a subsidiary of the U.S. firm ALCOA, the May 12 report states, and was fabricated in four sections. Sometime between December 2005 and February 2006, Step successfully exported one of the four sections to Iran, via the Derince Customs Port in Izmit. [3]

On February 10, however, the Turkish daily Milliyet broke the story of the November 12, 2005, seizure. The disclosure led the Turkish Foreign Ministry to open an investigation of Step, and, as a new target of Turkish authorities, the company chose not to complete the export of the ALCOA aluminum container. [4]
In the course of the investigation, papers seized from Step disclosed a pattern of procurement and re-export of metal and electronic parts using falsified end-user certificates that listed Turkey as the ultimate destination of the commodities. Among other items obtained for Iran were precision ball-bearing units, known as “Bearing SP3181,” acquired from the Italian firm, Frusca, S R L, which, in turn, had ordered the parts from France’s ADR Company, another manufacturer of advanced bearing systems. According to the Customs Directorate report, the parts are used in missile guidance units, which calculate the missile’s flight path. After the components were received by Step in Turkey, it re-exported them to Iran, to the ANA Trading Company.  The investigation noted that the export had not been authorized by the Turkish Ministry of Defense, the relevant Turkish licensing authority. [5]

The investigation also revealed that Step had set up a firm known as the Multimat Trading Company, which purchased parts from the U.S.-based All Nations Biz, Inc., as well as from the Dutch subsidiary of the U.S. Fluke Corporation, and sent them on to Iran. [6]

As a member of the Nuclear Suppliers Group (NSG), and the Missile Technology Control Regime (MTCR), as well as NATO, Turkey is subject to more lenient export licensing rules than Iran. Exports of nuclear dual-use items to Turkey from the other 44 members of the NSG, for example, do not require export licenses, and, while all dual-use missile-related exports from the other 33 MTCR member states do require licenses, they are far more likely to be granted in the case of Turkey than Iran, for which licenses are subject to especially strict scrutiny (and, in the case of the United States, are banned altogether).

While all the details have yet to be published, it appears that Step exploited this more lenient treatment of Turkey to facilitate the importation of the dual-use items described above into that country. Among other questions raised by the investigation is why European exporters (including subsidiaries of U.S. firms) did not scrutinize more carefully the credentials of the purported Turkish end-user for these transactions.

Once the goods were received in Turkey, Step apparently anticipated that it could defeat Turkey’s export controls to move these goods to Iran, and it experienced considerable success in doing so, according to the report of the Customs Directorate. This apparent weakness in Turkish licensing and customs capabilities highlights a further challenge confronting the international network of nonproliferation export controls.

In recent years, Pakistan has also exploited the lenient treatment of exports among NSG and MTCR members to procure items illegally for its nuclear and missile programs. The network established by Asher Karni and Humayan Khan relied on the lenient treatment of exports to South Africa, a member of both groups, in much the same way that Step exploited Turkey’s membership in these organizations. The Karni/Khan network also enjoyed considerable success defeating South African export controls in re-exporting dual-use commodities to Pakistan (often using an intermediate stop in Dubai). [7]

The November 12, 2005, seizure in Gurbulak and the subsequent investigation by Turkish authorities took place in the midst of intensified international efforts to curb Iran’s uranium enrichment program, coming less than two months after Iran was found by the IAEA to be in non-compliance with its IAEA inspection obligations. The fact that Iran continued its illicit procurement efforts in support of this program even after the IAEA’s noncompliance finding might be taken as further evidence of its intent to use its enrichment program for other than peaceful purposes. On February 4, when the IAEA Board of Governors voted to refer the Iran dossier to the UN Security Council, this episode was known to the United States, although not yet made public, and may well have been shared with other governments on the board as they reached a decision on referring the matter to the UN.

In early June 2006, Turkish prosecutors in Istanbul indicted the Iranian partners of Step, Milad Jafari, his brother Mani Jafari, and their father Mohammed Javad Jafari. The three were charged with violating the Turkish Anti-Smuggling Law by engaging in organized nuclear smuggling and with violating the Turkish Penal Code by engaging in fraud. [8]

Ibrahim Al-Marashi and Nilsu Goren – Sabanci University, Istanbul