(Bloomberg) -- An Iranian oil tycoon who’s managed to quietly embed himself in the heart of the Western financial system is among a cadre of businessmen handling weapons deliveries across the Caspian Sea to Russia, helping Moscow in its war in Ukraine.
Hossein Shamkhani, through a web of firms he oversees that include Dubai-based Crios Shipping LLC, began moving missiles, drone components and dual-use goods across the Caspian Sea on at least two ships last year, according to more than a dozen US, UK and European officials as well as people with direct knowledge of his dealings. They spoke on the condition of anonymity due to the sensitive nature of the information.
Moscow pays for the shipments with cargoes of petroleum, the people said, the kind of barter trade that has become increasingly common because of US and European sanctions on both Russia and Iran.
The transactions, which coincided with Russia using more Iranian weaponry in its assault on Ukraine, represent another side of a sprawling global business network that has enriched Shamkhani, whose father was Iran’s longest-tenured defense minister and remains a top adviser to Supreme Leader Ayatollah Ali Khamenei.
Read: Secretive Trader ‘Hector’ Seen as Global Kingpin for Iranian Oil
Shamkhani’s web of firms handle more than a quarter of the total volume of Iranian arms deliveries to Russia, according to people tracking the transactions. His empire also spans a hedge fund, which has operated from offices in London, Geneva and Singapore, as well as a Dubai-based commodities trading firm that’s dealt with Western oil majors.
Iran and Russia have acknowledged their strengthened defense cooperation, without disclosing all the details. While the bilateral weapons trade exposes participants to potential sanctions from Western governments, it’s not illegal.
“My understanding is the Shamkhani network ties into the drone contracts for use in Ukraine,” former US National Security Advisor John Bolton, who currently runs the Washington-based foreign policy research group Foundation for American Security and Freedom, said in an interview.
Representatives for the governments of Iran and Russia as well as Crios didn’t reply to requests for comment. A lawyer representing Shamkhani, who has consistently contested Bloomberg’s reporting on his business affairs, declined to comment on the specifics of this story in an e-mailed response to questions.
A State Department spokesperson said the US has been warning of the deepening security partnership between Russia and Iran since the outset of Moscow’s full-scale invasion of Ukraine.
“This partnership threatens European security and illustrates how Iran’s destabilizing influence reaches beyond the Middle East and around the world,” the spokesperson said.
Caspian Voyages
Since mid-2023, several Crios vessels that previously plowed Mediterranean and Black Sea routes suddenly shifted into the Caspian and they’ve shuttled back-and-forth between Iran and Russia ever since, according to ship tracking data compiled by Bloomberg.
The ships include Sea Castle (also known as Tooka) and Sea Anchor (also known as Roja), though they’re not the only ones, the people said.
This year, both vessels made at least five voyages from Iranian ports to Russia’s Astrakhan, data compiled by Bloomberg show.
By the standards of international shipping, Sea Anchor and Sea Castle are tiny but sufficient for transporting arms on short journeys across the Caspian. They have 3,000 and 4,000 tons of transportation capacity, roughly 1/100th of what might be hauled by giant container ships moving goods across the world’s oceans.
The 108-meter (354 feet) Sea Anchor was built in 1984 in Romania, one year after Sea Castle, which is a meter shorter, was constructed in the former Soviet Union.
A database maintained by S&P Global doesn’t list the country where either vessel is registered. Records compiled by the maritime intelligence firm Pole Star Global show they’ve both used flags from Palau, a Pacific island that, as a ship registry, is on an international blacklist.
The weapons-for-oil trade is the latest detail in a year-long Bloomberg News investigation into Shamkhani’s business activities, involving interviews with more than four dozen people familiar with his operations as well as a review of confidential documents and corporate records.
Preferred Passageway
It’s unclear how much weaponry has been delivered by ships controlled by the Shamkhani network or their precise deployment. The arms haven’t been declared in cargo manifests to avoid paper trails, the people said.
Shamkhani’s financial empire controls a fleet with dozens of vessels, including oil tankers and cargo ships, according to people with direct knowledge of the matter.
Crios, the firm central to the Caspian shipments, was founded in Dubai in October 2020, a federal registry of entities operating in the United Arab Emirates shows. On its website, the company calls itself an international ship management firm but didn’t disclose any details about its ownership or leadership.
It’s among a batch of shipping entities overseen by Shamkhani, including Oceanlink Maritime DMCC and Koban Shipping LLC, the people said. Some of the shippers sit next to employees of his hedge fund and oil trading firms. Most staff simply refer to Shamkhani as “H” or “Hector,” the people said.
Crios has a “tight relationship” with Oceanlink and Koban, which operate on behalf of Iran’s Ministry of Defense Armed Forces Logistics, according to David Tannenbaum, a former official at US Treasury’s Office of Foreign Assets Control who’s an expert in tracking Caspian shipments and analyzing vessel ownership in the so-called dark fleet.
In April, the US sanctioned Oceanlink and identified 13 vessels managed by the firm as blocked property, without stating a link to Shamkhani.
Representatives for Oceanlink and Koban didn’t respond to requests for comment.
Most of the recent actions targeting his network have focused on oil shipments. Efforts to clamp down on the cross-Caspian deals face added challenges.
“Sanctions enforcement against these barter networks is a lot harder, particularly when you consider Russia’s historic dominance in the region,” said Behnam Ben Taleblu, an expert on Iranian security at the Foundation for Defense of Democracies. “The short-term goal should be exposing these networks to the limelight.”
--With assistance from Julian Lee and Alfred Cang.
©2024 Bloomberg L.P.