Armenia, Iran, and International Sanctions

The South Caucasus presents experts and policymakers with a geopolitical paradox. A region where Armenia, the world’s first Christian state, is aligned with Shite Islamic Iran, a theocratic state which is building nuclear weapons and the main exporter of terrorism in the Greater Middle East. Meanwhile, Azerbaijan, a nominally Shite country where religious adherence is low, is aligned with the Jewish state of Israel which views Iran as an existential threat to its national security.

Since becoming an independent state in 1991, Armenia’s foreign policy was constrained until last year by its occupation of a fifth of Azerbaijani territory following the First Karabakh War in 1988-1994. With its borders with Azerbaijan and Turkey closed, Armenian foreign policy is heavily orientated towards Russia and Iran.

Although Azerbaijan re-captured its territories in last year’s Second Karabakh War, Armenian foreign policy has yet to adjust. If anything, with negotiations underway for new military bases, Armenia’s reliance on Russia has grown while relations with Iran are growing. Azerbaijan and Turkey will only re-open their two borders after Armenia signs a peace treaty with Azerbaijan which recognises the former Soviet internal boundary between their republics as the international border.

Temptations will continue to assist Iran in evading international sanctions if Armenia continues to be reliant on Russia and Iran. Armenia has largely ignored US warnings to ‘halt connections with Iran’ and a 2019 communique from the US Embassy in Yerevan unequivocally stated, ‘We have made it clear to the Armenian government and the private sector that we expect Armenia to live up to its responsibilities as a member of the international community.’

Armenia’s temptation to assist Iran in evading international sanctions imposed by the US and other Western countries is far greater. Iran shares a 44 km border with Armenia and trade has grown to record high levels in recent years. The Iranian border is Armenia’s ‘only reliable connection to the outside world.’ Armenia’s  overland trade has to cross Georgia with whom ‘the relationship between the two has become one of mutual mistrust and suspicion.’ Pro-Western Georgia fears pro-Russian Armenian nationalistic irridentism towards its Armenian minority.

Armenia receives gas from an Iranian pipeline, which is exempt from US sanctions against Iran, and exports electricity to Iran. Armenia and Iran have discussed re-exporting Iranian gas from, Armenia, a step which would trigger sanctions. A US diplomatic cable warned that ‘a project that enabled Iran to ship natural gas to a third country and from there to world markets would be a vastly different thing, and a huge problem for us.’

Russia and Iran are Armenia’s main suppliers of weapons and military equipment. In the chaotic 1990s, Armenia acted as a lucrative intermediary for Russian ammunition and spare parts to Iran for former Soviet military equipment.

The Azerbaijani Prosecutor’s Office charged three Armenian oligarchs – Samvel Karapetyan (Tashir Group), Davit Galstyan (Royalsys Engineering) and Ara Abrahamyan (Komeks company) with the ‘smuggling of very expensive weapons and military equipment to the Republic of Armenia and from there to the Nagorno-Karabakh region of the Azerbaijani Republic.’ The three had created a ‘criminal group with the aim of committing serious and especially serious crimes, creating illegal armed groups and supplying them with weapons, explosives and other military equipment, as well as illegal purchase, sale, storage, transportation or carrying of firearms, explosives and devices.’

All three oligarchs had been placed on an Interpol watch list for violating the Customs Convention on the International Transport of Goods and the Conventional Arms Control in Europe. They had used passenger flights and Armenian military Il-76 TD transportation aircraft for their operations.

The biggest scandal in US-Armenian relations took place in 2007-2008 when two US laws were broken, and Washington threatened the triggering of sanctions against Armenia. This was ‘part of a wider U.S. effort to block Iran’s access to the global arms and weapons, and technology market.’ US National security adviser John Bolton continued to raise the importance of squeezing Iran during his 2018 visit to Armenia.

The Armenian Ministry of Defence purchased from the Bulgarian company Metalica a total of 1,000 RPG-22s, produced by the Bulgarian Vazovski Mashinostroitelni Zavodi (VMZ), and 260 PKM machine guns, produced by the Bulgarian Arsenal company. The company ZAO Veber acted as an intermediary. The end user certificate was signed by then Defence Minister Serzh Sargsyan who promised they were for Armenia’s use (Bulgaria was unaware of the Iranian destination).

In Thomas De Waal’s book Black Garden published by New York University Press in 2003, Serzh Sargsyan admitted to his and other Armenian participation in the 1994 Khojaly massacre of over 600 Armenian civilians in February 1992. Serzh Sargsyan said, ‘Before Khojoly, the Azerbaijanis were toying with us, they thought that the Armenians were people who could not raise their hand against the civilian population. We were able to break that [stereotype], and that’s what happened.’

No documents were ever found on the Armenian shipment to Iran suggesting it was undertaken confidentially. When confronted with the evidence Armenian leaders and state officials categorically denied they had transferred weapons to Iran. For over four months former Armenian Defence Minister and from 2008, President Serzh Sargsyan denied the transfer had taken place saying, ‘it did not happen and could not have happened.’ A US diplomatic cable explained ‘The direct role of high-level Armenian officials and the link of the weapons to an attack on U.S. forces make this case unique and highly troubling.’

The funds for the arms were sent from an Iranian front company through an Armenian bank to Bulgaria. In the view of the US government, the weapons were found to have been used by the pro-Iranian Islamic Resistance of IraqHezbollah Brigade in terrorist attacks against US forces, killing 1 soldier and wounding 2.  Some parts of the weapons were recovered after the attacks tracing them back to Bulgaria and Armenia.

After the US provided irrefutable evidence, the US demanded Armenia reform its export controls as one of the conditions of not imposing sanctions. Washington hoped the Armenian authorities would implement the reforms and halt Armenia ‘from becoming a source of weapons for Iran or other states or groups involved with terrorism and/or weapons proliferation.’ Despite Armenian promises Washington remained concerned and, a US diplomatic cable warned it could be a ‘Soviet style calculation that they can sign the MOU, but probably won’t really have to implement it.’

In the late 1990s, Iran increasingly sought to procure technology and expertise from former Soviet military factories and research institutes which had been devoted to military production. Armenian engineers and scientists assisted Iran in building new facilities. Armenian oligarch and President Armen Sarkisian’s Lizin biochemical company supplied biochemical equipment to the Iranian front company Al-Ahd Sadeq Trading company in the UAE.  Sarkisian is well connected in the Armenian elites, himself a former prime minister and ambassador to the UK, and the youngest brother of Vazgen Sarkisian, the former prime minister murdered in a 1999 terrorist attack on Armenia’s parliament.

The US State Department blacklisted Armen Sarkisian and Lizin. The biochemicals were dismantled from a Soviet factory in Armenia which had been used to grow special bacteria to produce lysine. The bacteria could potentially generate other biochemical substances. The US government feared Iran could use the substance for its chemical warfare programme. US sanctions accused Sarkisian of involvement in ‘the proliferation of weapons of mass destruction and missiles’ to Iran.

Despite denials of the trade between the Armenian Lizin and Iranian front companies’ military cooperation has continued to grow between Armenia and Iran. In January 2017, Armenian Defence Minister Vigen Sargsyan held talks with Iran’s National Security Council in Tehran to discuss further military and ‘scientific’ cooperation and visited military enterprises. ‘Armenia seeks to expand its cooperation with Iran in the defence sphere and we believe that this visit will promote further cooperation,’ Sargsyan told Iranian Minister of Defence and Armed Forces Logistics Hossein Dehghani.

Armenia has assisted in deception schemes to provide aircraft which mysteriously undertake ‘emergency landings’ in Tehran and are then corporate raided into the country’s civilian airline fleets.  In February of this year a Fly Armenia B737-300 EK-FAA aircraft did an ‘emergency landing’ in Tehran when it was supposed to be flying for ‘maintenance’ repairs to the UAE. The aircraft joined Iran’s Caspian Airlines.

Six years earlier Iraq’s Al-Naser Airlines purchased a fleet of A340 aircraft which were destined to fly for ‘maintenance’ repairs to Kazakhstan. They also undertook an ‘emergency landing’ in Tehran and joined Iran’s Mahan Air.

Mahan Air has been used by the Iranian Revolutionary Guard Corps – Quds Force (IRGC-QF) to fly its units, mercenary fighters, and military equipment to Syria in support of the murderous Assad regime. The IRGC-QF have been designated by the US as a ‘foreign terrorist organization.’ President Donald Trump said, ‘This unprecedented step, led by the Department of State, recognizes the reality that Iran is not only a State Sponsor of Terrorism, but that the IRGC actively participates in, finances, and promotes terrorism as a tool of statecraft.’ Trump added, ‘The IRGC is the Iranian government’s primary means of directing and implementing its global terrorist campaign.’

 The US Treasury Office of Foreign Assets Control imposed sanctions against Mahan Air and an Armenian company providing services to the airline ‘in support of the IRGC-GF’s destabilising regional operations.’ Mahan Air transported IRGC-GQ commander Qassem Soleimani to oversee operations in Syria, who had been sanctioned by the UN and was assassinated by the US in January 2020. The US Treasury department noted, ‘Mahan Air plays an integral role supporting the IRGC-QF and its proxies in Syria by transporting personnel and weapons.’

The Armenian-based Flight Travel LLC was included in these US sanctions for providing Mahan Air with sales, marketing, administrative and financial services. The US Treasury reported, ‘Flight Travel LLC has refused to heed warnings about the risk of sanctions exposure due to commercial support to Mahan Air.’ Meanwhile, ‘The designation of Flight Travel LLC demonstrates the U.S. Government’s commitment to denying foreign support for Mahan Air and other designated Iranian airlines and reinforces multiple warnings to the aviation community of the sanctions risk for individuals and entities maintaining commercial relationships with these airlines.’

Armenia has been criticized by the US for providing banking services to the Iranian government to evade international sanctions. A report by a U.N. panel of experts monitoring compliance with the sanctions ‘concluded Iran was constantly searching for ways to skirt restrictions on its banking sector. One state bordering Iran informed the Panel of requests from Iran to open new financial institutions.’ U.N. diplomats confirmed the unnamed state was Armenia.

The US believed, former Congressman Dan Barton said, ‘Armenia has assured the West that its banking sector is under increased control and Iran will not be able to launder money through Armenian banks. However, according to American officials, Iran has free access to Armenian banks operating in Nagorno-Karabakh. Iran can use these banks to finance its nuclear and missile programs and even finance terrorist groups in the Middle East.’

An investigation by Reuters found that Iran looked to Armenia as a means to evade sanctions against Iranian banks. Armenia was attractive not only because it is a regional ally but also because its ties to the European Union ‘could make it easier for Tehran to obfuscate payments to and from foreign clients and deceive Western intelligence agencies trying to prevent it from expanding its nuclear and missile programs.’

Bank Mellat has been under UN sanctions since 2007 accused of facilitating ‘hundreds of millions of dollars of transactions of Iranian nuclear, missile and defence entities.’  The Armenian branch of the Iranian Bank Mellat ‘is active in Armenia, providing trade and commerce-related services primarily to Iranian customers.’ Bank Sepah and ACBA Credit Agricole Bank, also with branches in Armenia, were additionally sanctioned by the UN in 2007.

In the aftermath of last year’s 44-day war which lost Armenia its control over a fifth of Azerbaijani territories, Armenian foreign policy has an opportunity to reduce its reliance on Russia and Iran. This heavy reliance has only brought corruption, stagnation, out-migration of people, participation in the evasion of sanctions against Russia and Iran and retaliatory threats of US sanctions. If Armenia signed a peace treaty recognising the Soviet era boundary as its border with Azerbaijan there would be less need for Yerevan to put all its eggs in a Russian-Iranian basket.

Taras Kuzio (Twitter @TarasKuzio ) is a professor of political science at the National University of Kyiv Mohyla Academy and the author of Russian Nationalism and the Russian-Ukrainian War to be published by Routledge.


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