Lawmaker Hints Tehran City's Deal with China is to Circumvent Sanctions

An Iranian lawmaker has implied that a secret and controversial contract by Tehran's city administration with a Chinese firm is in fact an attempt to circumvent sanctions.

In recent days, there have been widespread criticisms regarding the municipality’s secretly concluded agreement with a Chinese company to import transport and traffic surveillance equipment, among other things.

Iran International reported on Wednesday that a group of city council members had objected to the contract concluded by Mayor Alireza Zakani, worth nearly two million euros, that will most probably be paid with proceeds of Iran's oil exports to China.

In response to criticisms, hardliner lawmaker Malek Shariati has stated that the agreement has been clinched with the official permission of Iran’s Supreme National Security Council.

“In the context of the oil embargo, a trust company, upon the approval of the anti-sanctions committee of the secretariat of the Supreme National Security Council, will become the supplier of foreign exchange in import contracts for basic goods, medicine and other necessities, including wagons, buses, etc.,” he wrote on X without providing further details about the much-disputed deal.

In the Iranian context, a trust company means little more than money exchange outfits operating in secret to launder money for the government. Tehran has long employed such companies to circumvent international sanctions, especially to sell its oil and transfer foreign exchanges.

According to the lawmaker, the National Security Council approved of the agreement in a “secret” resolution. “To expose it [the resolution] is treason and to demand transparency [regarding the contract] is foolishness,” Shariati went on to say.

After his visit to China in January, Mayor Zakani told the City Council that he had signed several agreements including a deal worth 1.67 million euros in the field of transportation. Various officials have named electric buses, vans, taxis, subway cars, and traffic cameras as part of the products to be supplied to the municipality.

However, the details of the contract have not been revealed so far despite urgent calls from both Tehran city councilors and media.

The Tehran city government does not have access to such a large amount of hard currency which only the state can provide. It is highly likely that permission for the whole project was granted by the office of Supreme Leader Ali Khamenei. The involvement of the Oil Ministry in the approval process of the deal suggests that the cost will be paid from funds accrued in China from Iranian oil imports. Iran sells 90 percent of its oil to China, which is the world’s largest oil buyer. However, these shipments violate US sanctions and both Iran and China cover up the trade by various means of circumvention and secret operations.

In April, whistle-blower Yashar Soltani disclosed on his website that the Chinese company which is to import public transportation vehicles to Tehran is in fact a young construction firm established in 2010.

Soltani reported “numerous violations” in Tehran Municipality’s agreement with its Chinese partner. “One of the most important issues regarding this contract is the insistence on abandoning the formalities and rushing to sing the contract with the Chinese side,” he stressed, sarcastically adding that what happens in this “ambiguous contract” goes beyond “the common violations committed due to negligence.”

Meanwhile, Mohammad Javad Azari Jahromi, Iran’s former Communications Minister, reacted to the agreement and quipped on his Telegram channel: “Do you know what is the end product of a construction company is? Good job, electric buses!”

Responding to Shariati’s remarks about the role of a trust company in implementing Tehran Municipality’s controversial agreement, Azari Jahromi said: “Babak Zanjani was also a trustee.”

Zanjani was an Iranian oil sales intermediary who was previously sentenced to death for embezzling billions of dollars in oil revenue during UN nuclear sanctions on Iran in the early 2010s. His sentence was commuted to 20 years in prison last week after his clemency request was approved by both the judiciary chief and the Supreme Leader. Observers expect that he will be soon released after serving about half his sentence.

Lack of transparency regarding Tehran Municipality’s contract also raises questions about possible hidden dimensions of the agreements and it is likely that equipment and services with dual applications could be included in the deal.

Nonetheless, Zakani, a former basij militia commander, defended the agreement, claiming that relevant authorities, including the Ministry of Industry and Iran’s Central Bank have been informed of the specifics of the deal.

In another controversial remark in February, Zakani announced that China will start building housing units in the capital. The announcement was met with many negative reactions in Iran. Ahmad Khorram, former Roads and Transportation Minister, lambasted the deal as an "insult to Iran's engineering community" while the local economy is in freefall.