Iranian mogul trades weapons for oil with Russia: Bloomberg

The son of a key figure in Iran's ruling establishment is at the heart of a sanctions-busting secret trade with Russia, in which Iran provides Moscow with weapons in exchange for oil, a report by Bloomberg said.

Hossein Shamkhani, son of ex-security chief Ali Shamkhani, oversees a network of companies central to facilitating weapons shipments across the Caspian Sea to Moscow amid its ongoing war in Ukraine, the report said.

Through his Dubai-based company Crios Shipping LLC, the younger Shamkhani began moving missiles, drone components, and dual-use goods last year, relying on at least two ships.

The Bloomberg report cited information provided by more than a dozen unnamed US, UK, and European officials, along with others familiar with the transactions.

These shipments, according to sources cited by Bloomberg, are part of a barter arrangement in which Moscow pays Tehran with oil cargoes in order to bypass sanctions restricting both nations’ access to international financial systems.

“My understanding is the Shamkhani network ties into the drone contracts for use in Ukraine,” said John Bolton, former US National Security Advisor, now a senior fellow at the Foundation for American Security and Freedom.

Shamkhani’s trading prowess highlights Iran's broader use of a vast network of companies spanning commodities trading and hedge funds.

A family legacy of influence and controversy

Hossein Shamkhani’s ascent in global commerce and politics is intertwined with his father Ali Shamkhani’s legacy. As a long-serving Iranian defense minister and national security advisor, Ali Shamkhani has remained close to Supreme Leader Ali Khamenei, leveraging his influence even after stepping down from the Supreme National Security Council in 2023.

The Shamkhani family has faced repeated allegations of corruption and abuse of power. Iran International’s investigative journalist Mojtaba Pourmohsen has reported extensively on family members’ involvement in high-profile scandals, including accusations of illicit business dealings, ownership of extravagant properties and bank accounts abroad.

One particularly contentious episode involved their role in the collapse of a building in Khuzestan province in 2022, a tragedy that left dozens dead. The building’s owner, a businessman linked to the family, was found to have violated multiple construction regulations.

Hossein Shamkhani has denied any wrongdoing and rejected claims of involvement in illegal arms shipments or sanction-busting oil trades.

A lawyer representing him told Bloomberg that the allegations are baseless and lack supporting evidence. Similarly, Mohamed Al Hashmi, managing director of Dubai-based Milavous Group Ltd—another firm tied to Shamkhani—dismissed allegations of involvement in Iranian or Russian oil trading.

Complexities of sanctions and enforcement

The cross-Caspian shipments highlight challenges in enforcing Western sanctions. Ships linked to Shamkhani’s network, including the Sea Castle and Sea Anchor, have completed multiple trips between Iranian ports and Russia’s Astrakhan in the past year.

These vessels, though modest in size by global shipping standards, are believed to have been sufficient for transporting weaponry on the short Caspian routes.

Bloomberg’s analysis of ship tracking data suggests these voyages accelerated in 2023, coinciding with Russia’s increased reliance on Iranian arms for its operations in Ukraine.

Shamkhani’s maritime network extends beyond these two vessels. Bloomberg cited sources describing an extensive fleet of tankers and cargo ships controlled through entities such as Oceanlink Maritime DMCC and Koban Shipping LLC.

While the US Treasury has sanctioned several of these ships and their associated companies, enforcement has been complicated by frequent changes in ownership and the lack of direct links to Shamkhani in official records.

“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, a senior fellow at the Foundation for Defense of Democracies.

He emphasized the importance of transparency and international cooperation to expose these networks and curb their activities.

Expanding business empire and diplomatic implications

Beyond shipping, Shamkhani’s network includes a hedge fund operating in financial hubs such as London, Geneva, and Singapore, and a Dubai-based commodities trading firm dealing with Western oil companies.

Despite these connections, he has not been personally sanctioned by the US or European governments. This lack of direct penalties has fueled concerns about loopholes in current sanctions regimes, particularly as entities within Shamkhani’s network continue to conduct significant business with Chinese buyers using yuan transactions, avoiding the US financial system.

Both Iran and Russia have acknowledged their growing military cooperation without detailing specific arms deals.

While their collaboration appears not to inherently violate international law, it exposes participants to potential sanctions.

A State Department spokesperson warned of the broader security implications, saying, “This partnership threatens European security and illustrates how Iran’s destabilizing influence reaches beyond the Middle East and around the world.”

The allegations against Hossein Shamkhani, if substantiated, underscore the resilience of global sanctions evasion networks and the complexities of monitoring illicit trade.

With limited transparency and persistent geopolitical rivalries, success in curtailing Iran's sanctioned trade has eluded the West and its allies.