Despite being subjected to one of the harshest sanctions regimes in the world, Iran has succeeded in building a sophisticated, law-evading mechanism to support its aviation and weapons smuggling industries, reflecting the shadow economy it has developed, a groundbreaking INSS report said on Wednesday.
Western states have "identified Iran’s aviation industry as key to the regime’s weapons smuggling to its regional proxies (Hezbollah in Lebanon, the Syrian regime prior to its collapse, and pro-Iranian militias in Iraq) as well as to Africa (e.g., shipments of UAVs and weapons to Sudan) and even to Venezuela," stated the INSS report.
This activity, noted the report, involves Iranian airlines such as Mahan Air and Qeshm Air, which the Quds Force of the Islamic Revolutionary Guard Corps (IRGC), operating under Unit 190, uses to transport weapons on ostensibly civilian flights.
The Quds Force oversees the covert smuggling of weapons, equipment, and funds to terrorist organizations and Iran’s regional proxies.
The INSS report said that, "The connection between these airlines and the IRGC extends beyond infrastructure and the civilian cover they provide. Numerous findings indicate substantial structural-organizational overlap between airline employees, their senior officials, and the IRGC."
This means that "the line between these companies’ declared civilian activity and their military-operational role is often blurred," which makes it difficult for "enforcement and regulatory agencies to detect."
INSS's report was authored by Danny Citrinowicz, Avishai Sober, Dor Huri, and Omer Bazia. Citrinowicz served 25 years in Israeli military intelligence before joining INSS.
The report maps the operational architecture of that mechanism, based on using front and shell companies in countries with little transparency, layered ownership registries, bursts of activity designed to complete transfers within short timeframes, and flight-path planning that includes fictitious emergency landings to allow aircraft to quietly enter Iran.
According to the report, Iran’s aviation sector, despite being significantly harmed by sanctions, has shifted from a civilian transportation tool to a core component of the regime’s economic and security strategy, enabling it to continue functioning, finance its regional proxies, and project resilience in the face of international pressure.
Its aviation industry represents only one link in a much larger apparatus designed to evade sanctions in the trade of oil, gold, and dual-use technologies, said INSS's report.
Yet, the aviation sector clearly demonstrates the weapons smuggling method, a sophisticated integration of state, market, and underground networks that operate in regulatory gray zones and disrupt efforts to globally enforce the sanctions.
US, European, and global sanctions imposed on Iran’s civil aviation sector are primarily designed to "block the transfer of dual-use technologies that could serve the regime’s security organizations, constituting an integral part of the sanctions regime."
Then American sanctions go far broader.
In addition to banning Iranian airlines from flying to a number of countries, Washington prohibits "any sale, lease, maintenance, or transfer of aircraft or aircraft components to Iran, including indirect transactions" through intermediaries.
The US's Export Administration Regulations (EAR) applies a "de minimis rule," which dictates that "products manufactured outside the United States containing more than 1% US components are still subject to American regulation."
Another US rule expands the scope of sanctions by determining that "equipment based on US software or technology, even if manufactured in a third country, will be considered an American product for legal purposes."
To date, the sanctions have significantly impaired Iran’s ability to renew and upgrade its aircraft fleet.
The Islamic Republic's "size and its extensive reliance on aircraft for both civilian and military purposes have required the regime to maintain the aviation industry’s operational continuity despite the sweeping sanctions."
According to the INSS report, "The critical importance of the aviation sector for the regime became evident immediately after the 2015 nuclear deal, when Iran sought to acquire aircraft from companies such as Airbus in an effort to modernize the fleets of its airlines."
As of 2025, it is estimated that approximately 60% of the passenger aircraft registered in Iran are grounded, with the average age of Iran’s civil aircraft fleet around 28 years, more than double the global average, said the report.
Next, INSS noted that, "Import restrictions and the lack of original spare parts have pushed airlines toward 'cannibalization' to keep the planes operational. Without access to international insurance, conversion, and oversight services, Iranian airlines struggle to meet even basic safety standards."
The three purposes which the report identifies as being part of Iran's aviation shadow smuggling are: oil, weapons, and aviation-related issues.
Part of the shadow banking system is "a parallel financial system. Currency-exchange businesses, informal payment channels, Chinese banks, and various financial instruments provide front and shell companies with access to funding channels and the ability to move money around globally while minimizing exposure and bypassing Western regulations."
According to the report, Iranian smuggling typologies reveal several distinct operational patterns used to conduct these transfers.
The first stage is the purchase of the aircraft, and this mechanism splits into two primary types of acquisitions: (1) purchases from states that permit trade with Iran and bypass the sanctions; and (2) purchases from states that publicly declare their compliance with sanctions.
Transfers from Russia, China, or Iran’s regional allies are generally carried out directly, without the need for front or shell companies, due to extensive cooperation between these countries, said the report.
Corporate shell games
By contrast, the report stated that transfers from states that ostensibly adhere to international sanctions shed light on the methods Iran uses to move essential equipment for its economy and security-industrial complex under the radar of Western oversight. These transfers rely on the strategic deployment of front and shell companies around the world.
"IRGC typically establishes them in countries with limited commercial transparency, including Gambia, Madagascar, Kenya, South Africa, Namibia, Myanmar, Cambodia, and Ukraine," the report revealed.
After the front or shell company completes the purchase, the report stated that the next stage is transferring the aircraft to Iran without raising suspicion.
This step involves significant risk. For example, in 2024, when Iran attempted to smuggle three aircraft owned by Macka Invest Company, registered in Gambia, on flights originating in Lithuania, the report noted that the third aircraft was stopped after authorities noticed that the first two aircraft had landed in Iran rather than the Philippines, the declared destination on the flight plan.
To minimize the window of opportunity for authorities to intervene, smugglers almost always conduct the transfers in close succession.
This operational approach is known in the field of fraud as “Burst Activity,” a series of rapid transfers designed to prevent law-enforcement agencies from identifying the illicit activity in real time, said the report.
Disappearing flights
To carry out many of its illegal transfers, Iran's front or shell companies must file legitimate flight plans with aviation authorities.
However, the report disclosed that the "planned flight path" is deliberately designed to pass close to, or even through, Iranian airspace.
"In this way, the aircraft can enter Iranian airspace, report a fabricated critical malfunction, and declare an emergency landing at an Iranian airport while switching off its radar system," the report explained.
The aircraft then “disappears” and is absorbed into the fleet of Iranian airlines.
This method, INSS noted, has been used repeatedly by the Quds Force, including in the three aircraft transferred from Lithuania; five aircraft smuggled via a Madagascar-based company in 2025; four aircraft transferred from South Africa under the cover of a flight to Uzbekistan in 2022; and many other cases.
When oil imports in Indonesia, Malaysia exceed production
The INSS report stated that, "Another dimension is the deliberate political involvement of states that help circumvent the US sanctions. This activity occurs in two main geographic areas. First, in Southeast Asia, Indonesia and Malaysia provide a largely permissive environment."
Indonesia serves as a central logistical and transit hub, and its government’s failure to intervene enables local intermediaries to handle forged paperwork and the final smuggling of Western aircraft into Iran, said the report.
Beyond aircraft smuggling, new research indicates that Iran also uses these states to bypass sanctions on its oil industry.
Data shows, the report noted, a sharp rise in oil imports to China from Indonesia and Malaysia, masking the Iranian origin of the shipments.
"In some cases, the volume of oil imported from these states exceeds their own total production, reinforcing the assumption that the oil in question is in fact Iranian rather than Indonesian or Malaysian," added INSS.
Second, "Central Asian countries and states aligned with Russia, including Mongolia, Kyrgyzstan, and Tajikistan, permit open trade with Iran, sometimes even through state-owned companies. Examples include Tajik Air, owned by the government of Tajikistan, and MIAT Mongolian Airlines, owned by the government of Mongolia, leading to significant smuggling," said INSS.
A British-Iranian agent
One example which the report flagged of complex smuggling schemes is Avro Global Limited, registered in Hong Kong and owned by British citizen Gary Neil Webster.
In 2019 the company purchased four aircraft from Turkish Airlines.
The aircraft were stored in South Africa without activity until 2022, after which they were re-registered under an anonymous company in Burkina Faso and departed on a flight ostensibly destined for Uzbekistan, said the report.
INSS described how the aircraft conducted a planned emergency landing in Iran and were absorbed into the Mahan Air fleet.
"In this case, aircraft smuggling is not Webster’s only activity on behalf of the Iranian regime. In fact, he is a long-standing business partner of brothers Nader and Yaser Al-Aqili, with whom he owns several companies," said the report.
Moreover, the report stated that, "The Al-Aqili family has a long history of smuggling and financing networks on behalf of Iran, and several family members and affiliated companies have already been placed on US sanctions lists."
For example, the report said that "ACS Trading, jointly owned by Webster and Yaser Al-Aqili, is believed to have functioned as an Iranian front company that facilitated gold transfers from Venezuela in exchange for Iranian oil.
The company has also cooperated extensively with Mahan Air, which further reinforces the relationship between Webster and the Iranian entities and explains his role in facilitating aircraft smuggling through his company registered in Hong Kong."
Asia Sky Lines from Tajikistan presents a different pattern of activity. In 2019, the report said that it transferred three Airbus aircraft to Iran, with the company owned by Narzikul Khamraev and having direct connections to Iranian airlines and the Wagner Group in Africa.
There are also examples of French shell companies and many other such examples.
On May 23 of this year, Hossein Pourfarzaneh, head of Iran’s Civil Aviation Organization, said, "Iran’s aviation industry has achieved independence and is ready to overcome the sanctions."
In September 2025, the UN Security Council fully activated the snapback mechanism, reinstating all international sanctions that had been lifted from Iran under the 2015 nuclear deal.
Despite this major turning point, INSS stated that, "It is unlikely that the activation of the snapback mechanism will fundamentally change this reality. The American threat of secondary sanctions has already produced strong deterrence among airlines, manufacturers, and financial intermediaries, limiting Iran’s ability to conduct open transactions in aviation or in international trade regardless of the renewed application of sanctions under the UN Security Council framework."
Put differently, most of where the UN sanctions hit Iran were already in place from American and EU sanctions, and where the Islamic Republic has succeeded in gaming the sanctions system, the UN decision is unlikely to plug the loopholes.
All of this shows the vast challenge in holding back Iran's illegal aviation, weapons, and oil smuggling during a period when the West is trying to get Tehran to agree to terms on the nuclear, ballistic missiles, and global terror issues.