April 10, 2010:
Iran is increasingly using Chinese firms to facilitate weapons related smuggling efforts. This is not necessarily with the cooperation of the Chinese government. But there is apparently little risk of getting arrested in China for buying some weapons related items from a European or American firm, and passing it out the back door to Iranian smugglers. Chinese exporters are particularly enthusiastic about selling Iran dual (civilian and military) use items. These can be exported more openly, and later claiming that the Iranians had promised not to use the stuff for military purposes.
Many Western nations have become more aggressive in curbing this sort of thing. Australia recently stopped a shipment of pumps that, it turned out, were capable of being used in nuclear power plants (as well as for more benign uses). Iran has been quite blatant about buying dual use equipment, and then openly using the stuff for military purposes. That bravado is backfiring. But there are several nations that are willing to look the other way at this sort of smuggling (while diverting to Iran, items purchased for use in some other country). Malaysia has become a hotbed for all sorts of smuggling schemes. That works until the international pressure (often via threats to limit access to the banking system, and technology in general) triggers a crackdown on the smugglers. China has successfully stonewalled complaints about all sorts of illegal behavior (especially related to technology theft and Internet based espionage.)
Ever since the U.S. embargo was imposed in 1979 (after Iran broke diplomatic protocol by seizing the American embassy), Iran has sought, with some success, to offer big money to smugglers who can beat the embargo and get needed industrial and military equipment. This is a risky business, and American and European prisons are full of Iranians, and other nationals, who tried, and often failed, to procure forbidden goods. The smuggling operations are currently under more scrutiny, and attack, because of Iran's growing nuclear weapons program. But the Iranians simply offer more money, and more smugglers step up to keep the goodies coming.
The U.S. has gotten more aggressive, and successful, at shutting down Iranian smuggling operations. Not just by bribing the smugglers themselves, but also by getting the cooperation of nations the smugglers operate out of. This has been so successful that most of these smugglers no longer feel safe working out of Arab Persian Gulf nations (especially the United Arab Emirates). As a result, more smugglers are operating out of Malaysia, and the U.S. is trying to shut down that activity. America also monitors the international banking network, seeking signs of smuggler activity, and leaning on the banks involved, to step back.
The smuggling effort has been a mixed success. The Iranian armed forces are poorly equipped, because new tanks, warplanes and ships could not be sneaked in. Thus major weapons acquired in the 1970s are falling apart for want of sufficient replacement parts.