Category Archives: China

Is there Anything the Chinese Wont Steal?

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In Iowa corn fields, Chinese national’s seed theft exposes vulnerability

ARLINGTON, Iowa (Reuters) – Tim Burrack, a northern Iowa farmer in his 44th growing season, has taken to keeping a wary eye out for unfamiliar vehicles around his 300 acres of genetically modified corn seeds.

Along with other farmers in this vast agricultural region, he has upped his vigilance ever since Mo Hailong and six other Chinese nationals were accused by U.S. authorities in 2013 of digging up seeds from Iowa farms and planning to send them back to China.

The case, in which Mo pleaded guilty in January, has laid bare the value — and vulnerability — of advanced food technology in a world with 7 billion mouths to feed, 1.36 billion of them Chinese.

Citing that case and others as evidence of a growing economic and national security threat to America’s farm sector, U.S. law enforcement officials are urging agriculture executives and security officers to increase their vigilance and report any suspicious activity.

But on a March 30 visit to Iowa, Justice Department officials could offer little advice to ensure against similar thefts, underlining how agricultural technology lying in open fields can be more vulnerable than a computer network or a factory floor.

“It may range down to traditional barriers like a fence and doing human patrols to making sure you get good visuals on what’s occurring,” Assistant Attorney General John Carlin, head of the Justice Department’s national security division, said when touring Iowa State University.

But agriculture sector executives say fences and guards are not feasible, due to the high cost and impracticality of guarding hundreds of thousands of acres.

Tom McBride, intellectual property attorney at Monsanto — one of the firms whose seeds were targeted by Mo — said it safeguards its genetically modified organism (GMO) technology by protecting its computers, patenting seeds and keeping fields like Burrack’s unmarked. Monsanto says it is not considering physical barriers like fences or guards.

The FBI and the U.S. Justice Department say cases of espionage in the agriculture sector have been growing since Mo was first discovered digging in an Iowan field in May 2011. Over the past two years, U.S. companies, government research facilities and universities have all been targeted, according to the FBI.

Although prosecutors were unable to establish a Chinese government link to Mo’s group, the case adds to U.S.-China frictions over what Washington says is increasing economic espionage and trade secret theft by Beijing and its proxies.

A U.S. law enforcement official told Reuters the agency looked for a connection between the Chinese government and the conspiracy carried out by Mo.

“In cases like this, we can see connections, but proving to the threshold needed in court requires that we have documents that the government has directed this,” the official said. “It’s almost impossible to get.”

A Chinese embassy spokesman in Washington, Zhu Haiquan, said he did not have detailed information on the Mo case but that China “stands firm” on the protection of intellectual property and maintains “constant communication and cooperation” with the U.S. government on the issue.

On his visit to Washington last September, President Xi Jinping reiterated China’s denial of any government role in the hacking of U.S. corporate secrets.

Mo, an employee of Chinese firm Kings Nower Seed, pleaded guilty to stealing seed grown by U.S. firms Monsanto, Dupont Pioneer and LG Seeds.

Prosecutors say he specifically targeted fields that grow the parent seeds needed to replicate GMO corn. The FBI says it suspects he was given the location by workers for the seed companies, but did not charge any employees.

DuPont Pioneer and LG Seeds declined to comment for this story.

Mo, whose case was prosecuted by the Justice Department as a national security matter rather than a simple criminal case, now faces a sentence of up to five years in prison. Five others charged in the case are still wanted by the FBI and are believed to have fled to China or Argentina. Charges were dropped against a sixth Chinese suspect.

NATIONAL SECURITY

The number of international economic espionage cases referred to the FBI is rising, up 15 percent each year between 2009 and 2014 and up 53 percent in 2015. The majority of cases reported involve Chinese nationals, the U.S. law enforcement official told Reuters. In the agriculture sector, organic insecticide, irrigation equipment and rice, along with corn, are all suspected to have been targeted, including by Chinese nationals, the official said.

Mo Hongjian, vice president of Kings Nower Seed’s parent company, Beijing Dabeinong Technology Group, declined to comment on the case or on the company’s connection with the Chinese government.

The parent firm is privately owned, but says it receives government money for research in “science and technology.”

China bans commercial growing of GMO grains due to public opposition to the technology and imports of GMO corn have to be approved by the agriculture ministry. Still, President Xi called in 2014 for China to innovate and dominate the technique, which promises high yields through resistance to drought, pests and disease.

In January, a Greenpeace report found some Chinese farmers are illegally growing GMO corn whose strains belong to companies including Monsanto, Syngenta and DuPont Pioneer.

Monsanto, which supplies Burrack’s seed, said it can block foreign groups who request to tour their lab and learning center in Huxley, Iowa. For the past few years, Monsanto says it has run its own background checks on Chinese delegations that ask for a tour, and, if they are approved, boosts security to be sure they do not steal anything or take pictures.

In Washington, U.S. senators have called for a review of the $43 billion deal by state-owned ChemChina to buy Swiss seed group Syngenta, which generates nearly a quarter of its revenue from North America.

Acquiring GMO seed and successfully recreating a corn plant would allow Chinese companies to skip over roughly eight years of research and $1.5 billion spent annually by Monsanto to develop the corn, the company says.

Burrack’s farm itself was not targeted by Mo, though he grows the Monsanto parent seed that the Chinese national was digging for. Burrack grows the corn in two fields in front of and behind his house where he can watch them, a small part of his 2,800-acre farm.

He said he is told by Monsanto where and when to plant the parent seed, but has never been told to keep what he is planting a secret.

“What no one seems to understand is that they’re stealing from people like me,” Burrack said. “They’re stealing the research that farmers pay for when they buy Monsanto seed.”

Navy LTC Accused of Spying and Prostitution

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Navy Officer Accused of Spying for Foreign Power Held Secretly for 8 Months

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The amphibious assault ship USS Boxer transits the East Sea during Exercise Ssang Yong 2016 on March 8. It’s been revealed that a U.S. Navy officer accused of spying was held in secret for eight months.

The redacted charge sheet is here.

By Jeff Stein/Newsweek: A U.S. Navy officer accused of spying for an unidentified foreign power was secretly arrested last summer in an espionage investigation that is ongoing, authorities said Saturday.

The heavily redacted charge sheets say the unidentified officer gave secret information “relating to the national defense to representatives of a foreign government.” But the four-page document does not say exactly what information was provided, or for how long a period it was provided, how the information was transmitted or which nation it was provided to.

The multiple charges of espionage and attempted espionage, made public only on Friday, suggest the accused officer was under surveillance by Navy counterespionage agents for an extended period of time. The officer was arrested “about eight months ago,” according to a U.S. official who asked for anonymity in exchange for discussing some details of the case.

The name of the officer, a lieutenant commander who was assigned to a sensitive maritime patrol and reconnaissance group, is being withheld from the public “out of respect for the ongoing investigation” and the privacy rights of the accused, said the official.

The official did not rule out the possibility of further arrests in the case, which is being jointly pursued by both the FBI and Naval Criminal Investigative Service, or NCIS. The officer is being held in the Naval Consolidated Brig in Chesapeake, Va.

 

The officer’s unit “provides airborne anti-submarine warfare, anti-surface warfare and maritime intelligence, surveillance and reconnaissance operations from planes such as the P-8A Poseidon, P-3C Orion and unmanned MQ-4C Triton,” according to the Norfolk Virginian-Pilot newspaper. The command of the Maritime Patrol and Reconnaissance Force is headquartered at Hampton Roads Naval Support Activity in Norfolk, “although it’s not clear whether he was stationed there,” the paper said. The unit has wings at Jacksonville Naval Air Station in Florida, Whidbey Island Naval Air Station in Washington state and Marine Corps Base Hawaii.

The Navy’s charge sheet said the officer is accused of three counts of attempted espionage, three counts of making false official statements and five counts of communicating defense information “to a person not entitled to receive said information.” It also said the officer provided a false address when he was on leave “rather than the actual foreign destination,” and failed to report contacts with foreign nationals.

The Navy also accused the officer, “a married man,” of procuring prostitutes ”on divers occasions” and having sex with “a woman not his wife,” a violation of the Uniform Code of Military Justice, or UCMJ.

The dates of the alleged espionage, the identity of the foreign spy service—if any—and the foreign nationals involved will not likely be disclosed until and if the Navy prefers court martial charges against the accused.

Adm. Philip S. Davidson, commander of Fleet Forces Command, will weigh the results of an Article 32 investigation, the military’s version of a grand jury, to determine whether a court martial is warranted.

The accused officer could face the death penalty if found guilty of the most serious espionage charges.

Under the UCMJ, a service member is eligible for the death penalty for espionage if found “guilty of an offense that directly concerns nuclear weaponry, military spacecraft or satellites, early warning systems, or other means of defense or retaliation against large scale attack, war plans, communications intelligence or cryptographic information, or any other major weapons system or major element of defense strategy.”

****

InquisitR: A U.S. Navy officer was charged with giving secrets to China and prostitution at the Norfolk Air Station in Virginia. It is believed that Lieutenant Commander Edward Lin gave secrets about vital communications systems, although the Navy has yet to determine how much and for how long.

CBS News reported that the Navy officer charged worked as a flight officer on an EP-3E Reconnaissance, a sensitive intelligence gathering aircraft. Lin is alleged to have given information on the aircraft’s communications system. The information he gave could be used to counter U.S. eavesdropping capabilities.  Additional details here.

The heavily redacted documents released accused Lieutenant Commander Edward Lin of five counts of espionage and attempted espionage, three counts of making false official statements, and five counts of communicating information to a person not authorized to receive it.

Susan Rice, the Quasi CiC, Imposed a Gag Order

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In a recent interview by Bret Baier of three previous Secretaries of Defense a significant response by all three was that the White House does not listen to the military commanders at the Pentagon but rather interferes directly with selected field commanders for political military decisions bypassing the Pentagon completely.

We are seeing for sure this is an accurate description and Susan Rice has been given the responsibility of being the quasi commander in chief. She even went so far as to impose a gag order when it came to the matter of China.

4-star admiral wants to confront China. White House says not so fast

NavyTimes: The U.S. military’s top commander in the Pacific is arguing behind closed doors for a more confrontational approach to counter and reverse China’s strategic gains in the South China Sea, appeals that have met resistance from the White House at nearly every turn.

Adm. Harry Harris is proposing a muscular U.S. response to China’s island-building that may include launching aircraft and conducting military operations within 12 miles of these man-made islands, as part of an effort to stop what he has called the “Great Wall of Sand” before it extends within 140 miles from the Philippines’ capital, sources say.

Harris and his U.S. Pacific Command have been waging a persistent campaign in public and in private over the past several months to raise the profile of China’s land grab, accusing China outright in February of militarizing the South China Sea.

But the Obama administration, with just nine months left in office, is looking to work with China on a host of other issues from nuclear non-proliferation to an ambitious trade agenda, experts say, and would prefer not to rock the South China Sea boat, even going so far as to muzzle Harris and other military leaders in the run-up to a security summit.

“They want to get out of office with a minimum of fuss and a maximum of cooperation with China,” said Jerry Hendrix, a retired Navy captain and defense strategy analyst with the Center for a New American Security.

The White House has sought to tamp down on rhetoric from Harris and other military leaders, who are warning that China is consolidating its gains to solidify sovereignty claims to most of the South China Sea.

National Security Adviser Susan Rice imposed a gag order on military leaders over the disputed South China Sea in the weeks running up to the last week’s high-level nuclear summit, according to two defense officials who asked for anonymity to discuss policy deliberations. China’s president, Xi Jinping, attended the summit, held in Washington, and met privately with President Obama.

The order was part of the notes from a March 18 National Security Council meeting and included a request from Rice to avoid public comments on China’s recent actions in the South China Sea, said a defense official familiar with the meeting readout.

In issuing the gag order, Rice intended to give Presidents Obama and Xi Jinping “maximum political maneuvering space” during their one-on-one meeting during the global Nuclear Summit held March 31 through April 1, the official said.

“Sometimes it’s OK to talk about the facts and point out what China is doing, and other times it’s not,” the official familiar with the memo said.  “Meanwhile, the Chinese have been absolutely consistent in their messaging.”

The NSC dictum has had a “chilling effect” within the Pentagon that discouraged leaders from talking publicly about the South China Sea at all, even beyond the presidential summit, according to a second defense official familiar with operational planning. Push-back from the NSC has become normal in cases where it thinks leaders have crossed the line into baiting the Chinese into hard-line positions, sources said.

Military leaders interpreted this as an order to stay silent on China’s assertive moves to control most of the South China Sea, said both defense officials, prompting concern that the paltry U.S. response may embolden the Chinese and worry U.S. allies in the region, like Japan and the Philippines, who feel bullied.

China, which has been constructing islands and airstrips atop reefs and rocky outcroppings in the Spratly Islands, sees the South China Sea as Chinese territory. President Xi told Obama during their meeting at the nuclear summit that China would not accept any behavior in the disguise of freedom of navigation that violates its sovereignty, according to a Reuters report. The two world leaders did agree to work together on nuclear and cyber security issues.

Experts say administrations often direct military leaders to tone down their rhetoric ahead of major talks, but the current directive comes at a difficult juncture. U.S. leaders are struggling to find an effective approach to stopping the island-building without triggering a confrontation.

The NSC frequently takes top-down control to send a coherent message, said Bryan Clark a former senior aide to Adm. Jon Greenert, the recently retired chief of naval operations. While serving as Greenert’s aide, Clark said the NSC regularly vetted the former CNO’s statements on China and the South China Sea.

Critics say the administration’s wait-and-see approach to the South China Sea has failed, with the island-dredging continuing in full force.

“The White House’s aversion to risk has resulted in an indecisive policy that has failed to deter China’s pursuit of maritime hegemony while confusing and alarming our regional allies and partners,” said Sen. John McCain, R-Ariz., chairman of the Senate Armed Services Committee, in a statement to Navy Times. “China’s increasingly coercive challenge to the rules-based international order must be met with a determined response that demonstrates America’s resolve and reassures the region of our commitment.”

When presented with the findings of this article, Harris declined to comment through a spokesperson. A spokesman for the chief of naval operations had no comment when asked about Harris’ proposals and whether the CNO was supporting them.

An administration official said the Navy’s operations in the South China Sea are routine and that the administration often seeks to coordinate its message.

“While we’re not going to characterize the results of deliberative meetings, it’s no secret that we coordinate messaging across the inter-agency-on issues related to China as well as every other priority under the sun,” the official said.

The gag order has had at least one intended effect. The amphibious assault ship Boxer and the dock landing ship Harpers Ferry, both carrying the 13th Marine Expeditionary Unit, steamed through the South China Sea in late March to little fanfare.

‘The status quo has changed’

Meanwhile evidence is mounting that China aims to build another island atop the Scarborough Shoal, an atoll just 140 miles off the coast of the Philippines’ capital of Manila and well within the Philippines’ 200-mile economic exclusion zone, that would extend China’s claims. Chinese missile batteries and air-search radars there would put U.S. forces in the Philippines at risk in a crisis.

Harris and PACOM officials have been lobbying the National Security Council, Capitol Hill and Pentagon leaders to send a clear message that they won’t tolerate continued bullying of neighbors. Part of the approach includes more aggressive, frequent and close patrols of China’s artificial islands, Navy Times has learned.

“When it comes to the South China Sea, I think the largest military concern for [U.S.] Pacific Command is what operational situation will be left to the next commander or the commander after that,” said a Senate staffer familiar with the issues in the South China Sea. “The status quo is clearly being changed. Militarization at Scarborough Shoal would give [China’s People’s Liberation Army-Navy] the ability to hold Subic Bay, Manila Bay, and the Luzon Strait at risk with coastal defense cruise missiles or track aviation assets moving in or out of the northern Philippines.”

The administration is negotiating rotational force presence in the Philippines that would put the U.S. in a position to counter China’s moves in the region but the focus on the big picture isn’t changing the China’s gains in the here and now, the staffer said.

“Force posture agreements and presence operations are important, but the administration has yet to develop a deterrence package that actually convinced Beijing that going further on some of these strategic-level issues like Scarborough … is not worth the costs.”

Stepped-up patrols and of the South China Sea like the one conducted by the carrier John C. Stennis and her escorts in early March are part of the PACOM response to China, but actual freedom of navigation patrols in close proximity to China’s islands must be authorized by the White House.

The patrols to date have been confusing, critics argue, because they have been conducted under the right of innocent passage. For example, the destroyer Lassen’s October transit within 12 nautical miles of Chinese man-made islands in the disputed Spratly Islands chain, was conducted in accordance with innocent passage rights. Some officials saw that as tacit acknowledgment that China did in fact own the islands and were entitled to a 12-mile territorial sea around them.

During innocent passage, warships are not supposed to fly aircraft, light off anti-air systems or shoot guns — just proceed expeditiously from point “A” to point “B.” All those activities are fair game in international waters.

The lack of a more aggressive response has only encouraged continued expansion, critics say, including the new Scarborough Shoal project, which China seized from the Philippines in 2012.

The Lassen was the first U.S. warship to pass within 12 miles of China’s man-made islands in three years and was followed by the destroyer Curtis Wilbur’s patrol of the disputed Paracel Islands in January. But if the goal of those patrols was to stop China from constructing man-made islands, it has clearly failed, which was noted last month by the U.S. military’s top officer.

“In the South China Sea, Chinese activity is destabilizing and could pose a threat to commercial trade routes,” Marine Gen. Joe Dunford, the chairman of the Joint Chiefs, said at a March 29 speech at the Center for Strategic and International Studies. “And while our exercise of freedom of navigation provides some assurance to our allies and partners, it hasn’t stopped the Chinese from developing military capabilities in the South China Sea, to include on territories where there is a contested claim of sovereignty.”

Administration officials say they’ve been tough on China’s claims, supporting military patrols by U.S. Air Force bombers and Navy ships, as well as sending high-tech military assets to the region, including two more destroyers and the sophisticated X-band AN/TPY-2 missile defense radar system. The U.S. is also negotiating rotational presence for U.S. troops on bases in the Philippines, right on China’s doorstep.

“The idea that we are somehow inconsistent or that we are giving China a free pass just isn’t supported by the facts,” said a U.S. official who spoke on background to discuss internal deliberations.

‘Irreversible’ gains

Harris wants to double down on the close island patrols but conduct them on the assertion they are in international water, sources who spoke to Navy Times said.

Clark, now an analyst with the Center for Strategic and Budgetary Assessments who has followed Harris’s strategy, said he thinks Harris is lobbying for more assertive freedom of navigation patrols that include military operations such as helicopter flights and signals intelligence within 12 miles of Chinese-claimed features. Such patrols, Clark said, would make clear the Navy does not acknowledge Chinese claims and that the surrounding waters are international.

“He wants to do real [freedom of navigation operations],” Clark said. “He wants to drive through an area and do military operations.”

Harris is not the only Navy expert raising alarms. Capt. Sean Liedman, a naval flight officer serving as a fellow at the Council on Foreign Relations, called for the U.S. to take a hard line.

“Failing to prevent the destruction and Chinese occupation of Scarborough Shoal would generate further irreversible environmental damage in the South China Sea — and more importantly, further irreversible damage to the principles of international law,” Liedman wrote in a late March blog post. “It would further consolidate the Chinese annexation and occupation of the maritime features in the South China Sea, which would be essentially irreversible in any scenario short of a major regional conflict.”

Liedman said the Navy should consider taking military actions like disabling Chinese dredging boats to steps to impair the land-reclamation effort.

Failing to stop China’s expansion in the South China Sea into territory also claimed by its neighbors is only heightening the chance of getting into an armed confrontation, said Hendrix, the retired captain.

“The Obama administration has tended to take the least confrontational path but in doing so they created an environment where it’s going to take a major shock to reestablish the international norms in the South China Sea,” he said. “Ironically, they’ve made a situation where conflict is more instead of less likely.”

 

North Korea Threat Real or Sorta Real?

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Analysts remain sceptical of North Korea’s nuclear strike claims

Janes: Photos released by North Korean official news outlet Rodong Sinmun on 9 March showed the country’s leader, Kim Jong-un, meeting the country’s nuclear technicians at what could be a KN-08 (Hwasong-13) intercontinental ballistic missile production facility near Jonchon in the country’s northern Chaggang province.

The accompanying article said Kim was congratulating his nuclear weapon scientists for having developed a miniaturised nuclear warhead: a claim being met with scepticism by various Western analysts.

The photos and article came two days after Pyongyang threatened its South Korean neighbours with a pre-emptive nuclear strike for the 7 March initiation of joint exercises ‘Foal Eagle’ and ‘Key Resolve’: the largest set of manoeuvres ever conducted with US forces in the region, in which around 17,000 US troops are exercising alongside some 300,000 South Korean military personnel.

In the week prior to the beginning of the exercises, Pyongyang’s KCNA state news agency quoted Kim as saying that North Korea’s “nuclear warheads need to be ready for use at any time”.

Various security policy think-tanks have accused Washington and its South Korean allies of raising tensions on the Korean peninsula, calling the exercises ill-advised. Stephan Haggard from the School of Global Policy and Strategy at University of California, San Diego, who authors a blog on North Korea, told news sites like CNN, “I didn’t see the logic of expanding the exercises. I personally think that upping the sizes of the exercises didn’t serve any material function. It’s not clear that the size will bring North Korea back to the diplomatic table, so there’s no real purpose to do that. All you’ve done is stir the viper’s nest.”

Specialists on North Korea’s defence capabilities and internal politics dismiss these criticisms of the US-South Korean manoeuvres, arguing that such condemnation ignores the realities of the immediate objectives of North Korea’s nuclear programme and the nature of the regime’s internal political intrigue.

(CNN)The North Korea monitoring project 38 North says that satellite imagery shows “suspicious activity” at a nuclear enrichment site in North Korea.

Plumes of exhaust steam, a byproduct of heating the main plant at the Yongbyon Radiochemical Laboratory complex, have been seen in commercial satellite images taken March 12 and over the preceding five weeks, the group says.
This activity is unusual, the report by the Washington-based project says.
“Exhaust plumes have rarely been seen there and none have been observed on any examined imagery this past winter,” the report says.

Weeks away?

The plumes of steam do not necessarily indicate that the process for refining plutonium for nuclear weapons is underway or will be soon, the report says.

It does, however, note that U.S. Director of National Intelligence James Clapper recently testified that Pyongyang had “announced its intention to ‘refurbish and restart’ its nuclear facilities,” including the uranium enrichment facility at Yongbyon, and that it could be able to recover plutonium from the reactor’s spent fuel “within a matter of weeks to months.”
Separate images appear to show further work on the site’s Experimental Light Water Reactor, a key facility for the enrichment of nuclear fuel, is ongoing, with a new transformer yard and road built, and the installation of electrical cables completed. More here.

Any Americans in the Panama Papers?

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Headlines coming soon courtesy of media as noted by McClatchy
Mossack Fonseca worked with oil firms owned by Iranian state despite sanctions

Documents show law firm at centre of Panama Papers leak carried on doing business with companies after learning of their real owners

Guardian: The law firm at the centre of the Panama Papers leak acted for an Iranian oil company that had been blacklisted by the US, the documents reveal.

Mossack Fonseca realised it was working for Petropars Ltd in 2010 only when another client accidentally fell foul of the US sanctions that had been imposed on the energy firm.

Petropars and the other client had been assigned the same PO box in the British Virgin Islands by Mossack Fonseca, and the address had been flagged by banks as linked to a blacklisted company.

The episode highlights the perils of giving the same address to thousands of shelf-companies – and the lack of rigour in Mossack Fonseca’s due diligence procedures.

This was acknowledged by the firm’s managing partner, Jürgen Mossack, who sent an angry email complaining about the lack of background checks, the documents show. “Everybody knows that there are United Nations sanctions against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC [the Office of Foreign Assets Control, the US Treasury department that deals with sanctions] but out of principle.”

Mossack Fonseca discovered it had been acting for the Iranian firm when the head of its Geneva office requested that a client be given a new mailing address in the British Virgin Islands (BVI).

PO box 3136 in Road Town, Tortola, was shared by a multitude of other shelf companies on the law firm’s books, including Petropars.

Petropars had been designated by the US Treasury in June that year as an oil company ultimately owned by the Iranian state. With offices in Dubai and London, it played a key role in securing foreign investment for the South Pars natural gas field. The largest in the world, the field lies in the Persian gulf and is shared with Qatar.

Putting Petropars on the official OFAC sanctions list was intended to sap financial support for Iran’s nuclear and missile programmes.

After a flurry of checks, Mossack Fonseca discovered it was acting for Petropars and two other companies in which it held stakes: Drilling Company International Limited and Venirogc Limited, a joint venture with Venezuela’s state-owned oil company PDVSA, which would itself be blacklisted by the US the following year.

Three months after the blacklisting, Mossack Fonseca’s compliance team recommended resigning from Petropars and “all its associated companies”. By then, not only OFAC but the United Nations had issued sanctions against the Middle Eastern state.

Mossack Fonseca duly stood down and Petropars was recorded as inactive from May 2011, as were its two subsidiaries. But another Iranian company remained on the books.

Despite resolving to cut ties with Iran, Mossack Fonseca continued servicing an outfit called Petrocom. It shared the same London accountant as Petropars, and gave its address as Sepahbod Gharani Avenue in Tehran.

The relationship was managed through London, where a separately owned business holds the exclusive UK rights to market Mossack Fonseca’s services.

Mossack Fonseca in the BVI produced a certificate of good standing (often requested by banks or trading partners), stamped by the office of the Virgin Islands deputy governor on 14 September 2010; papers approving the appointment of a new chairman and managing director; and others for the creation of a joint venture.

Mossack Fonseca’s BVI office did carry out checks on the company. A request for the name of the ultimate beneficial owner of Petrocom elicited the following reply from Mossack Fonseca’s UK franchise: “I think we could assume that would be Mahmoud Ahmadinejad unless I’m mistaken.”

While Iran’s then-president was unlikely to have actually held shares in these offshore entities, the comment makes it clear Mossack Fonseca’s UK office knew it was continuing to act for state-owned companies.

In June 2013, the US imposed sanctions on Petrocom’s parent OIIC, describing it as part of a network of 37 front companies set up to manage the Iranian leadership’s commercial holdings. OIIC was allegedly controlled by a holding company called Eiko, which stands for The Execution of Imam Khomeini’s Order.

“The purpose of this network is to generate and control massive, off-the-books investments, shielded from the view of the Iranian people and international regulators,” a US Treasury press release stated.

The most recent data, from December 2015, shows Petrocom remains on the firm’s books. A certificate of good standing was issued as recently as April 2015.

Mossack Fonseca said: “We have never knowingly allowed the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria and other countries or individuals sanctioned by the United States or European Union. We routinely resign from client engagements when ongoing due diligence and/or updates to sanctions lists reveals that a party to a company for which we provide services has been either convicted or listed by a sanctioning body.”

Emmanuel Cohen, who runs Mossack Fonseca’s UK franchise, said in a letter from his lawyer that he had been “in the forefront of undertaking due diligence checks over the years”, and that “he takes the obligations of reporting extremely seriously and files any suspicious activity” with the National Crime Agency. Regarding Petropars, Mossack Fonseca UK “was working through a professional client in the UK and was not responsible for any due diligence”. He added that the UK business was under no obligation to follow US sanctions.

Petrocom and Petropars did not respond to requests for comment.

In January 2016, the US removed Petropars and OIIC from its blacklist, following the nuclear deal with Iran.

Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins