Iran's Gulf smugglers feel blowback from tensions

KHASAB, Oman (AP) — By dawn, the unmarked speedboats from Iran pull into port. By dusk, they are racing back across the Strait of Hormuz loaded with smuggled consumer goods ranging from Chinese-made shoes to cut flowers from Holland.

Even as sanctions squeeze Iran ever tighter, there's one clandestine route that remains open for business: A short sea corridor across the Persian Gulf connecting a rocky nub of Oman and the Iranian coast about 35 miles (60 kilometers) away.

Yet even this established smugglers' path is now feeling the bite from the pressures on Iran over its nuclear program.

Business is sharply down, the middlemen and boat crews say, as the slumping Iranian currency leaves fewer customers for the smuggled wares. At the same time, the risks of interception are higher as Iranian authorities step up patrols near the strategic oil tanker lanes at the mouth of the Gulf.

The strait, which is the only access in and out of the Gulf, has been the scene of Cold War-style brinksmanship between Iran and the West after Tehran last month threatened to block the passageway for about one-sixth of the world's oil in retaliation for new U.S. sanctions.

"We used to make two or three trips across every day. Now, it's maybe one," said an Iranian middleman, who gave only his first name Agheel to protect his identity from authorities in his homeland.

He watched crews load up a pickup truck with bolts of fabric from Pakistan and table-size boxes of cut flowers from the Netherlands, before the trucks headed off through the treeless mountains to Khasab port.

The operation smuggles in merchandise to avoid Iranian tariffs and to bring in American and European products that have disappeared from Iranian markets because of international sanctions. Experts note that the consumer items post no real challenge to efforts to block material with military or nuclear uses.

"Still, it shows you can't close off all channels into Iran no matter how hard you try," said Paul Rogers, who follows security affairs at Bradford University in Britain. "People will find a way."

On this side of the Gulf, the smugglers operate under a tacit tolerance from authorities, even though Oman and the United Arab Emirates are close U.S. allies and have pledged to enforce sanctions. The port lies in a sparsely populated peninsula enclave belonging to Oman but encircled on land by the UAE, a legacy of how the area was carved up in the final days of British rule here in the last century that resulted in Oman holding joint control with Iran over the strait.

The goods are legally imported into the UAE and truck drivers take them across the border, paying the customary 50 dirham ($13.50) entry fee, according to the smugglers interviewed by The Associated Press. In Khasab, the merchandise is taken to warehouses and then piled on the docks less than 100 yards (100 meters) from the port police headquarters.

Omani authorities did not respond to requests for comment on the traffic.

The Khasab speedboats are far from the only back channel into Iran. Drug traffickers easily cross the hinterland borders with Pakistan and Afghanistan, and black market networks stretch across the frontiers with Iraq and Turkey. Authorities in Iraq's Kurdish region have been under pressure for years to crack down on fuel trucks heading into Iran in violation of U.S. sanctions.

But Khasab stands out for its openness and for lying on the highly sensitive Strait.

A shipment arranged by the Iranian smuggler Agheel this week was done with practiced efficiency.

A pickup truck backed into a wood-floored warehouse with hundreds of cases of cigarettes bundled three together and wrapped tightly in gray plastic weave — in total 3,000 cigarettes under south Asian brands such as Ruby Menthol. The truck was soon sagging under the weight of boxes piled five high.

Agheel did some quick calculations: Each three-case load cost him about $1,200 and he could sell them to merchants in Iran for the equivalent of about $1,350 under current exchange rates. The truck pulling out of the warehouse represented a potential return of about $4,500.

"If we don't get caught," he added.

The smugglers have their ways of avoiding Iranian authorities.

Spotters off the coast — on the island of Qeshm and near the port of Bandar Abbas — call in coast guard movements to Khasab. The speedboat drivers keep close attention to the water conditions on the Strait and try to approach the Iranian coast just after sunset. The trip can take as little as 90 minutes in calm seas and up to four hours in rough water in the stripped down stripped-down 16-foot (five-meter) fiberglass boats.

Agheel's truck passed through the Khasab customs station at midday and then down a strip of hardscrabble road.

At the port — almost in the shadow of a Costa cruise ship making a day stop — dozens of boats were being packed and secured for the trip. There were no names or markings on the speedboats. But the items loaded on carried familiar logos: LG 42-inch flatscreen TVs, Discovery Channel DVDs, Panasonic microwaves, Yamaha motorcycle parts. Also in the stacks were textiles, satellite dishes and Chinese-made clothes and shoes.

One boat driver, who gave his name only as Aziz, had a breakfast of eggs, beans and Mountain Dew as he waited for the day's shipment to be loaded for the return run to Qeshm, a long arrow-shaped island near the Iranian coast and a main waystation for the smugglers.

Months ago, he could make as many trips as possible because the merchants in Iran were demanding goods.

But now the struggling Iranian rial — dragged down partly by U.S.-led sanctions that could target Iran's Central Bank — has put many things out of reach for Iranians, he said.

"No one wants to buy because the (rial) rate is not stable," he said.

He also said the Iranian coastal patrols have been boosted amid the escalating tensions over the Strait.

On Wednesday, U.S. Defense Secretary Leon Panetta said the American military is "fully prepared" to deal with any Iranian effort to close the waterway. Next month, Iran's powerful Revolutionary Guard plans naval exercises in the area.

If spotted by patrols, Aziz said the two-man boat crews try to heave the goods overboard. They then must pay back the smuggling network, which can amount to thousands of dollars.

But it's worth the risk, he said.

"The situation is getting worse now," he said. "All the prices are up and Qeshm has nothing else" except smuggling.