The Musandam Governorate of Oman, just inside the Strait of Hormuz, is a small dot on the face of the Persian Gulf. Its 31,425 inhabitants dwell in area of 1,800 square kilometers (695 sq mi) which are politically an exclave of Oman and separated from the mainland by the United Arab Emirates. It gives Oman control of the strategic strait jointly with Iran.
This tiny, remote tongue of land has suddenly moved into the center of global politics thanks to its rare geography at a certain moment in history. Khasab, the capital of Musandam, is located 500 kilometers from the Omani capital of Muscat. The two towns are linked by a passenger ferry service said to be the fastest in the world. The sea is fast claiming the peninsula, rushing in to fill valleys and creating a paradise for clandestine agencies, smugglers, pirates and felons, and other secretive parties engaged in furtive endeavors.
Musandam is perfectly cast for this role by its, location, proximity to Iran and traditions.
Until a couple of years ago, Iranians shipped sheep and goats to the local port whence they were trucked to the United Emirates and Saudi Arabia. For the return journey to Iran, the sailors loaded up on electronic goods and American cigarettes, docking in Khasab after sunrise and departing before sunset in keeping with Oman’s immigration laws.
Iranian mini-government in Khasab
Since this trade was also banned by Iran, the smugglers avoided the Islamic Republic’s coastguard and also the big oil tanker ships passing through the busy waters of the strait. Piled high with contraband, they darted dangerously around the big ships to cut across their paths.
But in the last couple of years, Khasab has achieved grander status, elevated from local smugglers’ haven to Iran’s central clearing-house for busting Western sanctions.
DEBKA-Net-Weekly's intelligence and Iranian sources report Iran has moved a mini-government into Khasab alongside the Omani administration. It is a home from home for Iranian military intelligence bodies, its nuclear program and departments engaged in financial and commercial activities subject to Western sanctions Yesterday’s smugglers, Irani and Omani alike, have matured into today’s respectable businessmen who routinely handle tens or hundreds of millions of dollars a month.
The little smuggling boats which struggled to stay afloat in the wake of giant tankers have grown into large vessels escorted by Revolutionary Guard speedboats.
Musandam: “The biggest Iranian money-laundering center
The irony is that whenever oil tankers sailing out of the Gulf or Western warships encounter these convoys, they slow down and make way for them to pass. But the merchandize aboard is no longer smuggled electronic appliances and American cigarettes, but heavy civilian and military industrial equipment, rigs and drills for developing oil fields and forbidden materials for Iran’s nuclear and military industries – all shipped to Iran in violation of sanctions and under the noses of the world’s navies.
The Obama administration gave up on the mandate granted Western shipping by the UN Security Council to board vessels suspected of carrying cargoes to Iran in breach of sanctions, when Tehran declared any forcible search of an Iranian vessel would be deemed an act of war.
Oman’s three largest banking institutions – the Central Bank of Oman-CBO, BankMuscat and the National Bank of Oman-NBO – all maintain branches and agencies in Khasab, which transact business with Iranian agents based there without turning a hair as though they were just ordinary Omani businessmen.
In the short space of two years, Oman has made itself, according to senior businesspeople in the Gulf with whom DEBKA-Net-Weekly's sources spoke, "the biggest Iranian money-laundering center outside Iran." It has also grown into a financial center through which Iran can bypass US and European sanctions on its monetary dealings.
Oman cashes in on two peninsulas
President Barack Obama is reported by our sources to have tried twice to intercede with Sultan of Oman Qaboos bin Said Al Said on the phone to put a stop to the sanctions-busting trafficking thriving on the Musandam peninsula. He offered the Qaboos the example of UAE leader Sheikh Khalifa bin Zayed Al Nahyan: Three years ago this entire Iranian sanctions-busting machinery flourishing in Oman operated out of Abu Dhabi, but the US president managed to swing him around to shutting it down.
But the Omani ruler refused to listen. He shook off Obama's arm-twisting and refused to take any action either to remove or even curtail Iran’s unlawful activities on Musandam.
The Qaboos is well placed for exploiting to the full the conflict between the United States and Iran.
On the one hand, Oman hosts big US army and air force bases on the Masira peninsula; on the other, he is placing the Musandam peninsula at Iran’s disposal.
The Qaboos has got himself two insurance policies, one from America and one from Iran, while making money hand over fist from both.