Iran-Russia drone agreement stokes war in Ukraine and probes the limits of Western sanctions

Iran-Russia drone agreement stokes war in Ukraine and probes the limits of Western sanctions

A wide-ranging new investigation has exposed how Iran's clandestine drone alliance with Russia has not only accelerated Moscow's war effort in Ukraine but also left gaping holes in international sanctions enforcement. The report, published Thursday by US-based think tank C4ADS and shared with The Washington Post, lays out how Russia has redeveloped Iran's Shahed-136 drone as a domestically manufactured weapon of war—redesignated the Geran-2—capable of hitting Ukrainian cities with lethal regularity.

The partnership, begun in 2022, saw the creation of a large drone manufacturing facility in Russia's Tatarstan region, enabling Moscow to move away from dependence on Iranian drone imports to mass-scale local production. The agreement was valued at $2 billion and entailed a technology transfer, shipments of parts, and an underground payment system utilising wire transfers via UAE banks and shipments of physical gold in an effort to circumvent Western financial controls.

From Shahed to Geran: Mass production of drones redefines battlefield

Russia is currently producing a daily 300–350 long-range drones, the report says, which is many times more than Ukraine's own manufacturing capacity of about 100. In recent attacks, barrages of 100–300 drones a night have been targeting Ukraine, which gets overwhelmed by it. The drones have improved on speed, altitude, and payload, and a newer model Geran-3, jet-powered and more manoeuvrable, is now joining the battlefield.

"Russia is now able to make and update the Geran-2 independently, without additional Iranian assistance," report author Omar Al-Ghusbi explained, adding that local production has provided the Kremlin with a strategic advantage in the current drone arms race.

Secret payments and gold deals evade sanctions

The report details how the Russian side funded the drone transaction partly using gold bars valued at approximately $104 million, according to documents leaked by Tehran-based Sahara Thunder—a front company owned by Iran's Defence Ministry. The payments passed through UAE Free Zone Establishments, which provide tax breaks and minimal supervision, enabling the two nations to bypass conventional banking scrutiny and US dollar exposure.

The utilisation of gold served to keep the partners from direct infractions on US Treasury enforcement. "The gold transfer makes for extra anonymity," the report stated, adding that Sahara Thunder has since initiated a formal liquidation procedure, likely to be replaced by a new front company.

Leaked documents and mounting indications of Iranian military connections

The disclosures are derived from more than 10GB of internal documents leaked from Sahara Thunder by Prana Network hacking group earlier in 2024. The documents authenticate Iranian investment in providing drone components, directing production facilities, and training Russian engineers at the Alabuga Special Economic Zone. The United States sanctioned Sahara Thunder in April 2024 for its involvement in managing weapons shipments.

Iran has recognized Russia-Iran defence cooperation prior to the Ukraine war, but not the recent report. Russia's Defence Ministry too has stayed mum.

Implications for sanctions enforcement

The Iran-Russia drone initiative is a prime example of the highly sanctioned nations constructing alternative payment and trade systems beyond US and EU oversight. "By comprehending and learning from these strategies, the international stakeholders can only break up similar entities," the C4ADS report concludes, adding that additional such secret alliances are likely already in the works.