Iran Arms Smuggling Backs Terrorists

The U.S. 5th Fleet ships seized approximately 1,400 AK-47 assault rifles and 226,600 rounds of ammunition from a stateless fishing vessel during a flag verification boarding in accordance with customary international law in the North Arabian Sea, Dec. 20.

U.S. Navy patrol coastal ships USS Tempest and USS Typhoon found the weapons during a search conducted by embarked U.S. Coast Guard personnel. The illicit weapons and ammunition were later transported to guided-missile destroyer USS O’Kane (where they await final disposition.

The stateless vessel was assessed to have originated in Iran and transited international waters along a route historically used to traffic weapons unlawfully to the Houthis in Yemen. The direct or indirect supply, sale or transfer of weapons to the Houthis violates U.N. Security Council Resolutions and U.S. sanctions.

The vessel’s five crew members identified themselves as Yemeni nationals and will be returned to Yemen.

After removing the crew and illicit cargo, U.S. naval forces determined the stateless vessel was a hazard to navigation for commercial shipping and sank it.

U.S. naval forces regularly perform maritime security operations in the Middle East to ensure the free flow of legitimate trade and to disrupt the transport of illicit cargo that often funds terrorism and other unlawful activity. U.S. Navy warships operating in the U.S. 5th Fleet region have seized approximately 8,700 illicit weapons in 2021.

Guided-missile cruiser USS Monterey seized dozens of advanced Russian-made anti-tank guided missiles, thousands of Chinese Type 56 assault rifles, and hundreds of PKM machine guns, sniper rifles and rocket-propelled grenade launchers from a stateless vessel transiting the North Arabian Sea in May.

In February, guided-missile destroyer USS Winston S. Churchill seized a cache of weapons off the coast of Somalia, including thousands of AK-47 assault rifles, light machine guns, heavy sniper rifles, rocket-propelled grenade launchers and crew served weapons. The inventory also included barrels, stocks, optical scopes and weapon systems.

The U.S. 5th Fleet area of operations encompasses approximately 2.5 million square miles of water area and includes the Arabian Gulf, Gulf of Oman, Red Sea, parts of the Indian Ocean and three critical choke points at the Strait of Hormuz, Suez Canal and Strait of Bab al Mandeb.

Iran is the most dominant weapon supplier to terrorist organizations such as Hamas and Islamic Jihad.

The Israeli Security agency notes that Hamas and PIJ enjoy extensive material backing from Iran in their arming efforts, in light of Iran’s determination to amplify its influence in the Palestinian arena and among Palestinian terror groups. Iran substantiates its support of the resistance camp by providing high-quality standard weapons to both groups.

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The major smuggling route is from Iran to Sudan, on to Egypt and the Sinai peninsula, and from there to the Gaza Strip, with Iran’s direct involvement in providing the arms and transferring them into the Gaza Strip.

As of 2010 hundreds of standard rockets had been smuggled into the Gaza Strip (most of long ranges of up to 20 and 40 km), as well as about a thousand mortar shells, several dozen Anti-Tank items, tons of standard explosives and raw materials for explosive production.

Photo: Illicit weapons seized from a stateless fishing vessel in the North Arabian Sea are arranged for inventory aboard guided-missile destroyer USS O’Kane’s (DDG 77) flight deck, Dec. 21. (U.S. Navy photo by Mass Communication Specialist Seaman Elisha Smith)

Quick Analysis

Federal Reserve Report on the Economy

The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information, gathered directly from each District’s sources. The latest edition has just been released. We present key portions of the summary here. Overall Economic Activity Overall economic activity expanded slightly, on balance, since late February. Ten out of twelve Districts experienced either slight or modest economic growth—up from eight in the previous report, while the other two reported no changes in activity. Consumer spending barely increased overall, but reports were quite mixed across Districts and spending categories. Several reports mentioned weakness in discretionary spending, as consumers’ price sensitivity remained elevated. Auto spending was buoyed notably in some Districts by improved inventories and dealer incentives, but sales remained sluggish in other Districts. Tourism activity increased modestly, on average, but reports varied widely. Manufacturing activity declined slightly, as only three Districts reported growth in that sector. Contacts reported slight increases in nonfinancial services activity, on average, and bank lending was roughly flat overall. Residential construction increased a little, on average, and home sales strengthened in most Districts. In contrast, nonresidential construction was flat, and commercial real estate leasing fell slightly. The economic outlook among contacts was cautiously optimistic, on balance. Labor Markets Employment rose at a slight pace overall, with nine Districts reporting very slow to modest increases, and the remaining three Districts reporting no changes in employment. Most Districts noted increases in labor supply and in the quality of job applicants. Several Districts reported improved retention of employees, and others pointed to staff reductions at some firms. Despite the improvements in labor supply, many Districts described persistent shortages of qualified applicants for certain positions, including machinists, trades workers, and hospitality workers. Wages grew at a moderate pace in eight Districts, with the remaining four noting only slight to modest wage increases. Multiple Districts said that annual wage growth rates had recently returned to their historical averages. On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels. Prices Price increases were modest, on average, running at about the same pace as in the last report. Disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge caused some shipping delays but so far did not lead to widespread price increases. Movements in raw materials prices were mixed, but six Districts noted moderate increases in energy prices. Contacts in several Districts reported sharp increases in insurance rates, for both businesses and homeowners. Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases. On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few Districts—mostly manufacturers—perceived upside risks to near-term inflation in both input prices and output prices. Highlights by Federal Reserve District Boston Business activity expanded at a modest pace in recent weeks, and prices rose slightly. Employment was flat overall, but one retailer reported significant layoffs. Convention and tourism activity grew at a robust pace. Home sales increased on a year-over-year basis, marking a turnaround. The outlook ranged from cautiously optimistic to bullish. New York On balance, regional economic activity remained flat. Labor market conditions were solid and continued to normalize as labor supply and labor demand came into better balance. Consumer spending was unchanged after a weak first quarter. Housing markets strengthened, with the spring selling season picking up beyond the seasonal norm. The pace of selling price increases remained modest. Philadelphia On balance, business activity was flat in the current Beige Book period—after declining slightly last period. Employment edged up, despite staffing and recruitment efforts slowing to a crawl. Wage and price inflation continue to moderate; however, housing affordability continues to be a concern. Overall, the outlook is positive, as firms remained optimistic about expectations for future growth. Cleveland District business activity increased modestly, as did employment. Firms anticipated greater ease filling open positions, including those that have been particularly challenging, because of increased labor availability. Wage pressures continued to normalize, and some contacts reduced starting wages for new roles. Cost and price pressures changed little. Richmond The regional economy grew at slight pace since our previous report. Consumer spending on retail goods was mixed but spending on travel and tourism was up slightly. Fifth District port activity slowed and was impacted by the collapse of the Francis Scott Key Bridge. Employment growth slowed from a moderate to a modest rate in recent weeks, but wages continued to grow moderately. Price growth also remained moderate. Atlanta The Sixth District economy grew modestly. Labor markets continued to stabilize; wage pressures eased. Many nonlabor costs moderated. Retail sales were steady, but consumers remained price conscious. Tourism remained robust. Commercial real estate conditions slowed. Transportation activity was mixed. Manufacturing grew slightly. Loan demand was flat. Energy activity improved. Chicago Economic activity increased slightly. Employment increased modestly; business and consumer spending rose slightly; nonbusiness contacts saw no change in activity; and manufacturing and construction and real estate activity were flat. Prices and wages rose moderately, while financial conditions were stable. Prospects for 2024 farm income were unchanged. St. Louis Economic activity has continued to increase slightly since our previous report. Prices have increased modestly, as contacts are broadly feeling the pressures of increases in both labor and non-labor costs. The outlook was neutral to slightly optimistic, which is generally unchanged from our previous report, but better than one year ago. Minneapolis District economic activity grew slightly. Employment grew some, but labor demand was softer. Wage pressures were present but continued to ease, while price pressures ticked up. Consumer spending was mostly flat, and manufacturing slowed modestly. Commercial and residential construction improved […]