Hong Kong Intelligence Report #178 Underground Assets: The Hong Kong Shell Games Fueling the U.S.–Iran War
- Ryota Nakanishi
- 11 hours ago
- 15 min read
Open-source intelligence (OSINT)
🔻 IMPORTANT 【重要】The Hong Kong Shell Games
▪️ My Conclusion (Both in English and Chinese):
The Hong Kong Shell Games: The citizens of Hong Kong require media literacy, at the very least in real life, if it is not political power. A substantial proportion of the discourses present in Hong Kong outlets can be distilled into a limited number of positions. The question arises as to why we are unable to adopt a position of bilateral, trilateral, or multilateral relations. The most suitable options for the broader choice are China, the United States, and Israel or Iran. The ongoing U.S.–Iran War has brought to light the significance of Hong Kong's role in international and trade dynamics. A rudimentary response to this inquiry would posit that Hong Kong functions as a nexus for the illicit trade of weapons for Iran and other entities. Moreover, the map depicting the Iranian-controlled area in the Strait of Hormuz clearly demonstrates the country's resilience and the war's current state of stalemate, thus contradicting the information disseminated in various media outlets. An area spanning 22,000 square kilometers under Iranian jurisdiction in the Strait of Hormuz serves as a testament to Iran's military superiority over the Empire of Japan during the Pacific War. This assertion is further substantiated by the strategic sophistication evident in the development of subterranean missile cities.
香港市民需要具備媒體素養，即便無法掌握政治權力，至少在現實生活中也是如此。香港媒體所呈現的論述中，有相當大一部分可以歸納為有限的幾種立場。這不禁令人質疑：為何我們無法採取雙邊、三邊或多邊關係的立場？若要從更廣泛的選擇中挑選，最適合的選項應為中國、美國，以及以色列或伊朗。當前持續的美國與伊朗之戰，已凸顯出香港在國際及貿易動態中的重要性。對此問題的初步回應會指出，香港充當了伊朗及其他實體進行武器非法貿易的樞紐。此外，描繪霍爾木茲海峽伊朗控制區的地圖，清楚顯示了該國的韌性以及戰爭當前的僵持狀態，這與各類媒體散佈的資訊相矛盾。霍爾木茲海峽內那片隸屬伊朗管轄、面積達22,000平方公里的區域，正是伊朗的軍事實力超越太平洋戰爭時的大日本帝國的明證。而地下導彈城建設所展現的戰略精妙性，更進一步佐證了此一論點。
▪️ Analytical Contents (Only in English):
Iran claims sovereignty over a significant portion of the Strait of Hormuz, controlling large swaths of the maritime corridor through its territorial waters. In contrast, the United States has no sovereign control or territorial waters in the area, though the U.S. Navy and its allies maintain a heavy operational, tactical, and patrolling presence in the region. [1, 2, 3, 4, 5]
A breakdown of the territorial dynamics and control highlights the following:
Iranian Control: Iran borders the entire northern boundary of the 30-to-60-mile-wide strait. Through claims of expanded territorial seas and strategic islands like Larak and Qeshm, Iran exercises sovereign dominance over the northern half, dictating safe corridors and requiring ships to coordinate their passage with Iranian armed forces. [1, 3, 5, 6, 7]
Omani Control: The southern portion of the strait is bordered by Oman (and the UAE). Much of the international shipping lane falls within Omani territorial waters, which Oman manages in accordance with international maritime law. [6, 8, 9]
U.S. Presence: The U.S. Navy does not possess or claim any physical territory in the strait. The U.S. role relies on force projection, naval blockades, and operational military strategies to maintain the free flow of global trade and secure maritime routes. [2, 3, 4, 6, 10, 11]
For official details on the legal governance of the waterway, you can review the UK Parliament Research Briefings on the Strait of Hormuz.
[6] https://time.com
[11] https://www.cfr.org
The Iranian resistance and the war situation have solidified into a rigid military and economic stalemate, characterized by a fragile, repeatedly violated ceasefire. Neither the United States nor Iran has achieved their core wartime objectives, leaving both nations locked in a "gray zone" conflict that is neither total war nor true peace. [1, 2, 3, 4]
Signs of this stalemate and the current state of Iranian resistance manifest across several fronts:
1. The Maritime Choke Point Deadlock
The Strait is Blockaded: Iran continues its selective closure and blockade of the Strait of Hormuz. It actively reroutes commercial vessels, demands transit tolls, and enforces its own strict passage corridors. [2, 5, 6, 7]
Dual Economic Strangulation: The U.S. Navy enforces a counter-blockade on Iranian ports and attempts to force open the international shipping lanes. This dynamic has created a test of "who will blink first" on the water. [2, 4, 6]
Persistent Violations: Despite an active diplomatic framework, both sides regularly exchange fire. U.S. forces have conducted targeted airstrikes against Iranian missile launch sites and mine-laying boats. Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) continues to target transiting warships and commercial tankers with drones, missiles, and small assault boats. [6, 8, 9, 10]
2. Signs of Iranian Regime Resistance
No Retreat Posture: Officially, Tehran portrays itself as victorious, as its regime remains intact and its core missile and nuclear capabilities have survived the war. The Supreme National Security Council has explicitly vowed "no retreat" in its struggle against the U.S. and Israel. [3, 11]
Strategy of Attrition: Iranian strategy relies on endurance and economic pain. By choking the global supply of petrochemicals and forcing energy prices to skyrocket, Iran seeks to make the war too economically painful for Washington to sustain. [6, 7, 8, 12]
3. Deepening Internal Iranian Fractures
Fational Splits: Beneath the public display of resistance, the Iranian elite is deeply divided. The death of Supreme Leader Ayatollah Ali Khamenei has left a massive power vacuum, causing hardline factions and moderate factions to openly clash over whether to compromise or continue the war. [13, 14]
Domestic Unrest: The regime faces a severe internal threat from nationwide protests sparked by a collapsing economy and war fatigue. Authorities have used severe crackdowns, internet blackouts, and the deployment of IRGC ground forces to keep a lid on domestic instability. [15, 16, 17, 18]
4. Diplomatic "Standoff" and Potential Exit Ramps
Negotiators from both sides have recently hammered out a Memorandum of Understanding (MoU) via Qatari mediation for a 60-day ceasefire extension to wind down the war. However, a diplomatic stalemate persists because: [7, 19, 20]
U.S. Demands: The Trump administration demands that Iran completely reopen the Strait of Hormuz and dispose of its highly enriched uranium before finalizing terms. [19]
Iran Demands: Tehran refuses to dismantle its programs or yield unless the U.S. permanently lifts the maritime blockade and unfreezes billions of dollars in sanctioned Iranian assets. [1, 19, 21]
Because both sides possess the capability to deny the other a clean victory, the conflict remains entirely gridlocked while awaiting final executive approval from Washington and Tehran. [1, 19, 20]
[12] https://uinjkt.ac.id
[13] https://gulfif.org
[19] https://www.wsj.com
The vast majority of Iran’s ballistic and cruise missiles are stored deep underground. The Islamic Revolutionary Guard Corps (IRGC) refers to this vast subterranean network as "missile cities". [1, 2, 3]
These underground complexes are a core pillar of Iran's military strategy and have been a major focus of the current war. [2, 4]
1. Where Are They Located?
Iran has constructed dozens of these facilities carved deep into granite mountain ranges and under strategic islands. Major identified underground missile clusters include: [3, 4]
The Zagros Mountains: Home to heavily fortified bases near cities like Isfahan (such as the Soffeh Mountain complex), Tabriz, Kermanshah, and Shiraz. [5, 6]
Strait of Hormuz & Persian Gulf: Hidden "naval missile cities" are buried under coastal cliffs and islands like Qeshm Island, housing anti-ship cruise missiles and fast-attack ballistic boats to control the shipping lanes. [1, 7, 8]
2. How Deep Are They Built?
Many of these tunnel systems are buried at depths approaching 500 meters (over 1,600 feet) under solid rock and concrete. This immense depth was intentionally engineered to make them impervious to conventional airstrikes, including the U.S. Military's most powerful bunker-buster munitions (like the GBU-57 Massive Ordnance Penetrator). [4, 9, 10]
3. How Do They Operate?
Rather than using static, vulnerable launch silos, Iran's missile cities function as highly mobile, automated underground fortresses: [2, 4, 9, 11]
Secret Rail Systems: Missiles are transported through cavernous tunnels on automated, railway-type tracks. [2, 9]
Vertical Magazines: Projectiles are kept vertically on ready-to-fire platforms so they can be rapidly rolled out and launched in succession. [11]
Hidden Launch Hatches: Missiles are moved to disguised launch hatches or tunnel openings, fired, and the launching mechanisms are immediately retracted back under the mountain before satellites or aircraft can target them. [2, 9]
4. The Impact of the War
During the recent heavy fighting, the United States and Israel launched a massive air campaign explicitly targeting these bases. Because the bombs could not penetrate the solid rock to destroy the missiles inside, Western forces employed an "access denial" strategy—bombing the roads, collapsing the tunnel entrances, and burying the launch hatches to trap the missiles underground. [3, 4, 12, 13]
However, since the recent ceasefire took effect, satellite imagery analyzed by CNN reveals that Iran has used bulldozers and dump trucks to rapidly clear at least 50 blocked tunnel entrances across 18 different sites. While Iran's above-ground manufacturing plants suffered severe damage, roughly half of its pre-war missile fleet remains intact, safely preserved inside these underground mountain bunkers. [4, 14, 15]
[16, 17]
[15] https://www.jns.org
The trade status of Iran with both Hong Kong and Mainland China between 2025 and 2026 is severely strained and declining rapidly due to the ongoing U.S.–Iran war and intensifying international sanctions, though a massive underground "shadow trade" persists.
1. Iran – Hong Kong Trade Status (2025–2026)
Official direct trade between Hong Kong and Iran has shrunk to minimal amounts, while Hong Kong’s role as a logistical and financial transit hub for covert Iranian trade has faced unprecedented crackdowns.
Dwindling Official Trade: According to Trading Economics data for 2025, Hong Kong's official direct exports to Iran sat at just USD 27.55 million. The primary categories were electrical/electronic equipment (USD 9.7 million) and vehicles (USD 6.42 million). [1]
The "Shadow" Energy Network: While legitimate direct trade is tiny, Hong Kong front companies are heavily involved in moving Iranian energy. Recent U.S. Treasury actions in May 2026 exposed that Hong Kong-registered entities like Worth Seen Energy Limited, GS Chemical Transportation, and Verda Gas Co Ltd have used front networks to move millions of barrels of Iranian crude oil, liquefied petroleum gas (LPG), and methanol. [2, 3, 4]
Sanction Enforcement & Financial Fallout: In early 2026, the U.S. leveled severe sanctions against these Hong Kong-based shipping and procurement networks. This, combined with active military flare-ups in the Persian Gulf, has caused severe volatility in Hong Kong’s financial markets, dragging down the Hang Seng Index during escalation periods. [2, 3, 5, 6, 7]
2. Iran – Mainland China Trade Status (2025–2026)
China remains Iran’s largest overall trading partner, but the wartime environment and localized maritime blockades have triggered a massive, sharp decline in trade values between 2025 and 2026. [8, 9]
Massive Collapse in Trade Value: According to OEC World bilateral trade registries, official Chinese exports to Iran plummeted by 89.6% year-over-year, dropping from USD 688 million in March 2025 down to just USD 71.8 million in March 2026. Similarly, recorded imports from Iran fell by 48.7% over the same period (from USD 220 million down to USD 113 million). [10]
Disruption of the Oil Lifeline: Historically, direct and indirect Iranian oil accounted for roughly 13% to 14% of China’s total crude imports. However, the U.S. Navy's maritime counter-blockade around the Strait of Hormuz has severely disrupted shipping lines. While Beijing continues to buy heavily discounted "ghost tankers" of Iranian oil to secure its strategic reserves, rising shipping insurance costs and physical blockades have severely slowed down delivery speeds. [11, 12, 13, 14, 15]
Shift to Base Commodities: For non-oil trade, the structure has simplified. China primarily exports low-tier manufactured goods, iron, motorcycles, and auto parts to Iran. In return, Iran exports ethylene polymers, iron ore, frozen fish, and semi-processed petrochemicals (like methanol). [10, 16]
Strategic Hesitancy: Beijing has adopted a protective, "wait-and-see" diplomatic posture. While China refuses to cooperate with U.S. sanctions and continues backing Iran via platforms like BRICS and the Shanghai Cooperation Organisation (SCO), the fear of secondary U.S. sanctions has made major Chinese state firms highly reluctant to ink new infrastructure or industrial investments inside Iran while the war persists. [8, 13, 17, 18]
[10] https://oec.world
A massive network of shell companies in Hong Kong is actively being used to route military-grade drone and missile parts from mainland China to Iran. While Beijing denies sending fully assembled weapon systems, international intelligence and trade audits confirm that Hong Kong operates as a vital clandestine transit hub for critical military components. [1, 2, 3, 4]
The specific mechanics of this supply chain, the types of equipment involved, and the recent international fallout reveal a deeply integrated network:
1. The Weapon Parts Transshipment Mechanism
Western components (from the US and Europe) and Chinese-manufactured electronics are routinely routed through Hong Kong to exploit its open financial and shipping ecosystems. [1]
The Shell Company Loophole: Traders set up short-lived front companies in Hong Kong. These entities purchase dual-use technologies under the guise of civilian commercial trade. [1, 5, 6]
Obscuring the Destination: Once the goods land in Hong Kong, they are repackaged, given false manifests, and rerouted to Iran via intermediary ports in the Middle East (frequently Dubai or Oman) to mask their true destination. [7, 8, 9]
2. What Specific Parts Are Being Sent?
Intelligence teardowns of captured Iranian weaponry, such as the Shahed-136 attack drones, have traced critical electronics back to Hong Kong intermediaries: [1, 6]
Drone Components: Shipments include microelectronics, servomotors for precise motion control, batteries, computer chips, and high-performance engines.
Missile Materials: Aerospace-grade raw materials and missile propellant precursors used in expanding Iran's ballistic missile programs. [1, 2, 5, 6]
3. Recent Sanctions and Crackdowns (May 2026) [10]
In response to this supply line, the U.S. Department of the Treasury enacted severe sweeping sanctions targeting the specific networks operating out of Hong Kong. Front companies explicitly blacklisted include: [2, 10]
HK Hesin Industry Co Ltd and Mustad Ltd: Both Hong Kong-registered firms were blocked for serving as intermediaries to secure weapon-grade raw materials and components for Iran's Islamic Revolutionary Guard Corps (IRGC). [9, 11]
They worked directly alongside mainland companies like Yushita Shanghai International Trade and Hitex Insulation Ningbo to complete the procurement pipeline. [11, 12]
4. Allegations of Direct Weapon Sales [13]
Beyond parts and dual-use components, U.S. intelligence leaked reports indicating that China has explored secretly delivering fully completed weapon systems—such as shoulder-fired missiles (MANPADS) and advanced air defense networks—to help Iran rebuild its capabilities. [3, 14]
The Chinese Foreign Ministry vehemently dismissed these reports as "baseless smears," reiterating that China maintains strict export controls and does not provide military aid to nations currently engaged in active warfare. Donald Trump has threatened Beijing with a 50% tariff penalty if any direct military assistance to Tehran is uncovered, causing Beijing to remain highly protective and covert regarding its defense trade. [3, 15, 16]
[11] https://www.scmp.com
There is an official new map. In May 2026, Iran’s newly established "Persian Gulf Strait Authority" (PGSA) and the Islamic Revolutionary Guard Corps (IRGC) Navy officially released a highly controversial maritime map asserting military control over a massively expanded 22,000 square kilometer (8,800 square mile) zone. [1, 2]
This map fundamentally expands Iran's self-declared jurisdiction, cutting directly across international shipping lanes and encroaching heavily into waters recognized globally as the sovereign territory of the United Arab Emirates (UAE) and Oman. [3]
The Boundaries of Iran's New Control Map
According to the official PGSA and IRGC postings, the new map draws a strict "controlled maritime box" using four specific geographic anchors: [3, 4, 5]
The Western Boundary Line: Connects the westernmost tip of Iran's Qeshm Island directly across the water to the UAE’s Umm Al Quwain region. [3, 5]
The Eastern Boundary Line: Connects Kuh-e Mobarak (Mount Mubarak) on the Iranian mainland down to the south of Fujairah in the UAE. [3, 5]
The Central Restricted Zone: Features a square-shaped, coordinate-enclosed "no-go box" in the middle passage of the strait where ships are entirely banned due to stated "mine risks and wartime security". [4]
Strategic Implications of the Map
Eliminating the UAE Bypass: By extending the eastern line all the way south of Fujairah, Iran’s map purposefully swallows the waters outside the UAE's key port. This effectively nullifies the UAE’s strategic ability to bypass the internal strait to sell its oil. [3, 5]
Mandatory Authorization: The map explicitly warns that any commercial or military vessel transiting anywhere within these red-marked boundaries is legally required to contact Iranian armed forces to obtain prior authorization and coordinate their movements. [3, 5, 6]
The International Backlash: The international community completely rejects this map. Five Gulf states (Saudi Arabia, the UAE, Oman, Qatar, and Bahrain) issued a joint letter via the International Maritime Organization (IMO) instructing all global shipping lines to completely ignore the PGSA map. [3]
Where to View the Map Online
Because this map was released directly by state-affiliated media and military broadcast networks, you can view the visual layout, satellite overlays, and expert breakdowns across major global news records: [7]
Video & Visual Breakdowns: Detailed video reports showing the red-shaded zones and boundary lines are available via the BBC Verify Report on Iran's Strait Claims and the CNN World Analysis of Iran's New Map. [1, 8]
Cartographic & Analysis Articles: Comprehensive text-and-map breakdowns outlining the exact coordinates and regional tensions can be reviewed through Euronews Regional Coverage. [3]
The interactive map below highlights the fundamental geography of the Strait of Hormuz where these new, overlapping lines of military control are actively being contested. [3, 9]
In fact, the 22,000 square kilometer (8,800 square mile) zone declared by Iran's Persian Gulf Strait Authority is nearly 10 times larger than the entire Okinawa island chain and over 1,000 times larger than Iwo Jima.
Size Comparison Breakdowns
Iwo Jima (Iwo To): This tiny volcanic island measures roughly 21 square kilometers (8 square miles). The Iranian maritime control zone is 1,047 times larger than Iwo Jima.
Okinawa Main Island: The primary island of Okinawa covers roughly 1,207 square kilometers (466 square miles). The Iranian control zone is 18 times larger than Okinawa Main Island.
Okinawa Prefecture (All Islands): Even if you combine all 160+ islands in the entire Okinawa Prefecture, the total land area is only about 2,281 square kilometers (880 square miles). The Iranian claimed maritime zone is nearly 10 times larger than the entire prefecture.
Direct Area Comparison
Territory / Zone | Area in Square Kilometers | Scale Relative to Iran's Claimed Zone |
Iran's Strait Control Zone | 22,000 km² | 100% (Baseline) |
Okinawa Prefecture (All islands) | 2,281 km² | ~10% of Iran's zone |
1,207 km² | ~5.5% of Iran's zone | |
21 km² | ~0.1% of Iran's zone |
Why is it so large?
The massive difference comes down to geography. Okinawa and Iwo Jima are isolated physical islands (landmasses). Conversely, the Iranian zone is a vast body of open water that spans an entire international maritime choke point, stretching dozens of miles across from the Iranian coast all the way to the beaches of the United Arab Emirates and Oman.
If you are trying to picture its scale against other places, the 22,000 km² claimed area is roughly comparable to the size of the entire country of Slovenia, or the state of New Jersey in the United States.
Hong Kong media covers and defines both of these issues extensively, though the angle shifts dramatically depending on the specific news outlet. [1]
Because Hong Kong houses both independent English-language publications and Beijing-backed state press, the coverage splits into two very distinct narratives.
1. How HK Media Defines the "Strait of Hormuz Map & Control"
Hong Kong’s leading publications have explicitly detailed Iran’s newly drawn maritime boundaries, its creation of the Persian Gulf Strait Authority (PGSA), and the subsequent U.S. sanctions. [2]
The South China Morning Post (SCMP): The SCMP has framed the issue as a critical bottleneck for the global economy, emphasizing that the Strait handled a fifth of the world's oil before the war. They have highlighted the legal clash: reporting on Iranian military advisers who claim managing the Strait is Tehran's "legal right," while contrasting it against U.S. statements and international law that guarantees foreign vessels free transit. They also released detailed video breakdowns explaining the U.S. counter-blockade and its risk to Asian energy markets. [3, 4, 5]
The Standard & RTHK: The Standard explicitly defined the exact geography of the new PGSA map, noting that Iran's boundaries purposefully swallow waters south of the UAE's port of Fujairah to cut off oil pipelines meant to bypass the waterway. Broadcaster RTHK detailed how the IRGC enforces this map, requiring ships to ask for permission before transiting. [6, 7]
Independent & Local Media: Outlets like Bastille Post have covered the ground-level violence stemming from the map, reporting on Iranian forces firing warning shots at commercial ships that tried to cross the Strait without PGSA authorization. [2]
2. How HK Media Defines the "Weapon Parts via HK Shell Companies"
When it comes to mainland China routing drone and missile parts through Hong Kong front companies, the media is highly polarized:
Independent Outlets (SCMP & Hong Kong Free Press): These outlets directly publish Western intelligence findings and U.S. Treasury blacklists. For instance, the SCMP detailed the blacklisting of HK Hesin Industry and Mustad Limited, explicitly pointing out that they were acting as intermediaries to secure weapon-grade raw materials and satellite imagery for the IRGC. [8]
Pro-Beijing & State Outlets (China Daily HK): State-aligned media heavily amplifies denials from Beijing. China Daily HK features statements from China’s Ministry of National Defense calling the weapon-supply reports "baseless smears" and "false information," emphasizing that China does not provide defense systems or drones to nations in active wartime. [9, 10]
The Official Hong Kong Government Stance: Covered widely across local media, the Hong Kong government explicitly states that it strictly enforces United Nations Security Council sanctions against Iran. However, the government openly hits out at unilateral U.S. sanctions targeting local businesses, stating that Hong Kong is not legally bound to enforce trade bans pushed outside of the UN framework. [11]
[10] https://www.scmp.com
[11] https://www.scmp.com
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