A bottle of olive oil and a rug walk into a supermarket.
One of them doesn't walk out. But before we get to the punchline, here's what Hannah sent in this week. She was at Osher Ad, picked up a beautiful bottle of olive oil, everything on the label in French, so she assumed French. Then she looked closer. Tunisian. Which raised the obvious question: how did that get here? And separately, a few years back she was in a rug shop for work, and the owner showed her brand new high-end rugs and said, flat out, they were from Iran. When she asked how that was possible, he just said, "They have their ways."
Which is the most honest answer she could have gotten, frankly.
It's not wrong. So she wants a practical trade explainer. How do these products actually get here? Are they routed through third countries and relabeled or re-exported? Does Israel legally allow imports from countries it has no diplomatic relations with, including enemy states? And then the bigger version: how do goods from heavily sanctioned countries like Iran, Russia, or North Korea still circulate internationally? How do products move around political barriers, sanctions, and countries that officially don't do business with each other?
That's a whole semester of trade policy compressed into one prompt.
It is, and I think the way to approach it is as a mechanics question, not a geopolitics lecture. The politics is the boring part. The interesting part is how a bottle of Tunisian olive oil physically ends up on a shelf in Jerusalem with French writing on it.
Right, and the first thing to understand is that international trade is not a series of bilateral handshakes between governments. It's a system of goods, documents, ships, and intermediaries. Political relationships are one input, but they're not the operating system.
So before we get to the specific cases, give us the conceptual vocabulary. What's the distinction that actually does the work here?
Country of origin versus country of export. Those are two different things, and the gap between them is where everything interesting happens. Country of origin is where the good was made, grown, or substantially transformed. Country of export is the last country it left before arriving at its destination. Those can be the same place, but they often aren't.
And when they aren't, that's not automatically suspicious.
Not at all. It's how normal trade works. A German company buys coffee from Ethiopia, roasts it in Hamburg, and exports it to Japan. The origin is Ethiopia or Germany depending on how you classify roasting, the export country is Germany, and the Japanese importer declares whatever the paperwork says. Now apply that to goods from places with political problems, and the gap becomes a feature rather than a bug.
So the taxonomy. What kinds of barriers are we actually talking about?
At least four distinct things. No diplomatic relations, which is what Israel has with Tunisia. Active hostility or formal enemy status, which is Iran, Syria, Lebanon. Sanctions regimes, which is what the US and EU have on Iran, Russia, North Korea. And then import bans or tariffs, which are domestic policy. Each of these creates a different kind of workaround because each one is enforced differently.
And the workarounds range from completely legal to completely not, with a lot of gray in between.
That's the spectrum. Completely legal re-export through a third country, gray-market documentation that's technically accurate but misleading, and outright smuggling with falsified papers. Different goods, different paths, different risk profiles.
So let's start with the olive oil, because that's the one sitting on Hannah's shelf. Tunisia and Israel have no diplomatic relations. Tunisia has historically been pretty hostile. But Tunisian olive oil is in Osher Ad with French labeling. What's the actual pathway?
The most likely route is that a French or Italian importer bought the oil in bulk from a Tunisian producer. The oil was shipped to Marseille or Genoa or wherever, bottled there or maybe just relabeled, and then exported to Israel as a French or Italian product. The Israeli importer bought it from a European supplier, paid the European supplier, and the customs declaration says country of export: France. Country of origin might say Tunisia, might say France, might say European Union. Depends on how much processing happened and what the importer declared.
And that's legal.
Completely. Israel doesn't have a ban on Tunisian goods. There's no trade embargo. The absence of diplomatic relations doesn't automatically mean the absence of trade. Countries without formal relations trade all the time through intermediaries. Taiwan and China, India and Pakistan at various points, the US and Cuba in certain categories. Diplomacy and commerce are different channels.
So the French labeling isn't deception, exactly. It's just the last step in a chain.
It's the country of export, which is what the label often reflects, not the country of origin. A French company bottled it, a French company sold it, French is the language on the label because that's who marketed it. The oil inside is Tunisian. Nobody lied, but nobody volunteered either.
And the rug is a different category entirely.
Iran is not just a country Israel has no relations with. Iran is an enemy state under Israeli law. There's a formal ban on trade under the Trading with the Enemy Act, which dates back decades and covers Iran, Syria, Lebanon, and a few others. So an Iranian rug cannot legally be imported into Israel as an Iranian rug. Full stop.
But the rug dealer said they were from Iran.
And they probably were. But by the time they reached his shop, they weren't Iranian anymore, on paper. The classic route for Persian rugs is through Turkey or the United Arab Emirates. Iranian rugs are high-value, low-volume, and culturally prized. They're worth the trouble. So a dealer in Istanbul or Dubai buys them, holds them, maybe cleans them, maybe just stores them, and then re-exports them to Israel as Turkish or Emirati goods.
And the documentation follows the last country.
The documentation is the product, in a sense. The rug physically is what it is, but legally it's whatever the paperwork says. If the Turkish dealer declares them as Turkish rugs, and the Israeli importer declares Turkish rugs, and the customs broker files Turkish rugs, then they're Turkish rugs. The Israeli customs officer is not a rug expert. They're not going to unroll it and check the knot density and the dye pattern and say, ah, this is a Kashan, not a Hereke.
"They have their ways."
"They have their ways" is not mysticism. It's transshipment plus documentation. The ways are a shipping container, a warehouse in Dubai, and a set of forms.
Now, the legal question Hannah asked directly: does Israel allow imports from enemy states under certain circumstances?
The formal answer is no, with a significant asterisk. The Trading with the Enemy Act prohibits direct trade with enemy states. But the key word is direct. If a good has been substantially transformed in a third country, or even just re-exported from a third country with new documentation, it may not legally count as originating from the enemy state anymore. The rules of origin are complex and, frankly, gamed constantly.
Substantially transformed. What does that actually mean?
It's a legal standard that varies by trade agreement and by product. If you take Iranian crude oil and refine it in India, the refined product is arguably Indian. If you take Iranian pistachios and repackage them in Turkey, that's murkier. Repackaging alone usually doesn't change origin. But if you roast them, salt them, blend them with other nuts, now you've got a Turkish snack product. The more processing, the stronger the claim.
So the rug dealer's rugs probably didn't meet the substantial transformation test. They were just transshipped with new papers.
Which puts them in the gray market or outright smuggling category, depending on how the paperwork was handled. And here's the thing: enforcement is complex. Israeli customs can't verify the true origin of every rug that comes through. The system runs on documentation. If the documents are internally consistent and the duties are paid, the container moves.
Let's talk about the infrastructure that makes this possible. Free trade zones, customs warehouses.
These are the unsung heroes of global trade. A free trade zone is a designated area where goods can be stored, repackaged, relabeled, and re-documented without technically entering the host country's domestic market. So a container of Iranian rugs can sit in Jebel Ali in Dubai, which is one of the largest free zones in the world, and be re-documented as Emirati exports without ever paying Emirati import duties or being subject to Emirati import rules.
Because they never legally entered the UAE.
They're in a legal limbo. Physically they're in Dubai, but legally they're still in transit. And when they leave, the paperwork can say they originated in the UAE, or at least that they were exported from the UAE. The free zone is a laundering facility for origin.
Laundering is a strong word.
It's the right word for some of what happens. But free zones also do enormous legitimate business. Most of what moves through them is completely normal trade that just benefits from tax deferral and logistics efficiency. The same infrastructure that handles iPhones also handles rugs with questionable paperwork. The zone doesn't care.
So that's the olive oil and the rug. Now zoom out. Same mechanics, bigger goods, higher stakes. Russian oil.
Russian oil is the perfect case study because it's happening at massive scale right now. The West sanctioned Russian crude after the invasion of Ukraine. Russia's response was to redirect exports to India and China, who didn't join the sanctions. Indian refiners buy Russian crude at a discount, refine it into diesel and gasoline and jet fuel, and sell those products to Europe and the US.
And that's legal?
It's legal because the refined product is considered Indian, not Russian. The substantial transformation test again. The crude was Russian, but the diesel is Indian. The sanctions were designed to reduce Russian revenue, not eliminate it, and this loophole was arguably anticipated. But it does mean that European drivers are filling their tanks with fuel that started as Russian crude, processed in India, sold back at a markup.
And the ship-to-ship transfers.
That's the darker version. A Russian tanker meets another tanker at sea, transfers the cargo, and the receiving ship's paperwork says the oil came from somewhere else. Kazakhstan, Malaysia, wherever. The oil gets mixed with other cargo, the documentation gets murky, and by the time it reaches a port, the origin is a matter of assertion. This is harder to trace, harder to verify, and it's happening constantly in the Mediterranean, the Gulf, and off the coast of Malaysia.
The oil equivalent of the rug dealer's "they have their ways."
The ways are the same. It's just that the volume is measured in barrels instead of knots per square inch.
North Korea. That's the extreme end.
North Korea is under the most comprehensive sanctions regime in the world. The UN Security Council has banned virtually all of its exports: coal, iron, seafood, textiles, labor. And yet North Korean coal still reaches China. North Korean seafood still reaches markets in Southeast Asia. North Korean weapons components have been found in missiles fired by other countries.
How?
Ship-to-ship transfers in the East China Sea, mostly. A North Korean vessel leaves port with coal, meets a Chinese or Taiwanese or Panamanian-flagged ship in international waters, transfers the cargo, and the receiving ship's manifest says the coal came from somewhere else. Falsified documents, front companies, flags of convenience. The UN has documented hundreds of these cases. They publish reports with satellite imagery showing the transfers happening.
And the price is high enough to make it worth the risk.
That's the through-line. Sanctions evasion is a business. It has costs, risks, and margins. If the margin is high enough, someone will do it. North Korean coal is cheap, Chinese demand is huge, and the enforcement gap is real. The UN can't patrol every square mile of ocean. So the coal moves.
Now bring this back to Israel. The same infrastructure that moves North Korean coal and Russian oil is also moving Iranian rugs and Tunisian olive oil.
That's the key insight. The global trade system is not designed to stop goods from moving. It's designed to move goods and record the movement. Political barriers are inputs, but they're not walls. They're more like speed bumps. The system routes around them.
And Israel's specific import market makes this even more pronounced.
Israel's import system is concentrated and heavily regulated. A small number of licensed importers control a lot of the market. That means the people who know how to navigate these pathways are a known quantity. They have relationships with customs brokers, they know which free zones to use, they know which documentation will pass. The barrier to entry is high, which means the people who are in the game are good at it.
Which connects to the broader story of why everything in Israel is expensive. If you have to route your olive oil through Marseille and your rugs through Dubai, the logistics cost goes up, the documentation cost goes up, and the importer's margin goes up.
And the consumer pays for all of it. The Tunisian olive oil at Osher Ad probably cost more than it would have if Israel and Tunisia had normal trade relations and the oil could ship directly from Tunis to Haifa. The political barrier is a tax on the product.
Knock-on effect: trade statistics become misleading. If Tunisian oil enters Israel as French, then Israel's trade data shows imports from France that are actually Tunisian. If Iranian rugs enter as Turkish, the data shows Turkish rugs. The official numbers don't reflect the real flow.
And that has policy implications. If you're trying to understand Israel's trade relationships, or any country's trade relationships, the official data is systematically distorted by these routing patterns. A country can look like it has no trade with an adversary when it actually has significant indirect trade.
Another knock-on effect: consumers don't know what they're buying. Hannah picked up a bottle of olive oil thinking it was French. She found out it was Tunisian because she read the fine print. Most people never do. The label told a story, and the story was incomplete.
And that's not even necessarily a problem. Tunisian olive oil is often excellent. The oil isn't worse because the label was in French. But the consumer's ability to make informed choices is compromised. If you care about country of origin for political reasons, or for quality reasons, or for religious reasons, you can't always trust the label.
The rug dealer was more honest than the olive oil bottle, in a way. He said Iran. The bottle let her assume France.
The rug dealer could afford to be honest because he was selling in person to someone who was already in his shop. The olive oil is on a shelf competing with a hundred other bottles. The label is doing marketing work, not disclosure work.
So what does this mean for sanctions and boycotts as tools of statecraft? If the system is this porous, are they effective?
They're effective at raising costs and reducing volume, but they're not effective at stopping trade. The Russian oil still moves, but Russia has to sell at a discount and pay for the routing. The North Korean coal still moves, but at a smaller scale and with higher risk. Sanctions are a friction tool, not a blockade.
And boycotts?
Consumer boycotts are even more porous, because they rely on labeling that's already unreliable. If you want to boycott Tunisian olive oil, you first have to find it, and the label says France. The boycott works on the visible product, not the hidden origin.
The political statement is often more symbolic than practical.
It's a signal, not a seal. The goods still move. The system is built for movement.
Hilbert: The tiles were Italian.
What?
Hilbert: That's what the paperwork said. Italian ceramic tiles from Naples. The crates came through Haifa port, late eighties, I was a junior customs broker for a small firm that handled what the owner called specialty imports. My job was to match the shipping documents to the customs declaration and make sure the duties got paid. The tiles were Italian. That's what the manifest said, that's what the invoice said, that's what the declaration said.
And the crates?
Hilbert: The crates smelled like they'd been at sea for three months. The port stamps on the side were from Limassol. But the paperwork said Naples, so the tiles were Italian. My boss told me the tiles were Italian. I wrote down Italian. The customs officer stamped it. The tiles went to a showroom in Tel Aviv and sold for a very good price.
Did you ever ask?
Hilbert: I was nineteen and I needed the job. You don't ask questions about Italian tiles when the port stamps say Cyprus. You match the paperwork and you collect your pay.
The stamps said Cyprus but the invoice said Naples, and nobody opened the crate.
Hilbert: That's the thing nobody outside the business understands. Customs is not a truth-finding operation. It's a paperwork-matching operation. If the documents say Italy, the goods are Italian. Nobody opens the crate to check the soil. Nobody's got time for that. The port handles thousands of containers a day. You think they're going to unroll a rug and ask where the sheep was born?
The system runs on trust in documents.
Hilbert: The system runs on documents, full stop. Trust doesn't enter into it. The document is the product. The crate could have been full of anything. The paperwork said Italian tiles, the duty was paid on Italian tiles, the container moved. That's the whole job.
You still have the tiles.
Hilbert: A few of them, in my bathroom. They've held up beautifully. I look at them sometimes and think, I have no idea where you came from. Could be Italy. Could be anywhere. The grout doesn't care.
The grout doesn't care is the entire episode in four words.
It really is. The tile doesn't know what country it's from. The paperwork knows, and the paperwork can be wrong, and the tile still does its job.
Hilbert: The tile does its job and so does the system. The system's job is to move goods and collect duties. It's not the system's job to enforce foreign policy. That's somebody else's department, and they're not the ones standing on the dock at six in the morning with a clipboard.
When Hannah asks how the rug dealer does it, the answer is that the rug dealer is not doing anything exotic. He's using the same system that moved your Italian tiles.
Hilbert: The rug dealer knows a guy. That's the whole secret. He knows a guy in Turkey or Dubai who knows a guy with a warehouse and a stamp. The rest is shipping.
The tile in your bathroom is the proof that this has been going on forever. It's not a new loophole. It's the design.
Hilbert: The design doesn't care about politics. The design cares about movement. If you want to stop the movement, you have to change the design, and nobody wants to do that because the design makes everyone rich.
The one thing I'm taking from this is that the label on a product is not a fact about the product. It's a fact about the last place the paperwork was stamped. The olive oil and the rug and the tiles are all the same story: the system moves goods, and the documents tell you where the goods were last documented, not where they began.
That gap between origin and paperwork is not a bug. It's the feature that keeps global trade moving at all. The question is whether we want to close it, and what we'd lose if we did.
If trade documentation goes fully digital and fully traceable, do these pathways close, or do they just get more sophisticated? My guess is the latter. The ways adapt faster than the rules.
The ways are the rules, in a sense. They're the rules as they're actually practiced, not as they're written. And the people who practice them have every incentive to stay ahead of the people who write them.
Thanks to Hilbert Flumingtop for producing, and for the tiles.
This has been My Weird Prompts, the human-AI collaboration podcast.
If you want to send us your own weird prompt, email us at show at my weird prompts dot com. We'll be back soon.
