A non-violent tool for countering the Iranian threat

The successful divestment campaign against South Africa in the 1980s demonstrated that economic pressure can have a great impact on a country’s policies. The South African apartheid regime finally abandoned its racist policies when it was boycotted financially. Prior to that time, diplomatic pressure had proved wholly inadequate to the task.[1] Before foreign companies were compelled to pull out of South Africa, the government ignored international condemnations and resolutions, just as Iran does today.

The Danger Posed by Iran

The case against Iran is considerably stronger than that against South Africa. Iran’s clerical rulers not only oppress their own people [2] as South Africa did, but they also sponsor international terror groups [3] and have threatened to wipe another country off the map and to bring about a “world without America” while building atomic materials.[4] Iran has pursued its nuclear program despite UN Security Council sanctions. Terminating Western business with the Islamic Republic of Iran is an effective and peaceful step that may prevent Tehran from developing atomic bombs. Iran’s ability to fund its nuclear program and sponsor terrorism would come to a grinding halt without revenue gained from foreign investors. Eighty percent of Iran’s hard currency revenues come from its oil and gas revenues. The Iranian oil industry is controlled by the country’s clerical elite and its feared Iranian Revolutionary Guards Corps [5], at once the instrument of repression and the prime-mover of Iran’s terror network.

Economic Measures and the Iranian Regime

The United States has barred American companies from conducting business with Iran. Partial sanctions were imposed on Iran after the 1979 hostage crisis. These sanctions were expanded in 1996 with the Iran-Libya Sanctions Act (ILSA) which imposed fines on companies investing $40 million or more in the oil and gas industry of those countries. [6] Many companies – including some American corporations acting through their foreign subsidiaries, but most foreign-owned and -operated – are undeterred by U.S. policy. Thus, U.S. businesses, pension funds and other institutions invested in these companies have invested billions of dollars in Iran. Many Americans are unaware that their money ends up funding Tehran’s terror machine and repressive regime. In fact, these investments are absolutely critical to the survival of Iran’s government.

Iran’s oil production has dropped by 30 percent and energy exports have declined by almost 50 percent since sanctions were imposed. Iran’s oil minister confirmed last year that his country’s oil production capacity is falling by about 12 percent annually. A recent Johns Hopkins University study shows that Iran’s oil exports will drop to zero by 2015 if current trends persist. [7] Interestingly, a survey conducted last month by pollster Frank Luntz shows that about 80 percent of Americans would prefer to invest in businesses that exclude companies dealing with state sponsors of terrorism like Iran. Of those polled, 77 percent said it is important that "none of my money helps fund terrorists." A vast majority of the survey’s participants strongly agreed that "I am not willing to do business with companies that do business in and with terrorist-sponsoring states such as Iran, Syria or Sudan.” [8]

The Financial Weapon

What is the response of American pension funds? New York pension funds alone own nearly $1 billion in stock in three Fortune 500 companies tied to Iran, while America’s top 100 public funds are invested in 73 companies doing business in Iran. Concerned about the investments New Jersey, Maryland, Michigan, Florida, Pennsylvania, Texas, Louisiana, Georgia, California and others are considering keeping public pension funds from investing in any foreign company tied to Iran. [9] Missouri adopted a policy in June that orders state pension funds to divest from companies that do business with Iran and other rogue states. Just last year, the U.S. Treasury Department blacklisted two Iranian banks from dealing with the U.S. financial system after they were found to be involved in financing Tehran’s missile program and funding terror groups including the Islamic Jihad and Hezbollah.

The two banks, Bank Saderat and Bank Sepah have branches in almost every European capital and conduct business with numerous European companies despite the deadly money trail.[10] Some major European banks have recently stopped doing business with Iran due to a combination of sanctions and Iranian President Ahmadinejad’s threatening policies and statements.

One of the top Swiss banks, Credit Suisse, stopped dealing with Iran shortly after Ahmadinejad took power in 2005. A spokeswoman for Credit Suisse said the bank made the decision, "in light of the developments in the country…as well as to safeguard our reputation." [11] UBS, the largest European bank in terms of assets, cut all its business ties with Iran in 2006. UBS was fined $100 million by the US in 2004 for breaking the embargo when it transferred dollars to Iran and then tried to cover up the transaction. Dutch bank ABN Amro was fined $40 million for illegal money transfers to Iran a year later. [12]

Furthermore, European governments play a central role in trade with Iran through export credit guarantees that amount to about $20 billion a year. Some European governments have already scaled back their export credits while others have promised to limit their guarantees and loans for Iranian deals in the future. EU Foreign Ministers recently convened to deliberate ending or limiting the credit guarantees as part of wider sanctions that could soon be imposed on Iran. Germany has cut its export credits to Iran by a third over the past year and plans to reduce them further. Japan has also curtailed credits and stopped issuing medium and long-term guarantees and limited its short-term credits in 2006.[13] Beyond credits, earlier this year the EU imposed sanctions that outlaw the sale of nuclear technology and related material to Iran and freeze the assets of companies and individuals involved in its nuclear and missile programs.

Financial Life Support for the Iranian Regime

The sanctions stopped short of cutting economic ties, however, since European companies, mostly involved in Iran’s oil, gas and petrochemical industries, are Iran’s main source of foreign trade. [14] In addition, European companies invest in many other big businesses owned by the Iranian state. Almost half all Iran’s imports, valued at over $16 billion, came from the EU in 2006. That same year, Iran exported about $10 billion worth of goods to Europe. [15] In fact, most of Iran’s revenue comes from foreign companies. Tehran depends on this income to pay for its nuclear weapons program and to finance the international terror groups it supports. By doing business with Iran, these companies are effectively supporting its policies. In turn, by investing U.S. pension and other institutional and private funds in companies that partner with the Iranian regime, American investors are unwittingly enabling a nuclear-armed, terrorist-sponsoring adversary. Hundreds of companies do business with Iran with American investment dollars and, based upon publicly available information, the following are among the most active of the Tehran regime’s international business partners:

• Alcatel SA: French telecommunications giant Alcatel, has signed numerous multimillion dollar contracts deals with Iran as well as Sudan over the past five years. Alcatel supplies Iran with most of its telecommunications facilities, high-speed Internet service and communication devices and infrastructure for offshore oil and gas platforms. [16]
• Bow Valley Energy Ltd.: Canada’s Bow Valley Energy holds 15 percent of a $300 million deal with Iran to develop the Balal field off the Persian Gulf since 1999. [17] BNP Paribas: BNP Paribas is the only French bank to have remained in Iran after the 1979 Islamic Revolution. BNP Paribas mainly focuses on trade finance with Iran’s oil and gas industry which is controlled by the regime’s clerical elite and feared Revolutionary Guards Corp. [18]
• China National Petroleum Corp.: China National Petroleum Corp (CNPC) has announced it will invest $3.6 billion dollars to develop Block 14 of Iran’s South Pars gas field this year. CNPC is currently negotiating a $16 billion deal with Iran to develop its North Pars gas field and build liquefied natural gas infrastructures. [19]
• ENI Spa: Italy’s biggest energy company, Eni Spa has numerous oil and gas contracts with Iran. In 2001, Eni Spa signed a $900 million contract to develop Iran’s’ southwest Dharkovin oil field. The company holds large stakes in multiple Iranian energy projects including a South Pars contract valued at almost $4 billion. [20]
• Gazprom: Russian energy giant Gazprom has been heavily involved in developing the South Pars gas field, estimated to contain 7 percent of the world’ reserves, since 1997. In 2006 Gazprom announced it would consider setting up joint oil and gas projects with Iran’s state energy companies. [21]
• Hyundai: South Korea’s Hyundai supports Iran by supplying it with energy-related construction and development help, manufacturing components and ship maintenance. Among its other mega-deals with Iran, Hyundai recently signed a $1 billion contract along with Daewoo to build oil tankers for the regime. [22]
• INPEX: The Japanese market accounts for 22 percent of Iran’s oil exports which account for 85 percent of Japan’s total oil imports. The Tokyo-based INPEX, which is part-owned by the Japanese government, has billions of dollars invested in many Iranian oil projects including the Soroosh, Nowrooz and Azadegan oil fields. [23]
• LG Engineering and Construction Co.: In 2002, South Korea’s LG Engineering and Construction Co. signed a $1.6 billion deal for a gas processing plant project in the South Pars gas fields. The company has a 45.3 stake in the deal that allows it to claim $700 million of the total project cost. [24]
• Lukoil: Russia’s Lukoil collaborates with the National Iranian Oil Company on various exploration projects. Lukoil holds large stakes in oil projects in Anaran, Moghan, Western Changuleh and other areas in Iran. In 2000, Lukoil acquired Getty Petroleum Marketing Inc. and has gas stations across the United States. [25]
• Norsk Hydro: Norsk Hydro is Norway’s second largest energy company and is partially owned by the Norwegian government. Norsk Hydro has massive investments in Iranian oil projects including a $107 million contract signed with Iran last year. [26]
• OMV: Austria’s OMV is central Europe’s leading energy company. It has several oil exploration investments in Iran’s Mehr block. In addition, OMV is the driving force behind the Nabucco pipeline project which will transport gas from Iran’s Caspian Sea directly to Europe when completed in 2011. The other companies involved in the project are: Botas (Turkey), Bulgargaz (Bulgaria), MOL (Hungary) and Transgaz (Romania). [27]
• ONGC: India’s Oil and Natural gas Company (ONGC) signed a $40 billion deal with Iran in 2005 to import millions of tons of liquid gas. ONGC is involved in many lucrative exploration projects in Iran and is on the verge of signing a deal in the South Pars oilfields valued at over $100 million. [28]
• Petrobras: The Brazilian government control 60 percent of the Rio de Janeiro-based Petrobras Oil Company and has a final say in its investment decisions. Petrobras intends to sign a $ 470 million contract with Iran in mid-2007. Earlier contracts with Iran included a 2004 deal worth $34 million to drill in the Caspian Sea. [29]
• Petronas: Malaysia’s Petronas enjoys lucrative business with Iran. Among other deals Petronas signed a $2 billion contract, along with Total and Gazprom, to develop Iran’s South Pars gas fields. [30]
• Royal Dutch Shell: In 1999, The Dutch-British energy giant, Royal Dutch Shell spent over $800 to develop two Iranian offshore oil fields. Royal Dutch Shell together with Spain’s Repsol recently signed an agreement that could result in a $10 billion contract to develop sections 13 and 14 of Iran’s South Pars gas field. [31]
• Siemens AG: Siemens AG helped build Iran’s nuclear reactor in Bushehr but officially stopped working on the site after the 1979 Islamic Revolution. Siemens AG is currently active in Iranian telecommunications, high-tech, automotive and power industries. Siemens also trades with other rogue states including Sudan and Syria. [32]
• Statoil ASA: Norway’s biggest oil and gas company Statoil ASA has multiple high profile investments in Iran. Most of its efforts are concentrated in the South Pars gas field where it holds high percentages in various exploration and development projects. Norway prosecuted Statoil in 2004 when the company was convicted on corruption charges for trying to sway Iranian officials, including former President Hashemi Rafsanjani’s son, in a $15.2 million deal in 2002. [33]
• Stolt-Nielsen SA: UK-based Stolt-Nielsen SA is one of the world’s top liquid transporters, the company does business with Iran through its subsidiary Stolt-Offshore. The US Treasury began investigating the company in 2002 for trading with Iran and falsifying documents. In 2006 Stolt-Nielsen was indicted for price fixing and rigging bids. [34]
• Technip Coflexip: French based Technip Coflexip builds much of Iran’s petrochemical engineering plants and provides other technical infrastructure related to the regime’s oil and gas industry. Among its many lucrative deals with Iran, Technip Coflexip built a massive ‘steam cracker’ petrochemical plant in the Persian Gulf for $186 million. [35]
• Total SA: The giant French energy company Total SA has been active in Iran since 1995. Total has multiple oil exploration and development contracts with the regime including a 2006 deal valued at $1.6 billion. Total’s CEO Christophe de Margerie and two of the company’s chief executives are currently under investigation by the French authorities over corruption allegations linked to a 1997 gas project in Iran and the Iraqi oil-for-food program. [36]

In addition, the following companies are reportedly in the process of negotiating deals with Iran:

• Essar Oil: India’s Essar Oil reached a deal with Iran in 2006 for oil and gas exploration and production as well as contracts to build the regime steel plants, power plants, and an oil refinery. The deal, worth billions of dollars, is still waiting approval as both sides continue to negotiate. [37]
• China National Offshore Oil Corp: China National Offshore Oil Corp (CNOOC) signed a memorandum of understanding with Iran in 2006 to develop the Northern Pars gas field and build liquefied natural gas installations. The two sides are expected to sign the $16 billion deal by the end of 2007. [38]
• China Petroleum & Chemical Corp: In 2004, China Petroleum & Chemical Corp (Sinopec) won a bid to buy 10 million metric tons of liquefied natural gas every year for 25 years, but the contract hasn’t been signed yet. The deal is estimated to be worth about $100 million when approved. In 2006, Sinopec signed a memorandum of understanding with Iran to develop the Garmsar block. The deal, that has so far not been implemented, is valued between $20-38 million. [39]

The Bottom Line

American investors and Wall Street have vital roles to play in this War for the Free World. It is absolutely imperative that the financial power of the U.S. capital markets be brought to bear for the purpose of denying our enemies the means to threaten us and, if possible, to bring down regimes like that of Iran that seek to do so.

NOTES

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