Doing business in Iran – time for companies to choose

While
he was no doubt using the platform in New York to speak to a domestic audience
and energize hardliners back home, the reality is that around the world
a number of governments are (finally) waking up and taking action to impose
meaningful sanctions against Iran. In the past three months, the United
States, Canada, the European Union, Australia, Japan, and South Korea have
all enacted comprehensive new sanction laws targeting Iran.

With
respect to the new U.S. law, September 29th was significant because it marked
the day that the most biting of U.S. sanctions, covering a wide-range of
energy, telecommunications, and financial sectors, took effect. From this point
forward, any company bidding on contracts with the U.S. government, the
largest business in the world, must certify that they do not also engage in
business covered under the Comprehensive Iran Sanctions, Accountability, and
Divestment Act of 2010 signed into law by President Obama this past July.

These
new changes are long overdue. Consider that the Government Accountability
Office, the watchdog of the U.S. government, found that close to
$900 million in federal funds went to companies doing business in Iran’s energy
sector in the past five years. Iran’s energy sector is largely controlled
by the Iran Revolutionary Guard Corps, the government and military
unit in charge of Iran’s nuclear program and designated by the U.S. State
Department as a terrorist organization. Put differently, American tax dollars
had been supporting Tehran’s efforts to develop a nuclear weapon, sponsor
terrorism, and engage in brutal crackdowns against its own people.

The
new law also closes a significant loophole found in previous U.S. sanction
provisions by covering not only U.S. companies and financial institutions
but foreign firms and subsidiaries as well. In the past, too many
corporations and banks have simply played a shell game and relied on overseas
entities to conduct their business operations in Iran.

The
application of U.S. law to firms and subsidiaries residing overseas has prompted
cries of ‘extraterritoriality’ in some circles, but such charges are
misguided.

First,
the term ‘foreign firm’ is increasingly meaningless in today’s globalized
economy and many of these firms avail themselves and profit in U.S.
capital markets. Accordingly, it is not unreasonable for them to abide by
our rules including those related to disclosure of Iran business required by
the Securities and Exchange Commission.

Second,
the law applies equally to firms residing here in the United States and
government procurement rules in the World Trade Organization provide for clear
exemptions to protect legitimate national security interests. One would
be hard-pressed today to find a greater security threat to the world, not
just the United States, than the threat posed by Iran.

Finally,
the U.S. is hardly acting in a unilateral fashion. The provisions set
out in the new law build on four rounds of sanctions passed by the UN Security
Council. And, as noted above, many of the other world’s leading capitals
have joined Washington in adopting their own sanction laws.

At
home and abroad, the implications of the new sanctions are profound and, for
many companies, it is decision time.

Honeywell,
for example, has received over $12 billion in federal contracts
in the past decade, but has skirted U.S. sanctions law by selling security
equipment and upgrading key petroleum facilities in Iran through its
British subsidiary Universal Oil Products.

Similarly,
Danish shipping conglomerate Maersk has received close to $4 billion
in federal contracts from the U.S. government in the past 10 years and
has extensive business dealings in Iran. Recently, Maersk has denied that
any of its business dealings violate the new law but has clarified neither
what its two offices in Iran do, nor Maersk’s relationship with several
container facilities in Iran. Given that Maersk was fined over $3 million
in August for violating existing U.S. sanctions laws on Iran and Sudan,
skepticism is wholly warranted. Under penalty of law, Maersk will now have
no choice but to formally certify to the U.S. government that its actions
do not violate U.S law or face possible termination of existing contracts
and a prohibition of entering into new contracts for at least three
years.

The
most responsible path for companies to follow, of course, would be to cease
doing business in Iran altogether. Many have already done so, including
Caterpillar, Huntsman, General Electric, Ingersoll Rand, KPMG, Siemens
and Toyota. Last week, Germany’s largest steelmaker, ThyssenKrupp, joined
them and announced they are pulling the plug on new business dealings in
Iran in light of new US and European sanctions.

Iran’s
flagrant defiance of international norms should be reason enough for corporations
to cease their business dealings in Iran. Now the U.S. government
is presenting companies with a reasonable choice should they refuse
to do so: do business with Uncle Sam or with the mullahs in Tehran.

The
right course of action is clear. U.S. taxpayers no longer need foot the bill
for activities that directly threaten our security, not to mention provide
material support for someone who engages in malicious conspiracy theories
about the most horrific terrorist attack on American soil.

 Ambassador
Mark D. Wallace serves as the President of United Against Nuclear Iran.
Most recently, he served as United States Ambassador to the United Nations,
Representative for U.N. Management and Reform.

 

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