Honeywell Faces Administration Pressure to End Subsidiary's Iran Refinery
As the Obama administration moves closer to winning tougher United Nations sanctions against Iran, the loopholes allowing U.S. companies to do business with the Islamic regime may be closing. Honeywell International Inc. and its chief executive officer, David M. Cote, are already feeling the heat.
On May 18, Secretary of State Hillary Clinton announced that longtime holdouts China and Russia had agreed to back new Security Council-imposed sanctions against Iran, including ship inspections and an arms embargo. Congress is also close to completing legislation that would ban U.S. companies from doing business with European, Chinese, or Russian outfits that trade petroleum products with Iran or help upgrade its crumbling refineries. The measure, which expands a 1996 law that bars U.S. companies from direct investment in Iran, would target those like Honeywell that do business there through foreign subsidiaries.
Honeywell faces renewed pressure from the advocacy group United Against Nuclear Iran, Bloomberg Businessweek reports in its May 24 issue. UANI on May 18 asked the General Services Administration and Defense Secretary Robert Gates to declare Honeywell ineligible for government contracts until it ends the participation of its wholly owned British subsidiary, UOP LLC, in an upgrade of Iran’s Arak refinery and stops selling security equipment to Tehran. A similar provision exists in the Senate version of the legislation.
‘Moral Authority’
While Honeywell’s dealings with Iran don’t violate current law, getting it and other companies to stop using subsidiaries is a matter of asserting America’s “moral authority,” says UANI President Mark Wallace. It’s harder to pressure foreign companies to pull out of Iran “if we can’t even convince our homegrown companies to do that,” he says.
Rob Ferris, a Honeywell spokesman, says the company is legally bound to honor existing contracts, though it has committed to accept no new business in Iran “in anticipation of a change in U.S. law.” That’s an “inadequate” response for a company that received $12.9 billion in federal contracts from 2000 to March of this year, making it the largest recipient of federal funds to operate in Iran, Wallace says.
The focus on Morris Township, New Jersey-based Honeywell hits close to home for President Barack Obama, who regards Cote as one of the CEOs he most admires. Obama even named him to a bipartisan budget deficit commission.
Founder Holbrooke
UANI may have some White House clout of its own. It lists as a founder Richard C. Holbrooke, though he resigned from the group before he joined the administration as special representative to Afghanistan and Pakistan.
Stuart A. Levey, the U.S. Treasury undersecretary responsible for applying sanctions, says U.S. companies are voluntarily pulling back from Iran after administration prodding and public pressure. “Some companies are just making a decision based on business and political risk as well as the public attention being paid to this issue,” he says.
One success story, says Wallace, is Peoria, Illinois-based Caterpillar Inc., which in February barred its overseas subsidiaries from accepting orders from Iran. If Honeywell doesn’t do the same, he adds, it should brace for more pressure, including a naming-and-shaming ad campaign now in the works.
To contact the reporter on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Hans Nichols in Washington at hnichols2@bloomberg.net
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