Glencore Trades With Iran Even as Competitors Depart

Glencore Xstrata Plc (GLEN), the largest publicly traded commodities supplier, is conducting business with Iran even as competitors abandon the country, potentially drawing scrutiny from regulators.

Documents filed with the U.S. Securities and Exchange Commission by Century Aluminum Co. (CENX), in which Glencore owns 41.8 percent, show non-U.S. affiliates of Glencore “entered into sales contracts for agricultural products as well as purchase contracts for metals with Iranian entities” last quarter.

“You can be sure the U.S. is watching very closely what this company is doing on this issue,” Thomas Biersteker, the Curt Gasteyger chair in international security and conflict studies at the Graduate Institute in Geneva, said in an interview. “They will use pressure on affiliates, on transactions and on access to the U.S. market.”

Foreign companies have abandoned Iran after the country’s nuclear program prompted U.S., European Union and United Nations trade sanctions. Glencore competitors Trafigura Beheer BV and Vitol SA have halted crude-oil purchases from Iran as regulators move to end transactions with the Islamic republic.

The Iranian entities conducting business with affiliates of Glencore were either fully or majority owned by the government, according to the SEC filing, which was first reported by American Metal Market. Glencore said it’s not violating laws.

Legal Compliance

“Glencore Xstrata does comply with applicable laws and regulations, including applicable sanctions,” the Baar, Switzerland-based company said in a statement. “We are closely monitoring all new legal developments to ensure that we continue to be in compliance.”

Maintaining trading ties to Iran may draw scrutiny not only of Glencore but of its banks and insurers as well, according to Biersteker.

“They are taking a gamble,” he said. The company may face difficulty insuring transactions and shipping materials, he said.

U.S. regulators including New York’s Department of Financial Services, or DFS, are stepping up inquiries into dealings by financial firms and insurers with commodity traders over potential violations of the Iran Freedom and Counter-Proliferation Act of 2012.

The DFS requested files from Lloyd’s of London, which disclosed contracts with Glencore and Trafigura linked to alleged shipments of aluminum to Iran, a person with knowledge of the matter said this month.

Transaction Reviews

BNP Paribas SA (BNP), a French bank financing commodity trading in Europe, said in March it was reviewing a “significant volume” of U.S. dollar deals with countries that may face economic sanctions, adding that some transactions may be “impermissible” under Office of Foreign Assets Control rules.

Trafigura withdrew from any new oil business with Iran in January 2012 and hasn’t exported Iranian crude for “some years,” it said in a statement. The Amsterdam-based company said it concluded all outstanding Iranian oil deals before the July 2012 European sanctions deadline.

Since new EU sanctions were published in December, Trafigura’s metals and bulk trading operations have made no deliveries to Iran or received any exports, it said.

Vitol, the world’s largest independent oil trader, “ceased all sales of refined products to Iran and all purchases of crude oil from Iran some time ago,” it said in a statement. The company is “fully compliant with all applicable international laws and regulations governing trade with Iran.”

Vitol Purchase

A Vitol subsidiary based in Bahrain purchased a spot cargo of fuel oil that was of Iranian origin in July 2012, according to the company’s website. Vitol no longer buys any product of Iranian origin, it said.

The U.S., EU, UN and Switzerland have all imposed separate sanctions in response to Iran’s nuclear program, prohibiting foreign companies from conducting business with a list of local firms and individuals.

Glencore hasn’t disclosed the names of the companies it’s conducting business with in Iran.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore.

To contact the reporter on this story: Andy Hoffman in Geneva at ahoffman31@bloomberg.net

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net

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