The Obama administration told Congress today that Iran’s state-owned oil company is linked to a military unit sanctioned for weapons proliferation, terrorism and human-rights abuses.
Treasury Secretary Timothy F. Geithner was required by Congress to prepare the report, which determined that the National Iranian Oil Co., known as NIOC, is “an agent or affiliate” of Iran’s Islamic Revolutionary Guard Corps, according to two letters to lawmakers from the Treasury Department. The finding exposes foreign financial institutions that deal with the company to U.S. sanctions.
The Treasury didn’t find sufficient proof to sanction the National Iranian Tanker Co., or NITC, the main carrier for Iranian crude, for ties to the Revolutionary Guard, according to the letters.
Even with the finding of the oil company’s links to the Revolutionary Guard, current law allows for continued purchases of Iranian crude by nations granted exemptions from sanctions for making “significant” reductions in such imports. U.S. companies and individuals are already barred from almost any business with Iran.
Under a law signed Aug. 10, Congress gave the Obama administration until today to determine whether the oil and tanker companies were controlled by the elite unit. Lawmakers are seeking to deny funding to the Guard, known as the IRGC, as part of an array of sanctions intended to pressure Iranian Supreme Leader Ali Khamenei to halt his country’s suspected pursuit of nuclear-weapons capability.
“Treasury has reviewed classified reporting and unclassified information in support of these determinations,” Adam Szubin, director of the Office of Foreign Assets Control wrote today to Congress. “As Iran’s most powerful economic actor, the IRGC dominates many sectors of the economy, including energy, construction, and banking.” he wrote.
“Recently, the IRGC has been coordinating a new campaign to sell Iranian oil, in order to evade international sanctions,” he wrote.
Under today’s finding, any foreign financial institution “determined to knowingly facilitate significant transactions or provide significant financial services” for Iran’s oil company can be blocked from the U.S. banking system, according to the letters. That means joint ventures, investments, real estate deals or sales of any kind to Iran’s oil company would be prohibited, further squeezing oil exports that are Iran’s main source of revenue.
Representative Howard Berman, a California Democrat who was one of the sponsors of the measure requiring today’s report, said the finding “reveals the truth: that Iran’s oil company is a key element of the IRGC, the most hardline and dangerous agency of the Iranian regime. Oil transactions with NIOC directly support the IRGC’s role in Iran’s nuclear weapons program and its support for terrorism.”
Senator Bob Menendez, a New Jersey Democrat who was also a sponsor of the measure, praised the new designation as a means to “force financial institutions that do business with the United States to cease engaging in transactions with the NIOC.” He said it also will “encourage significant reductions in purchases of petroleum,” by letting crude buyers know that Iranian oil revenues benefit the Revolutionary Guard.
Mark Dubowitz, a sanctions advocate who prepared reports for Congress and the administration on Revolutionary Guard links to the oil sector, said the designation should encourage law-abiding refiners to seek other suppliers.
“This determination matters for all those foreign companies that continue dealing with NIOC and its dozens of subsidiaries,” Dubowitz, executive director of the Foundation for Defense of Democracies, said in an interview today. He called it a strong signal against “buying, financing, insuring or otherwise dealing in Iranian oil.”
China was the leading importer of Iranian oil in the first six months of last year, followed by Japan, India and South Korea, according to the U.S. Energy Information Administration. All four nations were granted renewable 180-day exemptions from U.S. financial sanctions over their Iranian oil purchases earlier this year.
Chinese customs data released Sept. 21 showed China’s imports of Iranian crude fell 20 percent in August compared with a year earlier, to the lowest level in five months.
Crude oil for November delivery declined 96 cents to settle at $91.93 a barrel on the New York Mercantile Exchange, down 7.1 percent since Sept. 14 and 7 percent for the year.
American officials including Secretary of State Hillary Clinton have accused the Revolutionary Guard of taking over the most lucrative sectors of Iran’s economy. The unit or its members have been sanctioned by the U.S., United Nations and European Union for alleged offenses including nuclear and missile work.
Oil supplies more than 50 percent of Iran’s national budget, according to International Monetary Fund data. Oil earned the Persian Gulf nation $95 billion in 2011, according to the U.S. Energy Department.
Proponents of the financial and energy-related sanctions imposed say hobbling Iran’s oil revenue is the best way to slow its nuclear progress and forestall military action by Israel or the U.S. Iran says its nuclear program is for civilian energy and medical research only.
The state-owned NIOC is the world’s second-largest oil company by volume produced, after the Saudi Arabian Oil Co. NITC, a former subsidiary of NIOC that was privatized 12 years ago, has the world’s fourth-largest fleet of supertankers, according to London-based Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.
In August 2011, Rostam Qasemi, a former Revolutionary Guard commander and former head of Khatam al-Anbiya, its engineering arm, was named Iran’s oil minister and chairman of NIOC. Qasemi and Khatam al-Anbiya have been sanctioned by the U.S. and the EU for ties to the Guard.
In a telephone interview in February, the tanker company’s general manager of planning, Abdolsamad Taghol, dismissed any suggestion of military links to the tanker line. NITC operates independently, without administrative, financial or political ties to the Guard, he said.
Menendez said he was disappointed that the tanker company wasn’t sanctioned today and urged the administration to continue investigating possible links to the Guard.
The U.S. already has sanctioned Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines, for involvement in missile programs and transporting military cargoes.
President Barack Obama on Feb. 6 ordered a freeze on all Iranian government and financial institutions’ assets under U.S. jurisdiction, which would apply to the state-owned oil company.
Iran, the second-largest oil producer in OPEC after Saudi Arabia, pumped 2.75 million barrels a day in August, 350,000 barrels a day less than in July, according to data compiled by Bloomberg.