AUGUST 25, 2010 WSJ
LyondellBasell Will Quit Iran
LyondellBasell Industries NV, one of the world's biggest plastic and chemical producers, will end its business operations in Iran to shield itself against penalties the U.S. could soon impose on companies for violating trade sanctions.
The Dutch-based company's board approved the decision early this month after months of deliberation, according to David Harpole, a LyondellBasell spokesman.
In the past year, a number of companies - including many of Iran's gasoline suppliers - have cut business ties with Iran because of worries about legal consequences in the U.S. and elsewhere, and public-relations concerns. They include Royal Dutch Shell PLC, which halted gasoline sales, and Toyota Motor Corp., which suspended car exports.
means it will stop all licensing of its proprietary technology
and services to Iranian petrochemical companies, which have
depended heavily on technology from European concerns to produce
plastics and other high-value products derived from natural gas.
Mr. Harpole said the move would be "immaterial" to LyondellBasell's overall operations.
But the decision is a blow to the Iranian government, which is trying to build the country's petrochemicals industry to diversify the economy.
Iran exported some $6.5 billion of petrochemical products in 2009, according to Facts Global Energy, a Singapore-based consultancy that tracks the Iranian energy sector. That is a small amount compared with the value of Iran's oil exports.
LyondellBasell's Mr. Harpole said that the mounting pressure over sanctions played a decisive role in the board's decision to halt its Iranian operations. The company - which has extensive U.S. operations, particularly in Texas - is also ending its business ties in Syria and Sudan. Those countries are also covered by existing U.S. sanctions.
The decision also reflects LyondellBasell's desire to avoid legal problems after exiting bankruptcy protection in April. The company plans to list 566 million shares on the New York Stock Exchange any day, according to Mr. Harpole, to beef up its capital position and help fund its growth plans.
He said the company recently made a "voluntary disclosure" about the nature of its past business in Iran to the U.S. agency that enforces sanctions, the Office of Foreign Assets Control, which is a unit of the Treasury Department.
He declined to elaborate. OFAC wouldn't comment on LyondellBasell's case or whether other companies had made similar disclosures.
The Obama administration could soon announce plans to sanction or warn companies, primarily from Europe and Asia, that they are in violation of U.S. sanctions against Iran.
"The administration is in the final stages of reviewing cases of potentially sanctionable activity [of companies] under U.S. law and expects to be making decisions on those cases soon," a senior official said.
The official declined to specify which companies are being targeted, but a person familiar with the matter said the State Department is considering action against about 10 companies. The companies could face civil or even criminal penalties depending on the nature of any confirmed violations, but such action could take months.
The U.S. last month adopted new sanctions against Iran, primarily targeting the country's energy sector.
For the first time, the rules require firms to effectively choose between doing business in the U.S. or Iran. Australia, Canada, the European Union and the United Nations have also passed their own versions of sanctions against Iran in recent months.
U.S. companies have long been barred from doing business in Iran. A report earlier this year from the U.S. Government Accountability Office, an oversight agency and arm of Congress, cited 41 companies, nearly all from Europe and Asia, with operations in Iran's oil, natural gas and petrochemical industries from 2005 to 2009.
Firms Reported to Have Commercial Activity in the Iranian Energy Sector and U.S. Government Contracts
U.S. law restricts U.S. firms from investing in Iran’s energy sector through sanctions to discourage Iran from supporting terrorism and developing nuclear weapons. In addition, the Iran Sanctions Act (ISA) provides for sanctions against persons, including foreign firms, who invest more than $20 million in Iran’s energy sector in any 12-month period. The act allows the President, who delegated authority under the act to the Secretary of State, to ban such persons from U.S. government procurement, including contracts for goods or services. The Secretary of State is responsible for determining whether a firm’s activities meet the legal criteria for an investment, and the firm could therefore be subject to actions under the Iran Sanctions Act. The Secretary of State may waive the sanctions if the Secretary determines it is in the national interests of the United States to do so.
Table 1: Foreign Firms Publicly Reported to Have Commercial Activity in the Iranian Oil, Gas, or Petrochemical Sectors
Firm Country Sector ABB Lummus Refining, petrochemicals OMV Austria Natural gas Belneftekhim Belarus Oil exploration and production Petrobras Brazil Oil exploration and production China National Offshore Oil Corporation China Natural gas China National Petroleum Corporation China Oil exploration and production, natural gas Sinopec China Oil exploration and production, refining INA Croatia Oil exploration and production, natural gas Haldor Topsoe Denmark Refining Total France Natural gas Uhde Germany Petrochemicals Indian Oil Corporation India Natural gas Oil and Natural Gas Corporation India Oil exploration and production, natural gas Oil India Ltd. India Natural gas ONGC Videsh Ltd. India Natural gas Petronet LNG India Natural gas Edison Italy Oil exploration and production ENI Italy Oil exploration and production Snamprogetti Italy Pipeline Tecnimont Italy Petrochemicals Inpex Japan Oil exploration and production JGC Corporation Japan Refining Amona Malaysia Oil exploration and production Petrofield Malaysia Natural gas SKS Ventures Malaysia Natural gas LyondelBasell Netherlands Petrochemicals Royal Dutch Shell Netherlands Natural gas StatoilHydro Norway Oil exploration and production, natural gas PGNiG Poland Natural gas Gazprom Russia Oil exploration and production, pipeline Lukoil Russia Oil exploration and production Daelim South Korea Natural gas Daewoo Shipbuilding & Marine Engineering South Korea Oil tankers GS South Korea Natural gas Hyundai Heavy Industries South Korea Oil tankers Repsol Spain Natural gas PTT Exploration & Production Thailand Natural gas Turkish Petroleum Company Turkey Natural gas Costain Oil, Gas & Process Ltd. United Kingdom Natural gas Hinduja United Kingdom Oil exploration and production, natural gas Petroleos de Venezuela S.A. Venezuela Natural gas
engineering firm Uhde GmbH and Italy's Maire Tecnimont SpA, an
energy and engineering-services firm, were named in the GAO
report as firms with business in Iran's petrochemical sector in
the past five years. Other foreign companies like them also work
in Iran's petrochemical sector, analysts say.
Uhde is a unit of German industrial conglomerate ThyssenKrupp AG. Alexander Wilke, a ThyssenKrupp spokesman, said that "to the best of our knowledge, all group companies are in full compliance with U.S. sanctions against Iran." Maire Tecnimont didn't respond to requests for comment.
Analysts say that actually levying penalties against companies for violations of U.S. sanctions could be a long, drawn-out process posing many hurdles.
OFAC has to establish a variety of legal criteria, including whether a company's apparent violation was part of a "pattern or practice" and whether a company demonstrated "reckless disregard" of U.S. sanctions law, in order to determine what action can be taken, according to agency enforcement guidelines. If OFAC thinks a company's actions could lead to a violation, the company may receive just a cautionary letter.
Illustrating the barriers to the imposition of sanctions, the recent GAO report said that in 1998 the U.S. made its first and only determination that a company's investments violated existing U.S. sanctions against Iran. In that case, the sanctions were eventually waived because they were deemed to conflict with American foreign-policy interests.