Unanimous Senate Amendment Opposes Federal Funds for Companies Doing Business in Iran’s Energy Secto

Energy Department has pending contract with Iran's largest gasoline supplier

Washington, D.C. (April 6, 2009) — The Foundation for Defense of Democracies praised the U.S. Senate for opposing federal funds from going to companies conducting business in Iran's energy sector.

“The question now,” said FDD Executive Director Mark Dubowitz, “is whether this unequivocal statement by the Senate will affect the U.S. Department of Energy's decision to award a $50 million contract to the Swiss-Dutch trading firm Vitol, which is Iran's largest supplier of gasoline and which pleaded guilty to grand larceny charges in connection with the U.N. Oil for Food scandal.”

On February 27, seven members of the U.S. House of Representatives wrote to Energy Secretary Chu requesting that he reconsider the contract based on the fact that Vitol's guilty plea on grand larceny charges for its role in the United Nations Oil for Food scandal “could provide sufficient grounds for debarment from federal contracting.” The Representatives also raised concern over Vitol's role as a “key supplier of refined petroleum to Iran.”

Iranian oil wells produce far more petroleum (crude oil) than Iran needs. Yet, remarkably for a country investing so much in nuclear power, Iran has not developed sufficient capacity to refine that crude oil into gasoline and diesel fuel. As a result, Iran must import some 40% of the gasoline it needs for internal consumption.

During the presidential campaign, then-Senator Barack Obama endorsed a cut-off of gasoline sales to Iran as a way to gain leverage over the regime's nuclear weapons program. For example, in the presidential debate on October 7, Obama stated: “Iran right now imports gasoline . . . if we can prevent them from importing the gasoline that they need . . . that starts changing their cost-benefit analysis. That starts putting the squeeze on them.”

The idea has attracted broad support across the political spectrum. FDD has been researching the companies that sell gasoline to Iran and has identified several policy options for using refined petroleum as a source of peaceful leverage over the Iranian regime's nuclear weapons program.

The unanimous approval of Amendment 980, sponsored by Senators Kyl (R-AZ) and Lieberman (ID-CT), to the Senate budget resolution puts the Senate on record as opposing federal expenditures for companies involved in Iran's energy sector, including those supplying refined petroleum to Iran, or assisting in the development of Iran's refinery capacity. Published reports indicate that Vitol supplies up to 60% of the gasoline that Iran imports. Other companies providing gasoline to Iran include the Swiss-Dutch firm Trafigura, India's Reliance Industries, Switzerland's Glencore, and France's Total.

“By awarding Vitol this lucrative contract, the previous administration missed a key opportunity to put Iran's gasoline suppliers on notice that it won't be business as usual,” said Dubowitz. “The Obama administration can rectify this mistake by following the Senate's wishes and, in these difficult economic times, instead spend taxpayer money to support companies that promote our national security and follow our laws.”

FDD is preparing a policy monograph on Iran's importation of gasoline and the policy options that are available to U.S. and European lawmakers to use refined petroleum as a source of leverage over the Iranian regime's nuclear weapons program.

For more on FDD's research and analysis of Iran's need to import gasoline, please visit www.iranenergyproject.org.