November 28, 2012 | Forbes
Sanctions On Iran: How Washington Can End The Game Of ‘Catch Me If You Can’
November 28, 2012 | Forbes
Sanctions On Iran: How Washington Can End The Game Of ‘Catch Me If You Can’
Since the European Union announced a new round of sanctions over Iran’s nuclear program last October, it has enacted new measures and an impressive group of companies to its blacklist. Meanwhile, the United States continues to designate Iranian people and companies, and Congress is preparing new legislation to tighten the screws even further.
With nuclear talks once again looming in December, one can only hope that Tehran has finally gotten the message.
But is the policy of blacklisting Iranian companies working?
Last Tuesday, International Atomic Energy Agency Director General Yukiya Amano, told reporters that the IAEA sees no evidence that sanctions are having any impact on Iran’s nuclear activities. When it comes to shutting down proliferating entities, at least, he is right: These measures work, but only briefly and partially.
Over the years, Iran has circumvented sanctions by obfuscating its activities, creating front companies, establishing firewalls to shield its businesses, and building holding companies and structures that look more like Russian matryoshka dolls than legitimate corporate entities.
The challenge for Western officials is to keep up with Iran’s game of “catch me if you can.” Iran’s successes in this department buy it time, and provides legal loopholes through which companies can continue dealing with Iran without fear of being sanctioned.
Take the case of Tidewater Middle East Co., an Iranian port operator blacklisted by the U.S. in June 2011 as an entity owned by the country’s Islamic Revolutionary Guard Corps, which has “links to Iranian proliferation activities.” It took the EU until January 2012 — more than six months — to follow Washington’s lead and impose sanctions on the company.
Tidewater — not to be confused with the New Orleans-based Tidewater Inc. — used to run Iran’s most important container terminal, the Shahid Rajaee Port Complex at Bandar Abbas, at the mouth of the Strait of Hormuz, where it oversaw an estimated 90 percent of Iran’s bulk and cargo traffic. The joint pressure of the U.S. designation and EU sanctions against Tidewater should have brought commerce with Iran almost to a standstill.
In a briefing on the U.S. action in July 2011, the international law firm Holman Fenwick Willan LLP concluded that, “Because Tidewater has operations at seven of the main ports in Iran, that is likely to have a very serious effect on trade to and from Iran.”
This would have been likely had Tidewater Middle East Co. remained officially in charge of handling container traffic for most of Iran’s ports. But it didn’t.
The action had little “serious effect” on trade to and from Iran because in the time EU policy makers took to discuss the pros and cons of following the U.S.’ lead, Tidewater was busy creating a new set of front companies to elude Western sanctions.
On July 1, 2011 — seven days after the U.S. action and almost seven months before the EU sanctions against Tidewater went into effect — the port operator registered a new company named Faraz Royal Qeshm LLC, and put it in charge of the container terminal.
The company has three board members. Farshad Fattahinia is the chief financial officer at Bahman Investment Co., a group considered by Iranian opposition groups to be a Revolutionary Guard holding. Ali Asghar Bahramian used to be Tidewater’s financial administrator. And Abbas Argon was chief executive officer of Negin Sahel Royal Co., Tidewater’s main shareholder and itself reportedly a Revolutionary Guard company.
Bahramian is also a board member of Bandar Abbas Arya Container Terminal, an integral part of the Shahid Rajaee container terminal complex that Tidewater used to manage. Argon is its vice chairman. Although there is little publicly available information about Faraz Royal Qeshm — its website, www.faraztainer.ir, is still under construction — the 2012 Tariff Book for the Bandar Abbas container terminal is no longer in the care of Tidewater, but of Faraz Royal Qeshm.
So, you can sanction Tidewater, and Tidewater passes all its assets and business to Faraz Royal Qeshm. Before you catch up with this, Iran will have another trick to pull out of its hat.
For European shipping companies, these tricks may make little difference. EU sanctions prevent these businesses from filing claims arising from accidents at Iranian ports, regardless of who operates them, meaning the companies are loath to deliver cargo there.
This doesn’t apply, however, to Asian and Middle Eastern shipping companies. According to companies’ shipping schedules, the following still stop at Bandar Abbas:
–China Shipping Container Lines Co. (China);
–Balaji Shipping Lines FZCO (UAE-based affiliate of India’s Transworld Group of Companies);
–Evergreen Line (a consortium of five companies based in Hong Kong, Singapore, Italy, Great Britain and Taiwan);
–Yang Ming Marine Transport Corp. (Taiwan);
–The Emirates Shipping Line (UAE);
–Hyundai Merchant Marine Co. (South Korea);
–T.S. Lines Ltd. (Hong Kong);
–Wan Hai Lines (UAE) LLC (UAE branch of Taiwan’s Wan Hai Lines);
–Ocean Lines Maritime Shipping LLC (Bahrain affiliate of the Indian namesake);
Their cargoes are being handled by Tidewater’s new front company. And the Islamic Revolutionary Guard Corps is still reaping the profits.
The U.S. and its allies should stop playing catch me if you can. They should stop trying to establish that each entity is owned or controlled by the Revolutionary Guards, or linked specifically to weapons of mass destruction or terrorism.
Instead, Congress should use its secondary sanctions authority to impose blanket prohibitions on doing any business with Iran’s port, energy, shipbuilding, and shipping sectors. This would include Tidewater and all its affiliates, fronts and successor entities. Each of these sectors is linked to Iran’s proliferation activities, and essential to the operation of Iran’s energy business and its economy as a whole.
If the U.S. can find that an entity is operating in these sectors, that should be sufficient to include it in this blanket ban.
Meanwhile, both the EU and the U.S. should plug the holes, adding Faraz Royal Qeshm, Bandar Abbas Arya and their interchangeable managers to the blacklist. And the U.S. should encourage Asian shipping lines — all of which have significant business interests in the U.S. — to comply with U.S. sanctions laws or face stiff penalties.
Before the EU sanctioned Tidewater Middle East Co., the U.S. put pressure on European shipping giants such as Maersk Line and CMA-CGM SA to stop calling at Bandar Abbas, and they eventually did. Threatening to inflict penalties on Asian companies under sanctions law is the least the U.S. can do. Forcing a choice between doing business in America and trading with Iran may be the key.
Tidewater’s terminals might now be operated by a different company, but the Revolutionary Guards remain in control — and doing business with them helps finance Iran’s efforts to build the bomb.
Emanuele Ottolenghi is author of The Pasdaran: Inside Iran’s Islamic Revolutionary Guard Corps, and a senior fellow at the Foundation for Defense of Democracies, where Mark Dubowitz is Executive Director.