Swiss energy company EGL issued a press release today announcing that it had inked a contract to buy natural gas from Iran over the next 25 years. Most of the natural gas purchased by EGL under the contract is destined to Italy via the Trans-Adriatic Pipeline, which EGL is building with Norway’s StatoilHydro ASA.

The United States was not amused:

Lisbeth Keefe, spokeswoman for the U.S. Embassy in Bern, said Washington had told the Swiss that “major new oil and gas deals with Iran send precisely the wrong message at a time when Iran continues to defy U.N. Security Council resolutions requiring it to suspend enrichment-related and reprocessing activities.” She said Washington was studying whether the deal actually violates the Iran Sanctions Act.

Actually it shouldn’t take much studying. Section 14(9) of the Iran Sanctions Act specifically excludes from the Act “entry into, performance, or financing of a contract to sell or purchase goods.” My guess is that Keefe knew that because she also said:

“But we believe the deal in any case violates the spirit of the sanctions,” Keefe said.

This is the first time I’ve heard anyone argue — presumably with a straight face — that the “spirit” of a U.S. law should have extraterritorial application.

A fascinating article in today’s Wall Street Journal details how Iran eludes U.S. sanctions on exports to that country. An interview with an Iranian merchant supplies an instructive example of how the merchant obtains iPod accessories from Tennessee-based Griffin Technology:

The owner of an electronics-goods store in affluent North Tehran, who asked to be identified only by his first name, Borhan, recently stopped using bank-to-bank wire transfers to pay for goods because of the restrictions. U.S. companies can’t ship most products into Iran. Borhan says he orders iPod accessories online from Griffin Technology in Nashville, Tenn., and has them shipped to a middleman — a UAE-registered company in Dubai that operates out of a post-office box.

A typical $10,000 order, packed in 10 boxes, costs as much as $800 to ship to Dubai, he says. He pays another $500 to the middleman to unpack the goods in Dubai and reship them to Tehran. To pay for the shipment, he says, he gives cash to an acquaintance in Tehran who sends the money to his brother in Dubai through an informal money-transfer service, or “hawala.” The brother then pays the middleman.

Commissions for the middlemen and for the hawala transfer come out to about $1,000. The payment system takes three days, instead of the 12 hours a bank-to-bank transfer would take. (A spokeswoman for Griffin says it is “unable to control where products end up in the marketplace.”)

The pat response from Griffin — “we can’t control where products end up” — just doesn’t cut it here. If the story of how the merchant ordered the product is true, this transaction doesn’t have red flags; it has red banners the size of a football field draped all over it. A transaction worth $10,000 shipped to a P.O. Box in Dubai is bad enough, but if Griffin checked the IP Address associated with the order it would almost certainly show that the order came from Iran. Game over.

Exporters can’t simply bury their heads, ostrich-like, in the sand and say they just have no idea where their products wind up and that they are “shocked, shocked to find that” their products were ultimately shipped to Iran or another sanctioned country.