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Archive for the ‘Iran Sanctions’ Category

Sep

6

Scramjet Conference Conundrum

Posted by Clif Burns at 10:17 pm on September 6, 2007

Scramjet engines title= An alert reader pointed out this interesting article in Aviation Week which raises the issue, which we last talked about in relation to the Chi Mak prosecution, of deemed exports at scientific conferences. The conference in question was an American Institute of Aeronautics and Astronautics conference in July on propulsion technologies, including scramjet and related technologies.

The Cincinnati meeting differed from a traditional U.S. industry gathering, because nearly a dozen engineers from Iran also submitted papers on Iranian solid and liquid rocket technologies. The Iranian engineers are based at the Sharif University of Technology and the KNT Technical University, both in Tehran. They apparently did not deliver the papers in person. However, as participants, the Iranians have access to all of the highly detailed U.S. aircraft and rocket propulsion presentations made at the conference.

Of course, the non-attendance of the Iranians isn’t surprising, since the probably didn’t apply for visas and even if they had those visas would likely have been denied. And the sanctions against Iran would not forbid access to presentations from the conference under the informational exception.

But, of course, if the information at the conference went beyond public domain information or fundamental research under section 120.11 of the ITAR, then companies and individuals at the conference may have committed export violations, not only because of any access to that information by Iranians nationals but also because of access to that information by any other foreign nationals. And it would appear that all the papers presented at the conference can be purchased from the AIAA website.

So, was any such information available? Consider this:

[O]ne [of] the more interesting historical papers presented at the forum was a detailed description of how the U.S. Air Force and Lockheed combined top-secret ramjet propulsion technologies with segmented solid rocket boosters for the Mach 3 D-21B reconnaissance drones that were launched by modified SR-71s and B-52Hs in the late 1960s. … This was the first time details on the segmented rocket booster portion of the D-21B program have been presented publicly, says Robert Geisler of Geisler Industries, who led the analysis with retired Pratt & Whitney and ATK Tactical Propulsion engineers.

Yikes. If I were the one who presented that paper, I might be a little nervous right now.

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Sep

4

UAE Responds to U.S. Pressure and Adopts Export Laws

Posted by Clif Burns at 4:56 pm on September 4, 2007

Category: Arms Export • Iran Sanctions

Dubai Last Friday, the UAE announced it’s long-promised export law. The new law not only forbids the unlicensed export of “strategic goods” including military hardware, CBW precursors and dual use items but also creates a catch-all exception that would allow the UAE government to ban other exports that it deems a threat to the country’s “national security, foreign policy, natural resources, public health and safety or the environment.” The announcement of the new law is part of the UAE’s response to continuing complaints from the United States that sensitive exports to Iran have been funneled through the UAE.

The ink on the new law was scarcely dry before Iran chimed in to denounce the law:

The U.S. pressure on the UAE is in the direction of the same illegal U.S. policy against Iran in the past and beyond the U.N. resolutions,” said Mohammad Ali Hosseini, spokesman for Iran’s Foreign Ministry.

…

Iran’s most widely circulated newspaper, Hamshahri, warned in its editorial Sunday that trade restrictions would hurt Iran, the UAE and other Mideast countries.

“Putting Iran’s economic interactions in danger would mean economic risk for many countries,” said the paper. “Under the circumstances, the UAE would not be able to repeat its economic boom years.”

Since the U.A.E. law doesn’t forbid all exports to Iran, the hue and cry from Tehran seems an implicit concession that defense articles and dual use items are indeed being funneled to Iran through the UAE.

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Aug

10

The Fat Man and the Imams

Posted by Clif Burns at 2:55 pm on August 10, 2007

Category: Iran Sanctions

Fouad Al Zayat, a Syrian businessman and high-stakes gambler better known by London casino staff as “The Fat Man,” just lost an appeal he filed to have the U.K. to release property that the U.K. had blocked at Iran’s request. Yes, you read that correctly, property that had been blocked at Iran’s request.

Part of the reason for this post is to add a little levity to the blog on a steamy Friday afternoon in August. The other reason is because, believe it or not, there is actually a U.S. export law angle to this story, as reported today by Bloomberg.

The story begins almost five years ago when Al Zayat made a $120 million deal with Iran to buy an Airbus 340 from the Sultan of Brunei to convert it into a VIP plane for high muckety-mucks in the Iranian government. In a not-very-focused moment, the imams gave Al Zayat the $120 million before they got the plane. (Note to Iran: don’t give money to notorious high-stakes gamblers without getting the goods first).

Instead of being a good boy and actually using the proceeds from Iran to buy the Sultan’s A340, Al Zayat apparently used the funds to settle multi-million dollar gambling debts he owed to Ritz Hotel Casinos Ltd and to buy property in London. The imams were not amused, and so they enlisted an army of solicitors and the U.K. judicial system to freeze Al Zayat’s assets in Great Britain.

Al-Zayat appealed the blocking order and — alert: export law angle ahead — claimed that there was a commercial dispute between him and Iran, in large part over the cost of refitting the plane and still complying with U.S. sanctions:

Al Zayat told the court his expenses were “enormous” because even though he planned to buy the plane for $85 million, Deutsche Lufthansa AG had a $20 million interest in it and the aircraft had to be converted in a way that ensured U.S.-imposed economic sanctions against Iran were respected.

As you’ll see below, Al Zayat had a plan for complying with the Iran Sanctions law that wouldn’t have cost more than about $50,000.

Now, you may be scratching your head and thinking that you’ve heard about Fouad Al Zayat before. And you have. He has a walk-on role in the affair of Bob Ney, the Ohio Congressman now languishing in the slammer for bribery. Al Zayat was mentioned in the Ney indictment as the “foreign businessman” who flew Ney and two staffers to London for a night of gambling, with an enormous pile of free chips included courtesy of Al Zayat.

Why, you ask, was Al Zayat bribing Ney? It’s all about the imam’s VIP A340. Al Zayat wanted to get an exemption to put U.S. parts in the VIP plane. Paul Kiel at TPMmuckracker finishes the story:

Ney walked away from their night of gambling with over $50,000 … . But Ney didn’t want to declare the full amount to customs when he re-entered the U.S. So he gave $5,000 to one of his staffers … to carry through customs. And in order to save Ney the trouble of depositing the money into a bank once they returned, “Heaton stored this money in the safe of Ney’s Congressional Office,” according to the charging documents, “opening the safe as requested so that Ney could make repeated withdrawals.”

Bob Ney was, apparently, the only person in the United States who ever got rich because of the U.S. sanctions against Iran. And Al-Zayat’s plan to fix his Iran Sanctions problem for the cost of a Congressman didn’t work out so well, either for him or the Congressman.

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Jul

24

Weatherford under Investigation for Operations in Iran

Posted by Clif Burns at 6:44 pm on July 24, 2007

Category: BIS • Criminal Penalties • Iran Sanctions

Denied Houston-based oil-drilling and oilfield services company Weatherford announced yesterday in its 8-K filing with the SEC that the company has

been notified that the Bureau of Industry & Security and the U.S. Department of Justice are investigating allegations of improper sales of products and services by us in sanctioned countries. We are cooperating fully with this investigation. In cooperation with the government, we have retained legal counsel, reporting to our audit committee, to investigate this matter. The investigation is in its preliminary stages.

It’s probably not to hard to guess what sanctioned country is involved. A map of Weatherford offices published in the September 2005 edition of W magazine, a Weatherford publication, tells the story:

Looks like three locations in Iran to me.

Of course, a foreign subsidiary of a U.S. company can do business in Iran provided that the foreign subsidiary has business in other countries (in other words, is not a device to evade the sanctions) and provided its operations in Iran are not controlled by the parent. Complying with the second condition — i.e. isolating the Iranian operation from control by the U.S. parent — is what normally creates a problem. Even something as innocent as U.S. approval of a travel and expense voucher in Iran from the foreign subsidiary can raise questions — particularly in an environment where U.S. officials are making louder and more frequent noises about swatting companies doing business in Iran.

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Jul

12

Living Up to Carp

Posted by Clif Burns at 8:24 pm on July 12, 2007

Category: Iran Sanctions • OFAC

Freshwater Carp Iowa-based fish processor Stoller Fisheries was recently assessed $931.25 by the Office of Foreign Assets Control (OFAC) for shipping 20 grams of carp pituitary glands (valued at $4,900) to Iran without an OFAC license. Carp pituitary glands are believed to be beneficial to the spawning and fertility of farmed fish. The violation was not voluntarily disclosed.

The penalty notice issued by OFAC indicated that the company made both a written presentation and a verbal presentation to OFAC, which prompted OFAC to reduce it’s proposed penalty of $3,725 to the $931.25 actually assessed. The $3,725 represents a substantial reduction from the $11,000 penalty that could have been imposed, assuming, as seems the case, that only one export was involved.

So what prompted this significant reduction for a company that, after all, didn’t voluntarily disclose the violation?

To begin with, Stoller’s case presented all the other factors that would normally be used for mitigation. As the penalty notice stated:

Company alleged that it was not aware of regulations prohibiting sales to Iran and that its primary business is in the processing of fresh water fish for human consumption and particularly kosher fish products. Moreover, Company alleged that the sale of carp pituitary glands is a by-product of the primary business.

In support of its request for a waiver, Company has submitted its current compliance policy instructing employees to check and verify exportations to countries prior to packaging any shipment to such country and to contact the U.S. Customs and Border Patrol if any questions arise. . . .

Company took affirmative steps to prevent further unlicensed shipments to Iran and that some relief is warranted in consideration of the fact that this constitutes Companyâ€™s first offense on record at OFAC, Company instituted a new compliance policy, and evidence that such activity may have been licensable.

First offense? Check. Inexperienced exporter? Check. Unintentional violation? Check? Licensable? Check. Implemented steps to prevent similar exports? Check. Adopted new compliance program? Check.

One part of the compliance program adopted by Stoller, however, is something that I don’t recommend. As noted above, Stoller’s program advises employees to contact Customs if they have questions about a shipment. If Customs thinks it is being used as compliance counsel, it may well decline to provide assistance beyond saying: “Ship it and we’ll seize it and prosecute if there’s a problem.”

In addition to the mitigation factors mentioned above, there is one intangible reason, which I’ll call the good guy factor, that I think may also explain why Stoller was treated well here. I can’t help but think that Company officials made quite a personal impression during their verbal presentation to OFAC. This suspicion is based on the Company’s website which is, frankly, simple, charming and appealing. Even though I have no particular use for the plate-frozen blocks of mechanically-deboned minced fish sold by the Company, the website made even me consider, if only for a moment, whether I might find some use for plate-frozen fish blocks. Okay, let’s be honest, I even wondered whether I could find some use for the carp pituitary glands.

I think what sold me on the Company, among other things, was this memorable phrase from the website: