International Affairs:

Firms Reported in Open Sources to Have Sold Iran Refined Petroleum Products between January 1, 2009, and June 30, 2010

GAO-10-967R: Published: Sep 3, 2010. Publicly Released: Sep 3, 2010.

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The United States has imposed multiple sanctions against Iran to deter it from developing its nuclear program, supporting terrorism, and abusing human rights. On July 1, 2010, the President signed into law the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010. CISADA amends the Iran Sanctions Act of 1996 (ISA) to require the President to impose three or more of a possible nine sanctions against persons who knowingly sell or provide Iran with refined petroleum products that, during a 12-month period, (1) have a fair market value of $1 million or more or (2) have an aggregate fair market value of $5 million or more. These new provisions regarding the sale or provision of refined petroleum products to Iran apply only to the sale or provision of refined petroleum products made on or after July 1, 2010. Under ISA, one of the sanctions that the President can apply is to bar foreign firms State administers ISA sanctions. According to the Department of Energy (DOE), Iran currently does not have sufficient refining capacity to meet its domestic demand for gasoline. Iran imported approximately 130,000 barrels of gasoline per day in 2009 as well as other refined products, such as diesel fuel. Iran's nine refineries are operated by the National Iranian Oil Refining and Distribution Company, according to DOE. With the potential participation of foreign companies, Iran plans to add capacity at eight of its nine refineries in an attempt to fully meet domestic demand for gasoline by 2013 or 2014 at currently projected demand levels, according to DOE officials. This report highlights open source information that, following further investigation by the State Department, could contribute to the identification of persons or firms whose activities may be sanctionable under ISA, as amended by CISADA. As Congress requested, in this report, we identify (1) firms that were reported to have sold refined petroleum products to Iran at any time during the period between January 1, 2009, and June 30, 2010, and (2) firms that also had U.S. government contracts in fiscal year 2009 or 2010 (up to June 2010). We define the sale of refined petroleum products as receiving payment for the provision of any such products through direct sale, shipment, or brokering (i.e., trading) of these products to Iran. GAO did not review the contracts or documents underlying these transactions reported in open sources and did not independently verify these transactions. Further, we did not attempt to determine whether the firms listed in this report meet the legal criteria specified in ISA, as amended by CISADA, and we did not attempt to determine whether reported transactions were conducted on or after July 1, 2010--the date of enactment of CISADA. The Secretary of State is responsible for making such determinations.

In this report, 16 firms were identified in open sources as having sold refined petroleum products to Iran at any time during the period between January 1, 2009, and June 30, 2010. GAO did not attempt to determine whether the firms meet the legal criteria specified in ISA as amended by CISADA, or whether sales were conducted on or after July 1, 2010--the date of enactment of CISADA. According to DOE, firms that sell refined petroleum products to Iran may change over the course of a year because a firm may increase, decrease, or end sales from one month to the next. According to the State Department, some firms may have discontinued their activities after passage of CISADA to avoid triggering sanctions. We sorted the 16 firms into different tables on the basis of open source information and the firms' responses to our inquiries. We provided all firms with an opportunity to comment on the information we found in open sources by calling the firms and sending each firm an e-mail. Further, 5 firms reported at least three open sources as having sold Iran refined petroleum products at any time during the period between January 1, 2009, and June 30, 2010. We found no reports or official statements to indicate that these firms have stopped their sales. None of the 5 firms had provided us with comments as of August 27, 2010. Four of the firms are based in Asia, and 1 is based in the Middle East. Three open sources are listed as having sold Iran refined petroleum products at any time during the period between January 1, 2009, and June 30, 2010, but the 3 firms are also reported in at least three open sources as having stopped their sales during this same time period. One of the firms is based in Europe and Asia, 1 is based in the Middle East, and 1 is based in Asia. Of these 3 firms, the Independent Petroleum Group of Kuwait confirmed that it had sold refined petroleum products to Iran during the period between January 1, 2009, and June 30, 2010. The other 2 firms--Lukoil and Petronas--had not provided us with comments as of August 27, 2010. At least three open sources reported had sold Iran refined petroleum products at any time during the period between January 1, 2009, and June 30, 2010, but notified GAO that they had stopped their sales. Five of the firms are based in Europe, 1 is based in Eurasia, and 1 is based in Asia. Open sources also reported that all of these firms have stopped selling refined petroleum products to Iran. At least three open sources reported had sold Iran refined petroleum products at any time during the period between January 1, 2009, and June 30, 2010, but notified GAO that it did not sell Iran refined petroleum products during this time period. British Petroleum of the United Kingdom notified GAO that the information reported in open sources was inaccurate. In fiscal years 2009 and 2010, the U.S. government obligated over $2.3 billion in contracts to 3 of the 16 firms. The Department of Defense (DOD) obligated over 99 percent of these funds for purchases of fuel and petroleum products overseas. These 3 firms are presented in table 5 in order of magnitude of obligations, from greatest to least, as reported by the primary government contracting database. According to the primary governmentwide contracting database, DOD obligated funds to (1) British Petroleum for the purchase of jet and turbine fuel; (2) Total of France for the purchase of jet fuel, gasoline, and diesel; and (3) Emirates National Oil Company for the lease of fuel storage buildings.

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