Firms Reported in Open Sources to Have Sold Iran Refined Petroleum Products Declined Since June 30, 2010

What GAO Found

Iran’s involvement in illicit nuclear activities, support for terrorism, and abuse of human rights has led the United States, as well as other nations, to impose sanctions in an attempt to curb these activities. According to the Department of State (State), the sanctions are intended to, among other things, target sectors of the Iranian economy that are relevant to Iran’s proliferation activities and block the transfer of weapons and technology related to Iran’s missile and nuclear programs. One of the measures enacted by the United States, intended to limit resources available for proliferation and support for terrorism, imposes sanctions on firms that sell refined petroleum products to Iran.

According to the Department of Energy (DOE), Iran has limited refinery capacity and has been reliant on imports of refined petroleum products to meet domestic demand for gasoline. Foreign commercial activity in Iran’s energy sector has also declined in recent years, limiting Iran’s ability to produce gasoline to meet demand, much less to export refined petroleum products on world markets. However, according to State and DOE officials, Iran has attempted to reduce its dependence on foreign refined petroleum products by reducing gasoline subsidies to its citizens in order to reduce demand, converting petrochemical facilities to produce gasoline, as well as expediting the construction of new refineries or the expansion of current refineries. In 2009, Iran imported approximately 130,000 barrels of gasoline per day, but, according to DOE, in 2010 the amount of gasoline shipped to Iran declined to an estimated 78,000 barrels per day, and by July 2011 it had declined to 50,000 barrels per day, according to "Petroleum Intelligence Weekly."

The United States has imposed multiple sanctions through various legislation and executive orders, including the Iran Sanctions Act of 1996 (ISA). On July 1, 2010, the President signed into law the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010, which amends ISA, among other provisions. ISA, as amended, provides for sanctions to be imposed against persons, including foreign firms, who engage in certain activities in Iran’s energy sector, including selling or providing Iran with refined petroleum products. In 2010, we identified, in open sources, 16 firms that reported having sold refined petroleum products to Iran from January 1, 2009, to June 30, 2010. This report updates the findings of the 2010 report.

As Congress requested, this report (1) provides a list of firms reported to have sold refined petroleum products to Iran from July 1, 2010, through December 31, 2011, and firms reported to have stopped sales to Iran since the 2010 report, and (2) identifies which of those firms have contracts with the U.S. government. We defined 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.

Why GAO Did This Study

Based on open source information, four firms—Petróleos de Venezuela S.A., China Oil, Unipec, and Zhuhai Zhenrong—were reported to have sold refined petroleum products to Iran between July 1, 2010, and December 31, 2011. Of the four firms, Petróleos de Venezuela S.A. was not identified in our 2010 report. According to open sources, the number of firms selling refined petroleum products to Iran has decreased since the release of our 2010 report. Eleven of the 16 firms that we listed in our 2010 report were reported in open sources and/or indicated in letters to us that they had stopped sales of refined petroleum products to Iran, and we did not find any open sources that reported the firms having sold refined petroleum products to Iran since June 30, 2010. For two firms that our 2010 report listed as having been reported to have sold refined petroleum products to Iran—Emirates National Oil Company and Hin Leong Trading Corporation—we did not find sufficient open source information that reported whether the firms had continued or ceased sales of refined petroleum products to Iran since June 30, 2010. According to DOE and open source reports, as well as a State official, sanctions have made it difficult for Iran to import gasoline as many suppliers of refined petroleum products stopped shipments after the passage of CISADA. According to DOE and State officials, Iran has attempted to increase its ability to refine its own gasoline and to reduce domestic demand.

The U.S. government did not have contracts with the three Chinese firms or Petróleos de Venezuela S.A., which were reported in open sources to have sold Iran refined petroleum products between July 1, 2010, and December 31, 2011.

For more information, contact Thomas Melito at (202) 512-9601 or melitot@gao.gov.