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Financial Times: US companies use stealth to sidestep Iran embargo By Guy Dinmore in Tehran and Edward Alden in Washington


US companies are quietly strengthening their presence in Iran, circumventing US sanctions in the expectation that improved relations between the two countries will lead to a lifting of Washington's unilateral trade embargo within a year.

In a calculated gamble that Washington will not raise objections, the companies have found ways to use foreign subsidiaries or Iranian middlemen to sell to Iran without technically violating the sanctions.

European businesses exhibiting at Tehran's trade fair this week accused Washington of double standards. They say the US is turning a blind eye towards its own companies dealing with Iran, while harassing foreign companies operating in the Iranian market when they seek business in the US.

This is indicative of Washington's current ambivalence towards Iran.

President Bill Clinton is eager for an opening to Iran that could become part of his foreign relations legacy.

But Iran remains a political time bomb in the US. The recent convictions of 10 Iranian Jews on espionage charges has angered the US Jewish community and its congressional supporters, blocking any chance of even a modest US initiative until after the November elections.

President Clinton, citing Iran as a threat to national security, signed an executive order in 1995 that barred US business dealings with Iran. In 1996, Congress passed the Iran-Libya Sanctions Act, which allows for sanctions against foreign companies participating in Iran's oil industry.

None of these efforts is preventing American products from being widely available in Iran.

Hewlett Packard and Intel products are common sights on Jomhouri Street, Tehran's most popular area for computer equipment. Iranian police and other security services use Motorola radios.

General Motors has held discussions with Pars Khodro, an Iranian carmaker, to get back into the Iranian market, Iranian officials say. General Motors owned Pars Khodro before it was nationalised.

Many of the products make their way to Iranian markets courtesy of Iranian middlemen, particularly in Dubai. Said one Iranian business consultant: "The US is not monitoring things very closely. They must know that agents in Dubai are importing far more US goods than the local Dubai market can absorb."

But more direct routes are also available. While the trade embargo prohibits foreign subsidiaries of US companies from trading with Iran under the direction of the parent company, this restriction is easily sidestepped.

As long as the US parent does not "facilitate" the transaction or directly approve the actions of a foreign subsidiary, those subsidiaries are free to deal with Iran.

That channel has been particularly important for US oil companies, which fear they will be frozen out of the development of Iranian oilfields. Conoco, the US oil group, has analysed seismic data for the National Iranian Oil Company through its British subsidiary.

Those transactions are currently under investigation by the Office of Foreign Assets Control, the US Treasury agency that enforces the trade embargo. Conoco has denied violating the embargo.

The uncertainty over enforcement of the sanctions regime has encouraged US companies to take risks. "A lot of companies are out there pushing the envelope because it is so grey," said a US lawyer who counsels companies on trade with Iran.


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