Bloomberg News

Tester Cites Koch in Calling for Limiting U.S. Business in Iran

October 15, 2011

Oct. 15 (Bloomberg) -- Senator Jon Tester, a Montana Democrat, said the U.S. should put an immediate stop to American companies circumventing sanctions against conducting business in Iran and singled out Koch Industries Inc.

“It’s clear we need to tighten the screws,” Tester told a Senate Banking Committee hearing this week on potential threats from Iran. Yesterday, Koch’s general counsel, Mark Holden, said in a statement that the company “voluntarily decided several years ago to stop sales to Iran.” The company also said the sales were legal at the time.

Iran has been a focus of U.S. attention this week as the Justice Department on Oct. 11 said it sponsored a plot to assassinate Saudi Arabia’s ambassador to the U.S.

Tester said he is concerned American companies can use loopholes in current sanctions to enable foreign subsidiaries to do business in Iran. “It boggles the mind that we continue to see businesses, American businesses, supporting Iran’s economy by actively circumventing imposed sanctions,” he said. “It’s outrageous, and we need to put a stop to it immediately.”

Koch’s Holden said Tester and other Democrats are singling out Koch for political reasons. The company’s political action committee this year has given 96 percent of its money to Republicans.

‘Political Hypocrisy’

Koch “supports those companies that chose to stop sales to Iran,” and “deplores the political hypocrisy that distorts facts and criticizes a single company for its actions while ignoring the activities of other companies who are the financial contributors to these same politicians,” Holden said in the statement.

A Bloomberg Markets Magazine investigation found that Koch Industries has sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism. Internal company documents show that the company made those sales through foreign subsidiaries, thwarting a U.S. trade ban on domestic companies selling materials to Iran.

Koch-Glitsch offices in Germany and Italy continued selling to Iran as recently as 2007, the records show.

The company’s products helped build a methanol plant for Zagros Petrochemical Co., a unit of Iran’s state-owned National Iranian Petrochemical Co., the documents show. The facility, in the coastal city of Bandar Assaluyeh, is now the largest methanol plant in the world, according to IHS Inc., an Englewood, Colorado-based provider of chemicals, energy and economic data.

Trade Sanctions

Melissa Cohlmia, Koch’s director of corporate communications, said in an e-mailed statement that, “During the relevant time frame covered” in the Bloomberg Markets article, “U.S. law allowed foreign subsidiaries of U.S. multinational companies to engage in trade involving countries subject to U.S. trade sanctions, including Iran, under certain conditions.” Koch has since stopped all of its units from trading with Iran, she added.

David Cohen, the undersecretary for terrorism and financial intelligence at the Department of Treasury, said at this week’s Senate hearing that officials are “working on some other ideas in the Treasury Department on how to more effectively limit what subsidiaries can do.”

U.S. companies have been banned from trading with Iran since 1995, when President Bill Clinton declared it a threat to national security. Iran supports Iraqi militants and Taliban fighters as well as terrorist groups, including Hamas and Hezbollah, according to the U.S. State Department.

Tester said that “With some companies, you can’t enforce common sense or the sense of patriotism.”

--Editors: Robin Meszoly, Jim Rubin.

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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