Saturday, Dec 17, 2011


   (From THE WALL STREET JOURNAL) 
   By David Crawford

BERLIN -- When the United Nations Security Council blacklisted Iran's Sepanir Oil & Gas Engineering Co. last year, the company's main German intermediary terminated their trading relationship, the German firm says -- an apparent victory for international sanctions.

But within months, another intermediary had seized on the business opportunity. Hansa Group AG of Duisburg, Germany, ramped up its trade with Iran's oil and gas sector, the company said, delivering industrial equipment from German manufacturers to a new Iranian company that didn't appear on the U.N. blacklist.

This week, 18 months after the U.N. sanctions were imposed, Hansa Group said Germany's export-oversight agency had asked it to halt deliveries to the Iranian firm, as the European Union discusses updates to its Iranian blacklist. A spokesman from the German agency, known as BaFa, declined to comment.

As the U.S. and EU seek stronger measures to force Tehran to abandon its nuclear program, the rise and fall of Hansa's supply business shows how the sanctions regime is often forced to play catch-up to businesses in Iran and abroad that quickly adapt.

The June 2010 U.N. sanctions targeted 15 companies belonging to the Islamic Revolutionary Guard Corps, the military-business conglomerate that dominates Iran's energy sector.

When the list came out with Sepanir on it, the company's CEO recommended to its German equipment suppliers that they work instead with a new company, Petro Karan Shafagh Kish, or Petrokish, according to correspondences between Iranian and German companies seen by The Wall Street Journal.

The new company was registered in Iran in April 2010, after Germany banned exports to Sepanir -- a move that followed a U.S. recommendation that the U.N. put Sepanir on its next blacklist.

Petrokish took over Sepanir's role -- to procure all equipment, materials and services for the onshore part of South Pars gas field, according to Petrokish's website.

After the sanctions were published in June 2010, Hansa began to move into the business abandoned by Sepanir's former German intermediary, Salzgitter Mannesmann International GmbH, which "ended cooperation as soon as we learned the Iranian Revolutionary Guards were involved," a Salzgitter spokesman said.

Hansa took over some contracts that had been drafted between Salzgitter and Sepanir to supply the Iranians with fire-protection equipment and other technical energy-industry needs -- fulfilling the orders for Petrokish instead, commercial records show.

In their new incarnation, some of these contracts even inherited the same procurement numbers, says Thomas Pfisterer, the Hansa management board member responsible for marketing.

Mr. Pfisterer said in October that Hansa had bartered with Petrokish on its own behalf, while separately helping German firms conclude sales in Iran. "We've taken market share" from competitors, he said.

From June 2010 through November 2011, according to sales records reviewed by The Wall Street Journal, Petrokish ordered through Hansa more than 150 million euros ($195 million) in technology.

Mr. Pfisterer said Hansa's niche in Iran trade was a "gray area of business," but was legal. The exports to Iran were approved by BaFa, according to Hansa and the suppliers.

On Tuesday, BaFa asked Hansa to halt all deliveries to Petrokish. The request was made in connection with an EU meeting on Dec. 1 that informally named new people and entities for sanction, Hansa told its suppliers in a letter seen by the Journal.

A spokesman for the EU declined to comment on the deliberations. The EU is expected to formalize new sanctions at a meeting in January.

A spokeswoman for Hansa Group said her firm is caught in a "terrible situation."

Its suppliers require Hansa Group to accept delivery and pay for goods it ordered on behalf of Petrokish, but the goods can't be delivered to the Iranian company. Hansa Group is bargaining "vacate its contracts with the least economic damage," she said.

Sepanir and Petrokish officials didn't respond to requests to comment. It wasn't clear how much of the sanctioned company's supply line was rerouted to supply Petrokish.

Michael Mann, spokesman for European High Representative for Foreign and Security Policy Catherine Ashton, said sanctions work at a political level as well as a practical level, and are updated as needed.

U.S. Undersecretary for Terrorism and Financial Intelligence David Cohen said: "If Petrokish is a successor to Sepanir, then it is up to us, and the U.N., to update the sanctions list."

Meanwhile Petrokish has taken down its website contents, posting an "under construction" message saying the company is shifting its "scope of activities to fields out of the energy sector."

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Trade Rerouted

Iran kept up a German supply line, despite sanctions

-- February 2010 The U.S. proposes new U.N. sanctions targeting entities controlled by Iran's Revolutionary Guards

-- April German export oversight agency BaFa bans shipments to Sepanir Oil & Gas Engineering Co.; a new Iranian firm, Petro Karan Shafagh Kish, is registered

-- June The U.N. sanctions Sepanir; the company's German intermediary halts business relations with Iran

-- December Officials at Hansa Group take up deals with Petrokish that were negotiated with Sepanir's German suppliers

-- November 2011 Hansa says it plans to end Iran business; Petrokish has ordered over $195 million in goods through Hansa

-- Dec. 13 Hansa says it has been asked by BaFa to halt deliveries to Petrokish, as EU weighs new sanctions

WSJ research

(END) Dow Jones Newswires

17-12-11 0712GMT