Sidestepping Sanctions

By Scherer, Michael | Mother Jones, July/August 2003 | Go to article overview

Sidestepping Sanctions


Scherer, Michael, Mother Jones


While the Bush administration looks the other way, U.S. companies are dodging laws that bar them from doing business with nations accused of sponsoring terrorism. By Michael Scherer

In April, as American tanks approached the outskirts of Baghdad, Pentagon officials suggested that only U.S. companies would be allowed to take part in the postwar reconstruction of Iraq's oil fields. In strategic leaks to the press, the Defense Department offered a rationale for an American-only policy: European firms, they declared, should be excluded because they do business with Iran and other countries that sponsor terrorist organizations and harbor weapons of mass destruction.

What defense officials failed to note, however, is that many U.S. companies routinely find ways to bypass economic sanctions and export regulations that bar American citizens and companies from trading with Iran, North Korea, Libya, and Sudan. Taking advantage of legal loopholes, these corporations simply conduct their business through offshore subsidiaries that employ only foreign citizens. With no Americans on the payroll, the subsidiaries are free to ignore U.S. sanctions against the "axis of evil" and other countries identified by the Bush administration as the primary sponsors of terrorism. Other U.S. firms-including Hewlett-Packard, Kodak, and Procter & Gamble-ship their products to Dubai, where third parties are known to "re-export" goods to Iran.

"It's a real problem," says Michael Beck, an expert on sanctions at the University of Georgia. "American companies bypass U.S. export controls by using entities based in other countries."

In Iran-"the most active state sponsor of terrorism," according to the State Department-General Electric is providing four hydroelectric generators to expand a dam on the Kurun River through a Canadian subsidiary called GE Hydro and is also supplying pipeline compressors and gas turbines for Iran's burgeoning oil sector through an Italian unit called Nuovo Pignone. Not far from the Iraqi border, a subsidiary of Halliburton is helping to build a $228 million fertilizer plant, one of the world's largest. Another Halliburton division based in Sweden is providing the Iranian National Oil Co. with a $226 million semi-submersible drilling rig, while other subsidiaries operate in Libya. A British subsidiary of ConocoPhillips helped Iran survey its Azadegan oil field, and ExxonMobil only recently sold its Sudanese gas subsidiary based in Khartoum.

U.S. companies acknowledge that they routinely use overseas subsidiaries to trade with sanctioned countries in the Middle East and elsewhere. "We have used foreign subsidiaries to sell oil equipment in those regions," says Scott Amann, a vice president at the oil -service firm Cooper Cameron. "We're not allowed to have an American company or American operation."

But while President Bush has drawn a line in the sand with foreign governments, warning them "you are with us or you're with the terrorists," he has done little to crack down on U.S. corporations that skirt trade embargoes designed to undercut terrorist organizations. "It is an outrage, if not actually criminal, when you have companies end-running these sanctions," says Frank Gaffney, a deputy defense secretary under Reagan and president of the Center for Security Policy, a conservative think tank in Washington, D.C.

Previous administrations have been less friendly to sanction dodgers. The Reagan administration pressured subsidiaries of Conoco and Marathon to leave Libya in the 1980s, and in 1995 the Clinton administration persuaded Conoco to abandon an Iranian oil contract arranged through a Dutch subsidiary. "If a government is strongly committed to stopping these kinds of transactions, it can do so," says Kenneth Rodman, a sanctions expert at Colby College. "There is power that the U.S. is choosing not to use for some reason."

Instead, the Bush administration has used its power behind the scenes to make it easier for American companies to do business with the very countries it has targeted in the war on terrorism. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Sidestepping Sanctions
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.