Pentagon Contractors Exploring Business with Iran

Companies with more than $107B in DoD contracts eyeing Tehran

Hassan Rouhani
Hassan Rouhani / AP
February 25, 2014

Multiple companies currently exploring new business ventures in Iran are also cashing in on highly lucrative contracts with the U.S. Defense Department, raising questions about whether their dealings with Iran could run afoul of U.S. law.

At least 13 major international companies have said in recent weeks that they aim to reenter the Iranian marketplace over the next several months. The companies have received Pentagon contracts totaling well over $107 billion, according to a Washington Free Beacon analysis that tracked DoD contracts awarded since fiscal year 2009.

Many of the companies, which include carmaker Renault and oil giants such as BP, have already sent high-level trade delegations to Tehran to meet with Iranian officials about striking new business deals.

Lawmakers, congressional insiders, and other experts expressed shock when presented with the figures detailing billions in taxpayer funds that have gone to companies eager to partner with Tehran.

These companies include Boeing and General Electric—which have DoD contracts worth $87 and $12 billion respectively—as well as the Italian oil company Eni, Merck, Safran, Vitol, Bosch Rexroth, Sanofi Pastuer, and AVL.

Lawmakers say that companies should be forced to choose between doing business with the Pentagon and doing it with Iran.

"The fact that major federal contractors are even considering business with Iran during this interim period demonstrates that we need to be incredibly vigilant in enforcing the existing sanctions," said Rep Brad Sherman (D., Calif.), a member of the House Foreign Affairs Committee.

"And even if their activity is technically not captured by our existing sanctions laws, these companies should know that Congress is watching," Sherman said. "We will focus on defense and other federal contractors. And we will make sure that if there are deals that do violate the law, they will be debarred from federal contracting or worse."

Sherman said that Congress’ next Iran sanctions bill should "include a near total ban" on business dealings with Iran.

"If you sell anything to Iran but food or medicine, you are ineligible for a federal contract, grant or other assistance," he said. "At some point, you may have to say to these firms, you either do business with us or with them."

While U.S. law has banned companies with federal contracts from doing business with Iran, a provision in the recently signed interim nuclear deal relaxed economic sanctions and provided a temporary window for companies to do limited business with Tehran.

The interim deal does not stipulate which companies can legally do business with Iran. However, it does outline permissible trade relationships.

Sanctions will be relaxed on Iran’s petrochemical industry, oil industry, auto industry, gold trading sector, and precious metals trade during the six months that the interim deal is in effect, according to guidance issued by the Treasury Department.

This means that these specific business activities will no longer be sanctioned for the next several months, providing Tehran a window in which to cash-in on potentially lucrative deals.

Critics of the sanctions relief argue that it is bad policy to permit federal contractors to do business with a nation that aims to build nuclear arms and potentially use them on U.S. allies.

"Companies doing business with Iran in any way should not be rewarded with Department of Defense contracts until Iran has verifiably dismantled its nuclear, chemical, biological, and ballistic missile launch technology programs and is no longer a state sponsor of terrorism," said Mark Dubowitz, executive director of the Foundation for Defense of Democracies (FDD).

"These are the conditions set by Congress for the permanent lifting of the most important legislative sanctions," Dubowitz said. "If companies want to reenter the Iranian market in the prescribed areas permitted under the Geneva agreement over the next six months, that's their choice. But the U.S. taxpayer shouldn't be rewarding those companies with lucrative defense contracts at the same time."

Lawmakers separately warned automotive tire company Michelin on Monday that it could jeopardize its federal contracts by doing business with Tehran.

Aerospace firms Boeing and General Electric have also sought permission to resume business with Iran, prompting bipartisan concern on Capitol Hill.

"I am deeply concerned by reports that U.S. companies are exploring the possibility of resuming business with Iran," said Rep. Peter Roskam (R., Ill.), the House chief deputy whip. "My office has requested prompt explanations from the companies. Rest assured that I will continue to vigorously oppose any plan that economically strengthens the world’s deadliest state sponsor of terrorism."

Top U.S.-Iran negotiator Wendy Sherman cautioned companies against rushing into the Iranian market during a recent congressional hearing.

"We would hope they wouldn't go to Tehran and show restraint while we negotiate the comprehensive agreement," Sherman said at the time.

However, international trade delegations have flocked to Iran since the interim deal went into effect.

Renault, for instance, resumed shipping car parts to Iran in January of this year. The French automaker has received at least $111,170 from the Pentagon, according to publicly available data.

BP representatives reportedly attended an Iran oil investor conference that included Iranian President Hassan Rouhani and the country’s oil minister.

Italy’s Eni also was reported to have met with Iran’s oil minister in December 2013, just a month after the interim nuclear deal was inked.

One senior Senate aide who works on the sanctions issue said that the Obama administration is sending a hypocritical message to the world by not cracking down on federal contractors.

"How is Congress supposed to take Wendy Sherman and [Treasury Department official] David Cohen seriously when mega defense contractors are among those companies heading back into Iran?" asked the source. "If the administration really wanted to enforce existing sanctions, they'd start by sending a shot across the bow at companies that get billions of dollars from the U.S. Government."

A Pentagon spokesperson said that it follows "all applicable regulations in our contracting processes" and directed a Free Beacon reporter to contact the Treasury Department, which declined multiple requests for comment.