Halliburton, Others Evade Iran Embargo

Halliburton, others evade Iran embargo
How do U.S. contractors legally do business there?
By Lisa Myers & the NBC investigative unit
Updated: 7:49 p.m. ET March 7, 2005

It's just another Halliburton oil and gas operation. The company name is emblazoned everywhere: On trucks, equipment, large storage silos and workers' uniforms.

But this isn't Texas. It's Iran. U.S. companies aren't supposed to do business here.*

Yet, in January, Halliburton won a contract to drill at a huge Iranian gas field called Pars, which an Iranian government spokesman said "served the interests" of Iran.*

"I am baffled that any American company would want to have employees operating in Iran," says Sen. Susan Collins, R-Maine. "I would think they'd be ashamed."*

Halliburton says the operation — videotaped by NBC News — is entirely legal. It's run by a subsidiary called "Halliburton Products and Services Limited," based outside the U.S. In fact, the law allows foreign subsidiaries of U.S. corporations to do business in Iran under strict conditions.

Other U.S. oil services companies, like Weatherford and Baker Hughes, also are in Iran. And foreign subsidiaries of NBC's parent company, General Electric, have sold equipment to Iran, though the company says it will make no more sales. (MSNBC is a Microsoft-NBC joint venture.)

Still, Halliburton stands out because its operations in Iran are now under a federal criminal investigation. Government sources say the focus is on whether the company set out to illegally evade the sanctions imposed ten years ago.

"I am formally announcing my intention to cut off all trade and investment with Iran," announced President Bill Clinton in 1995.

Sources close to the Halliburton investigation tell NBC News that after that announcement, Halliburton decided that business with Iran, then conducted through at least five companies, would all be done through a subsidiary incorporated in the Cayman Islands.

"It's gotten around the sanctions and the very spirit and reasons for the sanctions," says Victor Comras, a former State Department expert on sanctions.

For Halliburton to have done this legally, the foreign subsidiary operating in Iran must be independent of the main operation in Texas. Yet, when an NBC producer approached managers in Iran, he was sent to company officials in Dubai. But they said only Halliburton headquarters in Houston could talk about operations in Iran. Still, Halliburton maintains its Iran subsidiary does make independent business decisions.

Why should Americans even care if U.S. companies circumvent the sanctions?

"The purpose of these sanctions is to dissuade Iran from supporting terrorism and from seeking to acquire weapons of mass destruction," says Comras.

There's a move in Congress to close the loophole.***

"We don't want American companies propping up a government that's dedicated to our destruction," says Sen. Collins.

Halliburton says it is unfairly targeted because of politics, but recently announced it is pulling out of Iran because the business environment "is not conducive to our overall strategies and objectives."

However, that exit will be slow. Halliburton announced it was leaving Iran only three weeks after Iran announced the lucrative new gas deal, which industry sources say will take three years to complete.