Gazprom and Iran

Several U.S. senators are working to block U.S. financing for Russia's Gazprom because it plans to help Iran develop South Pars field.

On Sept. 30, Iran signed a $2 billion deal with Total of France, Petronas of Malaysia, and Gazprom to develop the field (OGJ, Oct. 13, 1997, p., 34).

The 1996 Iran-Libya Sanctions Act (ILSA) enables the U.S. government to impose sanctions against foreign firms and U.S. banks that help either country develop energy projects.

Meanwhile, Gazprom wants to raise $1 billion in U.S. capital markets for Russian projects, and the U.S. Export-Import Bank has agreed to guarantee Gazprom's purchases of $750 million in U.S. goods and equipment.

Sen. Alfonse D'Amato (R-N.Y.), Senate banking committee chairman and principal author of ILSA, held a hearing to question if the U.S. should be helping Gazprom whether it is helping Iran.

D'Amato's complaint

The senator said, "Gazprom should not be entitled to do business in the U.S. on the basis that 'all is well.' The fact of the matter is their conduct is in blatant defiance and violation of our law. U.S. investors and taxpayers should not be put in a position of financing Gazprom's dealings with Iran."

D'Amato said ILSA should be amended to prevent foreign firms from obtaining U.S. commercial bank financing if they ignore the law.

William Ramsay, deputy assistant secretary of state, said, "I think it is accurate to say that no nation's behavior poses a greater threat to U.S. political and security interests than that of Iran.

"Iran's support for terrorism, its efforts to obtain weapons of mass destruction and the means to deliver them, and its efforts to disrupt the peace process in the Middle East are intolerable.

"Despite the attention given to the election of a new Iranian government, we have seen no evidence of change in Iranian practices."

He said the State Department is investigating two Iranian projects under ILSA: South Pars and the Balal field project involving Bow Valley of Canada and Bakrie of Indonesia.

Ex-Im replies

James Harmon, Ex-Im chairman, said the bank does not consider U.S. foreign policy goals when it decides what exports to support.

He said Gazprom, as the world's largest gas firm, also is the largest potential buyer of gas equipment, services, and construction equipment.

"Gaining access to Gazprom's market for U.S. exports has not been a simple matter." He explained that in 1981, the U.S. imposed sanctions to block construction of the Yamal gas export line, which was built anyway.

"For Gazprom, it left a residue of antagonism toward the U.S. and at the same time established a relationship between Gazprom and western European and Japanese exporters."

He said so far the bank has $134.7 million in loans for Gazprom to buy U.S. compressor controls and has initially approved a $165 million horizontal drilling project involving 21 U.S. companies and $450 million for specialized industrial machinery.

But Harmon said if the administration decides to sanction Gazprom under ILSA, "Ex-Im Bank will promptly and faithfully implement this order."