Forbes, 4/04: "Trading with the enemy", re: Halliburton, UAE

[Bluebear]

Today American companies are downright brazen about dodging the sanctions. And why not? On the list of Specially Designated Nationals and Blocked Persons maintained by the Office of Foreign Asset Control at the U.S. Department of Treasury only 1% of 3,032 separate entries are Dubai-based individuals and entities designated under the Iraq, Libya and Iran terrorism sanctions programs. On the Commerce Department's current list of 55 foreign end users specifically involved in proliferation activities, there is not one U.A.E. entity; the agency dispatched its first attaché to Dubai only 15 months ago. Since 1999 the government has turned down just 2% of applications to export to the U.A.E.--sometimes snaring unsuspecting entrepreneurs (see box). Officials do point out that 114 end-use checks were conducted in the region between 2000 and 2003, up from 63 checks from 1996 to 1999.

Still, "companies are playing fast and loose," says Adam Pener of Conflict Securities Advisory Group, a D.C.-based consultancy to multinational businesses. Halliburton, for example, manages to do business with Iran obliquely. Its Dubai-based affiliate, Halliburton Products & Services Ltd., allegedly has no Americans on staff; the Houston oil services company claims it has no direct ownership of the operation. Nevertheless, FORBES has obtained documents showing how Kala Ltd., the British arm of the National Iranian Oil Co., solicited at least 17 separate bids from the affiliate during 1997 and 1998 (when Vice President Cheney was Halliburton's chief executive). A few bids include handwritten notes that say "FOB Dubai Airport" or "FOB Dubai port"--meaning that the U.A.E. was just a way station between Halliburton and Tehran. Halliburton would not comment on the bids. In any event, earlier this year the Treasury Department reopened a 2001 inquiry into Halliburton's Iran operations and its Dubai-based partner.

Halliburton is far from the only brand that shows up in Tehran. Hewlett-Packard, Dell and Microsoft, among many other U.S. companies, keep Dubai offices and are favorites these days among Iranian traders in Dubai. Reason? Strong demand for "anything high-tech for military or oil services," says Bolurfrushan of the Iranian Business Council. "In compliance with U.S. trade laws, it is Microsoft's policy to not sell products to Iran from any of its offices," says a spokeswoman for the software colossus. (Dell says it follows export controls, too.) To curtail the proliferations, the Department of Commerce is strengthening its regulation that punishes U.S. companies that send goods and know--or have reason to know--those goods could contribute to weapons of mass destruction. "U.S. companies cannot disregard facts showing that a violation will occur," says Commerce's Juster. Good luck proving that one.

Dubai, for its part, is happy to wink and look the other way. Last month the emirate's de facto ruler, Sheikh Mohammed bin Rashid Al Maktoum, met with Juster about the possibility of putting export controls on the books. The process would take at least five years and "would require drafting laws and regulations, establishing a licensing and enforcement process and training personnel," says Juster.

Baloney. The U.A.E. has acted swiftly in the past--when it has been in the state's interest to do so. After a Georgian-flagged ship sank off Dubai's coast in 2001, spilling smuggled Iraqi oil and forcing the closure of several water desalination plants, the U.A.E. foreign minister swiftly announced it would punish the shipowners and Dubai companies caught transporting illegal oil. Dubai authorities have squelched counterfeiting, another common practice in free zones, says Timothy Trainer, president of the International AntiCounterfeiting Coalition in Washington. One of its members, cigarette maker Philip Morris, worked on a three-month-long investigation with the Dubai police and in January 2002 seized 120 million knock-off cigarettes, worth $7.5 million. (None of the smugglers, however, faced jail time. Only one paid a fine, and that was negligible, Trainer says.)


http://www.forbes.com/free_forbes/2004/0412/086_2.html