Senators call for sanctions against contractors doing business with Iran

At least seven foreign companies doing business in Iran's energy sector also have won U.S. government contracts during the past five years, according to new findings released on Wednesday by the Government Accountability Office.

From 2005 to 2009, the Defense Department awarded those seven firms -- including ENI, Italy's largest industrial company, and Hyundai Heavy Industries, a South Korean corporation that ranks as the world's largest shipbuilder -- almost $880 million in contracts, the report said.

Roughly 90 percent of those contracts were for purchases of fuel and petroleum products overseas, Joseph Christoff, director of international affairs and trade at GAO, told the Senate Homeland Security and Governmental Affairs Committee on Wednesday.

For example, investigators found the Pentagon paid French firm Total for the purchase of jet fuel, gasoline and diesel. The government awarded contracts for the construction of family housing at a U.S. Army base in South Korea to Daelim Industrial Co. of South Korea, and paid Repsol of Spain for fuel for naval and aviation purposes, the watchdog said.

Repsol, which has received $319 million in U.S. contracts since 2005, told GAO that it had not made a final decision regarding proposed commercial activities in Iran. ENI, meanwhile, "neither confirmed nor denied" the information, the report said.

The other five contractors allegedly doing business with Iran did not respond to requests for information from GAO.

Defense told GAO the federal government had not banned the seven companies from qualifying for contracts and that the work was "critical to support mission requirements of worldwide military operations."

Sen. Joseph Lieberman, I-Conn., chairman of the Homeland Security and Governmental Affairs Committee, said firms doing business with Iran need to make a choice about their business partners. "Either do business with Iran's $250 billion per year economy or do business with America's $13 trillion economy, including our government," he said. "But, you can't do business with both."

The New York Times recently performed its own analysis and found that during the past decade, more than $107 billion in federal contracts and grants have been awarded to 74 companies that have done business with Iran.

GAO reported in March that 41 firms -- all foreign -- were active in the development of the Iranian oil, gas and petrochemical sectors from 2005 to 2009.

The 1996 Iran Sanctions Act restricts American firms from investing in Iran's energy sector to discourage support for terrorism and the development of nuclear weapons. The law also provides sanctions against foreign firms that invest more than $20 million in Iran's energy sector during any 12-month period.

The law allows the secretary of State to ban companies violating it from competing for government contracts. But, critics said the State Department has not determined that any company's activities have met the legal criteria for sanctions under the act since 1998.

"The United States government is for the most part indifferent as to whether beneficiaries of U.S. taxpayer dollars are doing business in Iran," said Danielle Pletka, vice president of foreign and defense policy studies at the American Enterprise Institute for Public Policy Research.

GAO did not rule whether any of the 41 businesses identified had violated the Iran Sanctions Act.

Congress now is considering legislation to strengthen and expand the law, including a provision by Rep. Ron Klein, D-Fla., that would prohibit the government from awarding any contract, grant or loan to any company doing business with Iran. The president could waive the restriction on a case-by-case basis, according to the bill.

But lawmakers said the White House should not wait until Congress passes new sanctions. Federal agencies should insert a clause in all contracts certifying that the company does not conduct any prohibited business with Iran, said the committee's ranking member Sen. Susan Collins, R-Maine. A similar contractual provision is in place for work in the Sudan.

Rep. Ted Deutch, D-Fla., said the Obama administration should replicate legislation Deutch helped pass while in the Florida Senate that prevents the state's pension funds from investing in companies that conduct business in Iran's energy sector. Nineteen other states and the District of Columbia have passed similar divestment policies, but Florida is the only locale to identify and publish a list of the violating companies.

"It is no surprise that companies do not often respond to moral pressure alone," said Deutch, who was sworn in last month, replacing former congressman Robert Wexler. "We need to hit them hard in their pocket book and on their balance sheet. We need to show them that their stock prices will be affected if their actions encourage Iran's nuclear weapons ambitions."