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Inside Shell’s Iran Game

Forbes: Inside Shell’s Iran Game

June 3, 2010 – 4:58 pm
Mark DubowitzBio | Email
Mark Dubowitz is Executive Director of the Foundation for Defense of Democracies, and leads the Foundation’s Iran Energy Project  

Royal Dutch Shell resumed its gasoline shipments to Iran, International Oil Daily reported this morning.  The company got back into business with the Iranian regime after a six-month hiatus. The move is a slap at the U.S. Congress, which has been working to develop energy sanctions that could curtail the regime’s nuclear weapons program, human rights abuses, and support for terrorism.

According to International Oil Daily, Shell delivered three 30,000-ton shipments of gasoline last month to Iran’s Bandar Abbas port. The company’s last known shipment to Iran was recorded in October 2009.

Until this new report, Shell ranked among a select group of international oil companies that reportedly ceased delivering refined petroleum to Iran, in what appeared to be a nod to the international effort to isolate the regime.  Other companies include: India’s Reliance Industries, Russia’s Lukoil, Switzerland’s Glencore, Malaysia’s Petronas, the UK’s BP, and Swiss-Dutch firms Trafigura and Vitol.

In March 2010, according to Reuters, Shell stated the company “currently does not supply gasoline to Iran.”  The announcement came on the heels of the U.N. Security Council’s efforts to pass new international sanctions against Iran.  At the same time, the U.S. House of Representatives and the Senate were putting together a conference committee for energy sanctions legislation that would target the refined petroleum supply chain and close loopholes with respect to Iran’s oil and natural gas sectors.

Congress, however, has temporarily delayed forwarding the sanctions legislation to the White House.  Members of Congress are waiting for a sign from President Obama, who is still trying to persuade the U.N. Security Council to pass new sanctions on Iran.  According to congressional sources, the legislation is due out later this month.

Shell now appears to be exploiting Congress’ delay, and is perhaps betting that the United Nations, the Europeans, or indeed the Obama administration will never pull the trigger on meaningful sanctions.

The Dutch firm’s calculus appears to be based purely on profits. Shell is trying to squeeze as many petrodollars it can from the Iranian regime before sanctions take hold. According to The New York Times, the company is still profiting from a 1999 deal signed to develop two oil fields in Iran that became fully operational in 2005.

Shell’s also has significant holdings in Iran’s natural gas sector. The Times of London reported that the company signed a service contract with Iran and Spain’s Repsol in 2007 to develop the South Pars natural gas reserve and build a liquefied natural gas plant. Shell has delayed the deal several times, possibly due to concerns over public perceptions of the partnership. The Iranians, however, have grown weary of this vacillation. International Oil Daily reported last month that the National Iranian Oil Company (NIOC) gave Shell and Repsol two weeks to finalize the project’s agreement. The deadline has since passed, and according to unconfirmed reports, NIOC gave the project to Iran’s Khatam al-Anbiya, the engineering and construction wing of the Islamic Revolutionary Guard Corps (IRGC), which the U.S. government has designated as a terrorist entity.  It is unclear whether Shell still has a role in this project.

Shell’s apparent reluctance to move forward on the South Pars deal and its decision to sell gasoline to Iran appear incongruous. However, there may be some logic here.

By opting to sell gasoline to Iran, rather than sign the longer term South Pars deal, Shell can now eject from Iran quickly when the congressional and/or international sanctions pass. Indeed, it will be relatively easy for the Dutch energy giant to cease its short-term oil sales. In the meantime, it can still enjoy whatever profits it can from this arrangement.

But, that doesn’t mean that Congress should give Shell a free pass. Given the company’s re-entry into the Iranian gasoline trade, Shell should come under intense scrutiny by the Obama administration and Congress once sanctions are passed.  In 2009 alone, Shell received $2.4 billion in contracts from the Federal government.

Expect legislators to take a hard look at these contracts.  Expect them also to ask why major international energy companies with significant business in the U.S. continue to partner with an Iranian regime that threatens America’s security.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies, and leads the Foundation’s Iran Energy Project (  Laura Grossman is a research analyst at the Foundation’s Iran Energy Project.

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