Special report: For Iran oil trader, Western ties run deep
LONDON (Reuters) - The newspaper notice sat next to advertisements for tarot-card readings, Alcoholics Anonymous meetings and children's tap-dancing lessons. The Naftiran Intertrade Company, an oil-trading firm owned by the Iranian government, announced plans to close its registered headquarters in the British tax haven of Jersey and move to a tax haven in Asia.
That advertisement, in a Jersey newspaper last September, came as Iranian companies were stepping up efforts to get around Western sanctions designed to slow or stop Iran's nuclear program. But the Iranian oil trader's retreat from the West has been only a partial one.
Reuters has learned that on February 1, Naftiran Intertrade increased its holding in British oil giant BP Plc by 1.85 million shares. It now holds a stake worth more than $190 million.
In addition to the shareholding, the Iranian company's ties to BP include the Rhum gas field in the North Sea, a venture that's now suspended due to sanctions. It also has active projects like a gas field with BP in Azerbaijan, and an investment with Royal Dutch Shell in fuel distribution in Senegal.
An examination of the operations of Naftiran Intertrade, or NICO as it is known, shows just how difficult it is for Western companies to untangle their ties with Iran. NICO is under pressure to leave Europe, but it has a web of assets, joint ventures and relationships with Western firms that will likely prove difficult and expensive for either side to break.
A spokesman at BP said the company would not comment on individual shareholders. "However we regularly review and take legal advice to ensure our compliance with sanctions legislation. We remain confident that BP is in full compliance with all applicable sanctions regimes including UN, EU regulations and US law, and will remain in compliance," he said. "We continue to monitor the situation closely."
NIOC and NICO did not respond to requests for comment.
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SPECIAL REPORT-Iran's cat-and-mouse game on sanctions: link.reuters.com/daf66s
SPECIAL REPORT-For Iran oil trader, Western ties run deep in PDF: link.reuters.com/vyj66s
Graphic showing changes to IRISL fleet over past four years: link.reuters.com/faf66s
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"A BIT TOO CLOSE"
NICO jumped from Jersey before it was pushed. The firm, which is essentially the offshore arm of the National Iranian Oil Company (NIOC), dissolved its base on the Channel isle on January 8 with a "certificate of continuance" that indicated it would move to the tax haven of Labuan, an island off the coast of Malaysia.
"The company decided it would be best to move their business elsewhere," said a person close to the Jersey government. "They were aware of government concerns. They had very close links to the Iranian regime, a bit too close."
A spokesman for Jersey's financial regulator JFSC declined to comment.
NICO has been under U.S. sanctions since 2008, deemed an entity "owned or controlled by the Government of Iran." It had moved its headquarters to Jersey from London in 1991, after decades of operations in Britain in the days before Iran's Islamic revolution and "long before the days when (Britain) grew a conscience," as one veteran oil trader put it.
The National Iranian Oil Company relies on NICO as an important source of foreign exchange. If NICO was to shut altogether, analysts say, it would starve the NIOC of cash and put it at the mercy of Iran's squabbling political elites and clerics.
"NICO is a way for the National Iranian Oil Company to raise capital without having to rely on budget allocations approved by the Iranian government," said Valerie Marcel, an associate fellow at think tank Chatham House and an expert in nationally owned oil companies.
To get around the sanctions, NICO uses offshore financial havens and a web of asset and industrial holdings in the West. While it was based in Jersey, the firm operated through a "service company" based in Switzerland. But even there, in a country that has not yet signed up to the trade sanctions against Iran, the company's future could be in doubt.
LAKESIDE OUTPOST
Tucked behind a pebble beach on Lake Geneva in Pully, a chic suburb of Lausanne, NICO's remaining active European base is housed in a five-storey glass and marble office block. The office was set up in 2002 after the company moved its oil trading and energy investment activities to Switzerland from London.
A profile page on professional networking website LinkedIn states that NICO's Swiss office has between 11-50 employees; one of those workers posted that the firm's annual trading profit was $23 billion, although this figure could not be independently verified.
NICO's Swiss base has played a key role in maintaining an international presence beyond the reach of Western powers seeking to choke it, say oil traders familiar with its operations.
Switzerland is neutral and not a member of the European Union. It is also divided into semi-autonomous 'cantons' which compete with each other to attract companies and are often reluctant to interfere in their affairs.
Officials in the canton of Vaud, which contains Lausanne, said they saw no reason for NICO to leave.
"It's not because of cowardice or indifference, it's just that we don't have the authority or the right to have a position on foreign policy," said an official in the canton's department for economic development.
That could change. Switzerland tends to copy sanctions passed by its largest trade partner, the European Union, and trade experts think that it will eventually pass a law aimed at curtailing the "import, purchase or transport" of Iranian oil.
But even then, pressure on NICO's Swiss hub could be blunted by the realities of Switzerland's special status as a neutral nation in international affairs, as well as a variety of loopholes.
A former Swiss diplomat now working in Brussels said that "the general plan has been for Switzerland to try to converge on what the EU does, but Iran is a case of its own."
Historically, Switzerland has helped the U.S. in its relations with Iran, he said. "I think the Swiss will be extremely careful about taking any decision on this matter. The overriding concern is the representation of U.S. interests and Switzerland's role as a go-between although this has been a difficult undertaking for years."
To avoid creating a loophole in the EU sanctions regime "the trading functions (of Iranian companies) could be moved elsewhere," he said.
LONDON HEYDAY
NICO's roots in Europe are deep. Its former European hub in London is a sparsely occupied seven-floor building a few doors down from New Scotland Yard and within sight of Westminster Abbey. It still belongs to parent company NIOC, according to Land Registry documents.
