FDD Praises Congressional Scrutiny of Iran’s Top Supplier of Gasoline

Washington, D.C. (March 2, 2009) – The Foundation for Defense of Democracies today praised Members of Congress who requested that Secretary of Energy Steven Chu reconsider a U.S. federal government contract awarded on January 16, 2009 to Vitol, a Swiss firm which is Iran's leading supplier of gasoline.

The letter was sent on February 27 by a bipartisan group of Members of Congress including: Rep. Brad Sherman (D-CA), the Chairman of the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade; Rep. Howard Berman (D-CA), Chairman of the House Foreign Affairs Committee; Rep. Ileana Ros-Lehtinen (R-FL), the Ranking Republican on the House Foreign Affairs Committee; Rep. Robert Wexler (D-FL), Chairman of the House Foreign Affairs Subcommittee on Europe; Rep. Mark Steven Kirk (R-IL); Rep. Rob Andrews (D-NJ); and, Rep. Edward Royce (R-CA).

The Representatives explained in their letter that Vitol's conviction in November 2007 in connection with the Oil-for-Food scandal “could provide sufficient grounds for debarment from federal contracting,” stating as follows:

“In November 2007, Vitol pleaded guilty to grand larceny in New York state court in connection with kickbacks paid to the Iraqi government during the Oil-for-Food program, and was ordered to pay a fine of $17.5 million. Prosecutors alleged that Vitol, through an associated entity or third parties, paid $13 million in kickbacks to Iraqi officials in connection with oil purchases under the program from June 2001 through September 2002, but allowed false representations to be made to the U.N. that no kickbacks were paid. These activities took place while Iraq was under United Nations Security Council sanctions.”

The Representatives' letter also notes that Vitol is a key supplier of fuel to Iran. Iranian oil wells produce far more crude oil than Iran needs. Yet Iran has not developed sufficient capacity to refine that crude oil into gasoline. Iran must therefore import some 40% of the gasoline it needs for internal consumption. FDD has led efforts to inform U.S. policymakers about how Iran's heavy dependence on imported gasoline could be used as leverage over Iran's nuclear weapons program.

In a recent Wall Street Journal op-ed, FDD Senior Fellow Orde Kittrie, a professor of law at Arizona State University, identified the five foreign companies that supply Iran with nearly all of its gasoline imports. Vitol has consistently been the world's leading supplier of gasoline to Iran, supplying Iran with as much as 60 percent of its gasoline imports (and thus some 25 percent of Iran's total gasoline consumption).

Professor Kittrie responded to the Representatives' letter as follows: “On January 16, in the waning days of the Bush administration, the U.S. Department of Energy announced the purchase from Vitol of one million barrels of crude oil. An administration with a sophisticated approach to increasing U.S. leverage over Iran might have used the opportunity to make a deal with Vitol: we'll buy crude oil from you if you stop selling gasoline to Iran. But that did not occur. However, the Obama administration can correct that mistake. This purchase from Vitol by the prior administration provides an opportunity for President Obama to take an important first step towards implementation of the gasoline cutoff that he called for during his campaign.”

“In light of yesterday's announcement by Joint Chiefs Chairman Mullen that Iran has stockpiled enough nuclear fuel to make a bomb, and last month's satellite launch by Iran using long-range missile technology, we are five minutes to midnight in terms of opportunities to stop Iran from acquiring the capacity to launch a nuclear-armed missile,” said Professor Kittrie. “The time is now to change Iran's cost-benefit analysis by cutting off its supply of imported gasoline. One very important step in that direction would be to put Vitol to a choice between selling to Iran and selling to the United States.”

“The idea of focusing on Iran's refined petroleum imports enjoys support from lawmakers on both sides of the aisle, from respected nuclear non-proliferation experts, and from the country's leading editorial boards,” said FDD Executive Director Mark Dubowitz, who along with Professor Kittrie leads the Foundation's efforts to research and publicize strategies for halting refined oil sales to Iran. “This support reflects a grave concern over the pace of Iran's nuclear program and a desire to find a peaceful way to persuade the Iranian regime to abandon its pursuit of nuclear weapons.”

“At a minimum, the U.S. government should not be rewarding those companies selling gasoline to Iran with federal contracts, loan guarantees and other financial inducements,” Dubowitz added. “These Members of Congress recognize that we owe at least that much to the many victims of Iranian terrorism, the countless Iranians who have suffered terribly under the Iranian regime, and to those who would suffer even more from a nuclear-armed Iran.”

The Department of Energy contract to purchase crude oil from Vitol for the U.S. Strategic Petroleum Reserve is valued at about $50 million.

In addition, Vitol is developing a $100 million fuel terminal in Port Canaveral, Florida that has drawn scrutiny from State Senator Ted Deutch following revelations about Vitol's business relationship with Iran.

Vitol is not the first of the five firms to have found itself under new scrutiny since Professor Kittrie's Wall Street Journal op-ed. In late 2008, two Senators and eight bipartisan Members of Congress wrote to the U.S. Export-Import Bank, asking for an investigation into $900 million in loan guarantees to the Indian firm Reliance Industries Limited (RIL). Over $500 million of those loan guarantees supported the expansion of the Jamnagar oil refinery complex used by RIL to refine petroleum for sale to Iran. Unconfirmed press reports indicate that since that congressional letter, RIL has ended or reduced its refined petroleum sales to Iran.

During the presidential campaign, then-Senator Obama twice called for peacefully cutting off gasoline sales to Iran until its stops its illicit nuclear activities. On June 4, for example, Mr. Obama said: “We should work with Europe, Japan and the Gulf states to find every avenue outside the U.N. to isolate the Iranian regime-from cutting off loan guarantees and expanding financial sanctions, to banning the export of refined petroleum to Iran.”

And during the presidential candidates' debate on October 7, Obama said, “Iran right now imports gasoline … if we can prevent them from importing the gasoline that they need … that starts changing their cost-benefit analysis. That starts putting the squeeze on them.”

The Foundation for Defense of Democracies is currently preparing a policy monograph on the companies selling gasoline to Iran and the policy options that are available to U.S. and European lawmakers to use refined petroleum as a source of leverage over the Iranian regime's nuclear weapons program.

The Foundation for Defense of Democracies is a non-profit, non-partisan policy institute dedicated exclusively to promoting pluralism, defending democratic values and fighting the ideologies that drive terrorism. Founded shortly after the attacks of 9/11, FDD combines policy research, democracy and counterterrorism education, strategic communications and investigative journalism in support of its mission. For more information, please visit defenddemocracy.org.