WASHINGTON -- The chairman of a key congressional panel yesterday welcomed news reports that an Indian oil refinery receiving U.S. Export-Import Bank assistance would no longer sell gasoline to Iran (see GSN, June 29, 2007).
(Jan. 8) -
U.S. Representative Brad Sherman (D-Calif.) expressed satisfaction yesterday that an Indian oil refinery reportedly halted sales to Iran (Tim Sloan/Getty Images).
Representative Brad Sherman (D-Calif.) and seven other House members last month voiced concerns about $900 million in loan guarantees that the official U.S. export credit agency granted to Reliance Industries Limited despite the Mumbai-based company's dealings with Tehran.
Reliance plans to use the money in part to finance an expansion of its oil refinery facilities in Jamnagar, India.
The company in the past has sold gasoline to Iran, which has insufficient refinery capacity of its own and imports an estimated 35 to 40 percent of the petroleum it consumes.
Citing worries about Iranian support for terrorism and suspected efforts to develop nuclear weapons, the lawmakers appealed to Ex-Im Bank President James Lambright to investigate the matter and press Reliance to end its sales to Tehran. The legislators view the Persian Gulf nation's dependence on imports to meet its energy needs as "one of the most important levers that can be applied to Tehran," according to their Dec. 17 letter.
"We need to figure out some way to economically pressure Iran and the gasoline [issue] is one thing that has come to light," said one House staffer interviewed this week on condition of anonymity. Though U.S. lawmakers support the Ex-Im Bank's role in export financing, the agency must ensure that its corporate partners "are not defeating more important foreign policy aims," the aide said.
The bipartisan House missive followed a similar expression of concern by Senators Joseph Lieberman (I-Conn.) and Jon Kyl (R-Ariz.). "It is inexplicable to us that the United States would be supporting energy projects that help the outlaw regime in Tehran," they told Lambright in an Oct. 29 letter.
An Indian daily newspaper, Business Standard, yesterday reported that Reliance Industries had pledged to stop supplying Tehran in response to the pressure from Capitol Hill. However, Reliance -- the largest private company in India -- would not confirm having taken any action on the matter for the Business Standard article, which instead cited unnamed sources for its lead.
Contacted by Global Security Newswire, neither Sherman's office nor Ex-Im Bank officials were able to substantiate the Mumbai reporting. Reliance Industries did not respond to a confirmation request by press time.
"We have no way to confirm it," said Phil Cogan, an Ex-Im Bank spokesman. "Nothing that we know confirms it, as far as the sales [to Iran are concerned]."
Based on the initial Indian news report, though, Sherman -- who chairs the House Foreign Affairs Terrorism, Nonproliferation and Trade Subcommittee -- was pleased.
"It appears that RIL has made a decision to cease selling gasoline to Iran. This is a welcome development," he said yesterday in a written statement. "It is clear that if we are to convince Iran to abandon its nuclear program, we will need a manifold increase in the economic and diplomatic pressure on Tehran."
It is unclear whether the Ex-Im Bank or other U.S. agencies were aware of Reliance's petroleum sales to Iran prior to approving an initial $500 million loan guarantee in May 2007 and a second $400 million guarantee in August 2008. The House members asked Lambright to look into the matter, but he has not yet responded.
Ex-Im Bank loan guarantees assure lending institutions that U.S. taxpayers will foot the bill if a borrower defaults. If approved, a qualified foreign company that purchases U.S. goods or services can obtain financing at competitive rates, according to the agency.
Sherman and his fellow lawmakers said "the U.S. government should not assist firms that provide Iran with refined petroleum without carefully examining the potential impacts on U.S.-Iran policy."
Limiting Iran's access to energy imports could prove to be a critical facet of new sanctions legislation this year, according to the House staffer.
"If a company is involved in selling gasoline to Iran, it should expect a growing amount of congressional scrutiny in the months ahead," echoed an aide to Lieberman.
The Indian firm would be a clear example.
"Reliance has at times provided as much as 30 percent of Iran's need for imported petroleum," Sherman said in a Dec. 18 press statement. "Ex-Im's assistance was approved to help finance the expansion of Reliance's refining complex at Jamnagar, the very facility that provides Iran with gasoline."
However, Lambright called that assertion into question in a Dec. 2 written response to Kyl and Lieberman.
The new refinery facility "will not have a commercial relationship with Iran," instead acquiring crude oil from other countries and selling refined gasoline to Western Europe and the United States, Lambright said.
The House aide countered that even if Lambright is correct, the loan guarantees could still indirectly benefit Iran. The guarantees result in lower interest payments for Reliance, potentially increasing capacity at one of the gasoline suppliers Iran needs to meet its energy demands, the staffer argued.
While the law forbids the bank from dealing with nations like Iran, the agency's transactions with allies or friends such as India might at times indirectly benefit rogue nations, Cogan acknowledged. He said the agency "abides by all applicable U.S. laws."
Lambright underscored that point last month.
"Ex-Im Bank scrutinizes every transaction to ensure full compliance with U.S. laws and regulations," Lambright, the agency president, told Kyl and Lieberman. He added that he shares the senators' concerns about "Iran's pursuit of an illegal nuclear weapons [program] and its support for international terrorism."
"However," he wrote, "Ex-Im Bank generally is prohibited from taking foreign policy considerations into account when making credit decisions."
The House lawmakers pushed back on that statement, writing in their own letter to Lambright two weeks later that the bank's charter includes "a major exception: the [U.S.] president may deny applications where he 'determines that such action ... would clearly and importantly advance United States policy in such areas as international terrorism, nuclear proliferation, environmental protection and human rights.'"
Cogan, the Ex-Im spokesman, would not say this week whether President George W. Bush had, in fact, reviewed this specific question and issued a determination that the assistance would be consistent with U.S. nonproliferation and antiterrorism policies.
He did note, though, that proposals for "all major transactions" undergo interagency review, typically including the State, Treasury and Commerce departments.
"Additionally," Cogan told GSN, "Congress was notified in advance of the approval of both transactions, as required by our charter."
The House lawmakers requested that the bank president "secure an understanding" that the Indian company would cease gasoline shipments to Iran before any further loan money is disbursed. Roughly $300 million guaranteed by the U.S. agency has yet to be released.
Cogan told GSN, however, that it is too late to change the terms of existing loan agreements.
"The transactions, as finalized by all parties, carry the full faith and credit of the United States government," he said. "No new conditions can be set."
Any further loan disbursements under the current agreement could be carried out by January 2010, Cogan said.