In its filings to the Securities Exchange Commission, the US markets regulator, Sasol talks of a “possible risk of sanctions”, Business Day reports. But the source documents suggest the chances sanctions will in fact be implemented are low. SEC filings, obligatory for companies which trade in the US, typically contain warnings about every conceivable contingency to guard against litigious US investors. However, the warning does illustrate how regulatory rulings are washing across national boundaries and the ripple effects deteriorating relations between Iran and the rest of the world might have.
Sasol’s SEC filing notes possible risks “with activities we are undertaking in the polymers field, as well as feasibility studies relating to a potential ammonia/urea project at Assaluyeh in Iran”. The risks relate to two sanctions programmes administered by the US government: the Iranian Transactions Regulations (ITRs) administered by the US Treasury Department Office of Foreign Assets Control (OFAC) and the Iran Sanctions Act (ISA) administered by the US Department of State. ITRs prohibit or restrict most transactions between US persons and Iran. Technically, they don’t apply to Sasol because the company is not considered a US “person”. But as a multinational enterprise, the ITRs may apply to certain entities associated with the group, including US employees, investors and certain subsidiaries, the filing says. Sasol says it is “taking measures to ensure that our US employees, investors and certain subsidiaries of the group to which the ITRs apply will not violate the ITRs”.
But the bigger problem is the ISA, which was adopted by the US government in 1996 with the objective of denying Iran the ability to support acts of international terrorism and fund the development or acquisition of weapons of mass destruction. It was extended in 2001 and amended in 2006 by the Iran Freedom Support Act and will continue to be in force through 2011.
Oddly, limiting weapons of mass destruction requires restricting the Iranian petroleum industry and the ISA grants the US president discretion to impose sanctions on companies found to be in violation of its provisions involving investment in industry in Iran. The sanctions could include restrictions on Sasol’s ability to obtain credit from US financial institutions, its procurement of US goods and services and Sasol’s ability to sell in the US. “Although we believe that our polymers project is not in the petroleum industry and we are involved only in a feasibility study in connection with a possible ammonia/urea project in Iran, we cannot assure you that our activities in Iran would not be considered investments as statutorily defined by the ISA,” Sasol says.
Read more here.
Photo by max_thinks_sees from Flickr.
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