Curious Sanctions

The most recent sanctions were announced when the State Department published a notice in the Federal Register on Dec. 30 2005.  Six foreign firms had “engaged in activities that require the imposition of measures pursuant to section 3 of the Iran Nonproliferation Act of 2000.”  The sanctions under the Iran Nonproliferation Act of 2000 will prohibit the companies from doing business with the U.S. government and are barred from receiving certain US exports.

State Department spokesman Adam Ereli did not specify what any of the companies had done wrong, beyond asserting the existence of “credible information” that the companies had transferred equipment or technology in violation of the Iran Nonproliferation Act.

The sanctions on the six firms were widely expected after Bill Gertz of the Washington Times and David Sanger of the New York Times wrote stories about their impending imposition. The anonymous sources in these stories declined to specify the exports, again claiming their classified nature.  Indeed, the Bush Administration has preferred sanctions in part because diplomatic efforts, such as demarches, may reveal sensitive intelligence information. 

The two Indian chemical companies, Sabero Organics Gujarat Ltd. and Sandhya Organics Ltd., however, have denied doing anything illegal.  Indian External Affairs Ministry spokesman Navtej Sarna issued a statement that neither firm had violated India’s export controls or international obligations under the Chemical Weapons Convention (CWC).

This author contacted both companies to determine the exact nature of the exports in question. Their full responses can be found at Arms Control Wonk.com.  In sum, Sandhya Organics said it had exported 1.5 metric tons of phosphorus oxychloride (POCl3) to Iran; Sabero Organics, that it exported 112 metric tons tri-methyl phosphite (TMP).

The implication of the export of these chemicals was subsequently analyzed by export control consultant Scott Gearity.  His report, at Export Control Blog, suggests the United States, absent some additional disclosure, may have a difficult time justifying its decision to sanction these two firms.

Gearity observed that both chemicals are chemical weapons precursors, but controlled via the third, least restrictive CWC list (Schedule 3).  According to the Organization for the Prohibition on Chemical Weapons, these types of chemicals are “typically manufactured in very large quantities for legitimate commercial purposes” including pesticides, pharmaceuticals, plastics and the like. Both India and Iran are parties to the CWC; therefore, according to Gearity, the Indian exporters were not prohibited from exporting the chemicals to their Iranian customers as trade in Schedule 3 chemicals amongst treaty parties is allowed.

The U.S. Iran Nonproliferation Act (INA) provides for sanctions in the event that a company transfers a chemical on the more restrictive Schedule 1 or Schedule 2 CWC lists.  The law is silent, however, about Schedule 3 chemicals.  (Some Schedule 3 chemicals, including POCl3 and TMP, are controlled by the Australia Group, to which the INA also refers.  India is not a member of the Australia Group).

The INA, however, allows the United States to sanction the export of technology, goods or services that do not appear on any prohibited list, Gearity noted, as long as that export is deemed to have “potential to make a material contribution to the development of nuclear, biological, or chemical weapons …” 

The United States does, of course, have reason to worry about even legal exports to suspicious entities.  Sabero Organics stated that it had exported the TMP to the Raja Shimi Industrial Manufacturing Centre -- a firm that Iranian exile groups have accused of being a front for an Iranian biological (though not chemical) weapons program.

Indian news outlets were much more active in pursuing this story than were their American counterparts.  And what they uncovered is, at least, intriguing.  The head of Sabero Organics, Mohit Chuganee, is a U.S. citizen who told the Indian Express and The Asian Age  that, after consulting with the Indian government, he refused a subsequent order from Raja Shimi, and stopped doing business with the company.   If his claims are true – and we only have his side of the story – then the United States sanctioned a firm already in compliance with the law and acting in the U.S. interest.  Perhaps worse, the very public imposition of sanctions may discourage Indian government officials from reprising the quiet efforts to curb legal, yet suspicious exports to Iran.  This, curiously, may be a case where sanctions will have made it harder to fight proliferation.