building is only half occupied now, but as late as the
1990s it was the biggest hub of Iranian oil trading outside
Tehran. Iran wanted to make money from the spike in crude oil
prices after the Iraqi invasion of Kuwait. NICO, it hoped, would
become the financial engine for NIOC. Setting it up was risky,
experts say; the OPEC oil cartel frowns on members who engage in
oil trading that might undermine the cartel’s effort to control
But profits fell short of hopes, and NICO instead deepened
its ties with European oil majors, handing a big portion of spot
oil sales to them.
Some of those links survive. Ongoing deals include a number
of joint-owned exploration ventures.
NICO, for instance, owns a 6.4 percent stake in a project
previously run by Shell (LSE: RDSB.L – news) in Senegal, according to a source at
Shell. In 2011, Shell sold most of its shares in the project but
still has a near 20 percent indirect stake in new owners Vivo
A Shell spokesman declined to comment.
Links with Shell’s main British rival, BP, run much deeper.
The U.S. Department of the Treasury has identified the Rhum gas
field in the North Sea, jointly developed by BP and NICO, as a
problem project. The gas field, 390 km (240 miles) off the coast
of Scotland, produced up to 6 million cubic meters of gas a day
in the first six months of 2010. NICO’s share was run by a
subsidiary called Iranian Oil Company UK, based in Aberdeen.
Hojat Heidari, executive director of the subsidiary declined
to respond to questions.
“The options are pretty limited. The only way out would be
for them to sell but the Iranians are bloody minded enough not
to care,” said an insider at BP.
Another collaboration between BP and NICO is the Shah Deniz
project in Azerbaijan, which is co-led by BP and Norway’s
Statoil (Other OTC: STOHF.PK – news) . The project, 10 percent owned by NICO, works a field
estimated to contain 1.2 trillion cubic metres of gas. The
British government, the EU and BP have lobbied U.S. lawmakers to
have the project exempted from new sanctions, people close to
the matter say, arguing it is important to European energy
security and reducing dependence on Russia.
And then there’s the matter of NICO’S 25 million shares in
BP. NICO’s stake entitles the Iranian firm to a dividend payment
of $7 million a year based on last year’s dividend, a payment
that some sanctions experts say could be illegal.
Under the European sanctions, if a corporate
entity is believed to have reasonable cause to suspect that it
may be making funds available – either directly or indirectly -
to someone on the sanctions list, British or European
authorities could investigate or even prosecute. Legal experts
point to British media company Pearson (EUREX: PSOF.EX – news) , which in March last year
froze a stake belonging to Libya’s sovereign wealth fund. The
company was worried that the ultimate beneficiary of the
stake was likely to have been a sanctioned person.
Harriet Territt, partner at law firm Jones Day and an expert
in international sanctions regulations, says a firm paying
dividends to a shareholder, even if that shareholder isn’t
identified on a U.S. or European sanctions list, must consider
the ultimate beneficiary.
“It’s not as simple as just saying the entity receiving the
dividend is not on the EU sanctions list,” she said.
A HAVEN FOR FIGHTING PIRATES
As NICO left its registered home in Jersey, it said it would
set up a new base in Labuan, a Malaysian tax haven nearer to
customers in China, India, Japan (EUREX: FMJP.EX – news) and South Korea. Collectively
those four nations buy around half of Iran’s daily 2.6 million
barrels in oil exports.
On the surface, the small, remote island off the north coast
of Borneo seems like a good place to hide from the scrutiny of
U.S. authorities. A British base for fighting pirates in the
Bay of Brunei during the 1840s, Labuan is now known for its
offshore oil and gas fields and its wild night life as much as
its banking and trust services.
It is also secretive. The Tax Justice Network, a
Europe (Chicago Options: ^REURUSD – news) -based group which campaigns against tax havens, gives the
island a “secrecy score” of 77 out of 100, making it one of the
world’s most opaque jurisdictions, alongside the Cayman Islands.
There is no public corporate register online. A visit to the
island’s regulator, based on the top floor of its financial
park, yields little information about a company beyond
confirmation of a firm’s existence.
For now, NICO has yet to officially appear in Labuan.
Despite the Iranian firm’s announcements in Jersey, Labuan’s
Financial Service Agency (FSA) says that no company by that name
has been registered locally.
Tehran already has a significant presence in Labuan: the
Southeast Asian offshoot of Iran’s First East Export Bank
U.S. authorities have been hunting FEEB in Labuan for more
than two years. A U.S. diplomatic cable acquired by WikiLeaks
and dated August 2009 urges Malaysian authorities to revoke
FEEB’s licence. The cable, addressed to the U.S. embassy in
Kuala Lumpur and attributed to current U.S. Secretary of State
Hillary Clinton, points to evidence that FEEB was helping NICO
“circumvent U.S. sanctions by providing financing that could be
used to invest in the Iranian energy sector”, via a new NICO
holding company and a subsidiary, not subject to U.S. sanctions.
Shortly afterwards, the United States added FEEB to its
sanctions list, alleging it had facilitated the movement of
hundreds of millions of dollars to fund Tehran’s nuclear weapons
A shiny plexiglass plaque next to a locked black door is the
only trace of FEEB in Labuan. Late in the morning on Feb. 8
there was little sign the bank was facilitating any kind of
transaction at all. Staff at the Standard Chartered (Xetra: 859123 – news) office
across the corridor said they rarely saw anyone come or go from
the unit at all.
“We see a few people ringing the bell, but it’s rarely
answered,” said one female employee.
Labuan’s FSA did not respond to emails on FEEB.
In Washington, U.S. officials continue to monitor Malaysia
and Labuan. Daniel Glaser, assistant Treasury secretary for
terrorist financing, said that Malaysia “understands its
obligations in implementing the U.N. sanctions.”
Speaking of FEEB, he continued: “I think it’s important for
(the) Malaysians to be very careful about their financial
relations with Iran. We’ve narrowed and narrowed Iran’s options
and now we’re at a point where I think it’s really kicking in.”
(Emma Farge reported from Pully, Switzerland, and Chris
Vellacott and Stephen Grey from London; Additional reporting by
Rachel Armstrong in Labuan, Mark Hosenball, William Maclean and
Tom Bergin in London, Martin de Sa’Pinto in Zurich, and Tabassum
Zakaria in Washington; Editing by Simon Robinson and Sara