For those of us who regularly read the headlines about Iran, there was a particularly interesting one that stuck out today – one (reported by the Tehran Times and reposted by other media) about a U.S. company in Southern California called World Eco Energy entering into a preliminary agreement with government authorities in Iran to invest 1.18 billion in Iran’s renewable energy facility sector, namely in Iran’s fairly remote Chaharmahal & Bakhtiari province in the southwest of the country. It was in the Iranian press as well, with amusing headlines like “Joint venturing of Chaharmahal & Bakhtiari Province and California.” Specifically, World Eco will be building a facility that will generate 250 MW per day, converting solid waste into electricity. This one surely has a lot of us Iran watchers and sanctions practitioners scratching our heads. What’s going on? Wasn’t this stuff sanctioned?
Well, there’s nothing on World Eco’s website. Furthermore, the agreement is preliminary. Which means World Eco (and other involved parties) could have a specific license from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) or not (it could perhaps be strictly conditioned on World Eco receiving all necessary approvals, be they from OFAC or the U.S. Department of Commerce’s Bureau of Industry & Security or “BIS,” which regulates so-called “dual-use” items that have both civilian and military application. But $1 billion? In Iran?
First off, investment by U.S. persons in Iran is generally prohibited under the Iranian Transactions and Sanctions Regulations (ITSR). In other words, a U.S. company like World Eco would need a license to even invest in a $1,000 CD, much less a $1 billion energy facility. As you know, not only does the U.S. prohibit U.S. persons from investing or even working for Iran’s petrochemical and oil sectors, but through the Iran Sanctions Act (ISA), it can even sanction third country companies that do so. However, here’s the catch – while U.S. sanctions are focused on preventing investment in Iran’s hydrocarbon (and obviously nuclear) sectors, the U.S. could perhaps be allowing companies to obtain licenses from OFAC to promote alternative energy in Iran on the grounds of environmental protection (and perhaps indirectly swaying Iran away from its apparent obsession with nuclear energy).
Indeed, last September, OFAC issued General License E, which allowed a wide range of philanthropic and civil society building activities with Iran. One provision in this GL is authorization for certain “Activities related to environmental and wildlife conservation projects in Iran…” The connection is tenuous, but maybe that’s all World Eco needed to convince OFAC (if it did indeed petition OFAC and obtain a license, and is not openly flouting the most robust sanctions regime the U.S. has ever imposed against any country ever, risking potentially billions in fines, not to mention imprisonment for its key personnel) that this type of investment be permitted – to help improve environmental quality of life and more broadly the world’s ecosystem.
Experience has shown that OFAC tends to stay within the confines of the letter of the law with regards to the spirit of the sanctions, although obviously licenses can be issued on a case by case basis for certain activities that OFAC deems consistent with U.S. policy interests. Issuing specific licenses to U.S. persons to provide technical assistance to Iran with respect to the environmental sector (beyond that allowed in General License E) is something that is arguably very fathomable, as the environment knows no geopolitical boundaries, and because what happens in Iran’s environment ultimately affects other ecosystems.
Perhaps World Eco can speak to the authorities it’s maybe been granted? It was the weekend, and perhaps World Eco may come out Monday denying this – as exaggerations like this are not entirely rare in Iran’s media. We’ll have to wait and see. All that said, the $1 billion investment in Iran by a U.S. would be truly a landmark milestone if indeed true. Not impossible, perhaps, but very unique and potentially game changing if true.