(Bloomberg) — The Obama administration will report today that Iran’s state-owned oil company is linked to a military unit sanctioned for weapons proliferation, terrorism and human-rights abuses, according to a U.S. official involved in the finding.
In a classified report to Congress, Treasury Secretary Timothy F. Geithner will present evidence that the National Iranian Oil Co., known as NIOC, is “an agent or affiliate” of Iran’s Islamic Revolutionary Guard Corps, the official said on condition of anonymity because the finding isn’t yet public.
The Treasury Department didn’t find sufficient proof to sanction the National Iranian Tanker Co., or NITC, the main carrier for Iranian crude, for ties to the Revolutionary Guard, according to the official.
Even with the finding of the oil company’s links to the Revolutionary Guard, the law allows for continued purchases of Iranian crude by nations granted exemptions for making “significant” reductions in such imports. U.S. companies and individuals are already barred from almost any business with Iran.
Under a law signed Aug. 10, Congress gave the Obama administration until today to determine whether the oil and tanker companies were controlled by the elite unit. Lawmakers are seeking to deny funding to the Guard, as part of an array of sanctions intended to pressure Iranian Supreme Leader Ali Khamenei to halt his country’s suspected pursuit of nuclear- weapons capability.
Mark Dubowitz, a sanctions advocate who prepared reports for Congress and the administration on Revolutionary Guard links to the oil sector, said the ties taint Iran’s crude by association with the Revolutionary Guard and should encourage law-abiding refiners to seek other suppliers.
“This determination matters for all those foreign companies that continue to dealing with NIOC and its dozens of subsidiaries,” Dubowitz, executive director of the Foundation for Defense of Democracies, said in an interview today. He called it a strong signal against “buying, financing, insuring or otherwise dealing in Iranian oil” now that U.S. law is establishing a link to what he called “the world’s most dangerous terrorist organization and proliferator.”
China was the leading importer of Iranian oil in the first six months of last year, followed by Japan, India and South Korea, according to the U.S. Energy Information Administration. All four nations were granted renewable 180-day exemptions from U.S. financial sanctions over their Iranian oil purchases earlier this year.
Chinese customs data released Sept. 21 showed China’s imports of Iranian crude fell 20 percent in August compared with a year earlier, to the lowest level in five months.
Crude oil for November delivery declined $1.23, or 1.3 percent, to $91.66 a barrel at 9:57 a.m. on the New York Mercantile Exchange.
American officials including Secretary of State Hillary Clinton have accused the Revolutionary Guard of taking over the most lucrative sectors of Iran’s economy. The unit or its members have been sanctioned by the U.S., United Nations and European Union for alleged offenses including nuclear and missile work.
Oil is Iran’s main source of income, supplying more than 50 percent of the national budget, according to International Monetary Fund data. Oil earned the Persian Gulf nation $95 billion in 2011, according to the U.S. Energy Department.
Proponents of the financial and energy-related sanctions imposed say hobbling Iran’s oil revenue is the best way to slow its nuclear progress and forestall military action by Israel or the U.S. Iran says its nuclear program is for civilian energy and medical research only.
The state-owned NIOC is the world’s second-largest oil company by volume produced, after the Saudi Arabian Oil Co. NITC, a former subsidiary of NIOC that was privatized 12 years ago, has the world’s fourth-largest fleet of supertankers, according to London-based Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.
In August 2011, Rostam Qasemi, a former Revolutionary Guard commander and former head of Khatam al-Anbiya, its engineering arm, was named Iran’s oil minister and chairman of NIOC. Qasemi and Khatam al-Anbiya have been sanctioned by the U.S. and the EU for ties to the Guard.
In a telephone interview in February, the tanker company’s general manager of planning, Abdolsamad Taghol, dismissed any suggestion of military links to the tanker line. NITC operates independently, without administrative, financial or political ties to the Guard, he said.
The U.S. has already sanctioned Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines, for involvement in missile programs and transporting military cargoes.
President Barack Obama on Feb. 6 ordered a freeze on all Iranian government and financial institutions’ assets under U.S. jurisdiction, which would apply to the state-owned oil company.
Iran, the second-largest oil producer in OPEC after Saudi Arabia, pumped 2.75 million barrels a day in August, 350,000 barrels a day less than in July, according to data compiled by Bloomberg.