Glencore bartered with firm linked to Iran nuclear program: report

TEHRAN,March 3(MNA) – Commodities giant Glencore supplied thousands of tons of alumina to an Iranian firm that has provided aluminum to Iran’s nuclear program, intelligence and diplomatic sources told Reuters. The previously undisclosed barter arrangement between Glencore, the world’s biggest commodities trader, and the Iranian Aluminum Company (Iralco) illustrates how difficult it is for Western powers to curb Iran’s ability to trade with the rest of the world. Even as the West imposes stringent restrictions on banks that do business with Iran, United Nations diplomats say that Tehran keeps finding new ways to do business with willing partners. Reuters first learned about Glencore’s barter deal with Iralco, and an aluminum supply contract that Iralco had with Iran Centrifuge Technology Co (TESA), from a Western diplomatic source in early November. That was about six weeks before the European Union’s December 2012 decision to levy sanctions on Iralco for supplying aluminum metal to TESA, which is a subsidiary of the Atomic Energy Organization of Iran (AEOI). The source showed Reuters a Western intelligence report concerning Glencore’s arrangement with Iralco. It described how Baar, Switzerland-based Glencore provided Iralco with thousands of tons of alumina last year in exchange for a lesser amount of aluminum metal. The report’s authenticity was confirmed by UN diplomats. It is not known whether any of the aluminum produced by Iralco from Glencore’s alumina raw material actually ended up with TESA. As part of AEOI, TESA has been subject to UN sanctions in place since 2006. Iran denies allegations by Western powers and their allies that it is seeking atomic weapons and has refused to stop enriching uranium. As a result, Iran has faced tough U.S. and EU measures, specifically targeting its financial and energy sectors. Glencore had supplied Iralco with about five tons of alumina for every ton of aluminum that Glencore received in return, according to the intelligence report. Given that on average it takes only about two tons of alumina to produce one ton of aluminum, the barter deal may have left Iralco with more aluminum after processing the alumina than it supplied to Glencore. Iralco covered costs inside Iran, while all activity involving foreign currency payments was covered by Glencore, including shipping costs and insurance, according to the intelligence report. Swiss authorities said they saw no evidence of UN or Swiss sanctions violations by Glencore. Iralco is not under U.S. or UN sanctions. The intelligence report described the Glencore deal as a good way for Tehran to get around global financial restrictions, though it did not say that Glencore violated sanctions. A UN expert panel has repeatedly reported to the UN Security Council that Iran has learned to dodge sanctions with the aid of intermediaries and friendly countries. But it has become difficult for any Iranian firm to make or receive payments abroad due to sanctions on Iranian banks and the barring of Iran from the international banking clearinghouse SWIFT. The appeal of barter deals is that because payments are made in goods rather than money, transactions are kept off the international financial grid and are less likely to be identified by governments. “From Iran’s point of view, the business offered through the exchange agreement (with Glencore) offers a model that can be replicated for trade in a range of commodities that it requires, by reaching similar deals with other foreign companies that have commercial interests but are reluctant to deal with Iran in the current circumstances,” the intelligence report said. “Each side benefits from the trade agreement, while risks of exposure through inevitable contact with third parties are dramatically reduced.” The EU said it imposed sanctions on Iralco in December because the company was allegedly “assisting designated entities to violate the provisions of UN and EU sanctions on Iran and is directly supporting Iran’s … nuclear activities.” The EU claimed that Iralco had a contract to supply aluminum to Iran’s centrifuge firm TESA from the middle of 2012, according to the official EU bulletin on the sanctions. The U.S. Treasury Department declined to comment specifically on Glencore’s dealings with Iralco, though a Treasury official told Reuters anyone providing alumina to Iran can face U.S. sanctions under new rules taking effect on July 1. Swiss companies have been bound by UN sanctions ever since Switzerland joined the United Nations in 2002. While Switzerland implemented sanctions on Libya and Syria, it has reasserted its traditional neutrality over Iran and opted not to adopt some of the more stringent measures passed by the EU and the United States.