home China, Economic Sanctions Chinese Company Pays Fine for U.S.-Iran Sanctions Violations

Chinese Company Pays Fine for U.S.-Iran Sanctions Violations

China’s leading off-shore energy drilling contractor settled a case with the U.S. government last week that could have resulted in fines of $13,750,000. In what amounts to a slight tap, not even a slap on the wrists, a series of factors resulted in the fine reduced to $415,350.

According to the Treasury Department Office of Foreign Assets Control (“OFAC”), COSL Singapore Ltd (“COSL Singapore”), the oilfield services company located in Singapore and a subsidiary of China Oilfield Service Limited agreed to settle its potential civil liability for 55 apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (“ITSR”).

What seems to have nabbed this crew were procurement specialists who for at least two years made at least 55 orders of supplies from vendors in the U.S. The purchases were made for, and were specifically intended for shipment and/or re-export to, four COSL Singapore oil rigs located and operating in Iranian territorial waters between October 2011 and February 2013. Basically someone in the supply chain was helping Iran, or someone in Iran, evade U.S. economic sanctions. During that same timeframe, diplomats were engaging in nuclear talks with Iran that included the Chinese government.

COSL Singapore has had a business presence in the Western Hemisphere for some time. For example, it won a lucrative contract with Mexico in 2016. Yet, for reasons not discussed in the in the OFAC announcement, the company did not have an economic sanctions compliance program. While it is not legally necessary, it is poor compliance practice. But why would any Chinese stated-owned company bother with compliance with U.S. sanctions?

In this case the parent company, China Oilfield Services, is a majority-owned subsidiary of Chinese state-owned company CNOOC Group. CNOOC has been in the news the past few years because the Chinese government is allegedly cracking down on high-level corruption. Frankly, while the Communist Party puts on a good show when it comes to anti-corruption efforts, in reality most Communist Party officials, especially the senior hardliners who control the economy, have no problem violating U.S. laws to advance China’s national interests. This is especially true of U.S. export controls and economic sanctions.

This latest sanctions enforcement action is not the first, and it will not be the last case of Chinese-government connected companies engaging in unlawful behavior when it comes to Iran matters. Meanwhile their “China First” at all cost mindset is making it harder to contain Iran and other bad international actors such as North Korea and Cuba.

You can read the entire OFAC notice here.

 

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