October 25, 2008
The State Department has slapped financial sanctions on Russia's state arms exporter for its dealings with Iran, but in an unusual move, it granted the company a partial waiver to permit the sale of nearly two dozen Russian helicopters to Iraq, U.S. officials said yesterday.
The new sanctions -- required by U.S. law to thwart the sale of sensitive technology that could help Iran, North Korea and Syria develop weapons of mass destruction or missile systems -- were also imposed on 12 other companies or organizations based in China, Iran, North Korea, South Korea, Sudan, Syria, the United Arab Emirates and Venezuela.
Russian Foreign Minister Sergei Lavrov denounced the sanctions on Russia's Rosoboronexport, and its subsidiaries, as illegal and unjust. The company had been sanctioned by the United States in 2006 but would have come off the list had the State Department determined that it had not made any suspect sales in the past two years.
"These new sanctions were introduced without any international legal foundation whatsoever," Lavrov said in Moscow. "Russia will of course take this into account in practical affairs and relations with the United States, such as in trade and economic and other spheres."
He added that Russia would not change its policies on Iran because of the sanctions. "All our trade and all of our military-technical cooperation with Iran is carried out in strict accordance with current international legal norms," he said. "There can be no other explanation here than the rather arrogant extra-territorial implementation of American laws."
State Department officials declined to specify why the companies were placed on the list, saying the reasons are classified.
Spokesman Gordon K. Duguid said the sanctions, which will remain in effect until September 2010, prohibit any agency of the U.S. government from entering into a contract with the sanctioned companies for any goods, services or technology and ban any participation in U.S. assistance programs.
However, the notice published Thursday in the Federal Register excludes dealings "to the extent the Secretary of State otherwise may have determined," which is how the Russian helicopter deal survived, State Department officials said.
The Defense Department earlier this year gave a U.S. company a $325 million contract to supply 22 Russian-made M-17 troop transport helicopters. According to an account on Wired magazine's Danger Room blog in July, and confirmed by U.S. officials, the U.S. company, Carlyle Group-owned ARINC, purchased the helicopters as commercial items from Kazan, a Russian helicopter manufacturer, in an effort to avoid direct work with the sanctioned Russian state agency. But Kazan is linked to Rosoboronexport via a holding company called Oboronprom, and Rosoboronexport is also linked to a company in the UAE that was hired to convert the copters for military use.
Without the waiver, the lucrative sole-sourced deal was potentially in violation of the law. "This was a screw-up," one U.S. official said.
The sanctions against two North Korean companies -- Korea Mining Development and Korea Taesong Trading -- come just two weeks after the Bush administration removed North Korea from the State Department's list of terrorism sponsors in an effort to rescue a deal to eliminate Pyongyang's nuclear weapons programs. The announcement of the sanctions was delayed to accommodate concerns that the sanctions might complicate the agreement with North Korea.