Risky Business: Japan-Based Sojitz Fined For Violating Iran Sanctions, Directly Financing Regime

(New York, N.Y.) – On January 11, a Hong Kong-based subsidiary for Sojitz, a Japanese general trading company, was fined more than $5 million by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) for violating sanctions against the Islamic Republic of Iran. The violations came despite repeated warnings from United Against Nuclear Iran (UANI) to company officials in the U.S. and Japan. OFAC’s punitive action should serve as an example of the tangible and consequential dangers of being in the Iranian market.

As early as January 2017, Sojitz was advised by UANI of the commercial, legal, financial and reputational risks of the Memorandums of Understanding (MOU) it had signed with two Iranian state-owned entities: the National Petrochemical Company and the Industrial Development and Renovation Organization. The nature of the Iranian economy, which is dominated by a web of front companies by the Islamic Revolutionary Guard Corps (IRGC), a U.S.-designated Foreign Terrorist Organization, and doing business with the state meant that any transaction in Iran put Sojitz at considerable risk of inadvertently furthering Iran’s nuclear ambitions and financing its terror activities or any other number of malign activities in which the regime engages. 

Of additional contention was a field office that Sojitz had apparently established in Tehran to “[promote] authorized business activities in Iran.” Notably, as of today, this office is still listed on Sojitz’s website.

“Despite UANI’s warnings, Sojitz stated with a high degree of certainty that it was ‘complying with all applicable laws’ related to U.S. sanctions and that the MOUs they were warned about had been terminated. In fact, Sojitz even stated that its ‘internal policy prohibits all transactions in and relating to Iran,’” stated UANI Research Director Daniel Roth. “Clearly, that was not the case.”

In its announcement, OFAC reported that Sojitz had purchased 64,000 tons of Iranian high density polyethylene resin (HDPE). OFAC further noted that the HDPE, which is derived from petrochemicals, “appears to have conferred significant economic benefits to Iran and undermined broad U.S. sanctions specifically targeting Iran’s petrochemical sector, a major source of revenue generation for the Government of Iran.” To facilitate the purchase, Sojitz made 60 separate transactions in U.S. dollars totaling $75,603,411 with U.S. banks, violating sanctions prohibiting U.S. dollar payments to Iran. Company officials have blamed these transactions on “rogue” employees who worked with their suppliers to conceal the HDPE’s country of origin, thereby circumventing the company’s compliance personnel.

Roth concluded, “Like other companies that have expressed a commitment to fully complying with sanctions regimes only to fall short in the end, Sojitz failed to recognize the extent to which certain actors will go to generate revenue for the Iranian regime. Sojitz should be commended for the corrective it has since taken. Ultimately, the lesson should be clear to any other company that wants to avoid the wrath of OFAC: Don’t sign an MOU with Iranian companies; don’t establish a field office in Tehran; and most certainly, don’t do business with Iran. And if you do, you can expect it to come back to haunt you.”

To explore UANI’s Iran Corporate Violations & Penalties Tracker, please click here. 

To explore UANI’s MOU Monitor, please click here.  

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