Despite conflict, U.S. does business with Iran

updated 5:22 p.m. ET July 8, 2008

WASHINGTON - The rhetoric between the Bush administration and Iran may get tougher and tougher, but the trade marches on.

Terrorists and nuclear ambitions aside, the United States sells Iran brassieres and bull semen, cosmetics, cigarettes and a host of other goods, possibly even rifles.

In the words of President Calvin Coolidge: “The chief business of the American people is business.”

So true!

U.S. exports to Iran grew more than tenfold during President Bush’s years in office even as he accused it of nuclear ambitions and sponsoring terrorists. America sent more cigarettes to Iran, at least $158 million worth under Bush, than any other product.

Other surprising shipments to Iran during the Bush administration: fur clothing, sculptures, perfume and musical instruments. Top states shipping goods to Iran include California, Florida, Georgia, Louisiana, Michigan, Mississippi, New Jersey, North Carolina, Ohio and Wisconsin, according to an analysis by The Associated Press of seven years of U.S. government trade data.

Despite increasingly tough rhetoric toward Iran, which Bush has called part of an “axis of evil,” U.S. trade in a range of goods survives on-again, off-again sanctions originally imposed nearly three decades ago. The rules allow sales of agricultural commodities, medicine and a few other categories of goods. The exemptions are designed to help Iranian families even as the United States pressures Iran’s leaders.

“I understand that these exports have increased. However, we believe that they are increasing to a segment of the population that we want to reach out to, we want to know and understand that the U.S. government, the U.S. people want to be friends with them, want to work with them to integrate them into the world economy and become partners in the future,” Gonzalo Gallegos, a State Department spokesman, said Tuesday when asked by reporters about AP’s findings.

The government tracks exports to Iran using details from shipping records, but in some cases it’s unclear whether anyone pays attention.

Sanctions are intended in part to frustrate Iran’s efforts to build its military, but the U.S. government’s own figures showed at least $148,000 worth of unspecified weapons and other military gear were exported from the United States to Iran during Bush’s time in office. That included $106,635 in military rifles and $8,760 in rifle parts and accessories shipped in 2004.

The Bush administration looked into those shipments after AP questioned whether the U.S. really approved the export of military rifles to Iran. A review found the rifles and parts actually went to Iraq; the wrong country was entered on the shipping record, Treasury Department spokesman John Rankin said. The government will correct the data, he said.

The remaining military gear is likely $33,000 in military apparel shipped to Iran under the humanitarian exemption to the trade sanctions, Rankin said.

The government was also looking into U.S. records showing the export of at least $13,000 in “aircraft launching gear and/or deck arrestors,” equipment needed to launch jets from aircraft carriers. Iran’s navy is not believed to have carriers. It’s likely the wrong commodity code was entered in the shipping record or the parts are for civilian aircraft and legal to export, Rankin said.

U.S. law enforcement believes Iran is actively trying to acquire U.S. military technology, including aircraft parts that can sell for pennies on the dollar compared with what the Pentagon paid. Last year, federal agents seized four F-14 fighter jets sold to domestic buyers by an officer at Point Mugu Naval Air Station, Calif., for $2,000 to $4,000 each, with proceeds benefiting a squadron recreation fund. When F-14s were new, they cost roughly $38 million each.

Bush this year signed legislation prohibiting the Pentagon from selling leftover F-14 parts. The law was prompted by AP reporting that buyers for Iran, China and other countries exploited Pentagon surplus sales to obtain sensitive military equipment that included parts for F-14 “Tomcats” and other aircraft and missile components. Two men were indicted in Florida last week on charges they shipped U.S. military aircraft parts to Iran, including Tomcat and attack-helicopter parts.

Iran received at least $620,000 in aircraft parts and $19,600 worth of aircraft during Bush’s terms. Iran relies on spare parts from other countries to keep its commercial and military aircraft flying. In some cases, U.S. sanctions allow shipments of aircraft parts for safety upgrades for Iran’s commercial passenger jets.

Iran is a hot issue in Washington. The House plans a hearing Wednesday on U.S. policy toward Iran, and the Bush administration announced Tuesday it was freezing the U.S. assets of several people and entities accused of helping Iran develop nuclear weapons.

But the U.S. government seems uncoordinated on efforts to limit trade with Iran.

The Securities and Exchange Commission sought to shine a light on companies active in Iran but stopped after business groups complained. The Treasury Department allowed some companies and individuals suspected of illegal trading with Iran to escape punishment. Yet the Bush administration also has collected millions of dollars in fines from trade-rule violators and pressed Congress without success to pass laws to strengthen enforcement.

The fact that the United States sells anything to Iran is news to some.

“Until you just told me that about Iran I’m not sure I knew we did any business with Iran,” said Fred Wetherington, a tobacco grower in Hahira, Ga., and chairman of Georgia’s tobacco commission. “I thought because of the situation between our two governments, I didn’t think we traded with them at all, so I certainly didn’t know they were getting any cigarettes.”

The United States sent Iran $546 million in goods from 2001 through last year, government figures show. It exported roughly $146 million worth last year, compared with $8.3 million in 2001, Bush’s first year in office. Even adjusted for inflation, that is more than a tenfold increase.

Exports to Iran are a politically loaded but tiny part of U.S. trade. The United States counted more than $1 trillion in world exports last year. The value of U.S. shipments last year to Canada — America’s top trading partner — was more than 1,000 times the value of shipments to Iran.

Top U.S. exports to Iran over Bush’s years in office include corn, $68 million; chemical wood pulp, soda or sulphate, $64 million; soybeans, $43 million; medical equipment, $27 million; vitamins, $18 million; bull semen, $12.6 million; and vegetable seeds, $12 million, according to the AP’s analysis of government trade data compiled by the World Institute for Strategic Economic Research in Holyoke, Mass. The value of cigarettes sold to Iran was more than twice that of the No. 2 category on the export list, vaccines, serums and blood products, $73 million.

Iran is a top customer of Alta Genetics Inc., a Canadian company with an office in Watertown, Wis., that sells bull semen, used to produce healthier, more profitable cattle. “The animals we’re working with are genetically superior to those in many parts of the world,” said Kevin Muxlow, Alta’s global marketing manager.

Also getting Bush administration approval for export to Iran were at least $101,000 worth of bras; $175,000 in sculptures; nearly $96,000 worth of cosmetics; $8,900 in perfume; $30,000 in musical instruments and parts; $21,000 in golf carts and/or snowmobiles; $4,000 worth of movie film; and $3,300 in fur clothing.

Few people or companies asking U.S. permission to trade with Iran are turned down by the Treasury Department, the lead agency for licensing exports to sanctioned countries. During Bush’s terms, the office has received at least 4,523 license applications for Iran exports, issued at least 2,821 licenses and 213 license amendments and denied at least 178, Treasury Department data shows.

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