Washington Bureau

02.24.14

Lawmakers Warn Michelin Over Iran

French companies could risk Pentagon contracts if they take further steps towards doing business with Iran.

International firms racing to do business with post-sanctions Iran could jeopardize their contracts with the the United States military. Three Republican lawmakers who serve on the House Armed Services Committee warned French firms last week that dealings with Iran could make it impossible to do business with the Pentagon in the future.

“We write to you with grave concern about what we see as the unraveling of our sanctions regime involving the nuclear weapons, ballistic missile, and terrorism activities of the Islamic Republic of Iran,” wrote Reps. Doug Lamborn (R-CO), Trent Franks (R-AZ), and Joe Heck (R-NV), in a Feb. 18 letter to Defense Secretary Chuck Hagel, obtained by The Daily Beast.

The lawmakers noted that over 100 French business executives traveled to Iran in early February , including representatives from Safran, Airbus, Total, GDF-Suez, Renault, Alcatel, Alstom, Amundi and L'Oréal. Iranian President Rouhani’s chief of staff said during the visit, “A new chapter has begun in relations between Iran and Europe." The goal of the trip was to start relationships in order to do business if sanctions were lifted against the Iranian regime as as part of a potential deal to halt the  country's nuclear program. 

But one of the firms represented at the meeting also has earned over $2.4 billion from contracts with the U.S. military since 2007 – Michelin. The lawmakers singled out Michelin and called their participation in the Iran trip “greatly troubling.”

“We urge you to direct the Department to make clear to Michelin that any business with the Islamic Republic of Iran would make further contracts with the Department of Defense impossible,” the lawmakers wrote to Hagel.

They also asked the Pentagon to report back on how the U.S. government could terminate existing contracts with Michelin, if it wanted to, as well as what would be the costs of such terminations. A Congressional aide close to the issue said that if Michelin does enter into new business with Iran, lawmakers would try to use the annual defense appropriations and authorization bills to cut off the flow of U.S. taxpayer money to the French company.

Lamborn, a five-term Republican from Colorado Springs, told The Daily Beast, “I want any company doing business with the U.S. Government to think twice before conducting business with Iran. We have no desire to cut Michelin contracts. However, there should be consequences if Michelin and other companies try to do business with our government and Iran. I will keep a close eye on this issue as Congress develops our annual authorization and appropriation bills.”

The Pentagon did not respond to a request for comment and has not yet responded formally to the lawmakers’ letter.

But the Obama administration is keenly aware of the French business outreach to Tehran. Speaking next to French President Francois Hollande in Washington last week, Obama warned that if French companies jump the gun and start doing business with Iran now, they face stiff penalties.

“And so businesses may be exploring are there some possibilities to get in sooner rather than later if and when there is an actual agreement to be had, but I can tell you that they do so at their own peril right now because we will come down on them like a ton of bricks with respect to the sanctions that we control, and we expect full compliance with respect to the P5-plus-1 during this interim,” Obama said.

But top Obama administration officials have also said  that the international business trips to Iran could have a positive effect; they might give the Iranian government added incentive to complete a comprehensive nuclear deal by enticing them with the prospect of economic windfall. 

“Although we don’t want people to go, because we think it does send the wrong message, if they do go, it puts pressure, perversely, on the Rouhani administration,” Undersecretary of State Wendy Sherman testified to Congress earlier this month. “Because as far as we have seen to date, there are not deals getting done, but rather people getting first in line in the hope that someday there will be a deal.”

Treasury Undersecretary David Cohen acknowledged in testimony, “There is perhaps a mixed message that gets to the Iranians on this.”

Michelin's Managing Chairman Jean-Dominique Senard told The Wall Street Journal earlier this month that the company wants to resume business in Iran if sanctions are lifted and does not want to lose out to other companies preparing to take advantage of the new opportunities there.

“What I don't want is that when trading with Iran eventually resumes we discover that other companies have profited from a situation in which we have toed the line,” he said. “That would be very upsetting."