Parts for Tehran's Nuclear Program: Was Siemens Involved in Dubious Trade?

By and

Engineering giant Siemens has officially stopped doing business with Iran. But German customs officials say they recently intercepted a shipment of Siemens parts whose final destination was allegedly the Iranian nuclear reactor in Bushehr.

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REUTERS

July 1, 2010 will likely go down in the history of German engineering giant Siemens as the day the company ended a 140-year-old business relationship, one that was steeped in tradition. On that date, the Munich-based company stopped accepting new orders from Iran.

The decision, which management had made last fall, makes Siemens one of the few major German companies that has responded to pressure from the German government and from the United States to completely withdraw from the country, with its internationally ostracized president, Mahmoud Ahmadinejad.

Löscher and his advisers normally like to boast about how they are role models when it comes to global business ethics. Nevertheless, they allowed July 1, the day the company stopped accepting orders from Iran, to pass without further comment. It was probably a good idea, in light of what allegedly happened a few days later at Frankfurt Airport, in a scene that hardly seems to fit to Siemens' image as a trailblazer in the art of ethical deals.

According to customs officials at the airport, they intercepted a shipment of Siemens parts, including switches, switching components and computer modules, destined for a Russian customer. German authorities say that the Russian customer was supposed to forward the Frankfurt shipment through Moscow to its final destination, Iran's controversial nuclear reactor in Bushehr.

Public Relations Crisis

More than 30 years ago, Heinrich von Pierer, who would later become Siemens' CEO, secured the contract, worth billions, for the scandal-plagued Bushehr project. Today Atomstroyexport, a subsidiary of the Russian nuclear company Rosatom, is completing construction of the reactor.

Atomstroyexport has triggered a public relations crisis for Siemens, which is in the process of forming a joint venture for the peaceful use of nuclear energy with the Russians.

According to the shipping documents, the sensitive high-tech components were initially destined for a subsidiary of Atomstroyexport which describes itself as a "research and design institute," a name that sounds more American than Russian. Nevertheless, it is the Russian firm and its parent company, Atomstroyexport, that are jointly handling the Bushehr contract.

Both companies are under enormous time pressure, after having promised to finally complete the former Siemens reactor by September -- about 10 years later than the original completion date.

Strict Embargo

According to German border officials, the Siemens parts were to be shipped from Moscow to Bushehr. A company spokesman insists that no one in the company was aware of what was happening in Moscow.

The authorities say that if the Siemens components had been forwarded to Bushehr, it would have constituted a violation of the European Union's strict embargo against Iran, which was tightened even further at the end of July. This information prompted the customs officials at Frankfurt Airport to refuse to allow the Siemens shipment to leave the country.

"We are aware of the incident," says Atomstroyexport spokeswoman Olga Zylova, "but we have no comment." After being contacted, a Siemens spokesman said that he could not rule out the possibility that the material may have come from a reseller and that it possibly was completely harmless.

Strategically Important

The ominous incident will likely reignite a fundamental dispute that has been simmering among the EU, Russia and Iran for some time. The German government and other European countries suspect that Iranian President Ahmadinejad is seeking to develop nuclear weapons under the guise of a civilian nuclear program, which Ahmadinejad vehemently denies. The Europeans fear that the Bushehr plant could be misused to build bombs.

It was because of these concerns that, under the EU's former Iran embargo rules, strategically important products like computers and control devices could not be shipped to Iran from or through Germany, even if they were intended for allegedly civilian nuclear programs like Bushehr. The rule applies to any such products, no matter where they come from.

The only exceptions are relatively harmless products like light bulbs and electrical outlets. An export permit must be requested for so-called "dual-use" products that could potentially be used for military or civilian purposes. In the Siemens case, this export permit had apparently not been applied for -- and would probably not have been issued even if it had.

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