The Russian company Gazprom's activities demand public scrutiny. Especially in the wake of the recent deal it signed with Total in Iran, its plans to offer a convertible bond on the US market, and its intentions to carry out a number of energy-related projects in Libya. The bond offering would essentially result in US investors funding activities which pose serious threats to US national security interests. This is something which I believe must be examined closely.
I would like to say right up front that this is not a case of being "out to get Russia" or to prevent US companies from doing business with Russia. Gazprom's investments in Iran and Libya, however, and its attempts to fund these activities on the US market, are a matter of national security and one which -- if nothing else -- needs to be brought to the attention of the American people and those who might invest in this company.
Gazprom is the centerpiece of Russian hard currency earning structure and is a very closely held entity involving "old guard" Russian leadership. It continues to be a major instrument in the Russian economic monopoly as the embargo on Turkmen gas illustrates so well. It also is a bone of contention between the "old guard" and the young reformers in Russia who are trying to privatize this monolith while at the same time using it to raise much needed hard currency for domestic projects.
And as we all know, Gazprom recently entered as a substantial partner with the French oil company Total and the Malaysian company Petronas, into a $2 billion offshore gas deal in Iran's South Pars field.
However, Gazprom is short on the cash it needs to get the South Pars project up and running. And in an act of sheer gall, the company is planning to get US investors to pay for this by selling convertible bonds on Wall Street. Though Gazprom claims the funds raised will go towards other projects, the fact is that the income will free up cash for South Pars. This convertible bond -- as well as others planned to amount to some $6 billion in 1998 -- will ensure that Gazprom is able to continue with impunity its activities -- some of which pose serious threats to US national security interests. Such bonds will also provide the company with new investors who will have a vested financial interest in opposing sanctions or international penalties in the future.
Essentially, the matter boils down to this: should American investors fund Iranian ballistic and nuclear missile development? Of course not. And yet that is essentially the deal that Gazprom will be offering to unsuspecting American investors when it launches its bond next month.
The South Pars will help advance Tehran's nuclear ambitions and finance its terrorist activities. Iran is a nation which uses terror as a foreign policy tool, which is dedicated to undermining the Middle East peace process; providing financial support to Harnas and the Islamic Jihad; funding and directing Hezbollah which is wreaking death and destruction in Lebanon; and to rooting out Western influence in the Gulf region, Central Asia and elsewhere with the spread of anti-Western radical fundamentalism. By exploiting Iran's South Pars field and helping Tehran foot the bill for terrorist activities, Gazprom is underwriting Iranian terrorism and showing its utter contempt for our concerns.
And of course, this deal is a clear contravention of the US Iran-Libya Sanctions Act (ILSA). Iran's oil and gas sectors are Iran's main source of wealth. Assisting these sectors -- as the South Pars deal does -- fills Iranian coffers. Shouldn't American investors be aware that they might be investing in a company which is contravening US laws?
Should the US Government be financing the violation of our laws? Again, the answer is clearly no. Yet, taxpayer dollars are going to underwrite guarantees of commercial loans for Gazprom. In 1994, the Export Import Bank and Gazprom signed a memorandum of understanding to provide up to $750 million in guarantees of loans to Gazprom. I believe the . ExIm should immediately suspend all financing for Gazprom if it goes through with the South Pars deal. The US government should not be in the business of assisting companies which are providing hard currency to terrorists.
Finally, if investment in Iran were not enough, it was announced at the end of last week that the Russian-Libyan Intergovernmental commission had agreed in principle "on participation by Russian organizations in carrying out a number of projects in Libya in the sphere of power industry, communications, transportation, oil and gas extraction, and the construction of gas pipelines and other infrastructure facilities". Gazprom strikes again.
So where are our "allies" in this? The French and the Russians say our concerns in this matter are exaggerated. After all, they say, Iran is already selling enough oil to more 'than cover the cost of the missiles and missile technology it is buying from Russia. True. However, Iran cannot afford to develop and maintain the nuclear capability it is trying to acquire without new revenue streams, such as those gained from the South Pars deal. In fact this deal has an added financial advantage for Iran: much of the gas exploited in the South Pars field will go towards helping Iran maintain and improve its oil production -- thus helping Iran produce more oil and bring in yet more money.
The irony here is that the threat posed by a nuclear-capable Iran, is more severe for our European allies and partners. In an article which appeared Tuesday in the Washington Post, former Secretary of State Henry Kissinger points out that " our European allies will be the first victims of the spread of Islamic fundamentalism and of Iranian medium and long-range missiles. As a nuclear power, Iran will in the long run prove far more threatening to Russia than to America. And if the gulf blows up, our European allies will be the first to ask for military help and access to our energy supplies to avoid an economic catastrophe." Any money made in this venture will be blood money.
The time has come to provide fall disclosure about the companies in which Americans will be investing their hard earned money. We should not stand by and watch US securities firms, pension funds, insurance companies, corporations, personal investors and other provide unconditioned cash to an enterprise that is engaging in activities that could compromise US national security. US investors should get the full story on Gazprom's activities before helping to finance Iran's nuclear arsenal. And companies like Gazprom which engage in activities harmful to the United States cannot and should not expect the privilege of raising funds in our markets.
Thank you, Mr. Chairman. I will be happy to respond to any questions from the Committee.
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