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AS SANCTIONS BITE, IRANIANS INVEST BIG IN GEORGIA
Wall Street Journal, NY
June 20 2013
By BENOÎT FAUCON, JAY SOLOMON and FARNAZ FASSIHI
TBILISI, Georgia-Economic sanctions against Iran have made it
increasingly hard for Iranians to do business abroad. But Iranian
businessmen are flocking to Georgia, a longtime U.S. ally in the
Caucasus region, to pursue profits evaporating in much of the world.
In recent months, Iranian nationals have taken the reins of a private
Georgian airline, a major trade bank and a scrap-metal plant. Persian
is often heard, such as on a recent night at a Tbilisi casino,
where Iranian tourists played roulette and sipped drinks brought by
Russian hostesses.
Iranian products ranging from roofing materials to sour-cherry jam
are pouring into Georgian markets, made more attractive by Iran's
weak currency. Iran's government itself is buying Georgian land,
Iran's agriculture minister has told Iranian media.
"It's all Iranian, even that one with the sticker 'Italy,' " said
Iasha Tsatsanidze, a Georgian trader, pointing to a plastic garden
hose among goods he was selling at a Tbilisi market last month. "It's
cheap and good quality."
This is a boom being closely watched by U.S. authorities charged with
enforcing sanctions that aim to block Iran from obtaining nuclear
weapons. "We are focused intently on shutting down any Iranian
attempts to evade sanctions, including through possible business
connections in Georgia," said David Cohen, the U.S. Treasury's top
official overseeing Iran sanctions. "We are working closely with
the Georgians on the issue." Two delegations from the Treasury have
visited Tbilisi in recent months to discuss the matter, according to
U.S. and Georgian officials.
In some cases, they may have reason for concern. The business branch of
Iran's Islamic Revolutionary Guard Corps has some 150 front companies
in Georgia for the purpose of evading sanctions and importing dual-use
technology, according to two members of the Revolutionary Guard and
to the head of a Tbilisi facilitator agency-who said he helped set
up such firms registered under Georgians' names.
"Investing in Georgia is a way of skirting the sanctions," Iranian
media quoted an Iranian development official as saying in December.
In Tbilisi, Javad Golchinfar, an Iranian who helps his countrymen
set up Georgian businesses, said in an interview: "Especially in the
banking sector, Georgia has become a key place to evade sanctions."
Georgian officials said they closely monitor the trade to prevent just
that. "There's intense and routine coordination between the U.S. and
Georgia on enforcing Iran sanctions," a senior Georgian official said.
Iran takes the position that the sanctions are illegal and its
companies have the right to do business everywhere. Economics Minister
Shamseddin Hosseini said in an interview that to offset declining
commerce with Europe and Mideast states, Iran looks to expand trade
with Asia and the Caucasus region.
"It's the new Dubai here" in Georgia, said a 25-year-old Iranian
trader named Amin Akbari, referring to the United Arab Emirates
financial center that historically has been the main overseas locus
of Iranian business. Mr. Akbari's Tbilisi company, Saint Rich Amin,
imports Iranian asphalt to Georgia and uses Georgia's Black Sea port
to transport Ukrainian wheat to Iran-all legitimate trades.
Commerce such as that, a large part of the Iran-related business
here, doesn't normally run afoul of sanctions. Yet U.S. and European
officials suspect that some illicit funds handled by other Iranians
are mixing into the financial flood here. Some recent developments
suggest why Washington is concerned.
In the past two months, Georgian customs has caught Iranians landing
from Dubai with a total of $315,000 in smuggled cash, according to
the agency's website.
Among Iranian companies marketing products in Georgia is one that
counts among its customers back home the hard-line Revolutionary Guard.
The company, Parsian Civilization Development Co., sells products in
Georgia ranging from Iranian tomato sauce to bathroom tiles. "Georgia
is a good market for us," said its general manager, Hamid Reza
Miraftab.
In Iran, though, Parsian sells a line of equipment that includes
mobile-phone jammers. A list of customers on Parsian's website is a
who's who of Iranian power centers: Besides the Revolutionary Guard
there is the Interior Ministry, the office of the Supreme Leader and
the Atomic Energy Organization of Iran.
Mr. Miraftab didn't respond when asked about Parsian's business in
Iran. There is no suggestion the group's Georgia business violates
sanctions.
The surging Iranian presence in Georgia has startled the Obama
administration because of deep U.S.-Georgia ties that developed after
the 1991 breakup of the Soviet Union. In 2008, the U.S. publicly
supported Georgian President Mikhail Saakashvili in Georgia's military
clash with Russia. The U.S. also has supported Georgia's application,
still pending, to join the North Atlantic Treaty Organization. In
addition, Georgia has been one of the few countries sending sizable
troop deployments to back the U.S.-led war in Afghanistan.
But when it comes to Iran, Georgia, which recently elected a prime
minister who takes a less pro-American stance than Mr. Saakashvili,
seeks to forge an independent line, its officials said.
A large portrait of George W. Bush stands along the highway to the
Tbilisi airport, honoring the former U.S. president for his support
in the 2008 war. Yet a few miles along the same road is a billboard
for Sepahan Oil Co., an Iranian company subject to U.S. sanctions.
Sepahan's office in Tehran didn't respond to requests for comment.
Georgian officials said they regard Iran as too important
diplomatically and economically to isolate or ignore. Although Georgia
has shunned heavily sanctioned Iranian crude oil and natural gas,
it imports lubricants and asphalt from Iran, some of it over land,
according to Iranian businessmen in Tbilisi. Such trade could violate
U.S. sanctions if it involves companies such as Sepahan.
According to Georgian government officials, the closer ties between
Iran and Georgia stem both from intimidation-after Iran threatened to
recognize breakaway Georgian regions-and a need to tap into Tehran's
economic potential. "It's not our interest to be on a high level of
enmity with Iran," one official said.
Enlarge Image
.
In 2010, Georgia decided to lift visa requirements for Iranian
nationals. It is one of just three countries in Europe and the broader
Middle East that grant Iranians such easy access. The others are
Turkey and Armenia.
Companies registered by Iranians in Georgia shot up to 1,489 last
year from just 84 in 2010, a corporate registry shows.
More recently, the welcome has led growing numbers of Iranian nationals
to move to Tbilisi from Dubai-which, under U.S. pressure, has been
tightening its own restrictions on Iranian businesses, according to
Georgian officials and Iranian businessmen.
Three men, in particular, have driven the Iranian investment boom in
Georgia, according to corporate documents and Georgian and Mideast
businessmen.
Houshang Hosseinpour, Pourya Nayebi and Houshang Farsoudeh have jointly
established one of Georgia's first private airlines, FlyGeorgia;
have gained control of a bank, JSC InvestBank; and have opened a
string of other ventures.
They also negotiated last year to buy a Sheraton hotel in Tbilisi and
the Poti industrial zone on the Black Sea, both from an investment
fund controlled by one of the U.A.E.'s royal families. Mr. Nayebi
said those efforts have been put on hold.
The trio's rapid expansion has raised alarms in Washington and Europe
rooted in worries their efforts might be linked to Iran's government,
said Western officials. In visits to Tbilisi, U.S. Treasury officials
have specifically raised the matter of the men's acquisitions,
according to Georgian and American officials, based partly on their
bank's dealings in the Iranian currency.
Messrs. Hosseinpour and Nayebi, in separate interviews, denied
any financial ties to Iran's government. They said they simply saw
opportunity in Georgia after Dubai's welcome mat frayed.
"I have no connections to Iran," Mr. Hosseinpour said. "We have
nothing to do with evading sanctions."
Mr. Nayebi said, "We are not working for Iran's government. We hate
them and worked very hard to set up our businesses abroad away from
Iran." The third man, Mr. Farsoudeh, didn't respond to interview
requests.
Mr. Hosseinpour, in his mid-40s, was born in Tehran and later obtained
residency permits in Canada and the U.A.E., plus in 2011 a passport
from the tiny Caribbean nation St. Kitts and Nevis. His two partners
also hold St. Kitts passports.
Mr. Hosseinpour said he initially ran a trading business in Dubai
focused on supplying cars and auto parts in the Middle East and North
Africa. His family had hailed from the Caucasus region, he said, and
he was drawn to Georgia after the 2008 Russian-Georgian conflict. He
said he had bought about 500 acres near Georgia's border with Armenia
to raise corn and wheat.
Iranian airlines are increasingly cut off from international
destinations as sanctions limit them in buying fuel and spare parts.
Mr. Hosseinpour said that last year he founded FlyGeorgia, which
established direct flights to Tehran. It is 65%-owned by him and Mr.
Farsoudeh, Georgian corporate records show, with Mr. Nayebi as
chairman.
Business wasn't booming on a recent FlyGeorgia flight to Tbilisi from
Dusseldorf, Germany. On a largely empty plane, fliers were served
Georgian wines by hostesses in tightfitting red dresses, practices
hardly suggestive of a link to Iran's theocracy.
Messrs. Hosseinpour, Nayebi and Farsoudeh gained control of the
Georgian bank InvestBank in 2011 through a Liechtenstein-based
investment fund called KSN Foundation, Georgian corporate documents
show. The bank that year reported holding some assets in Iran's rial,
the only Georgian bank to do so.
This is a red flag for Washington. The U.S. has passed a law, taking
effect July 1, that calls for sanctioning any firm dealing in the
currency outside of Iran. InvestBank held no rials at the end of 2012,
a newer audit showed.
Liechtenstein regulators began a preliminary inquiry into the
foundation through which the Iranians bought InvestBank after
learning the U.S. Treasury was investigating the bank on concerns
it could be used to bypass U.S. sanctions on Iranian banks, said a
top Liechtenstein financial regulator. Georgian financial regulators
said that they are cooperating with the Treasury in investigating
InvestBank.
The Georgian regulators said they hadn't found evidence the bank
helped Iran avoid sanctions. They did say that the bank's Iranian
owners hadn't properly disclosed changes in the bank's board, and the
Georgian central bank is looking into "whether any unlawful change
in the ownership structure...has taken place," said a central-bank
legal officer.
Mr. Nayebi, InvestBank's chairman, said that "maybe [bank officials]
didn't update" board changes with the regulator. He said the problem
might have arisen because he was "too busy" with other Georgian
ventures, such as one in agriculture.
"The U.S. government is wasting its time" in scrutinizing InvestBank,
Mr. Nayebi said. "We didn't do anything in breach of sanctions."
Giorgi Kadagidze, the Georgian central bank's chief regulator, said
his government is taking extra steps to make sure no sanctioned
Iranian company can penetrate Georgia's banking system. Georgia
recently amended its laws to bar any country subject to international
sanctions from opening "microfinance" outlets that make small loans.
"Everything regarding Iranians makes us take a much closer look
because of the sanctions," Mr. Kadagidze said.
Georgia banking officials said they have thwarted several efforts by
Iranian banks or people linked to the Tehran regime to open finance
offices in Georgia.
Two years ago, Mr. Kadagidze said, top managers from Iran-based Bank
Pasargad visited Tbilisi three times seeking to open a branch. Denied a
license, the bank complained to the Georgian Foreign Ministry, he said.
The U.S. has since blacklisted the bank, a designation that bars
Americans from dealing with it and also puts pressure on foreign
banks not to. A Pasargad public-relations official declined to comment.
Iranian businessmen search out channels to finance their Georgian
enterprises. Mr. Akbari said for his wheat exports, letters of credit
are issued using accounts in China and Qatar.
One Iranian trader in Tbilisi said he pays for imports from Iran by
using a branch in neighboring Armenia of Iran's Bank Mellat, which
is sanctioned by the U.S. and EU but not the U.N.
Some Iranians in Georgia said they had to send cash overland to Tehran
to pay for imports-worth the risk because Georgia is a rare friendly
market. "We send the payments...by car through Turkey and Armenia,"
said Mohsen Bashiri, who runs a Tehran-based company selling copper
cable in Tbilisi. "We hope we can expand" in Georgia.
--Asa Fitch contributed to this article.
http://online.wsj.com/article/SB10001424127887323864304578320754133982778.html
Wall Street Journal, NY
June 20 2013
By BENOÎT FAUCON, JAY SOLOMON and FARNAZ FASSIHI
TBILISI, Georgia-Economic sanctions against Iran have made it
increasingly hard for Iranians to do business abroad. But Iranian
businessmen are flocking to Georgia, a longtime U.S. ally in the
Caucasus region, to pursue profits evaporating in much of the world.
In recent months, Iranian nationals have taken the reins of a private
Georgian airline, a major trade bank and a scrap-metal plant. Persian
is often heard, such as on a recent night at a Tbilisi casino,
where Iranian tourists played roulette and sipped drinks brought by
Russian hostesses.
Iranian products ranging from roofing materials to sour-cherry jam
are pouring into Georgian markets, made more attractive by Iran's
weak currency. Iran's government itself is buying Georgian land,
Iran's agriculture minister has told Iranian media.
"It's all Iranian, even that one with the sticker 'Italy,' " said
Iasha Tsatsanidze, a Georgian trader, pointing to a plastic garden
hose among goods he was selling at a Tbilisi market last month. "It's
cheap and good quality."
This is a boom being closely watched by U.S. authorities charged with
enforcing sanctions that aim to block Iran from obtaining nuclear
weapons. "We are focused intently on shutting down any Iranian
attempts to evade sanctions, including through possible business
connections in Georgia," said David Cohen, the U.S. Treasury's top
official overseeing Iran sanctions. "We are working closely with
the Georgians on the issue." Two delegations from the Treasury have
visited Tbilisi in recent months to discuss the matter, according to
U.S. and Georgian officials.
In some cases, they may have reason for concern. The business branch of
Iran's Islamic Revolutionary Guard Corps has some 150 front companies
in Georgia for the purpose of evading sanctions and importing dual-use
technology, according to two members of the Revolutionary Guard and
to the head of a Tbilisi facilitator agency-who said he helped set
up such firms registered under Georgians' names.
"Investing in Georgia is a way of skirting the sanctions," Iranian
media quoted an Iranian development official as saying in December.
In Tbilisi, Javad Golchinfar, an Iranian who helps his countrymen
set up Georgian businesses, said in an interview: "Especially in the
banking sector, Georgia has become a key place to evade sanctions."
Georgian officials said they closely monitor the trade to prevent just
that. "There's intense and routine coordination between the U.S. and
Georgia on enforcing Iran sanctions," a senior Georgian official said.
Iran takes the position that the sanctions are illegal and its
companies have the right to do business everywhere. Economics Minister
Shamseddin Hosseini said in an interview that to offset declining
commerce with Europe and Mideast states, Iran looks to expand trade
with Asia and the Caucasus region.
"It's the new Dubai here" in Georgia, said a 25-year-old Iranian
trader named Amin Akbari, referring to the United Arab Emirates
financial center that historically has been the main overseas locus
of Iranian business. Mr. Akbari's Tbilisi company, Saint Rich Amin,
imports Iranian asphalt to Georgia and uses Georgia's Black Sea port
to transport Ukrainian wheat to Iran-all legitimate trades.
Commerce such as that, a large part of the Iran-related business
here, doesn't normally run afoul of sanctions. Yet U.S. and European
officials suspect that some illicit funds handled by other Iranians
are mixing into the financial flood here. Some recent developments
suggest why Washington is concerned.
In the past two months, Georgian customs has caught Iranians landing
from Dubai with a total of $315,000 in smuggled cash, according to
the agency's website.
Among Iranian companies marketing products in Georgia is one that
counts among its customers back home the hard-line Revolutionary Guard.
The company, Parsian Civilization Development Co., sells products in
Georgia ranging from Iranian tomato sauce to bathroom tiles. "Georgia
is a good market for us," said its general manager, Hamid Reza
Miraftab.
In Iran, though, Parsian sells a line of equipment that includes
mobile-phone jammers. A list of customers on Parsian's website is a
who's who of Iranian power centers: Besides the Revolutionary Guard
there is the Interior Ministry, the office of the Supreme Leader and
the Atomic Energy Organization of Iran.
Mr. Miraftab didn't respond when asked about Parsian's business in
Iran. There is no suggestion the group's Georgia business violates
sanctions.
The surging Iranian presence in Georgia has startled the Obama
administration because of deep U.S.-Georgia ties that developed after
the 1991 breakup of the Soviet Union. In 2008, the U.S. publicly
supported Georgian President Mikhail Saakashvili in Georgia's military
clash with Russia. The U.S. also has supported Georgia's application,
still pending, to join the North Atlantic Treaty Organization. In
addition, Georgia has been one of the few countries sending sizable
troop deployments to back the U.S.-led war in Afghanistan.
But when it comes to Iran, Georgia, which recently elected a prime
minister who takes a less pro-American stance than Mr. Saakashvili,
seeks to forge an independent line, its officials said.
A large portrait of George W. Bush stands along the highway to the
Tbilisi airport, honoring the former U.S. president for his support
in the 2008 war. Yet a few miles along the same road is a billboard
for Sepahan Oil Co., an Iranian company subject to U.S. sanctions.
Sepahan's office in Tehran didn't respond to requests for comment.
Georgian officials said they regard Iran as too important
diplomatically and economically to isolate or ignore. Although Georgia
has shunned heavily sanctioned Iranian crude oil and natural gas,
it imports lubricants and asphalt from Iran, some of it over land,
according to Iranian businessmen in Tbilisi. Such trade could violate
U.S. sanctions if it involves companies such as Sepahan.
According to Georgian government officials, the closer ties between
Iran and Georgia stem both from intimidation-after Iran threatened to
recognize breakaway Georgian regions-and a need to tap into Tehran's
economic potential. "It's not our interest to be on a high level of
enmity with Iran," one official said.
Enlarge Image
.
In 2010, Georgia decided to lift visa requirements for Iranian
nationals. It is one of just three countries in Europe and the broader
Middle East that grant Iranians such easy access. The others are
Turkey and Armenia.
Companies registered by Iranians in Georgia shot up to 1,489 last
year from just 84 in 2010, a corporate registry shows.
More recently, the welcome has led growing numbers of Iranian nationals
to move to Tbilisi from Dubai-which, under U.S. pressure, has been
tightening its own restrictions on Iranian businesses, according to
Georgian officials and Iranian businessmen.
Three men, in particular, have driven the Iranian investment boom in
Georgia, according to corporate documents and Georgian and Mideast
businessmen.
Houshang Hosseinpour, Pourya Nayebi and Houshang Farsoudeh have jointly
established one of Georgia's first private airlines, FlyGeorgia;
have gained control of a bank, JSC InvestBank; and have opened a
string of other ventures.
They also negotiated last year to buy a Sheraton hotel in Tbilisi and
the Poti industrial zone on the Black Sea, both from an investment
fund controlled by one of the U.A.E.'s royal families. Mr. Nayebi
said those efforts have been put on hold.
The trio's rapid expansion has raised alarms in Washington and Europe
rooted in worries their efforts might be linked to Iran's government,
said Western officials. In visits to Tbilisi, U.S. Treasury officials
have specifically raised the matter of the men's acquisitions,
according to Georgian and American officials, based partly on their
bank's dealings in the Iranian currency.
Messrs. Hosseinpour and Nayebi, in separate interviews, denied
any financial ties to Iran's government. They said they simply saw
opportunity in Georgia after Dubai's welcome mat frayed.
"I have no connections to Iran," Mr. Hosseinpour said. "We have
nothing to do with evading sanctions."
Mr. Nayebi said, "We are not working for Iran's government. We hate
them and worked very hard to set up our businesses abroad away from
Iran." The third man, Mr. Farsoudeh, didn't respond to interview
requests.
Mr. Hosseinpour, in his mid-40s, was born in Tehran and later obtained
residency permits in Canada and the U.A.E., plus in 2011 a passport
from the tiny Caribbean nation St. Kitts and Nevis. His two partners
also hold St. Kitts passports.
Mr. Hosseinpour said he initially ran a trading business in Dubai
focused on supplying cars and auto parts in the Middle East and North
Africa. His family had hailed from the Caucasus region, he said, and
he was drawn to Georgia after the 2008 Russian-Georgian conflict. He
said he had bought about 500 acres near Georgia's border with Armenia
to raise corn and wheat.
Iranian airlines are increasingly cut off from international
destinations as sanctions limit them in buying fuel and spare parts.
Mr. Hosseinpour said that last year he founded FlyGeorgia, which
established direct flights to Tehran. It is 65%-owned by him and Mr.
Farsoudeh, Georgian corporate records show, with Mr. Nayebi as
chairman.
Business wasn't booming on a recent FlyGeorgia flight to Tbilisi from
Dusseldorf, Germany. On a largely empty plane, fliers were served
Georgian wines by hostesses in tightfitting red dresses, practices
hardly suggestive of a link to Iran's theocracy.
Messrs. Hosseinpour, Nayebi and Farsoudeh gained control of the
Georgian bank InvestBank in 2011 through a Liechtenstein-based
investment fund called KSN Foundation, Georgian corporate documents
show. The bank that year reported holding some assets in Iran's rial,
the only Georgian bank to do so.
This is a red flag for Washington. The U.S. has passed a law, taking
effect July 1, that calls for sanctioning any firm dealing in the
currency outside of Iran. InvestBank held no rials at the end of 2012,
a newer audit showed.
Liechtenstein regulators began a preliminary inquiry into the
foundation through which the Iranians bought InvestBank after
learning the U.S. Treasury was investigating the bank on concerns
it could be used to bypass U.S. sanctions on Iranian banks, said a
top Liechtenstein financial regulator. Georgian financial regulators
said that they are cooperating with the Treasury in investigating
InvestBank.
The Georgian regulators said they hadn't found evidence the bank
helped Iran avoid sanctions. They did say that the bank's Iranian
owners hadn't properly disclosed changes in the bank's board, and the
Georgian central bank is looking into "whether any unlawful change
in the ownership structure...has taken place," said a central-bank
legal officer.
Mr. Nayebi, InvestBank's chairman, said that "maybe [bank officials]
didn't update" board changes with the regulator. He said the problem
might have arisen because he was "too busy" with other Georgian
ventures, such as one in agriculture.
"The U.S. government is wasting its time" in scrutinizing InvestBank,
Mr. Nayebi said. "We didn't do anything in breach of sanctions."
Giorgi Kadagidze, the Georgian central bank's chief regulator, said
his government is taking extra steps to make sure no sanctioned
Iranian company can penetrate Georgia's banking system. Georgia
recently amended its laws to bar any country subject to international
sanctions from opening "microfinance" outlets that make small loans.
"Everything regarding Iranians makes us take a much closer look
because of the sanctions," Mr. Kadagidze said.
Georgia banking officials said they have thwarted several efforts by
Iranian banks or people linked to the Tehran regime to open finance
offices in Georgia.
Two years ago, Mr. Kadagidze said, top managers from Iran-based Bank
Pasargad visited Tbilisi three times seeking to open a branch. Denied a
license, the bank complained to the Georgian Foreign Ministry, he said.
The U.S. has since blacklisted the bank, a designation that bars
Americans from dealing with it and also puts pressure on foreign
banks not to. A Pasargad public-relations official declined to comment.
Iranian businessmen search out channels to finance their Georgian
enterprises. Mr. Akbari said for his wheat exports, letters of credit
are issued using accounts in China and Qatar.
One Iranian trader in Tbilisi said he pays for imports from Iran by
using a branch in neighboring Armenia of Iran's Bank Mellat, which
is sanctioned by the U.S. and EU but not the U.N.
Some Iranians in Georgia said they had to send cash overland to Tehran
to pay for imports-worth the risk because Georgia is a rare friendly
market. "We send the payments...by car through Turkey and Armenia,"
said Mohsen Bashiri, who runs a Tehran-based company selling copper
cable in Tbilisi. "We hope we can expand" in Georgia.
--Asa Fitch contributed to this article.
http://online.wsj.com/article/SB10001424127887323864304578320754133982778.html