Archive for the ‘France’ Category

New EU Trade SPV to Keep Iran Afloat After US JCPOA Withdrawal


By: Danielle Hatch

Recently France, Germany and Britain have started working on a new channel (Special Purpose Vehicle) for non-dollar trade with Iran to avoid the newly re-imposed US sanctions on the country. Last year the United States withdrew from the Joint Comprehensive Plan of Action (JCPOA) which had offered relief from US sanction on Iran for companies. Once the US left the JCPOA they began to the re-impose the trade sanctions on Iran, not only impacting US entities but also causing secondary sanctions for European entities to deal with, especially if they wanted to continue trade with Iran.

The goal of the re-imposed US sanctions is to encourage Europeans to stop business with Iran because of the threat of losing US business. This is puts European entities in a bit of a pickle because they would prefer to keep JCPOA up and running, without the US. They are working hard to make the deal work after Iran threatened to leave the JCPOA if they are unable to keep receiving economic benefits for their part in the deal. The goal of the Special Purpose Vehicle (SPV) is to help match Iranian oil and gas exports against purchases of EU goods, the problem is, that it won’t realistically be used for large trade transactions that Iran wants to see. It’s more likely be used for small trade such as humanitarian products or food. A European diplomat explained, “It won’t change things dramatically, but it’s an important political message to Iran to show that we are determined to save JCPOA and also to the United States to show we defend our interests despite their extraterritorial sanctions.”

“We do not expect the SPV will in any way impact our maximum economic pressure campaign,” a US State Department spokeswoman said. “The United States questions the efficacy of the SPV and remains committed to fully enforcing its sanctions,” another senior Trump administration offered.

Unfortunately, as the SPV is still months away from being operational, relations between the European Union and Iran have been strained. The EU recently imposed its first sanctions on Iran since JCPOA after ballistic missile tests and assassination plots were revealed on European soil. The EU added two Iranian individuals and an Iranian intelligence unit to its terrorist list. They are also still deciding if another push for new sanctions on Iran over its missile program will be part of the SPV.

“We are clear; this commitment does not in any way preclude us from addressing Iran’s hostile and destabilizing activities” Jeremy Hunt explained (British Foreign Secretary).

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France: Weaning Off of US Weapons Systems Parts


By: Danielle Hatch

French Defence minister Florence Parly recently explained that it will start to cut its dependence on US components in many of its weapons systems. Everyone knows that US export controls often limit European weapons sales even if they only contain a tiny US component. Just this year, the US blocked the sale of French-made SCALP cruise missiles to Egypt because they contained a US part that was subject to the US export regulations. Regarding the blocked sale, Parly said: “We are at the mercy of the Americans.” Without providing specific examples, Parly said France needed to “gradually wean ourselves off our reliance on a certain number of American parts.”

France and Germany are currently working on the Future Combat Air System (SCAF) project, a next generation combat jet and they are trying to minimize the dependence on US parts within the project. France’s Dassault Aviation and Airbus have signed a deal to work together on the jet which will have the ability to be at the center of a broader weapons system that can control a squadron of drones. Currently, France’s air force uses Reaper drones which are built by General Atomics, a US firm. France had to obtain US congressional approval to arm the drones since they are used in its counter-terrorism operations against Islamist militants. “Is that satisfactory? No. But we don’t have any choice,” Parly explained.

Quotes from French Defence minister Florence Parly during a joint news conference in Helsinki, Finland on August 23, 2018.

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Jet Sale to Egypt Is Being Blocked By a U.S. Regulation, And France Is Over It


(Source: Defense News, 1 Aug 2018.) [Excerpts.]

The U.S. is currently withholding clearance of an American component on the French Scalp cruise missile, which prevents the sale of additional Rafale fighter jets to Egypt. France is looking for ways to reduce its dependence on U.S. approval, but lacks the means to be completely autonomous.

“It is true that we depend on this [U.S. International Traffic in Arms Regulations] mechanism: We are at the mercy of the Americans when our equipment is concerned,” French Armed Forces Minister Florence Parly told the Committee for National Defense and Armed Forces of the lower-house National Assembly, according to recently released transcripts from July 4.

Parly said that the ministry needs “to analyze” French dependence on the U.S. and should be discussing with industry as well as the Economy and Finance Ministry ways for France to protect itself from American legislation.

When French President Emmanuel Macron attempted to convince President Donald Trump to provide clearance for the cruise missile component Trump recommended French experts talk to their American counterparts to work out the clearance, but the issue was not resolved according to a French defense source.

The U.S. has been the world leader in arms exports for more than 70 years, accounting for more than a third of total foreign military sales, Parly told parliamentarians. She added that European nations need to buy less American equipment to help reduce U.S. supremacy and take actions to promote European defense.

Macron has requested a French equivalent of the U.S. Foreign Military Sales program, which handles government-to-government deals, she said. Client nations prefer this approach rather than dealing with companies. The French Armed Forces and Economics and Finance ministries have created a framework agreement that will likely be adopted as the model for an intergovernmental arms contract, backed by a public tender and observing national and European law, she said.

The U.S. has been relaxing its rules on arms exports, with the State Department adopting the Conventional Arms Transfer policy, which eases the way for companies to directly pitch some types of weapons and drones without having to go to Washington for official approval.


BIS Settles with Ansell and Comasec for Attempted Transshipment of Industrial-Strength Gloves to Iran through UAE


By: Brooke Driver

Well, folks, here’s yet another case of the consequences of defying U.S. embargoes. BIS has announced that it has reached a settlement agreement with Ansell Protective Products Inc. of New Jersey and Comasec of Gennevilliers, France. Specifically, Ansell was charged with two counts of engaging in prohibited conduct by exporting items to Iran without the required license and two counts of evasion, while Comasec was charged with two counts of causing, aiding or abetting and two counts of evasion. Between June 27, 2008 and September 19, 2008, Ansell entered into business with French company Comasec SAS and agreed to export 35,000 pairs of Nitrotough N115 and Blue Nitrile industrial-strength gloves with a total value of $43,500 to Comasec’s client Zhabeh Safety Co. of Tehran, Iran. To avoid the U.S. embargo, Ansell and Comasec chose to first ship the items to the UAE, where they would then be transferred to their final destination in Iran. The scheme was thwarted in March of 2009, when the violation was discovered and the items seized by CBP.

The two companies were certainly smart to settle, rather than go to court over these charges, as the investigation had uncovered a significant amount of evidence of both companies’ conscious efforts to continue with the transaction despite the U.S. sanction. The evidence ranged from invoices that explicitly stated the end user’s location in Iran to emails between Ansell and Comasec expressing their knowledge of the U.S. embargo against Iran and detailing their plan for avoiding the restrictive U.S. law. Considering the amount and gravity of the evidence, in fact, BIS’ settlement of a $190,000 fine for each company is surprisingly lenient.

Of course, the relatively low value of the items involved certainly played a role in determining the appropriate payment, but Ansell’s and Comasec’s blatant disregard for U.S. regulations seems to merit a more severe consequence. All the same, the case certainly proves the point yet again that it is never worth the cost to engage in business with an embargoed country and that BIS is cracking down on those that do.

$100,000 Penalty for 14 Violations Committed by Meritor of Troy


By: Anna Barone

The Commerce Department’s Bureau of Industry and Security (BIS) has recently announced that Meritor of Troy, MI has committed 14 violations of the Export Administration Regulations. They have agreed to pay a $100,000 civil fine to settle allegations. The company recognized their own offenses, disclosed the violations and fully cooperated with the investigation of the Office of Export Enforcement.

Between August 2005 and November 2006 there were two instances in which Meritor shipped products, that were controlled for national security reasons, to China and France. Also, between December 2005 and May 2006 there were twelve instances in which the company exported technical data, that was controlled for national security reasons, to Italy, India, China, Mexico, South Korea and Brazil.

Meritor is a global leader in providing innovative drivetrain mobility and braking solutions for original equipment manufacturers of trucks, trailers and specialty vehicles, as well as the related aftermarkets in the transportation and industrial sectors.  They celebrated a centennial anniversary in 2009.

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Study Points at ITAR as Hurting US Defense Industry’s Competitiveness


By: Danielle McClellan

A recent study was published in the book “Fortresses & Icebergs: The Evolution of the Transatlantic Defense Market and the Implications for U.S. National Security Policy” outlining the decline of US defense firms market position in Europe. The study was funded by the Department of Defense and Johns Hopkins in order to get a feel for the transatlantic defense market. The US, UK, France, Germany, Italy, Poland, Romania and Sweden were all examined for market obstacles and restrictions, especially the ITAR in the US.

The book, written by Bialos, Christine Fisher and Stuart Koehl dives into the current state of the defense market and takes the reader through the present and future of the international industry and explains what the US needs to do to keep from drowning. “Fortresses & Icebergs” describes the negative trend that US firms are facing in Europe, increased cooperative buying among European nations and an ITAR backlash are turning the market upside down. In the past European nations bought nearly all of their defense article from the US but the recent study shows that more and more international companies are purchasing their defense articles outside the US. The study also confirmed that the number US firms buying from European firms is growing. This may be because of the Obama Administrations’ need to procure defense articles based on affordability and competition with the dwindling defense budget, a very positive sign for European companies wanting to compete in the US market.

The authors traveled to the 8 countries that were studied and interviewed 200 people to get an understanding of why so many European nations were shying away from the US and finally beginning to buy amongst themselves. Almost all 200 people had the same answer…they didn’t want to deal with the delays and risks that come with dealing with the ITAR.

Bialos explains that the “ITAR is a significant barrier to transatlantic defense trade,” and that “Everybody tells us that ITAR slows the speed of obtaining licenses, limits the release of technology, creates the business uncertainty and makes the process very difficult. European countries are very concerned about their operational autonomy being limited by not having access to technology, by having a ‘black box’ and not being able to change it during exigency.” As a result of the ITAR hardships, many European governments are looking to procure goods not restricted by the ITAR.

So where’s this leave the ITAR inhabited US, former Undersecretary of Defense for Acquisition, Jacques Gansler believes that a more open transatlantic defense trade will “help the US by offering  more effective weapons systems, more interoperability with allies as all future engagements for the US will likely be multinational and lower costs.”  Getting defense articles from international competition will get the US higher performance at a lower cost, but I have to wonder what will happen to the US firms if the US starts buying mostly foreign…will the US defense industry slowly succumb to its international competition, similar to that of the US auto industry.

In case you were wondering what Icebergs and fortresses have to do with the international defense market the authors gave the following:
“The iceberg” of the book’s title is a concept that says whereas the United States and European countries may have different platforms (icebergs), moving down the supply chain reveals more sharing of suppliers (the icebergs are connected beneath the waterline). The fortress refers to the demand side of the market and protectionist tendencies on either side of the Atlantic.

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Ebara Violation Part Deux: $500,000 Fine and Probation Falls Short of Initial $6.4 Million Penalty



By: Danielle McClellan

French corporation, Cryostar France pleads guilty to conspiracy, illegal export, and attempted illegal export of Cryogenic Submersible Pumps to Iran. Cryostar has several businesses worldwide where they specialize in the design and manufacturing of cryogenic equipment. They were sentenced in the US to a criminal fine of $500,000 and corporate probation of two years.

Cyrostar was a middleman between Ebara International Corp., Inc. and “TN” a French company with a US subsidiary. Cryostar was to purchase the pumps from Ebara and then resell them to “TN” who would then forward the pumps to Iran. Cryostar falsely indicated that the final purchaser was the French company “TN” who would install the pumps in France, when all parties were in agreement that the pumps would go to Iran. The three companies created false purchase orders, and purchased as many component parts from non-US suppliers as possible to avoid any and all questions from US suppliers and to conceal their conduct. No export licenses were ever obtained for any of the items.

In 2004 penalties were imposed on Ebara and its former CEO Everett Hylton. At that time Ebara pled guilty to criminal violations and agreed to an administrative settlement, with combined fines of over $6.4 million dollars while Hylton agreed to personally pay $109,000. Ebara and Hylton’s schemed together to violate the embargo on Iran after some people in Ebara initially stopped an Ebara sale to Iran. Ebara falsified some documents and removed “made by Ebara” markings from certain items to evade US restrictions on Iran.

More information:

  • DOJ Announces $500,000 Fine for Illegal Exports to Iran (WorldTrade Interactive)
  • For the 2004 penalties: BIS News Release