Total Recall

A French oil giant's deals with a rogue regime--this time in Iran.

Wall Street Journal
Thursday, March 29, 2007 12:01 a.m.

Don't stop us if you've heard this one: French oil giant Total SA is being investigated for illicit dealings with a rogue regime in the Middle East. This time it's Iran, but maybe you recall its experience with another dictator and something called Oil for Food.

A French judge is investigating bribes that Total executives allegedly paid Iranian officials to secure business in the Islamic Republic. Last week, the judge issued preliminary charges of abuse of company funds and corruption of foreign agents against Chief Executive Christophe de Margerie. The company and Mr. de Margerie deny any wrongdoing, but the Total experience is all too typical of the way European firms cut deals with dictators while their own governments provide political cover.

Meanwhile, the same French prosecutor continues to investigate Total for alleged kickbacks paid to Saddam Hussein in return for Iraqi oil. In his report on Oil for Food corruption, former Federal Reserve Chairman Paul Volcker found that Total, through intermediaries, had purchased some of the 11 million barrels of oil that former Iraqi officials claim was allocated to French Senator Charles Pasqua in thanks for his support of Saddam's Iraq. Total and Mr. Pasqua also deny any wrongdoing.


However the probes play out, Total's business with Tehran is probably a violation of the U.S. 1996 Iran-Libya Sanctions Act. The Clinton Administration thought so as far back as early 1998, when crude oil futures were selling for a quarter of the current price, and Tehran was desperate for cash to finance Hezbollah and, as we later learned, its nuclear program.
"We believe that transactions that substantially enhance Iran's ability to acquire the revenues necessary to acquire missile technology and weapons of mass destruction should not be in any way made easier," Defense Secretary William Cohen argued at the time. Secretary of State Madeleine Albright was even more blunt: "As far as the French are concerned, I must say it passes my understanding why there is no realization that pumping money into the system of Iran is not helpful to the rest of us."

But after French carping and trade threats by the European Union, President Clinton waived sanctions on Total, Russia's Gazprom and Malaysia's Petronas for the $2 billion natural-gas deal they had inked with the mullahs in 1997. That waiver set an informal precedent, as both the Clinton and Bush Administrations have stayed silent as companies from Italy, Canada, the Netherlands, Britain, Norway, Sweden, South Korea and Japan have signed energy deals with Iran worth some $11.5 billion, as the nearby table shows.

That patience may be ending now that Iran is kidnapping British sailors, supplying bombs that kill Americans in Iraq, and defying U.N. orders to stop enriching uranium. The Bush Administration is pressing financial sanctions against Iran especially hard, but pressure is building on Capitol Hill for firmer action. Democratic Senator Frank Lautenberg is talking about more severe penalties for U.S. firms that do business with states that sponsor terrorism, and stricter sanctions on the U.S. interests of foreign companies could be in the cards as well.


We've always thought sanctions are a blunt instrument, and they can backfire when used on the wrong target. It's also true that U.S. sanctions wouldn't hurt Total in the short term; the Iran-Libya Sanctions Act is limited to penalties for companies' U.S. businesses, and the bulk of Total's activities are in Europe and Latin America. But against a regime such as Iran's--which is now the biggest threat to world security--sanctions are also a form of diplomatic pressure short of the military action that European governments claim to want to avoid at all costs. Total executives and European politicians are fooling themselves if they think U.S. pressure for action against Iran will stop once the Bush Administration leaves power.

There's some debate in France about why prosecutors are suddenly showing so much interest in what is by now a 10-year-old case. Perhaps allies of Jacques Chirac have less political cover as his presidency winds down, or maybe big companies are no longer seen as untouchable on the Continent after a series of corporate scandals. Or it could be that investigative judge Philippe Courroye is anxious to close out his current docket before his scheduled transfer to another court. Whatever the reason, it's good to see someone in Paris take corrupt dealings with dictators seriously.

In Iraq 10 years ago, Total and its political protectors canoodled with Saddam and propped him up until the U.S. decided it had no choice but to act against him. Europe shouldn't make the same mistake in Iran.