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Iranian bidder sparks halt to $2 bln Uganda dam project


Reuters Africa

September 7, 2012

By Elias Biryabarema

KAMPALA, Sept 7 (Reuters) – Uganda has halted plans to develop a $2.2 billion hydropower dam after objections were raised over the short-listing of an Iranian company in potential contravention of international sanctions, a procurement official said on Friday.

Billed as one of East Africa‘s largest infrastructure projects, construction of the 700 MW Karuma dam on the Nile river was expected to begin by the end of this year aimed at overhauling the east African nation’s stuttering energy supply.

“We received petitions by a whistleblower and representatives of other companies which were left out who said one of the firms that prequalified was an Iranian (firm),” said Vincent Mugaba, spokesperson for Public Procurement and Disposal of Public Assets Authority (PPDA).

“The Iranian company would not have the capacity to conduct international trade in light of sanctions imposed on Iran so we have halted the whole procurement process until we complete an investigation into the matter,” Mugaba said.

Washington and Europe have imposed sanctions on Tehran over its disputed nuclear programme. Some of the sanctions make it difficult for other countries to trade with Iran.

Mugaba said PPDA had requested the energy ministry, which is managing Karuma’s procurement process, to explain why it had overlooked the impact of sanctions on the Iranian company, Perlite Construction.

“What happened was that when we prequalified the Iranian company the U.S. sanctions had not come into effect but of course we realise that the company might have problems executing the contract if its bid was to be successful,” Yusuf Bukenya-Matovu, a public relations officer at the energy ministry, told Reuters.

“Uganda isn’t bound to respect U.S. unilateral sanctions but nevertheless there are implications. Perhaps there would be problems if the Iranian firm were to win but we’ll cooperate with the PPDA investigation,” he said.

LATEST DELAY

The Karuma dam is expected to more than double the country’s total power output. The state-run Electricity Regulatory Authority says Uganda produces a total of 550 MW while power demand at peaks stands at about 480 MW.

The snag was the latest to stall progress on Karuma, which the government is banking on to help prevent persistent power outages that have put a strain on the economy and discouraged investors from pouring more money into the oil-rich country.

Several years ago, a Norwegian investor that had expressed interest pulled out because it failed to secure funding for the project.

The Ugandan government wants to develop Karuma as a public-private project with the private investor as lead financier.

Uganda is keen to woo investment in its cash-starved energy sector to rapidly increase its generation capacity and in October plans to start pegging power tariffs to changes in inflation, international fuel prices and the exchange rate to make the sector more attractive.

Energy officials say the internal rate of return for energy projects in Uganda is fairly attractive at between 15-18 percent and higher than South Africa’s 12-14 percent, although the country has a higher risk perception.

Commercial hydrocarbon deposits were discovered along the Albertine rift basin along its border with the Democratic Republic of Congo in 2006 and reserves are estimated at 2.5 billion barrels. (Editing by Yara Bayoumy and Jason Neely)

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S. African telecom firm helped Iran evade US sanctions, documents show


By Steve Stecklow  Reuters
August 30, 2012, 8:11 pm

Rogan Ward / Reuters  A shopkeeper awaits customers in a shop advertising MTN airtime sales in Umlazi township in Durban, South Africa.

LONDON — A South African telecom giant plotted to procure embargoed U.S. technology products for an Iranian subsidiary through outside vendors to circumvent American sanctions on the Islamic Republic, according to internal documents seen by Reuters.

The fresh revelations about MTN Group, buttressed by interviews with people familiar with the procurement, come as the South African multinational faces fights on several fronts over its lucrative but controversial Iranian venture, a fast-growing telecom.

MTN is in talks with the U.S. Treasury in an effort to win permission to repatriate millions of dollars of profit now bottled up in Iran by American sanctions on the Iranian financial system. MTN’s chief executive disclosed the talks with U.S. officials this month, saying, “U.S. sanctions should not have unintended consequences for non-U.S. companies.” An elite South African police unit is investigating how MTN obtained the Iranian telecom’s license, following corruption allegations made by a Turkish rival in a U.S. federal lawsuit.

Johannesburg-based MTN Group is Africa’s largest telecom carrier, with operations in more than 20 countries. It owns 49 percent of MTN Irancell, a joint venture with a consortium controlled by the Iranian government. The South African company provided the initial funding for the venture and oversaw the telecom’s launch in 2006.

Hundreds of pages of internal documents reviewed by Reuters show that MTN employees created presentations for meetings and wrote reports that openly discussed circumventing U.S. sanctions to source American tech equipment for MTN Irancell. The documents also address the potential consequences of getting caught. The sanctions are intended to curb Iran’s nuclear program, which Tehran maintains is peaceful.

The equipment included products from Sun Microsystems Inc, Oracle Corp, International Business Machines Corp, EMC Corp, Hewlett Packard Co and Cisco Systems Inc, and was used to provide such services as wiretapping, voice mail and text messaging, the documents show.

In a statement, MTN denied any wrongdoing. The U.S. companies have said they were not aware MTN Irancell had acquired their products, and several are investigating the matter. U.S. Treasury officials declined to comment.

‘It all showed up’ Reuters first reported in June that MTN Irancell had procured U.S. equipment through a network of tech companies in Iran and the Middle East. The article quoted Chris Kilowan, MTN’s top executive in Iran from 2004 to 2007, saying that the South African company was directly involved in obtaining U.S. parts for the Iranian telecom.

The new documents provide a much deeper understanding of the extent of MTN’s procurement of embargoed U.S. goods, exposing new links in the supply chain of products worth millions of dollars. They also give a rare inside look at the thinking of a multinational doing business in Iran and the difficult choices involved. The documents show that MTN was well aware of the U.S. sanctions, wrestled with how to deal with them and ultimately decided to circumvent them by relying on Middle Eastern firms inside and outside Iran.

MTN was not alone. In recent months, new evidence has emerged that other foreign companies, including Britain’s Standard Chartered bank and China’s ZTE Corp, have helped Iran undermine increasingly tougher sanctions. The bank, which agreed to pay $340 million to New York’s bank regulator to settle allegations it hid transactions with Iran, still faces a separate U.S. probe. ZTE is the subject of investigations by the Federal Bureau of Investigation and the Commerce Department after Reuters reported it had supplied U.S. equipment to Iran’s largest telecom.

The new MTN documents appear to detail an intentional effort to evade sanctions. For example, a January 2006 PowerPoint presentation prepared for the project steering committee — comprised of then top-level MTN executives — includes a slide titled “Measures adopted to comply with/bypass US embargoes.” It discussed how the company had decided to outsource Irancell’s data center after receiving legal advice.

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“In the absence of applicable U.S. consents, it is a less risky route to MTN for Irancell to outsource data centre than it is to purchase restricted products,” the PowerPoint slide says.

The documents also include a lengthy spreadsheet of “3rd Party” equipment dated June 2006 that lists hundreds of U.S. components — including servers, routers, storage devices and software — required for a variety of systems.

A delivery schedule also dated June 2006 lists U.S. equipment needed for “value-added services,” including voice mail and a wiretapping system. The schedule states that the equipment would be “Ready to Ship Dubai” that July and August. It estimates it would take two weeks to arrive in the southern Iranian port of Bandar Abbas by “Air or Sea/Road,” and then up to 30 days to clear Iranian customs.

According to a person familiar with the matter, the equipment ultimately arrived by boat. “It all showed up,” this person said.

‘Outstanding issues’ Reuters reported in June that a Kuwait-based telecom-service provider called Shabakkat was used to procure some U.S. equipment for MTN Irancell. Shabakkat’s former country manager in Iran said the products were purchased from a local Iranian company.

But the person familiar with the matter said Shabakkat also sourced U.S. products from a distributor in Dubai called Exit40. The distributor no longer operates.

A Shabakkat executive in Kuwait did not respond to requests for comment. Two former top executives of Exit40 could not be reached for comment.

The documents suggest procuring the U.S. parts often wasn’t easy, and the process was plagued by delays. For example, a “High Level Weekly Report” in November 2006 discusses problems sourcing Sun hardware.

“Urgent decision required to source SUN machines through local supplier,” it states. A note in red at the bottom of another PowerPoint slide says: “According to Shabakkat, all SUN HW is at Dubai waiting for Payment.” HW stands for hardware.

The following month, a spreadsheet detailing “Outstanding issues” cites delays in deploying a system called USSD that enables interactive services. “The USSD platform is completely built on SUN hardware – hence until the SUN hardware is delivered by Shabakkat USSD implementation will be delayed,” the spreadsheet says.

Paul Norman, MTN Group’s chief human resources and corporate affairs officer, said in a statement to Reuters: “MTN denies that it has ever conspired with suppliers to evade applicable U.S. sanctions on Iran or had a policy to do so. MTN works with reputable international suppliers. Our equipment is purchased from turnkey vendors and all our vendors are required to comply with U.S. and E.U. sanctions. We have checked vendor compliance procedures and continue to monitor them and we are confident they are robust.”

The Hawks, a South African police unit, is investigating MTN over allegations contained in a federal lawsuit filed in Washington in March by Turkcell, an Istanbul-based rival. The suit alleges that MTN stole the Iranian telecom license from Turkcell in November 2005 by paying bribes. MTN denies the allegations and has attacked the credibility of former MTN executive Kilowan, who is Turkcell’s key witness in the case. The procurement of banned U.S. products is not a subject of the lawsuit.

‘Civil and criminal consequences’ According to the internal procurement documents, right from the start MTN was well aware of what it termed “embargo issues” and the inherent risks involved.

A December 2005 PowerPoint presentation marked confidential and emblazoned with MTN’s logo noted that the “Consequences of non compliance” included “Civil and criminal consequences.” The PowerPoint slide added that the U.S. government could blacklist MTN, “which could result in all MTN operations being precluded from sourcing products/services from U.S. based companies in future.”

According to a person familiar with the matter, MTN was determined that MTN Irancell procure substantial amounts of U.S. equipment: The U.S. products had performed well in its other networks, and the company’s technicians were familiar with them. But MTN soon learned that its major contractors on the project — particularly Nokia — wouldn’t provide the equipment because of the U.S. embargo.

So MTN executives began to explore ways to procure the parts without violating sanctions, the documents show. The company initially explored an exception to the sanctions known as the “de minimis” rule. Under it, tech products can sometimes be legally exported to Iran from a foreign country if the aggregate value of the U.S. parts or technology inside is less than 10 percent.

According to the person familiar with the matter, MTN believed that if U.S. components comprised less than 10 percent of a large system, its major contractors could legally procure them. But the company learned that the rule applies to each component, not to an overall system.

“Once they figured it out, they realized the vendors wouldn’t accept that,” this person said. “Now they had a problem.”

According to a weekly report from December 2005, MTN also explored another alternative — obtaining U.S. parts from the so-called “grey market,” or unauthorized distribution channels. The report suggests “obtaining go ahead to procure US embargoed products … from grey market notwithstanding the adverse consequences to MTN.”

The person familiar with the situation said MTN was under tremendous pressure to launch the Iranian mobile operator as quickly as possible, because it had told shareholders it projected having 1 million subscribers by the end of 2006. The operator finally launched in October, after months of delays, and is now Iran’s second-largest wireless carrier by subscribers.

The procurement problems are referenced in numerous internal MTN and MTN Irancell documents. A June 2006 status report discussed delays in the delivery of essential components for value-added services, or VAS.

“The primary challenge in the establishment of the VAS solution is simply that the hardware platforms required are of US origin and therefore fall foul of the US embargo on exports to Iran,” the report says. “This means that innovative mechanisms need to be applied to secure delivery of the hardware platforms.” Another progress report makes reference to an “Order placed last week with Turkey and Iran to circumvent embargo issues.”

Reuters reported in June that some of the U.S. equipment — including at least a half-dozen Sun servers –was sourced locally through Iranian companies. But according to the person familiar with the matter, many other U.S. components were acquired via Dubai by Shabakkat, which was paid about $30 million to $40 million to acquire them — about twice their value.

“You had a buyer who was desperate,” the person said, referring to MTN. “They didn’t have any other options.”

Mahmoud Tadjallimehr became a project manager for Nokia on the MTN Irancell project in November 2006. In an interview, he said it was known within the mobile operator that Shabakkat was sourcing U.S. equipment for the project, and he dealt directly with the firm. But he said that one day in discussing a delivery problem, a Shabakkat manager told him, “The issue was not with Shabakkat but with Exit40.” He also said “someone told me that we should never use this name (Exit40) in any kind of emails or conversations.”

According to archive.org, which archives websites, Exit40’s site in 2006 described the firm as a privately held, “leading independent wholesale distributor of IT products” that was headquartered in Switzerland, with offices in Dubai, Florida, Switzerland and India. The site also included this boast: “Exit40’s procurement executives source hard to find or locally constrained products for customers.”

S.Africa’s MTN slides on Iran corruption lawsuit


Reuters

The MTN Logo
The MTN Logo (Photo credit: Wikipedia)

By David Dolan

JOHANNESBURG | Fri Mar 30, 2012 9:00am EDT

(Reuters) – Shares in MTN Group (MTNJ.J) slid on Friday after rival Turkcell (TCELL.IS) filed a $4.2 billion suit against the South African mobile operator, alleging it bribed officials and lobbied support for Tehran‘s nuclear program to win an Iranian license.

Turkcell, which lost the 2004 bid for the Iranian license to MTN, filed the suit in a U.S. federal court in Washington, accusing the Johannesburg-based firm of using its influence with Pretoria to arrange support for Iran’s military.

The Turkcell case threatens to tarnish the reputation of both MTN – a black-run company widely seen as a post-apartheid success story – and the South African government, including former President Thabo Mbeki.

It comes at a time when countries around the world, including South Africa, are under strong Western pressure to halt oil imports from Iran and cut other trade.

MTN, Africa’s top mobile operator, has said the claim is without legal merit and has accused Turkcell of attempting to extort money from it – an allegation the Turkish company rejects.

Turkcell’s suit, backed by a collection of alleged MTN internal documents including emails, invoices, memos and presentations, accuses the South African firm of a “staggeringly brazen orchestra of corruption”.

Turkey’s largest mobile operator alleges that under a strategic plan code-named “Project Snooker”, MTN used corrupt practices to win the license which had initially been awarded to Turkcell…Read more.

(Additional reporting by Jon Herskovitz and Pascal Fletcher; Editing by David Holmes)

South Africa may be sanctions-busting hub for Iran, warns DA


The Witness

by Rajaa Azzakan

May 15th, 2012

CAPE TOWN — The Democratic Alliance warned yesterday that South Africa may be used as a route to get parts for military helicopters in Iran.

Lindiwe Mazibuko, DA parliamentary leader, yesterday told the Cape Town Press Club this was totally against a resolution of the United Nations.

At the same time she praised Deputy President Kgalema Motlanthe for his request that the Public Prosecutor investigate bribery allegations against his life partner, Gugu Mtshali.

She said Motlanthe showed much needed political will to get corruption investigated independently.

The Sunday Times reported that Mtshali was allegedly involved in an attempt to get a bribe of R104 million in exchange for government support for a South African company to get a contract to supply Bell helicopters and parts to Iran.

Mtshali, Raisaka Masebelanga and other associates of Motlanthe reportedly met in February last year in Johannesburg with representatives of 360 Aviation to discuss the buying of government support for a contract with Iran, which would be worth some R2 billion.

The report stated that Barry Oberholzer, chief director of 360 Aviation, said Mtshali and company wanted R10 million up front as a consultancy fee as well as shares worth some R94 million.

A front company, which would have been registered by 360 Aviation, would have supplied American Bell helicopters and parts to the the National Iran Oil company.

Mazibuko warned that the larger picture — that South Africa could be used as a route to supply parts for Iran military helicopters — should not be lost sight of.

She said Motlanthe’s fast reaction was in stark contrast with the delays involving investigations into South Africa’s arms deal, which have been dragging on for years.

Mazibuko will ask President Jacob Zuma in the Assembly today if the full report by the commission of inquiry that he ordered into the weapons transactions will be made public and whether any action will follow against those involved.

Regarding Cosatu’s refusal to meet the DA, Mazibuko said the labour federation was not serious about helping to solve the issue of joblessness among South Africa’s youth.

She said it seemed the trade union was placing petty party politics ahead of SA’s interests.

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