The relationship between Petropars and Mossack Fonseca

The Panama Papers: ‘This is dangerous!’

Mossack Fonseca took a more aggressive attitude toward Petropars Limited, a company controlled by the Iranian government that was sanctioned by the U.S. Treasury in June 2010.

The relationship between Petropars and Mossack Fonseca began in 1998, nearly 20 years after the Iranian revolution, when Mossack Fonseca incorporated Petropars in the British Virgin Islands.

Petropars was known to watchers of Iranian politics as an intermediary between foreign companies and Iran’s oil ministry. With offices in Dubai and London, it was also a player in the development of Iran’s multibillion-dollar South Pars natural gas field.

Three years before Mossack Fonseca began work for Petropars, President Bill Clinton, citing Iranian support for terrorism and its quest for weapons of mass destruction, banned U.S. involvement with Iranian oil. Not bound by the U.S. prohibition, Mossack Fonseca helped Petropars to issue shares in a Tehran-based oil investment company in 1998.

Petropars’ links to the Iranian government were highlighted as early as 2001 when Iranian authorities investigated and then charged board members of the company in connection with “irregularities” in lucrative gas contracts. By 2002, the news had made headlines in The Economist and The New York Times.

Iranian workers dig the ground in a natural gas refinery in the South Pars gas field in Asalouyeh, Iran. Photo: AP Photo / Ebrahim Noroozi

The 2001 corruption allegations “put Petropars on the map,” says Georgetown University political scientist Paasha Mahdavi. “Even before any of the allegations emerged, it wouldn’t have required too much digging to know this is a company whose majority, at the very least, is controlled by government officials.”

Petropars remained a customer of Mossack Fonseca until 2010, when Jürgen Mossack, one of the firm’s founders, learned that his company’s British Virgin Islands post office box had been listed as Petropars’ address in OFAC’s blacklist entry for the company.

After an internet search, a company employee in the BVI office, Marcia DaCosta, recommended that the firm cut Petropars loose.

“It is a decision that may be 12 years too late,” added another employee, Daphne Durand, “but one that must be taken in light of the circumstances.”

The firm’s founders — Mossack and Ramón Fonseca — agreed.

“This is dangerous!” Mossack emailed. “Everybody knows that there are United Nations sanctions against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC, but out of principle. Anybody having had to do anything with this company, at absolutely all levels, should have realized immediately that the names associated with it were Iranian names. A red flag should have been raised immediately.”

The firm resigned as registered agent of Petropars in October 2010. Mossack blamed the London office, which had processed Petropars’ paperwork and should have conducted what the financial industry calls “due diligence” — checking on customers’ identity and making sure they’re not involved in questionable activities.

“It would appear Mossack Fonseca UK are not doing their Due Diligence thoroughly (or maybe none at all),” Mossack said.

Early this year, as a result of the deal that lifted economic sanctions against Iran in exchange for that country’s disabling key parts of its nuclear program, the United States removed Petropars and other Iranian-controlled oil companies from the OFAC blacklist.

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