Letter details Posco strategy for trade with Iran

Korean steelmaker Posco, minority-owned by Warren Buffett’s Berkshire Hathaway, has cut ties with government entities and sensitive industries such as energy in Iran and continues to trade with private companies, a letter showed.

Tough Western measures imposed on Iran over its disputed nuclear program have hit many sectors of its economy including steel and other metals, where it is heavily dependent on imports. Tehran says its atomic program is peaceful.

Earlier this month, intelligence and diplomatic sources said commodities giant Glencore supplied thousands of tons of alumina to an Iranian firm that supplied Iran’s nuclear program.

Separately, Swiss-based trade house Trafigura confirmed it had traded with the Iranian company the EU says has links to Iran’s nuclear program.

In a letter sent to U.S. pressure group United Against Nuclear Iran (UANI) dated Feb. 28, Posco, a top global steelmaker, said it had scaled down business with Iran.

“Some of Posco’s subsidiaries continue to engage in transactions in Iran,” Posco’s chief legal officer Song Se-bin wrote.

“However, these transactions involve only the civil market. Moreover, these Posco entities engage in transactions only with Iranian entities that Posco believes, based on its best due diligence efforts, are not owned or controlled by the Iranian government.”

Song said Posco entities had “completed, terminated or assigned all of their activities related to the sensitive sectors of the Iranian economy - the energy, defence and nuclear sectors.

“Although these efforts have resulted in the loss of certain projects and substantial financial losses to the Posco entities, Posco believes it important that it be regarded as a responsible corporate citizen.”

A targeted campaign by UANI, which includes former U.S. ambassadors as well as former CIA and British intelligence chiefs on its board, has led to several foreign companies in sectors including shipping to leave Iran. UANI, which is funded by private donations and backs tougher sanctions on Teheran, had called on Posco to halt its Iran trade.

UANI chief executive Mark Wallace said it appreciated the company had taken steps to reduce its Iran business.

“We continue to call, however, for Posco to fully end its business in Iran,” said Wallace, a former U.S. ambassador to the United Nations.

“Given the nature of the business, the only way for Posco to eliminate its exposure to the Iranian regime and IRGC-controlled entities is to completely pull out of the country,” he said, referring to the Revolutionary Guards, which reports directly to Iran’s Supreme Leader.

Posco, which is 5.1 percent owned by Berkshire Hathaway, is the world’s No. 5 steelmaker by output. Buffett’s business partner Charlie Munger has frequently praised Posco as being, in his opinion, the best-run steelmaker in the world. Buffett, via his assistant, could not be immediately reached for comment.

When contacted about its Iran deals, Posco spokeswoman Kim Ji-young said: “Posco and its subsidiaries stopped trades with Iranian government and state-run Iranian companies. Posco will abide by the law regarding U.S. sanctions on Iran, and plans to actively cooperate with U.S. policies.”

Sanctions imposed by the European Union last year on sales of steel and other key materials to Iran have prompted many traders and producers to halt sales, hitting Russian steel producers, which were heavily reliant on the Iranian market.

Reuters