The Obama administration is pushing for tougher sanctions on Iran to stem the Islamic republic's nuclear ambitions, and advocates of stiff measures note that the mere threat of sanctions has already convinced a few foreign firms to stop trading with the country.
Both the Senate and the House have passed bills that would punish companies that sell refined petroleum products to Iran, and once reconciled the final version of the bill will be sent to the president for signature. On Monday morning, Secretary of State Hillary Clinton told the American Israel Public Affairs Committee that the Obama administration is pressing the United Nations for international "sanctions that will bite."
But anyone who would tout the coercive power of sanctions should remember the story of oil trader and international fugitive Marc Rich, an American who made a fortune off them. Before being pardoned by President Bill Clinton during his last hours in office, Rich earned billions over 16 years selling oil for the Iranian ayatollahs – oil he wasn't allowed to sell, according to U.S. prosecutors – to countries that weren't allowed to buy it.
As Rich himself told me during a series of exclusive interviews, even the taking of 53 American hostages, the event that sparked the U.S. oil embargo in the first place, was no impediment to business.
"It was a political development which did not affect the business," Rich told me. "It was very unpleasant and tragic for the hostages and humiliating for America, but it didn't affect the business."
The embargo and the sanctions that followed the Iranian Revolution of 1979 proved a boon to the man considered the most secretive and powerful oil trader in history, as Rich detailed to me in interviews conducted for my book, "The King of Oil." For the first time ever, Rich publicly acknowledged doing business with the Iranian ayatollahs.
"We performed a service for them," Rich told me. "We bought the oil, we handled the transport, and we sold it. They couldn't do it themselves, so we were able to do it."
American sanctions on Iranian oil began with President Jimmy Carter, who imposed harsh economic punishments on Iran after the November 1979 seizure of the U.S. Embassy in Tehran. Carter froze all Iranian government assets in the U.S. He also banned the import of petroleum products from Iran, and prohibited U.S. citizens from conducting financial transactions with Iran. The Iranians, in turn, canceled all contracts with American oil companies operating in Iran and forbade them from exporting crude oil out of the country.
For Rich, the revolution and the oil embargo were the beginning of a lucrative and unusual business partnership. On the same day that Ayatollah Khomeini returned from his French exile to take power in Iran, one of Rich's closest business partners landed in Tehran to seek contacts in the new government. Soon the anti-American, anti-Israel and anti-Semitic Khomeini regime was in business with the Jewish-American business mogul.
Rich had worked closely with the regime of the hated and recently deposed Shah Reza Pahlavi. The ayatollahs, however, decided to abide by contracts that had been signed by the shah. Iran would become Rich's most important supplier of crude oil for more than a decade and a half. Rich acknowledged to me that he maintained a much more intensive business relationship with Iran than was previously known.
Rich was indicted in 1983 for trading with the enemy and tax evasion by Rudy Giuliani, then the U.S. Attorney for the Southern District of New York. But Rich's company, the Swiss-based Marc Rich + Co, purchased approximately 60 to 75 million barrels of Iranian oil every year up to 1994, when Rich finally sold the company to the management.
The contract continued throughout the hostage crisis of 1979 to 1981, after the USA had broken off diplomatic relations and prohibited the import of Iranian crude oil.
"We sold oil because it was available and the price was right.," said Rich. "We didn't force anyone to either buy from us or sell it to us." When asked if the new Iranian authorities, who had no experience whatsoever in running their oil company, would have been helpless without him, Rich said: "They didn't behave that way, but in a way it's true."
Rich says his most important clients after the Iranian revolution were two countries that had been almost completely dependent on oil from the Shah's regime: Israel and apartheid South Africa. The new Islamic regime explicitly prohibited the sale of a single drop of oil to these two countries.
As I show in my book, Rich would serve as the most important single supplier of oil to both Israel and South Africa. Rich told me he remembers selling Israel "between 1 to 2 million metric tons per year," or 7 million to 15 million barrels). For many years, Rich provided Israel with at least one out of every five barrels that it needed, and the bulk of the oil he provided was Iranian.
The business with South Africa -- which itself was under an international embargo -- was even bigger. I calculated that Rich's companies delivered at least 400 million barrels of oil to South Africa, making a profit of $2 billion over the course of 15 years. A former employee told me that in the wake of the Iranian revolution, Marc Rich + Co was at times making a profit of up to $14 per barrel.
Iranian inner circles were well aware of Rich's dealings with Israel and South Africa, and with American oil companies such as the Atlantic Richfield Company. They knew exactly where their oil was flowing; yet no one at the National Iranian Oil Company seemed to mind.
"They didn't care," Rich told me. "The professionals in the oil business in Iran didn't care. They just wanted to sell oil."
"Business is neutral," Rich answered when I asked how it is possible to remain neutral when doing business with countries like Iran, apartheid-era South Africa, or Cuba. "You can't run a trading company based on sympathies."
When I replied that he was viewed as a crisis profiteer and sanctions buster, he said: "Whatever we did, we did legally. We were doing business with Iran, Cuba, and South Africa as a Swiss company. These businesses were completely legal according to Swiss law."
The U.S. government felt differently. Though the Belgian-born Rich now holds Spanish and Israeli passports and has resided in Switzerland and Spain for years, U.S. prosecutors considered him a U.S. citizen who had violated the ban on doing business with Iran. He was a wanted man until Clinton pardoned him on Jan. 20, 2001. Rich has still never returned to the U.S.
Are today's oil traders more responsive to the threat of sanctions? The Swiss trading giant Glencore recently stopped supplying Iran with gasoline ahead of any tightening of international sanctions. Glencore is the current name of the company that Marc Rich founded in 1974 and sold in 1994.
Daniel Ammann is the author of "The King of Oil: The Secret Lives of Marc Rich."