Minn.: $1.6B steel plant back on track

Minn.: $1.6B steel plant back on track

	Published : Wed, 31 Oct 2007 22:18 By : Agencies Print this Story

ST. PAUL (AP) - A $1.6 billion steel plant planned for northern Minnesota got back on track Wednesday after Gov. Tim Pawlenty said he'd been assured that the Indian firm behind the project wouldn't simultaneously do prohibited business in Iran.

Essar Global Ltd.'s deal hit a bump when reports surfaced that it was in negotiations to build a multibillion dollar gas refinery in Iran. That raised questions of whether it would run afoul of the Iran Sanctions Act, a U.S. law that aims to punish foreign companies that invest more than $20 million in one year in Iran's energy sector.

'They have clarified their intentions in a way that satisfies my concerns regarding what would otherwise be a problematic investment in Iran,' Pawlenty said.

Pawlenty had written to Secretary of State Condoleezza Rice on Monday to help determine if Essar was violating the seldom-invoked sanctions law.

The GOP governor released a letter from Essar dated Wednesday that acknowledged it has 'considered business development initiatives in Iran by way of interest in a refinery and exploration blocks.'

The letter went on to say 'no investment or firm commitment will be made in Iran, unless and until permitted to do so under the applicable U.S. or international laws.'

The stakes were high: Pawlenty had threatened to oppose the ore-to-steel plant that promised to bring 700 high-paying jobs to Nashwauk, on the struggling Iron Range. Specifically, he said he would oppose an Itasca County request for $67 million in subsidies geared toward the project. On Wednesday, he said he would now back the county's request at an unspecified level.

Northern Minnesota lawmakers were relieved that the roadblock had been cleared.

'This was really more of a pit stop on a really long journey,' said House Majority Leader Tony Sertich, a Democrat from Chisholm. 'We have been working at this for almost a decade and glad this is out of the way.'

American firms are already barred from doing business with Iran, but foreign companies are harder to police. And the U.N. Security Council has had two rounds of sanctions aimed at materials and financing that could help Iran's nuclear ambitions.

But the Iran Sanctions Act, signed by President Clinton in 1996, is broader. It requires sanctions that can include blocking U.S. bank loans of more than $10 million or blocking U.S. government purchases from the offending company.

But the law allows the sanctions to be waived, and no company has ever been sanctioned under the law. President Clinton granted such a pass in 1998, saying he would not penalize Total, a French company leading a $2 billion gas project in Iran that also involved Gazprom of Russia, and Petronas of Malaysia. Clinton said at the time he was satisfied with a commitment from the European Union to increase cooperation with the United States on non-proliferation and counter-terrorism, according to the Congressional Research Service, the nonpartisan research arm of Congress.

Kenneth Katzman, an expert in the Iran Sanctions Act for the Congressional Research Service, said about a dozen projects that would appear to be big enough to trigger sanctions under the law have not been deemed to be in violation, by either the Clinton or Bush administrations. He said there is no time limit for the administration to decide a violation has taken place, the President can waive sanctions, and anyway none of the sanctions include barring a U.S. construction project by the offending company.

'So technically, even if we get all that way and say the company has violated the Iran Sanctions Act, that would not in and of itself necessarily block the construction in the United States,' he said.

Often, those sanctions would fall on companies in countries the U.S. government is friendly with, said Andrew Davenport, a vice president at Conflict Securities Advisory Group, which identifies companies that do business in Iran, North Korea, Sudan, and Syria.

'So if the U.S. government were to enforce this law, it would be heavily criticized by foreign governments and foreign companies for sticking its nose where it doesn't belong,' he said.

Wednesday's news capped a flurry of activity around the steel plant deal. Last week, Essar announced it had closed on its acquisition of Minnesota Steel Industries, passing word to Pawlenty as he was on a trade mission to India.

Soon after, Pawlenty learned of the company's reported connections to Iran. By Saturday, he said the ties could cost Essar his public support for the project, a possibility that angered some people in northern Minnesota. Private negotiations ensued and resulted in the company's promise.

It came none too soon for Pawlenty, who is due to open the state's deer hunting season this weekend on the Iron Range.

'I figured I'd better get this cleared up before the governor's deer hunting opener this weekend in Hibbing,' Pawlenty said. 'Otherwise the hunter may become the hunted.'

Associated Press writer Joshua Freed contributed to this report from Minneapolis.