California Life Science Company Pays $55 Million in FCPA Settlement

Bio-Rad Laboratories agreed this week to pay a total of $55 million to settle DOJ and SEC claims that its subsidiaries made improper payments to foreign officials in Russia, Vietnam, and Thailand to win business.

Bio-Rad paid a $14.35 million criminal penalty to make DOJ criminal charges go away. DOJ claimed that Bio-Rad violated the Foreign Corrupt Practices Act by cooking its books and records, and failing to have adequate internal controls in connection with sales in Russia. Bio-Rad was successful in getting a non-prosecution agreement with the DOJ, so it will dodge formal criminal charges (more about that later), but it has to report its FCPA compliance efforts for two years. Read More »

Ebola and bribery?

With today’s newscasts full of stories about a second Dallas healthcare worker contracting the Ebola virus, people are focused on this woman and the 75 other Dallas healthcare workers (and their pets!) being monitored for symptoms. So what does this have to do with our usual subject of international corruption? Plenty, as it turns out. Read More »

FCPA-Like Enforcement in China

In prior blog posts, we have discussed the Foreign Corrupt Practices Act (FCPA) enforcement by the United States government through the SEC and/or the U.S. Department of Justice.  But we’ve also said that countries other than the U.S. or the UK, viewed by some as the worldwide leaders in anti-corruption enforcement, are getting into the act.  China has now ramped up its anti-corruption enforcement, adding more risks for those companies, and their employees, doing business in China or with Chinese entities. So let’s talk about China’s laws as they affect your business activities and some steps you might want to take to minimize your exposure to problems. Read More »

India Coal Permits

India’s Supreme Court ruled on Monday that over 200 coal permits granted by the government between 1993 and 2009-2011 were illegally allocated, citing lack of accountability and the opaqueness of the process.[1] The bench determined that the screening committee, set up in 1992 for the purpose of vetting private companies for ownership and operation of coal mines, did not follow any guidelines or use any objective criteria for the evaluation of applications. The court further held that the central government lacked the power to allocate coal blocks, a practice which should have been carried out by the states.[2] This ruling comes in the wake of an audit report by India’s federal auditor in 2012 which indicated that the government lost $33 billion by selectively allocating mines to producers rather than holding competitive auctions.[3] Consequences of this decision are unknown at this time, pending further hearings regarding whether previously issued licenses should be removed.

The ruling will likely have a profound impact on India’s already pressing energy concerns, as the stability of coal production is jeopardized, forcing India to increase imports of coal or raise the price of domestic natural gas to incentivize production.




Iraq Fails To Seize Kurdish Crude Oil Bound for Texas

The saga of 1,032,212 barrels of crude oil continues. A week ago, a tanker carrying over a million barrels of crude oil from the Kurdish region of Northern Iraq arrived 60 miles off the Port of Galveston, Texas.

It had been a very unusual journey. The Kurdish crude was produced in the Kurdish region in December of last year, and pumped through a recently completed pipeline traversing the Kurdish region directly to Turkey. It was then loaded in Ceyhan, Turkey onto the vessel, the United Kalavrvta, operating under the flag of the Marshall Islands.  Although the manifest of the ship stated Augusta, Georgia as its port of call, then changed to Gibraltar, it arrived into the Texas Gulf of Mexico late last week. Read More »

Iraqi Kurds Seek Energy Independence

Iraq and its semiautonomous state Kurdistan have frequently been at odds, especially since the latest oil boom in the latter. After months of trying to come to a deal with Baghdad, Kurdish officials began shipping crude oil to Turkey.  The oil was stored in Kurdistan before it was exported, prompting Iraq to threaten to take the matter to the United Nations and mount a legal challenge against the Kurds as well as Turkey. However, Kurdistan doesn’t seem to be heeding these warnings and instead is relying on oil to secure its independence. Read More »

China and Russia Ink Mega Gas Deal

On May 20, 2014 reports broke[1] that a long anticipated gas deal[2] between China and Russia would not be forthcoming on Russian President Vladimir Putin’s current trip to China. Hours later[3] the blockbuster deal to sell up to 38 billion cubic meters of Russian natural gas a year to energy hungry China for a term of between 20 and 30 years to begin in 2018 was announced. Negotiations regarding the deal have been going on for at least a decade with pricing being the major sticking point. However the final pricing terms were unannounced, so it is unclear if this is a final agreement or another in a series of memoranda of understanding. The route the pipeline will take to transport the gas from Russia to China was also not disclosed. Agreements regarding coal and LNG exports to China were also formally signed.[4]

Many in the West see the timing of this deal as a reflection of Russia’s need to diversify away from its reliance on gas exports to Europe. While this is certainly a factor it must be remembered that this deal was going to happen regardless of Russia’s relations with Europe as China has been extremely active in securing long term access to energy supplies. Perhaps most notably last year when Chinese President Xi Jinping went on a tour of Central Asia and returned to Beijing with energy supply agreements from Kazakhstan[5], Tajikistan, Turkmenistan[6], and Uzbekistan[7]. Nonetheless it appears likely that China was able to obtain better terms from Russia than in the past. Whether this is a result of current geopolitical concerns, diversification of supply, or both is unclear. What is clear is that this is one of, if not the largest, gas supply deals in history. No doubt the final terms of the deal will make for interesting reading.


U.A.E. is America’s Largest Export Destination in MENA Region for the Fifth Year in a Row

In 2013, the U.A.E. imported USD $26.9 billion in U.S. exports, making it the U.S.A.’s largest export destination in the Middle East and North Africa (MENA) region for the fifth year in a row. The fact that new U.S. Secretary of Commerce Penny Pritzker started her inaugural tour from Abu Dhabi and Dubai indicates how Washington values the commercial ties between both countries.

Confirming this, Pritzker addressed an audience in Abu Dhabi saying, “Our bilateral friendship reaches all the way back to the U.A.E.’s foundation.  We have supported each other in countless ways.  Clearly, the U.S. and the U.A.E. share a commitment to preserving the stability and security throughout the Gulf and that commitment won’t change, even as the U.S. becomes more energy independent.”

Only an eight-hour flight from most of the world’s strongest and emerging markets, the U.A.E. boasts world-class and multi-modal infrastructure that satisfies the needs of global travelers as they connect from the Emirates to economic hubs in MENA and the rest of the world. With the U.S.’s support, Emirati business leaders are learning how to become more ingenious and innovative while competing on a global stage.

Both the U.S. and the U.A.E. are currently creating commercial partnerships and innovative projects, especially in the infrastructure development and green build, energy development, transportation, media and tourism, education, and energy development sectors. These projects are in part a result of the U.A.E.’s economic development plans (e.g. U.A.E. Vision 2021 and Abu Dhabi Vision 2030) and President Barack Obama’s national export initiative.

Pritzker commented, “We are helping to build a legal environment where entrepreneurs can have the ability to try, fail, and try again, which is crucial. Entrepreneurship is something that is near and dear to my heart, having started five companies myself, so there are a lot of ways we can work together on that.”

Khalfan Al Kaabi, the vice president of the Abu Dhabi Chamber of Commerce, agreed saying that the country plans to build bridges with the U.S. and maintain them. “As we go through an economic growth in Abu Dhabi, we see there are more opportunities that can be concluded between our members and their U.S. counterparts,” he said. “As a business community, we must take advantage of this excellent reality.”

The U.A.E.’s government has committed billions of dollars to expand its airports and infrastructure across the country, including a multi-modal rail system that would link it to neighboring GCC countries. By planning these projects, the Emirates has added American industry to its list of key commercial partners. And by the looks of it, American private and public sector leaders will become active members in this process.


Kurdistan Oil Exports Crisis Coming to an End: Baghdad and KRG near a Deal

Despite successfully flowing Kurdish crude to Turkey earlier this year, Kurdistan is unable to start exporting internationally until Baghdad approves the deal.  However, despite threats from both sides, the Anglo-Turkish exploration and production company, Genel Energy, is expecting that the Baghdad-Erbil oil issues would be resolved.

Officials so far aren’t reaching a point of agreement.  While Iraq’s Deputy Prime Minister of Energy Affairs, Hussein Shahristani, announced that Erbil and Baghdad have agreed on “the mechanism of exporting oil through SOMO (State Oil Marketing Organization)”, a Kurdistan Regional Government (KRG) spokesman, Safeen Dizayee, contradicted this saying that there is no such agreement between Kurdistan and the federal government.  Muayad Tayib, a spokesperson for the Kurdistani Alliance in the Iraqi parliament, confirmed Dizayee’s statement calling Shahristani’s comments “baseless.”

With tensions rising between both governments, the U.S. stepped in as a mediator.  Brett McGurk, Deputy Assistant Secretary of State for Near Eastern Affairs, shuttled between Erbil and Baghdad to find a common ground.  As a result, on March 22, the KRG announced its plans to resume exporting 100,000 barrels a day through the Iraqi pipeline beginning April 1.

The KRG’s official website quoted Kurdish Prime Minister Nechirvan Barzani as saying, “As a goodwill gesture, the Kurdistan Regional Government (KRG) has offered to make a contribution to the Iraqi oil pipeline exports to give the negotiations (with Baghdad) the maximum chance of success.”  He added, “The KRG contribution to oil export will be 100,000 barrels per day effective 1st April 2014, and will continue while the negotiations are proceeding in a positive direction.”

In addition to the U.S. involvement, Kurdistan’s decision to flow oil through Iraq’s pipelines may have been spurred by the central government’s decision to cut off funding to the KRG, causing the latter to delay paying some government salaries.  While unofficial reports say that the U.S. pressured Baghdad to pay the KRG budget allocation for February, the payment for March is yet to be sent through.

To ensure that both sides reach a mutually beneficial agreement, the U.S. will take part in the upcoming negotiations.  In a statement by the embassy, the U.S. invited both sides to discuss exports and find a solution. “The United States urges the joint GOI-KRG committee, comprising experts from the GOI’s Ministry of Oil and the KRG’s Ministry of Natural Resources, to meet and assess future month-to-month export targets based on technical capacities and in a manner consistent with the Iraqi Constitution.”

Meanwhile, the U.S. will be a “neutral broker and facilitator” to the extent both governments agree on and according to the Strategic Framework Agreement with Iraq.  U.S. Vice President Joe Biden believes that Erbil-Baghdad oil issues can be solved with the help of dialogue and understanding.


Kurdistan Oil Exports Face Continued Political Hurdles

In January 2014, Kurdish crude successfully flowed into Turkey, where it was to be stored until Iraq decided to waive its claim over Kurdish oil. Turkish Minister of Energy Taner Yildiz told the press that he believed the first exports to actual customers could start by the end of January. However,  February doesn’t bear tidings of a solution any time soon.

On January 27, Kurdish Regional Government (KRG) Prime Minister Nechirvan Barzani met with Kurdish lawmakers from the Iraqi parliament to discuss the region’s oil exports. The central government in Baghdad had threatened both the KRG and Turkey, indicating that any kind of trade would violate national laws. Without Baghdad’s approval, Kurdish oil would not cross Turkish borders.

As a result, despite the oil’s availability, buyers are few. The largest energy companies fear Baghdad’s wrath, especially since Iraq has signed major crude oil supply contracts and is considered one of the world’s largest oil producers. A senior executive of a large energy company commented, “We will not be involved in KRG tenders until we have a much better understanding of the ramifications for our relationship with Iraq.” Two other companies which also refused to be named said that they would not be part of the bidding process initiated by the KRG’s Ministry of Natural Resources.

Kurdistan is rich in oil and has already approved exploration licenses for some of the largest energy companies including ExxonMobil and Total. However, it’s 200,000 barrels a day doesn’t contribute much to the global market. In addition, executives are worried about stepping into a dispute that has the KRG and energy-hungry Turkey pitted against Iraq and the U.S.  The U.S. appears to be concerned that direct Kurdish crude oil exports may lead to a break up of the Iraqi state.

The Kurdish government, however, is trying its best to export its oil resources and to please the central Iraqi government. It is offering to sell two million barrels at official Iraqi prices. In addition, the KRG invited Iraq’s State Oil Marketing Organization to observe the process while assuring Baghdad that it will receive a majority of the revenues.

Unfortunately, these efforts are not met with much enthusiasm because Baghdad still insists that the State Oil Marketing Organization should be fully in control of all Iraqi oil exports. As a result, the central government is pushing energy providers not to take part in the Kurdish tender. In a statement, the organization said, “Companies [that participate in the tender] shall be subject to legal proceedings.”

BP and Royal Dutch Shell have aligned themselves with the central government to protect major projects in the country’s southern region. Meanwhile, Total, Chevron and Repsol continue to rely on Iraqi crude despite defying the government and getting exploration licenses in Kurdistan. Even independent trading houses have taken a stance. Swiss traders Vitol and Glencore continue to supply fuel to Iraq while Trafigura has been blacklisted from such contracts because it traded Kurdish oil.

Due to the lack of sales from the largest oil buyers, experts recommend that the KRG rely on one-off sales to smaller trading houses.  However, that will limit the impact of the tender, which some think is being used to force Baghdad to approve the exports.

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