South Africa feels the pain of sanctions against Iran

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As nations around the world scramble to comply with U.S. sanctions on dealing with Iran, one of those in the toughest predicament is South Africa.

South Africa relies on Iran for 27 per cent of its oil supply, and it hasn't yet figured out how to replace the Iranian oil. But that's only one part of the dilemma. South Africa also has a web of business and political connections with Iran, and those will be equally difficult to sever.

The U.S. and European Union sanctions are already sparking a backlash from key political factions in South Africa, where foreign policy is still influenced by a strong streak of "anti-imperialism."

Iran was a firm opponent of apartheid, and South Africa tends to remember those things. In fact, South Africa has sharply increased its trade with Iran since the end of apartheid in 1994, importing nearly $21-billion in oil from Iran at its peak in 2007.

The ruling African National Congress, which has a political alliance with a trade-union congress and the South African Communist Party, has significant left-wing influences in its decision-making, and it tends to resent U.S. pressure.

There would also be a populist backlash if the U.S. sanctions lead to higher prices at the gas pumps. And the government is worried about the potential $40-million cost of converting its refineries to non-Iranian crude.

So far, there's no indication that South Africa will try to defy the U.S. sanctions. South Africa knows it would lose its access to the U.S. financial system if it refuses to comply with the sanctions.

Negotiations are continuing, and South African officials say the government is hoping for an agreement with Washington by the end of May. But the officials also say they are considering "a variety of scenarios" and "all options" – including possibly defying the sanctions.

The Congress of South African Trade Unions (COSATU), one of the two alliance partners with the ANC, loudly condemned the United States for its "attempts to bully countries." The U.S. allegations about Iran's nuclear program are "unproven," the union congress said.

"COSATU demands that the South African government stop this kowtowing to the U.S. imperialists," the congress said. It called for a "principled stand against U.S. imperialism's attempt to impose its will on sovereign states."

The government often ignores COSATU's demands, and it will probably do so again on the Iran oil issue. But the business connections between South Africa and Iran will be more difficult to cut.

One of South Africa's biggest telecommunications companies, MTN, is a major investor in Iran. It owns 49 per cent of Iran's second-biggest cellphone operator, MTN-Irancell, which controls almost half of Iran's mobile phone market.

Critics say the South African company complied with Iranian orders to cut off Skype and text-messaging services to Iranian cellphones during the anti-government protests in 2009. They also allege that MTN-Irancell did a deal with a Chinese company to install tracking technology on Iranian cellphones, so that Iran can track dissidents.

Avi Jorisch, a researcher at the American Foreign Policy Council, has cited reports that MTN won the Iran cellphone deal by promising to lobby the South African government to mute any criticism of Iran's nuclear program. MTN has strongly denied the allegations.

"MTN has a responsibility to stop supporting Iran," Mr. Jorisch wrote last week. "Partnering with a regime that uses mobile technology to track and kill the opposition is a betrayal of its corporate responsibility."

Turkish company Turkcell, which lost to MTN in the bidding for the Iranian company, has alleged that MTN made improper payments in exchange for the Iranian business. It also charged that MTN lobbied South Africa to supply military equipment to Iran.

MTN has rejected the allegations, and the South African government has said it won't order MTN to pull out of Iran. The Iranian market is one of MTN's biggest and fastest-growing sources of revenue.

Even as the MTN controversy continues, another business connection between South Africa and Iran has emerged. A report in a South African newspaper said several front companies in South Africa were involved in a sanctions-busting scheme to export helicopters and spare parts to Iran.

The partner of South Africa's deputy president, Kgalema Motlanthe, attended a meeting where a bribe was solicited in exchange for government support for one of the Iranian export deals, although the scheme eventually fell apart, the report said. Several investigations into the report are now under way.