GAO-13-344R Iran

United States Government Accountability Office

Washington, DC 20548

February 25, 2013

Congressional Committees

Subject: Firms Reported to Have Engaged in Activities Related to Iran’s Energy and 

Communications Sectors While Having Had U.S. Government Contracts

Iran’s illicit nuclear activities, support for terrorism, and human rights abuses have 

led the United States and other nations to impose multiple sanctions.1 For example, 

U.S. law provides for sanctions against foreign firms that engage in certain activities 

in Iran’s energy sector.2 It also prohibits U.S. agencies from entering into or 

renewing procurement contracts with individuals or entities that export sensitive 

technologies to Iran for monitoring, filtering, or disrupting the flow of information and 

communication in Iran or of the people of Iran.3 The United States imposed these 

sanctions through legislation and executive orders that include the Iran Sanctions 

Act of 1996 (ISA)4; the Comprehensive Iran Sanctions, Accountability, and 

Divestment Act (CISADA) of 20105; and the Iran Threat Reduction and Syria Human 

Rights Act of 2012 (TRA).6

Senate Reports 111-201 and 112-267

 

1

For example, see the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, Pub. L. No. 

111-195, 124 Stat. 1312, and Council Decision 2010/413/CFSP Concerning Restrictive Measures Against Iran 

and Repealing Common Position 2007/140/CFSP, 2010 O.J. (L 195) 39.

 require GAO to annually update a 2010 GAO 

report that used open source data to identify foreign firms with commercial activity in 

 

2

For example, see Iran and Libya Sanctions Act of 1996, Pub. L. No. 104-172, as amended (the name of this law 

was changed to the Iran Sanctions Act of 1996 by the Iran Freedom Support Act, Pub. L. No. 109-293, 120 Stat. 

1344 (2006)).

3

Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, Pub. L. No. 111-195, § 106, 124 

Stat. 1336, codified at 22 U.S.C. § 8515.

4

Pub. L. No. 104-172, as amended.

5

Pub. L. No. 111-195.

 

6

Pub. L. No. 112-158, 126 Stat. 1214.

7

S. Rep. No. 111-201 (2010) and S. Rep. No. 112-26 (2011). 
Page 2 GAO-13-344R Iran

Iran's energy sector and determine if they had contracts with the U.S. government.8

They also require GAO to expand the 2010 report’s scope to include firms that 

export technologies to Iran that are specifically to be used to disrupt information and 

communication flows. GAO has previously issued two reports related to the Senate 

mandates.9 In addition, GAO issued a report in December 2012 that identified seven 

firms reported in open sources to have engaged in commercial activities in Iran’s 

energy sector at some point between June 1, 2011, and September 30, 2012.10

(1) whether any of the seven foreign firms reported in open sources to have 

been engaged in commercial activity in Iran’s energy sector between June 1, 

2011, and September 30, 2012, had U.S. contracts, awards, or purchasing 

agreements; and 

 To 

further update GAO’s response to the Senate mandates, this report identifies: 

(2) which foreign firms were reported in open sources to have exported 

technologies to the Iranian government for monitoring, filtering, and disrupting 

information and communications flows, from June 24, 2011, through 

December 15, 2012, and whether they had U.S. contracts, awards, or 

purchasing agreements. 

To determine if any of the seven firms that were reported to have engaged in 

commercial activity in Iran’s energy sector had U.S. contracts, awards, or purchasing 

agreements, we searched the Federal Procurement Data System-Next Generation 

(FPDS-NG), the primary government-wide contracting database since 1978, for 

active contracts for the time period from June 2011 through December 2012. To 

conduct our open source review for firms that exported technologies to the Iranian 

government, we reviewed open source information, including industry and trade 

publications, corporate reports and statements, and U.S. Securities and Exchange 

Commission filings, for the time period from June 24, 2011, through December 15, 

2012. We did not attempt to determine whether the activities for which the firms are 

listed in our reports met the legal criteria for sanctionable activities specified in U.S. 

law. The Secretary of State and/or the Secretary of the Treasury is responsible for 

making such determinations. See enclosure I for a full description of our scope and 

methodology.

We conducted this performance audit from December 2012 to February 2013 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on 

 

8

GAO, Firms Reported in Open Sources as Having Commercial Activity in Iran’s Oil, Gas, and Petrochemical 

Sectors, GAO-10-515R (Washington, D.C.: Mar. 23, 2010). 

9

GAO, The U.S. Government Is Establishing Procedures for a Procurement Ban against Firms that Sell Iran 

Technology to Disrupt Communications but Has Not Identified Any Firms; GAO-11-706R (Washington, D.C.: Jun. 

30, 2011); and GAO, Firms Reported in Open Sources as Having Commercial Activity in Iran’s Oil, Gas, and 

Petrochemical Sectors, GAO-11-855R (Washington, D.C.: Aug. 3, 2011). 

10GAO, Firms Reported to Have Sold Iran Refined Petroleum Products or Engaged in Commercial Activities in 

Iran’s Energy Sector, GAO-13-173R (Washington, D.C.: Dec. 7, 2012).
Page 3 GAO-13-344R Iran

our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.

Summary

Of the seven foreign firms we identified in December 2012 as having been reported 

to have engaged in commercial activity in Iran’s energy sector at some point 

between June 1, 2011, and September 30, 2012, we found that one—Daelim—had 

U.S. government contracts. 

Our review of open sources did not identify any foreign firms that exported 

technologies to the Iranian government for monitoring, filtering, or disrupting 

information and communications flows. 

Background

Iran’s economy and government rely heavily on revenues from its oil and gas 

industry. Iran’s crude oil production peaked in 1978 and has not matched that peak 

since then because of a high rate of natural decline in mature oil fields, limited 

investment, and sanctions. IHS Global Insight found that Iran’s oil sector will require

approximately $25 billion in annual investment to maintain existing production.11 

Members of the U.S. Congress and others have found that the current Iranian 

government has a history of human rights abuses, including the suppression of free 

expression. According to an OpenNet Initiative (ONI) report, the Iranian government 

regulates speech with restrictions over free speech on a broad range of topics, 

including religion, immorality, social harmony, and politics.12 This suppression 

applies to electronic media as well, according to ONI and Senate Report 111-201.13 

According to a Freedom House report, the Iranian government’s suppression tactics 

include upgrading its filtering technology to block particular types of Internet traffic, 

hacking international firms’ digital certificates to undermine user privacy, and 

implementing the first stage of establishing a national Internet that would allow Iran 

tighter control over the flow of information.

14

 

11IHS Global Insight, “Iran, Energy: Report”, viewed May 26, 2011. IHS Global Insight provides economic and 

financial information for the energy industry on a contract basis, including analysis and forecasting for the Iranian 

oil, gas, and petrochemical sectors. 

Freedom House also states that the 

government continued to use other forms of repression to punish and intimidate 

bloggers, journalists, and ordinary users, including imposing the death penalty on 

three bloggers and information technology professionals. 

12OpenNet Initiative, Internet Filtering in Iran (Toronto, Canada, Cambridge, Massachusetts, and Ottawa, 

Canada, June 16, 2009). The OpenNet Initiative’s stated goals are to “investigate, expose, and analyze Internet 

filtering and surveillance practices in a credible and non-partisan fashion.”

13OpenNet Initiative; and S. Rep. No. 111-201 (2010).

14Freedom House, Freedom on the Net 2012; A Global Assessment of Internet and Digital Media (Washington, 

D.C., and New York, N.Y., Sept. 24, 2012). Freedom House identifies itself as an independent watchdog 

organization that functions as a catalyst for freedom, democracy, and the rule of law through its analysis, 

advocacy, and action. 
Page 4 GAO-13-344R Iran

One Firm Reported in Open Sources as Having Engaged in Commercial 

Activity in Iran’s Energy Sector between June 1, 2011, and September 30, 

2012, Had U.S. Government Contracts 

In December 2012 we identified seven foreign firms that were reported to have 

engaged in commercial activity in Iran’s energy sector at some point between June 

1, 2011, and September 30, 2012.15 We found that one of these seven firms, 

Daelim, had U.S. government contracts. According to data from FPDS-NG, the 

Department of Defense obligated about $1.5 million through contracts to Daelim 

(see table 1), from June 2011 through December 2012.16 

Table 1: Firms Reported in Open Sources as Having Commercial Activity in the 

Iranian Energy Sector That Have U.S. Government Contracts between June 1, 2011, 

and December 30, 2012

Firm name/country Contract actions Total obligated funds from 

June 2011 to December 2012 

Daelim Industrial Co./South Korea Housing construction at a U.S. 

military base in South Korea 

$ 1,496,297

Source: Data from the Federal Procurement Data System – Next Generation

According to the contract information identified in FPDS-NG, Daelim entered into the 

contracts with the U.S. Department of Defense for construction of family housing on a 

military base in South Korea. 

Open Sources Did Not Identify Any Firms Exporting Technologies to Iran for 

Monitoring, Filtering, or Disrupting Information and Communication Flows 

from June 2011 through December 15, 2012

Our open source review did not identify any foreign firms that had exported

technologies to the Iranian government for monitoring, filtering, and disrupting 

information and communication flows during the specified time period. Accordingly, 

we found no such firms that have contracts with the U.S. government. We searched 

open source publications for the time period from June 24, 2011, through December 

15, 2012, and, consistent with the findings in our previous report,17 we did not find 

sufficient evidence to identify any firms.18

 

 We previously reported on numerous 

15For a complete listing and discussion of firms reported to have engaged in commercial activity in Iran’s energy 

sector from January 1, 2005, through September 30, 2012, see GAO-13-173R.

16In our August 2011 report (GAO-11-855R), we reported that the U.S. government obligated almost $4.4 million 

in contracts from January 2010 through May 2011 to 2 of the 16 firms identified as having engaged in 

commercial activity in Iran’s energy sector in our August 2011 report. Daelim was one of the two firms identified 

as having U.S. government contracts. 

17GAO-11-706R.
Page 5 GAO-13-344R Iran

challenges to identifying firms through open sources that may account for our 

inability to identify any firms.19 

Agency Comments

We provided a draft of this report to the Department of State for comment. State 

declined to comment.

---

We are sending copies of this report to appropriate congressional committees and 

the Secretary of State. In addition, the report is available at no charge on the GAO 

website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me at (202) 

512-9601 or melitot@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. GAO staff 

who made key contributions to this report are listed in enclosure 2.

Thomas Melito

Director, International Affairs and Trade

Enclosures - 2 

 18Under our methodology, firms are to be identified only when three standard industry publications or the firm’s 

corporate statements reported the firm to have signed an agreement to conduct business, invest capital, or 

received payment for providing goods or services. We do not consider news articles, blogs, or Iranian 

government statements as credible sources of evidence. 

19We reported that the competitive and proprietary nature of the communication industry limits information, if any, 

reported in open sources. Additionally, a firm’s intention in selling Iran technology may be difficult to determine 

because technology that can enable acceptable filtering for objectionable sites, such as pornography, can also 

be used to disrupt the free flow of information and communication. Finally, Iran’s need to obtain monitoring and 

filtering technology from outside sources may be lessening as it develops indigenous censorship and 

surveillance capabilities, possibly in response to sanctions against western companies selling it sensitive 

technologies. For a more complete discussion of these challenges, see GAO-11-706R.
Page 6 GAO-13-344R Iran

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Howard P. McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives
Page 7 GAO-13-344R Iran

Enclosure I

Scope and Methodology

To identify which firms that were reported to have engaged in commercial activity in 

Iran’s energy sector had been awarded contracts, awards, or purchasing 

agreements with the U.S. government, we searched the Federal Procurement Data 

System-Next Generation (FPDS-NG). We chose FPDS-NG because it has served 

as the primary government-wide contracting database since 1978. Congress, 

executive branch agencies, and the public rely on FPDS-NG for a broad range of 

data on agency contracting actions, procurement, and spending.20 We searched the 

FPDS-NG archives for the period from June 2011 to December 2012 using the Data 

Universal Numbering System (DUNS) numbers21 for the seven firms identified as 

having commercial activities in Iran in our December 2012 report.22 With certain 

exceptions, all firms that do business with U.S. agencies are required to register with 

the U.S. government’s central contractor registry and obtain a unique DUNS 

number. We also obtained information on the identified contracts, including 

obligations, and a description of activity under the contract from FPDS-NG as well as 

other U.S. agency documents. 

To identify, through open sources, firms that export technologies to the Iranian 

government for monitoring, filtering, and disruption of information and 

communications flows, we reviewed and analyzed open source information dated 

from June 24, 2011, through December 15, 2012, that a GAO information specialist

determined to be credible and comprehensive. We relied only on information from 

credible sources to identify firms as having a financial interest in the development of 

Iran’s monitoring, filtering, and disruption of its information and communications 

infrastructure that met one of the following criteria: (1) if the firm was listed in three 

standard industry publications; or (2) if the firm’s corporate statements reported the 

firm to have signed an agreement to conduct business, invested capital, or received 

payment for providing goods or services in connection with these technologies. We 

excluded sources deemed insufficiently reliable, such as newspaper reports, 

newswires, and direct news releases from the Iranian government. 

We reviewed a wide range of open source information in an attempt to identify 

entities, including industry standard trade publications, marketing reports, corporate 

 

20FPDS-NG can be accessed at https://www.fpds.gov/fpdsng_cms/. Reporting requirements for FPDS-NG are in 

Federal Acquisition Regulation (FAR) subpart 4.6; FPDS-NG data are described in FAR 4.602. The Office of 

Management and Budget established FPDS-NG, and the U.S. General Services Administration administers the 

system. For more information on FPDS-NG and other federal procurement data systems, see GAO, Federal 

Contracting: Observations on the Government’s Contracting Data Systems, GAO-09-1032T (Washington, D.C.: 

Sept. 29, 2009). 

21Data Universal Numbering System numbers are nine-digit identifying numbers obtained by firms through Dunn 

and Bradstreet to uniquely identify a firm. Dunn and Bradstreet, a leading source of commercial information, 

maintains a commercial database with more than 140 million business records. U.S. vendors must be registered 

in the U.S. Central Contract Registry prior to the award of a U.S. government contract and a firm must have a 

DUNS number to register.

22GAO-13-173R.

 
Page 8 GAO-13-344R Iran

statements, Securities and Exchange Commission filings, and general web 

searches. We searched Nexis.com to find content files covering the Internet, 

telecommunications, and electronics industries for the time period between June 24, 

2011, and December 15, 2012. Included in these files were numerous industry 

standard trade publications, such as the Electronics Engineering Times, 

Communications Today, and TechWeb. We searched Gartner.com for marketing 

reports and firm websites for press releases and corporate statements. We searched 

and analyzed Securities and Exchange Commission filings filed between June 24, 

2011, and December 15, 2012. We also conducted general web searches for 

specific firms named in nongovernmental reports, in interviews with private sector 

firms, and mentioned extensively in the media. 

We conducted this performance audit from December 2012 to February 2013 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on 

our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives.
Page 9 GAO-13-344R Iran

Enclosure II

GAO Contact and Staff Acknowledgments

GAO Contact

Thomas Melito, (202) 512-9601, or melitot@gao.gov

Staff Acknowledgments

In addition to the contact named above, Pierre Toureille (Assistant Director), Michael 

Maslowski, JoAnna Berry, Lynn Cothern, Martin de Alteriis, and Grace Lui made key 

contributions to this report. 

(320960)
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