To develop Iran’s most historic oil field, the Iranian government paid millions of U.S. dollars to a network of state-linked Chinese businesses with shell companies in Cyprus, a notorious tax haven and money laundering destination. Oil ministry officials continued to pay the parent company of a Chinese energy firm, Sheer Energy (Cyprus), even after that firm failed to fulfill its contractual obligations, an investigation by Tehran Bureau has found.
Chinese oil & gas companies escalated their activity in Iran in the early 2000s, when intensifying sanctions on Iran’s oil sector forced many other international firms to leave the country. One of the earliest mentions of a Chinese oil company’s presence in Iran dates back to June 2004. That year, Iran Oil Ministry officials announced China National Petroleum Corporation (CNPC) was replacing the Canadian firm Sheer Energy halfway through a $88-million, four-year oil field development project, SHANA news agency reported.
Oil Ministry spokespeople said the contractual change was necessitated by significant delays to the project, caused by Sheer Energy’s financial shortcomings. At stake was the fate of the Masjed-e-Soleyman oil field in Khuzestan province, the oldest in Iran and the Middle East. Ministry spokespeople said Sheer Energy was struggling to fulfill its service contract for the development of the field, which included drilling, design of surface facilities, construction of desalination plants, and completion of the project and start-up, in the remaining time.
International business registry documents show the Chinese energy giant China National Petroleum Corporation (CNPC) owns Sheer Energy through a Cyprus-based subsidiary. This means the Iranian government chose to resolve Sheer Energy’s inability to honor its contractual obligations by awarding the same contract to its parent company. Upon closer examination, Sheer Energy’s ownership structure points to a convoluted network of shell companies, a mechanism typically set up to facilitate sanctions evasion, money laundering, and other illicit activities.
Details regarding Sheer Energy’s ownership structure are shown below.
Sheer Energy and its Shell Companies
Sheer Energy acquired the original service contract to develop the Masjed-e Soleyman oil field through its subsidiary, Sheer Energy (Cyprus) Ltd., according to the Oil and Gas Journal. As mandated by Iranian law, Sheer Energy (Cyprus) operated the project with a 49% interest. Naftgaran Engineering Services Co., Tehran, a subsidiary of the Oil Industry Investment Co. (OIIC), Tehran, had the other 51%.
OIIC is a subsidiary of the National Iranian Oil Company (NIOC). Naftgaran was established in 1999, two years before the deal was signed, and is now in dissolution, according to the OIIC website.
Information on Sheer Energy is scarce. International business records show it went on to become Cygam Energy Inc. after acquiring Italian oil and gas exploration companies Rigo Oil and Vega Oil. Sheer Energy (Cyprus) Ltd. went on to change its name to CNPCI (CYPRUS) LIMITED, short for CNPC International, which in turn is a subsidiary of China National Petroleum Corporation (CNPC).
According to the company’s public profile on career search website Iran Talent, “CNPCI has become increasingly involved in the development of Iranian oil fields and is engaged in oil and gas operations and oilfield services such as Masjed Soleiman (MIS), North Azadegan and South Azadegan Oil Fields projects in Iran.”
The board of CNPCI (CYPRUS) LIMITED includes MONTRAGO SERVICES LIMITED, whose board, in turn, includes MERCO SERVICES LIMITED. All these companies are registered at the same address in Cyprus: “Arch. Makariou III, 195, NEOCLEOUS HOUSE, 3030, Limassol, Cyprus.” This address also appears in the Panama Papers, a seminal collection of leaked offshore company documents published by the International Consortium of Investigative Journalists in 2019.
This is also the registered address for Andreas Neocleous & Co LLC, a law firm specializing in “wealth preservation,” according to its website. One of the owners of the Andreas Neocleous & Co LLC law firm, Elias Neocleous, said in a 2016 interview with Fox Business Network he believed Cyprus could become “an energy hub for the future,” adding that he noticed “a lot of interest from international players of great reputation to come here [Cyprus] and establish a base.” (Elias owns Elias Neocleous & Co. LLC, another one of the Neocleous family firms.)
The Cyprus Papers
Cyprus has gained international notoriety as a tax haven and money-laundering hub. Until 2019, its “Golden Passport Scheme” allowed wealthy individuals to access European Union citizenship by paying the government 2.5 million Euros and meeting certain other criteria.
More recently, the Cypriot government began implementing reforms after European Union officials called Cyprus a “back door to the EU.” It revoked the citizenships of 222 individuals connected to illegal activities, including two Iranians, Maleksabet and Mehdi Ebrahimi. This father and son are on the Interpol red notice, and have faced trial in Canada for money laundering from proceeds of sanctioned oil sales. They are also wanted in Iran for “misappropriation, breach of trust, fraud, forgery and counterfeiting, and leading an organized crime gang,” according to Shargh daily and Al Jazeera. Both men deny any wrongdoing, and say they complied fully with Iranian and Canadian law.
The Cypriot government’s crackdowns against the high-risk individuals who had settled there under its liberal business and citizenship schemes came as a reaction to the Cyprus Papers. This Al Jazeera database of leaked official documents shows “convicted criminals, oligarchs on the run from the law, and government officials” were among the individuals who opened businesses and acquired residency in Cyprus. Russian and Chinese are the top nationalities of the individuals listed in this database.