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Trade Embargo

Andreas Becker (jen)
May 8, 2008

The German security-technology firm Draeger is being investigated in the US for potential violation of a trade embargo with Iran.

A general view of Phase five of the South Pars gas field in the southern port of Assaluyeh, Iran on Saturday, 16 April 2005. Two more Iranian gas fields were inaugurated on Saturday in the southern Persian Gulf port of Assalouyeh. The phases four and five of the South Pars gas field include off-and on-shore installations equipped with two submersible sea platforms, sea jackets, drilling platforms and a 56-inch gas transfer pipeline more than 100km kilometres in length. The two new phases are set to produce 50 million cubic metres of natural gas per year of which 10.5 tons would be for export. Foto: ABEDIN TAHERKENAREH +++(c) dpa - Report+++
Was the pipeline-software sale due to "organizational deficits"?Image: picture-alliance/ dpa

Security-technology concern Draeger has been accused of delivering software to Iran that can be used for military purposes.

In 2003, Draeger, based in the northern German city of Luebeck, got an order from Iran to build a surveillance system for a gas pipeline. Special software is needed to run the system, including a program that displays measured values.

That software, which costs some 80,000 euro ($123,000) is made by a subsidiary of US electronics concern General Electric. Because the “dual use” software is applicable for both civil and military uses, export restrictions apply.

However, the software was delivered to Iran without the necessary authorization. In September, the Draeger management told US authorities: “it has become clear to us that both softwares require export approval,” Draeger spokesperson Burkhard Dillig said.

Regulatory jungle

"We realized it broke the rules and that's why we informed the US authorities,” he said.

While it is certainly difficult to wade through the regulatory jungle regarding exports to Iran, it appears clear that Draeger knew that the software couldn't simply be delivered to Iran. The firm wrote a letter -- which Deutsche Welle has read -- to the customer clearly stating that the system couldn't be delivered with software, and that software needed to be purchased and installed in Iran.

Stefan Dräger, CEO of Draegerwerk AG, gives the year-end report in 2007
Draeger and the supplier play hot-potato with blameImage: picture-alliance / dpa

The customer apparently made early contacts to a software provider in the Middle East, but nothing was ordered.

In the end the customer, Irasco -- an Italy based company that works for the Iranian oil ministry -- demanded a full test of the product, including software, prior to delivery.

Draeger hired Austrian businessman Sasan Azodi to purchase the software for the test in Luebeck. Azodi, who was born in Iran and whose business involves mediating deals between Iranian and European companies, had helped Draeger to get the contract in the first place.

Azodi acknowledges that he arranged for the delivery of the software, via the US, to Luebeck, but claims he only sent it for test purposes. Upon learning that the software had been delivered to Iran, Azodi said, “that's when I realized I had probably been conned.”

Ongoing legal battle

The realization was the start of a legal battle, on the one hand for money he says he is still owed, and on the other, to try and prove his innocence in accusations that he broke the US trade embargo.

Draeger headquarters in Luebeck
Dräger depends on the US for one-fifth of its salesImage: picture-alliance/ dpa

He claims his business has suffered from his supposed breach of US rules. But as a sign of his innocence, he points to the fact that the lawsuit he started against Draeger in the US predated the company's own admission to US officials by a half a year.

'Organizational deficits' to blame?

The result of his lawsuit has been destructive, Azodi said. “None of my business partners wanted anything to do with me. And there were threats: If I am ever in Iran, I could run into legal troubles. Those were the consequences of my US lawsuit,” he said.

His ongoing lawsuits -- in the US and Europe -- are a battle he sees as one for his reputation.

For its part, Draeger claims it did not trick Azodi into delivering the software, nor did it knowingly contravene US re-export rules. Firm spokesman blames the problem on “organizational deficits” in the company for the regulatory troubles.

"We immediately examined them and changed them,“ he said.

US regulators have yet to make a statement on the case. Should sanctions apply, it would be a hard hit for Draeger; one-fifth of its 1.8 billion euros annual sales volume comes from the US.

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