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Roger W. Robinson – former Senior Director of International Economic Affairs at the National Security Council

Committee on International Relations
U.S. House of Representatives
Washington, D.C. 20515-0128

Testimony of Hon. Roger W. Robinson Jr.
President and CEO of Conflict Securities Advisory Group, Inc.
and former Senior Director of International Economic Affairs at the
National Security Council
before the
House International Relations Subcommittee on the Middle East and Central Asia
Rayburn House Office Building, Room 2172
June 25, 2003

I’d like to thank the Chairman and the Committee for convening this timely session.  I am testifying today in my capacity as President and CEO of Conflict Securities Advisory Group, which specializes in impartially assessing the financial and reputational risks associated with the operations of publicly traded companies in or with countries that sponsor terrorism.  Our firm was founded in 2001 to help investors identify portfolio companies exposed to global security risk of the type described as well as those firms that have been associated with proliferation-related concerns.  I also currently serve as Chairman of the Congressional U.S.-China Economic and Security Review Commission.

By way of background, I have been evaluating the nexus between national security and global finance for over twenty-five years.  From 1982-1985, I served as Senior Director of International Economic Affairs at the National Security Council.  Prior to my government service, I was a Vice President in the International Department of the Chase Manhattan Bank, with responsibilities for the bank’s loan portfolios in the former Soviet Union, Eastern and Central Europe and Yugoslavia.

A determination was made by the SEC in May 2001 that significant corporate operations in U.S.-sanctioned countries, including Iran and Libya, can represent a material risk to investors and should properly be disclosed.  Pursuant to this development, we launched our Global Security Risk Monitor online service in May of last year.  The Monitor is the world’s only on-line research and risk assessment tool that identifies and profiles every publicly traded company worldwide that does business in Iran, Libya and other terrorist-sponsoring states.  Put simply, it allows investors and government analysts to know who is doing business where and, more importantly, what specific operations are underway in these higher risk countries.  It is recognized, for example, that there is a substantial difference between a firm selling soft drinks and one that is constructing a potentially dual-use fiber optic network.

Due to time constraints, I encourage interested parties to review our website – www.conflictsecurities.com – for more information regarding global security risk and our Global Security Risk Monitor subscription service.  The site includes some examples of “at risk” companies and dozens of mainstream print and broadcast media pieces covering this topic.  As we now have over $1 trillion in funds under management that have subscribed to the Monitor, it is reasonable to assert that corporate ties to terrorist-sponsoring states is a market issue that has taken on national prominence.  To underscore this point, the announcement of the shareholder resolutions on this subject recently registered with the SEC by the New York City firefighters and police pension funds and the unanimously-passed legislative resolution of Pennsylvania’s State Assembly are submitted for the record of this hearing.

I should emphasize at this point that we do not take a position regarding whether companies should or should not do business in Iran, Libya or other terrorist-sponsoring states.  The relevance and use of our data is for the individual investor to determine.  We likewise assume that the operations of companies included in our Monitor product are legal and commercial in nature.  That said, we recognize the important public policy issues embedded in our research, hence the relevance of our findings to today’s discussion.

Following an exhaustive, seven-month research effort, our company and our partner firm, Investor Responsibility Research Center, determined that roughly 375 publicly traded companies are operating in State Department-designated terrorist-sponsoring states (not including Cuba).  There are over 200 publicly traded firms with such links to Iran.  Over 60 have business activities in Libya.  Based on our research findings, it is my view that these companies offer critical commercial infrastructure for the governments of Iran, Libyaand other terrorist-sponsoring nations.  Three major points underpin this view.

Size and Type of Companies: First, as might be expected, it is primarily the largest and most well-known companies in the world that have the risk appetite to conduct business with government sponsors of terrorism.  Many of these firms are found in the retirement portfolios and mutual funds of millions of Americans.

Some 70 percent of those firms identified in our Monitor product are of European and Asian origin – companies such as TotalFinaElf and Alcatel of France, ENI of Italy, Hyundai of South Korea and several leading Japanese firms come to mind.  Notwithstanding U.S. sanctions, some 35 major U.S. companies have legal operations in these countries through their overseas subsidiaries.

Country Assessments: Second, virtually all of these nations are afflicted with serious economic shortcomings and bottlenecks.  Years of economic mismanagement, corruption and ill-advised policies have left these nations inordinately dependent on foreign corporate and government assistance.  Accordingly, it is common for these firms to be required to partner with state-owned enterprises in these countries to ensure that the government can access advanced technology, equipment and expertise as well as maintain control over associated revenue flows.
Volume: Third, the shear volume of business being conducted by publicly traded firms in these countries is worth noting.  Many companies do not disclose figures associated with projects in terrorist-sponsoring states or document how much revenue they are generating for these governments.  Our research, however, indicates that these companies are participating in projects and financial and commercial transactions totaling, at minimum, tens of billions of dollars in these countries.  ENI alone is engaged in consortia energy deals in Iran and Libya totaling as much as $9 billion.  Given the size of these economies, this level of foreign corporate involvement is of great significance.

In conclusion, publicly traded companies are providing substantial hard currency revenues and infrastructure support to terrorist-sponsoring governments.  The fact that legal, commercial transactions and revenue flows can, in select cases, be employed by these irresponsible governments for dual-use, military-relevant purposes, has created a risk to the sharevalues and reputations of many companies doing business in these nations.  Such risks can take the form of official sanctions, lawsuits, negative publicity, shareholder activism or military intervention.  Thank you and I would be pleased to take your questions.

News Release

House Resolution #263 (pdf – 12 kb)

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