Pawlenty says more facts needed on Essar-Iran ties

By jane brissett

News tribune staff writer

When Gov. Tim Pawlenty made a surprise announcement Saturday that he might oppose using state money in conjunction with the construction of a steel mill on the Iron Range, he did so knowing there had been no investigation of what Essar Global Ltd. plans to do in Iran, his spokesman said Sunday.

But the governor intended to send a message to the India-based company that is looking to build Minnesota Steel, saying Minnesota won't do business with a corporation dealing with a terrorist state, said his spokesman, Brian McClung.

"There are some things more important than a big project, and not doing business with Iran is one of them," McClung said Sunday.

Essar, the company that acquired Minnesota Steel last week, reportedly is preparing to build an $8 billion to $10 billion oil refinery in Iran beginning in 2008 that would be owned 60 percent by Essar and 40 percent by the Iranian government. Jim Cunningham, an official with the U.S. Commerce Department in Mumbai, India, told Pawlenty of a news report containing the information, McClung said.

Minnesota Steel, which would be west of Nashwauk, would be the largest industrial project in the history of the Iron Range. The project is expected to provide good-

paying jobs, create spinoff businesses, attract new families to the region and boost school enrollments.

The $1.6 billion project would include a new open-pit taconite mine; crushing, concentrating and pelletizing plants; a direct-reduced iron facility; and a steel slab plant capable of producing 2.5 million tons of slabs a year. The plant would employ 700 people, and need 2,000 construction workers. It also could create about 2,100 spinoff jobs.

Pawlenty's statement about Essar's involvement with Iran said the information about the project there is "murky." McClung said the governor would like to know "specifically if Essar is involved in any prohibited business practices."

That determination will be made by the federal government, which will begin an assessment next week, McClung said.

Minnesota Steel officials in Minnesota and Michigan did not return messages from the News Tribune on Sunday requesting comment.

But people are talking about the governor's announcement in Nashwauk, where Minnesota Steel would be built.

Nashwauk Mayor Bill Hendricks said he believes the project will be built whether or not the bonding is approved.

"It's a stumbling block, and the governor is playing politics with 2,800 jobs," he said.

"This is a phony excuse for him not to support the Northland," he said. "I'm very unhappy with the governor for making this decision when he doesn't have all the facts."

The money would be an investment, not a subsidy, he added. "This money ... will come back tenfold."

Itasca County is looking for $45 million to $60 million for infrastructure for Minnesota Steel in the state bonding bill next year.

Privately owned Essar, a $20 billion company, does business in steel, energy, power, communications, shipping and logistics and construction and employs 20,000 people worldwide.

A U.S. Treasury Department's Office of Foreign Assets Control fact sheet lists sanctions against Iran "as a result of Iran's support for international terrorism."

Pawlenty talked with representatives of the U.S. Commerce and State departments about Essar's involvement with Iran while on a trade mission to India last week, McClung said. While in India, the governor also spoke with Madhu Vuppuluri, president of Essar North America. "He expressed to him directly that the governor would strongly oppose any prohibited activity in Iran," McClung said. Vuppuluri did not return messages left Sunday by the News Tribune.

According to a Reuters news service article last Wednesday, Essar also plans three steel plants in the Middle East "including a joint venture to build a 1.5 million tons a year steel plant in Iran."

The report also said that an Essar official told the news service early this year that the company wanted to "strengthen its relations with Iran." It said Essar is discussing a joint venture with Iran to develop that country's biggest oil field and has submitted bids for oil exploration.