Tuesday, August 24, 2010

Iran Shuts Down European Company

Iranian security officials have shut down the local office of European cosmetics firm Oriflame in a move likely to scare away foreign investors at a time that Western companies are leaving Iran or scaling back operations because of international sanctions that restrict trade with the Islamic Republic.

Iranian officials and Oriflame executives say authorities arrested five company employees, including a Swedish national. The authorities accuse Oriflame, a publicly held $1.6 billion cosmetics firm that eschews animal testing and claims to use natural ingredients, of running a $70 million pyramid scheme involving 250,000 cases of fraud.

Company officials and analysts say the charges are a pretext for Iranian concerns that Oriflame’s business model empowers thousands of Iranian women by allowing them to earn substantial amounts as independent sales consultants. They said the charges were moreover an attempt to distract attention from the fact that busting the sanctions aimed at punishing Iran for its nuclear program has sparked a booming business for government-run sanction busting companies that operate through fronts in Venezuela and Central Asian countries, including Afghanistan and Turkmenistan.

Oriflame warned its investors in recent months that it was finding it increasingly difficult to operate in Iran with authorities obstructing its sales and waging a media campaign against it. Despite the shutdown of its Tehran office, Oriflame said it was determined to maintain operations in Iran, which accounts for 20 percent of the company’s Asian sales. Oriflame with operations in 62 countries was founded in Sweden in 1967, but has since moved its headquarters to Switzerland and Luxemburg.

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