WASHINGTON, Jan. 10 (HalliburtonWatch.org) -- Halliburton admitted today that it expanded economic relations with Iran despite the Bush administration's insistence that the nation finances terrorism. A Halliburton subsidiary incorporated in the Cayman Islands, along with an Iranian firm known as Oriental Kish, will help Iran's Pars Oil and Gas Co. develop an estimated 280 trillion to 500 trillion cubic feet of natural gas in Iran's ocean waters.

"Halliburton and Oriental Kish are the final winners of the tender for drilling South Pars phases 9 and 10," Pars Oil and Gas Co. managing director Akbar Torkan told Iranian state television, Agence France Press reported from Tehran, Iran.

Halliburton's Cayman Islands subsidiary, known as Halliburton Products & Services, won the contract from Iran. The subsidiary has been working in the country on many phases of the Pars project for a number of years.

According to today's Houston Chronicle, Halliburton Products & Services has its headquarters in Dubai, United Arab Emirates, and historically has been selling $30 million to $40 million worth of oil-field services and equipment to customers in Iran annually.

Although U.S. companies are forbidden by law from doing business with Iran, a loophole exempts foreign subsidiaries from such business ties. The loophole allows Halliburton's Cayman Islands subsidiary to legally profit in Iran. Nevertheless, Halliburton is under criminal investigation by the U.S. Justice Department for illegally profiting in the country. Investigators believe the Cayman Islands subsidiary is actually controlled by officials in Houston and therefore not a true "foreign" subsidiary.

Corporate America generally opposes the prohibition against doing business in Iran since many European companies are profiting there. In May 2004, the U.S. Senate voted against legislation that would have stopped companies like Halliburton from using foreign subsidiaries to invest in Iran. The legislation was defeated by a 50-49 vote, mostly along party lines.

"Halliburton's business is clearly permissible under applicable U.S. laws and regulations," Halliburton spokesperson, Wendy Hall, told the Houston Chronicle. "These entities and activities are staffed and managed by non-U.S. personnel," she said.

Vice President Dick Cheney, while CEO of Halliburton, expressed his unhappiness with America's laws against doing business in Iran. "I think we'd be better off if we, in fact, backed off those sanctions [on Iran], didn't try to impose secondary boycotts on companies ... trying to do business there," Cheney told an Australian television interviewer in April 1998. Nevertheless, President George W. Bush calls Iran a member of the "axis of evil" since the nation is widely believed to finance terrorism around the world.

Sen. Frank Lautenberg (D-NJ) said the reports of Halliburton's business ties with Oriental Kish sound like a front company for Halliburton.

"Should this be true, it only justifies more scrutiny of our questionable business activity in this terrorist nation," Lautenberg wrote in a letter to Halliburton Chief Executive Officer Dave Lesar.

Halliburton said it has no ownership interest in Oriental Kish.