Coca-Cola and Pepsi's Irish operations shipping to Iran

Coca-Cola and PepsiCo are using their Irish-based subsidiaries to ship product to Iran and skirt US trade sanctions with the pariah state.

The two cola giants are shipping concentrate from their Irish operations to Iran, where it is then bottled for sale.

A loophole in the sanctions allows American companies to ship certain foodstuffs to Iran by using overseas subsidiaries.

This means Coca-Cola and PepsiCo can sidestep the trade sanctions, while also benefiting from Ireland 12.5 per cent corporation tax rate.

Reliable statistics for the size of the soft drinks market in Iran are not available. Some reports, however, suggest that it could be worth as much as $1 billion annually. In 2006 Iranians drank an average 95 bottles of soft drink, which is expected to rise to 120 by 2010.

PepsiCo confirmed that it has shipped concentrate from Ireland to Iran since 2002. "This is perfectly lawful," said Dick Detwiler, senior vice president for pubic affairs at PepsiCo International. "The products of dozens of companies in America are sold in that market."

PepsiCo, which has manufacturing operations in Cork, employs about 400 people in Ireland and has invested more than €200 million here in the past five years, according to Mr Detwiler.

"Ireland is one of our larger concentrate facilities," Mr Detwiler said.

Coca-Cola, which has had manufacturing facilities in Ireland since 1974, would not confirm that its Irish subsidiary ships cola concentrate to Iran. "Our Irish concentrate facility exports to customers on six continents," said Charles Sutlive, a senior communications executive at the Atlanta-based multinational.

Informed sources, however, confirmed that Ireland is being used by Coca-Cola to ship concentrate to Iran. This is bottled in Iran by a local company called Khoshgovar, which also produces its own brands of cola and is thought to control about 50 per cent of the soft drinks market there.

Khoshgovar also licences Fanta, Sprite and Dasani water from Coca-Cola, although it is not clear if all of this is sourced from Ireland.

Relations between Iran and the US have been frosty since the 1979 Islamist revolution, which saw the Shah overthrown. That resulted in Coca-Cola and PepsiCo leaving the market and trade sanctions being put in place.

These were eased in the early 1990s, with the result that Coca-Cola and PepsiCo gradually built up relationships with local producers again.

A tightening of sanctions under president Bill Clinton's administration and the current stand-off between Washington and Tehran over uranium enrichment has since made it difficult for US corporations to do business in the country.

Neither brand is popular with conservative clerics in Iran and hardliners often appear on television to denounce both Coke and Pepsi. This has not stopped trendy, young Iranians from consuming the American brands in large numbers.

"Coke is ubiquitous in Iran," said John Teeling, an Irish entrepreneur who controls a company called Persian Gold and is a frequent visitor to Iran. "You see people drinking it everywhere."