The Clinton administration, in talks with the European Union, has agreed to waive sanctions against European firms that help Iran or Libya develop energy projects.
The Iran-Libya Sanctions Act (ILSA) prohibits such investments by U.S. firms or non-U.S. firms operating in the U.S. The law applied to a plan by Total SA of France, Gazprom of Russia, and Petronas of Malaysia to help Iran develop South Pars gas field in the Persian Gulf.
The administration also signaled it would not oppose future European investments in Iran, if they did not include pipelines to export production from the Caspian Sea region. Neither will the U.S. pursue sanctions against either of Total's partners in the South Pars development project.
The agreement, therefore, sets a precedent allowing non-U.S. firms to help Iran and Libya develop oil fields in the future without fear of a U.S. retaliation; U.S. firms are still prohibited from doing so.
In return for the U.S. concession, the EU and Russia pledged to cooperate with the U.S. in denying Iran technology to develop weapons of mass destruction and discouraging its support of terrorist groups.
Sen. Alfonse D'Amato (R-N.Y.), principal author of ILSA, called President Clinton's action "a mistake."
D'Amato said, "It will send a signal to others that they can do business as usual with Iran, at a time when Iran continues to pursue weapons of mass destruction and continues to sponsor terrorist acts."
The official Iranian news agency said, "The U.S. finally bowed down to pressure from the EU."
Explanation
Sec. of State Madeleine Albright said granting the waiver for South Pars "does not mean we support this investment; we do not. In fact, we made vigorous efforts to stop it, including representations at the highest levels of the governments involved."When it appeared that the project would nevertheless go forward, we closely studied the possible application of sanctions. We concluded that sanctions would not prevent this project from proceeding.
"While unsuccessful in stopping the South Pars deal, our efforts to discourage the Indonesian firm Bakrie from proceeding with the development of the Balal oil field contributed to Bakrie's apparent decision to withdraw, although the impact of the Asian financial crisis was also important.
"Moreover, granting waivers will prevent retaliation against U.S. firms, which the imposition of sanctions would probably engender, and avoid possible challenges based on claims related to treaties and other international obligations.
"We remain deeply concerned about Iran's support for terrorism and efforts to acquire weapons of mass destruction. While there are indications that the Iranian government may be trying to improve its relationship with the West, we have not seen substantial change in Iranian policies of greatest concern."
Albright said European nations are working with the U.S. to tighten controls on technology that would help Iran develop weapons of mass destruction and already are cooperating on measures to discourage terrorism.
She said, "As long as this heightened level of cooperation is maintained, we would expect that a review of our national interests in future ILSA cases involving Iran similar to South Pars, involving exploration and production of Iranian oil and gas, would result in like decisions with regard to waivers for EU companies.
"The U.S. remains strongly opposed to oil and gas pipelines that transit Iran and, as a policy matter, we will continue to encourage alternative routes for the transport of Caspian energy resources. We will carefully examine any proposals for trans-Iranian pipeline constructionellipsefor possible implications under ILSA and take whatever action is appropriate."
Clinton's views
At a London press conference with U.K. Prime Minister Tony Blair and European Commission Pres. Jacques Santer, Clinton said, "The EU countries have committed to enhance their cooperation with us with regard to Iran."I'd also like to emphasize that Russia, too, has taken important steps to strengthen controls over the export of sensitive technology, notably but not exclusively, to Iran, in effect establishing Russia's first comprehensive catch-all export control system.
"The actions taken by the EU and Russia advance Congress' objective in enacting the Iran-Libya Sanctions Act. It is not primarily a sanctions act. It is an act that is designed to give the incentives for all of us to work together to retard the spread of weapons of mass destruction and to support more aggressive efforts to fight terrorism.
"Therefore, the waivers we have granted today are part of our overall strategy to deter Iran from acquiring weapons of mass destruction and promoting terrorism," Clinton said.
Blair said, "We've avoided a showdown over sanctions with which we don't agree, and we've done it in a way that at least provides the chance of a solution to the problem in the future."
Santer said, "The deal today means that European companies and businessmen can conduct their business without the threat of U.S. sanctions hanging over their heads."
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