Washington, DC - While all eyes were focused on the threat of a nuclear arms race in South Asia, the Clinton administration quietly made a decision that could have just as devastating consequences for U.S. national security and for our allies in the Middle East: lifting U.S. sanctions on investment in Iran.
With little fanfare, Secretary of State Madeleine Albright announced on May 18 that the administration would not penalize the French oil company, CFP-Total, for investing $2 billion in Iran's oil industry, despite the requirements of the Iran-Libya Sanctions Act (ILSA), which was overwhelmingly approved by Congress and signed into law by President Clinton in August 1996.
The law requires the President to impose a series of penalties on foreign companies which aid Iran in rebuilding its aging oil and gas industry. The logic for these sanctions is simple: since Iran earns more than 80% of its hard currency revenues from energy exports, curtailing its ability to export oil will reduce Iran's ability to finance a large-scale military build-up or the massive investments it needs in order to build ballistic missiles and nuclear weapons.
Iran is already close to producing a 1300-kilometer range ballistic missile, the Shahab-3. According to commercial satellite photographs published recently in Jane's Intellience Review, the Iranians have prepared a launch site with underground storage bunkers in Western Iran for these missiles, that will allow them to reach targets throughout the Persian Gulf and in Israel. With the expanded income it will derive from a revitalized oil industry, Iran will be able to accelerate production of the longer-range Shahab-4, and a second series of missiles designed to threaten New York. For as long as Iran is ruled by a regime aggressively pursuing such weapons which considers terrorism as a legitimate instrument of foreign policy, sanctions are the single most effective means the United States has for constraining Tehran's bad behavior.
For nearly two years, just the threat of U.S. sanctions prevented foreign oil companies from investing in Iran. Even the French firm, Total, was hesitant to brave U.S. sanctions alone, and secured hard commitments from Russia's Gazprom and from Petronas of Malaysia to participate in the $2 billion South Pars project before signing the contract with Iran. Just for extra measure, Total sold off its U.S. assets, to prevent any U.S. retaliation. Total's behavior showed that the ILSA sanctions were a credible threat. And yet, the administration has squandered this important tool.
The repercussions of the U.S. decision are already beginning to be felt. Iran has said it will announce a series of 20 oil and gas projects to foreign bidders at a conference in London on July 1-3., and the line of foreign oil companies lining up to bid is long.
Senator Alfonse D'Amato, who crafted ILSA, released a statement saying the administration's action "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."
If anything, D'Amato's reaction was understated. Among the foreign oil companies that have already announced they were opening commercial negotiations with Iran over future oil and gas ventures are Elf Aquitaine, Agip, Royal Dutch/Shell, British Petroleum, Monument Oil and Gas, Enterprise Oil, Lasmo, and British Gas. The Australian group, BHP, said it was opening an office in Tehran to explore new oil and gas ventures, joining BP and Shell who announced they were opening Tehran offices earlier in the month.
Not to be outdone, France's Total said it intended to explore additional new contracts with Iran, while Shell has expressed interest in building a 1,600 km pipeline to bring gas from Iran's South Pars field in the Persian Gulf to Pakistan, in a consortium with British Gas, Petronas, and Gaz de France. Shell also confirmed on June 1 that it had held talks with the National Iranian Oil Company, NIOC, on investing an additional $2 billion to expand Iran's North Pars natural gas field.
What we are seeing is the wholesale collapse of a carefully crafted approach toward Iran, that had the support of the Clinton administration and Congress. The Administration claims it has received guarantees from the Europeans to support the U.S. in curtailing Iran's efforts to acquire nuclear weapons and the missiles needed to launch them, but when asked to specify what these guarantees means, has repeatedly been unable to provide any significant detail.
The Europeans sense that their long-held dream of cornering Iran's potentially large market and excluding the Americans is at hand, and they are ready to do anything to accomplish it- including transfer military production facilities, as France has been accused of doing recently by an Iranian opposition group, the Organization of the People's Fedayeen Guerrillas.
U.S. oil companies are understandably angry, and have already begun to lobby the administration to allow them to participate in Iranian oil and gas development projects as well." The United States is now in the process of ceding the tremendous energy resources of much of the Persian Gulf and Caspian basin to foreign companies -- effectively withdrawing from one of the world's most plentiful energy supply sources," said Frank Kittredge, President of the National Foreign Trade Council and Vice Chairman of USA*Engage, the official spokesman for the oil industry lobby on the sanctions issue.
Assistant Secretary of State Martin Indyk has repeatedly diminished the threat of Iran's revolutionary regime, saying it has entered a "thermidor" period, meaning that realism has trumped ideology in the minds of Tehran's leaders when it comes to troublesome issues such as Iran's support for international terrorism, its nuclear weapons program, or its violent opposition to the Middle East peace process.
But this is manifestly not true. In a May 10 editorial, which expressed "the policies of the United States government," the Voice of America broadcast the State Department's assessment that Iran remains "the most active terrorist supporter" in the world, despite the rise to power of "moderate" cleric Mohammad Khatami last August.
President Khatami has stated his intention to liberalize Iranian society, but after more than a year in power he has done nothing to moderate the behavior that threatens U.S. security interests in the region. On the contrary, Mr. Khatami has gone out of his way to reinforce the Iranian regime's opposition to Israel by recently giving a hero's welcome to Hamas leader Sheikh Ahmad Yassin, and declaring Israel " the continuation of fascism." In earlier comments to visiting Lebanese Hezbollah leaders, Khatami called Israel "the greatest manifestation of international terrorism," and Israel's leaders "a gang of racists." Moderate words, these are not.
Certainly, Mr. Khatami's overwhelming victory over the regime's hand-picked candidate for President last year was an event of tremendous political significance. But it was not a sign that the regime had changed; it was an expression of revolt by the Iranian people, who are fed up with a minority, clerical regime that has been unable to restore Iran to its rightful place in the council of nations, and has been unable to respond to the overwhelming thirst for freedom and civil liberties of ordinary Iranians.
Lifting economic sanctions now will only shore up a dying regime, and discourage democratic change in Iran. Worse, it will provide the regime with the financial resources it needs to more vigorously pursue its ballistic missile and nuclear weapons programs. With help from Russia and China, Iran will have missiles capable of reaching U.S. forces stationed in Saudi Arabia, and of attacking Israel, within a year. Unchecked by sanctions, it will have nuclear warheads to put on top of them soon thereafter. Taking the pressure off Iran at this juncture is not only foolish, it is a virtual guarantee that the nuclear genie will finally erupt in the Middle East. Do Mr. Clinton and Mr. Gore really want such a responsibility on their hands?
Kenneth Timmerman is the Executive Director of the Foundation for Democracy in Iran (FDI). FDI is a private, non-profit corporation registered in the State of Maryland. FDI materials, including the FDI News Update, are available free-of-charge via the Internet at http://www.iran.org/.