Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, Feb. 18 --The White House told the US Congress that an existing law designed to discourage non-US companies from investing in either Iran or Libya should continue to give President George W. Bush wide discretion on when or if sanctions are appropriate.
When Congress reauthorized ILSA (Iran Libya Sanctions Act) in 2001, it mandated that the White House issue a report before March 2004 that recommends whether the controversial law should be terminated or modified.
The legislation currently sunsets in August 2006: Some in Congress want to repeal the law while others want to strengthen it (OGJ Online, Oct. 22, 2003). ILSA calls on the White House to impose harsh economic sanctions if a country or company outside the US invests more than $20 million in either country. But the law also allows the president to waive or exempt countries from penalties. Since the law first was enacted in 1996, no US president has imposed sanctions on a country or company that chose to make investments in Iran or Libya.
Industry sources and free-trade advocates had hoped that the White House would use the report as an opportunity to give US companies a green light to reestablish business relationships with Libya. US officials have signaled that recent cooperation by the Libyan government over antiterrorism measures may mean US policy changes in the near future. Currently US companies are barred from making any investment in either country, and unlike ILSA, violators have been prosecuted.
Libya focus
It appears that the White House, however, is not yet ready to signal any profound shifts with regard to Libya. And business interests familiar with the report criticized the White House about being noncommittal about when or if sanctions law should be changed.
"It doesn't say anything," said one lobbyist who represents multinational energy interests.
The White House report is circumspect about ILSA's effectiveness and does not directly call on Congress to repeal the law.
The report said that, "to the extent ILSA delayed or succeeded in discouraging petroleum investment in Iran or Libya, one might posit some impact from reduced oil supply and higher prices."
Yet the report goes on to say: "but investment lost to Iran or Libya might have been channeled to other producing areas, so the net effect would be difficult to measure."
White House officials also touched on US allies' concerns that ILSA represented a kind of "secondary boycott" that violated international trade rules. US officials acknowledged the law has been an "irritant" to key allies, although the US' enforcement of the law to date has "not led to a rupture or to a diminution of cooperation on common concerns." But the White House warned Congress that conditions could change if the US ever imposed sanctions. Such a step could "lead to serious strains with some of our closest allies, with negative consequences across a very broad range of issues."
The report was sent to Capitol Hill earlier this month, about a week before Japan announced plans to sign an oil development agreement with Iran.
Responding to the news Feb. 18, the US State Department called the $3 billion deal disappointing; it said US policy toward Iran remains the same.
"It's the same as it's always been. Our policy has always been, with respect to Iran, to oppose petroleum investment there," said a State Department spokesman. "We remain deeply concerned and -- about deals such as this and disappointed that these things might go forward. So we've, I think very consistently, expressed these views. The Government of Japan is quite aware of our views on this."
In its February report, the White House gave ILSA credit for "contributing to nonproliferation and counterterrorism objectives with respect to Iran and Libya." Officials noted that, "ILSA has served as a platform for emphasizing and reiterating our concerns with respect to Iran and Libya."
Furthermore, the White House gave ILSA at least some credit for discouraging a Caspian oil export route through Iran.
Changing relationships
The White House report does acknowledge that the US' relationship with Libya now is decidedly different from that of 2001 when the law was reauthorized.
"The Libyan authorities have taken important steps to fulfill their commitments, authorizing the removal of sensitive weapons-related documents and critical materials related to its nuclear weapons program and ballistic missile capacity, as well as beginning the destruction of unfilled chemical munitions."
Conversely the White House notes that there has been no fundamental change in US policy regarding Iran since 1996 because of longstanding issues regarding weapons of mass destruction and antiterrorism cooperation.
