US SHOULD NOT EXTEND IRAN-LIBYA SANCTIONS ACT

The governments of Iran and Libya are international menaces. Most other governments agree about that but not about how to respond.

The governments of Iran and Libya are international menaces. Most other governments agree about that but not about how to respond.

The US has responded to Iranian and Libyan misbehavior by punishing itself and threatening its friends. A bipartisan effort in the US Congress would prolong the folly.

Sens. Chuck Schumer (D-NY) and Gordon Smith (R-Ore.) have introduced a bill that would extend through August 2006 the Iran-Libya Sanctions Act of 1996 (ILSA), which expires in August. In the House, Rep. Benjamin Gilman (R-NY) has filed similar legislation.

The bills are reported to have widespread support (OGJ Online, June 7).

Under ILSA, the US claims the right to punish companies from other countries that invest more than $20 million/year in Iran and $40 million/year in Libya.

The law is folly because the US has no intention of enforcing it.

Sponsors of the extension legislation say ILSA has discouraged investment in the maverick countries. Their evidence: the poorly performing Iranian and Libyan economies.

While those economies are indeed struggling, the reason has to do more with sloppy governance than with ILSA.

The law might have slowed investment in Iran and Libya during its early years. It's not slowing investment now.

Companies from Europe, Scandinavia, Canada, and Asia are flocking to Iran and Libya. They're investing money. They know the US won't enforce ILSA. Assertions to the contrary are rubbish.

In fact, the US would be foolish to enforce ILSA, and everyone outside the US knows that to be so.

Enforcing ILSA would risk provoking trade conflict of varying intensity with at least the UK, the Netherlands, France, Austria, Germany, Italy, Spain, Sweden, Norway, Russia, Canada, Malaysia, Indonesia, Japan, and India. Companies based in those countries have or are discussing investments in Iran, Libya, or both.

Obviously, the US is alone in thinking that investment and trade barriers represent proper responses to Iranian and Libyan incivility.

Outside the US, therefore, the move to extend ILSA will be taken as arrogance. The impression might be appropriate if there were any chance for US experimentation with ILSA's challenge to other countries' sovereignty. Because the chance doesn't exist, the impression is unduly respectful.

ILSA represents no threat to companies based outside the US. It represents no threat to the sovereignty of governments that don't share Washington's view about how to deal with Iran and Libya. And because companies from those countries recognize ILSA's unenforceability and are investing at will, it represents no threat to Iran or Libya.

ILSA just panders to base instincts in US politics and keeps US companies from pursuing opportunities available to competitors. It makes easily fooled Americans feel good about a get-tough law that's tough only on Americans.

Extending it, therefore, wouldn't be arrogant. Extending it would be stupid.

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