Oil industry sees mixed signals on evolving US Iran policy--a Mar. 20 update

Updated text is shown in boldface

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Mar. 15, updated Mar. 20 -- US oil companies hoping to invest in Iran continue to receive mixed signals from the White House and congressional officials.
A White House official who spoke to the American Iranian Council Mar. 13 stressed the White House wants to see an improved relationship with Iran, according to industry officials. But even as recently as this week, there were fresh roadblocks to normalized relations between the two nations.

While National Security Council advisor Zalmay Khalilzad avoided the controversial "axis of evil" label made by President George W. Bush last January, he also made clear the US remains frustrated with Iran's conservative "Supreme Leader" Ayatollah Khamenei for ignoring the clear wishes of elected officials, industry officials said.
Last January, President Bush linked Iran with North Korea and Iraq, saying "states like these, and their terrorist allies, constitute an axis of evil, arming to threaten the peace of the world."
Khalilzad also indicated the US is not ready to lift trade sanctions the oil industry strenuously opposes until Iranian officials cease what Khalilzad called a "hostile" relationship between the two countries, lobbyists said.
The White House says Iran must abandon efforts to acquire weapons of "mass destruction," such as nuclear warheads, and stop supporting terrorist groups.
Some in the Bush administration are also concerned Iran is trying to bully nearby countries the US has a strategic interest in. Last week, a high-level State Department official warned Iran it should stop trying to pressure its oil-rich Caspian neighbors to follow an agenda not supported by US political or commercial interests (OGJ Online, Mar. 8, 2002). Those comments by Deputy Sec. of State Richard Armitage and similar remarks by White House officials have given US oil companies the clearest indication yet the administration is not yet prepared to allow American investment in Iran.

Optimism remains
Despite that harsh rhetoric however, some politicians within Congress and even in the Bush administration hold out hope the US relationship with Iran could change over time.
Department of State officials, for example, indicated the US has no plans to start slapping sanctions on European countries that invest in Iran's potentially lucrative oil sector, even though the president last fall renewed, at Congress's request, a law designed to punish foreign countries or companies that spend $20 million or more a year in either Iran's or Libya's oil business.

Senate interest
Meanwhile, the chairman of the Senate Committee on Foreign Relations Joseph Biden (D-Del.) told the AIC he believes the Bush administration wants dialogue with Iran. But if talks are ever to occur, the president should consider policies "that do not rest on the principle of reciprocity."
Biden said that the most entrenched elements in Iran seek to perpetuate Iran's isolation through confrontation with the outside world.
To help change the status quo, Biden suggested the president relax US sanctions on Iran to permit American nongovernmental organizations to financially support "democracy-building" activities in Iran."It is unfortunate that it is our own government, not hard-line clerics in Tehran, that have prevented practitioners of democracy in America from aiding their struggling counterparts in Iran," he said.
Biden called on the US to "acquiesce" in Iran's bid to begin accession talks to the World Trade Organization. The senator argued the WTO application process alone could force structural changes that increase transparency and undermine the key power bases of hard-liners.
Another suggestion by the chairman was for the US to help Iran "indirectly" with refugee and narcotics matters.
Biden also invited his counterparts from the Iranian parliament to visit Capitol Hill.
Whether the White House would try to block such an action was unclear. State department officials indicated there may not be a problem with a "legislative" visit.
"The United States continues to promote and pursue cultural, scientific, educational and people-to-people exchanges between the United States and Iranian people as a means of promoting positive change inside Iran and increasing understanding between Americans and Iranians," a State department official said Mar. 19.
However, the White House last week would not allow an Iranian diplomat stationed at the United Nations to travel to Washington, DC, for the AIC conference in which Biden made his remarks.
Biden stressed that his suggestions would not be a panacea for repairing US-Iranian relations.
"We should be under no illusions that these steps by themselves have a decisive impact. The direction that Iran takes, the form of government it chooses, are ultimately matters for the Iranian people to settle."
But, as he told a reporter following his speech, "I am an optimist. There is an inevitability of Iran, whether it is this president or another—something has to happen."

Sanctions working
Exactly what the US plans next is uncertain, according to lobbyists and policy analysts. Biden's remarks were largely conciliatory and dovetail the feelings of some influential Republicans, such as fellow Committee on Foreign Relations member Richard Lugar (R-Ind.). But there is also a bipartisan coalition of lawmakers who strongly believe existing US economic sanctions must continue to force Iran to rethink its position on issues of concern to the US.
"The US-Iran relationship should be cognizent of Iran's policies toward Israel," said Keith Weissman, deputy director of the American Israel Public Affairs Committee, a group that successfully lobbied both Congress and the administration to renew various economic sanctions against Iran.
Weissman said that Iran was included in President Bush's now famous "axis of evil" speech because "they did it the old-fashioned way: They 'earned it' through supplying weapons to groups seeking to destroy Israel by any means necessary.
Until Iran's hardliners change, there is no reason for the US to lift sanctions," which he said even the Iranian government acknowledges are working.