Decision looms on Iran

Push is coming to shove over U.S. economic sanctions against Iran and countries that do business with it. The Department of State must decide whether third-party provisions of the Iran-Libya Sanctions Act (ILSA) apply to an international group hoping to develop natural gas reserves off Iran. If the provisions indeed apply, the administration of President Bill Clinton must decide what to do about it.

Third-party sanctions surely do apply to Total of France, Petronas of Malaysia, and Gazprom of Russia and their $2 billion deal to develop South Pars gas field. The ILSA threshold is only $20 million. Yet imposing the sanctions would be wrong.

The oil and gas industry should urge the administration not only to refrain from enacting third-party sanctions but also to seek repeal by Congress of ILSA. The issue is less a maverick regime in Iran than it is an overdeveloped tendency in Washington, D.C., to stomp commercial interests in the name of foreign policy.

The sanctions dilemma

Mischief from Tehran didn't shove the Clinton administration into its dilemma. Neither did the companies working in Iran with the blessings of their own governments. It is ILSA that forced Clinton to seriously consider slapping trade restraints on friends-an outrage that would surely be met with retaliation. And the president deserves part of the blame. His executive order against business in Iran encouraged Congress to pass the wretched law.

Escape from this trap should be easy, though. The Iranian "change" sought by U.S. policy is at hand. Popular President Mohammad Khatami has appealed for better relations with the U.S. and drawn explicit scorn from Iran's spiritual leadership. This newly obvious-though hardly new-fracture in the Iranian power structure ought to pass for change. So the U.S. can unravel the sanctions mess and not even have to call it a mistake.

Political cosmetics aren't important. What is important is that the U.S. end sanctions both as a way out of a foreign-relations jam and as a positive gesture to Khatami and the citizenry that elected him. Support for Khatami would weaken Iranian trouble-makers working through a shadowy and historic alliance between factions of the Shiite clergy and merchant class. By ending sanctions, the U.S. would help distinguish friends from foes in this complex network and, for the first time, show that it understands distinctions need to be made.

Stiffing Total, Petronas, and Gazprom, on the other hand, would be disastrous. It would weaken Khatami, whose authority is democratic, not constitutional. For the moment, it is Khatami, not the antiwestern clerical council at whose pleasure he governs, who can bring Iranians chanting into the streets. A blow to the South Pars deal would hurt Khatami and the Iranian masses that support him and his boldly expressed taste for rapprochement.

The U.S. must not subvert Khatami as it did his predecessor, Hashemi Rafsanjani. The former president took a large risk in 1995 when he approved an offshore development deal with Conoco Inc., in response to which Clinton banned U.S. business with Iran. The rebuke chilled whatever desire Rafsanjani had for improving relations with the U.S. and probably pushed him closer to antiwestern factions among Iran's clerical rulers. Nothing similar should happen to Khatami.

U.S. interests

Any U.S. move to support Khatami would run afoul of Sen. Alfonse D'Amato (R-N.Y.), who sponsored ILSA and who will never lighten up about the Islamic republic. The administration should treat D'Amato's crusade for what it is: a campaign of demonization that conflicts with national economic and foreign policy interests.

Iranians have bypassed the clerical elite that rules them and declared what they want. And what they want aligns with American interests-including resistance to terrorism, control of weapons of mass destruction, and Middle East peace. How can the U.S. not respond?

Copyright 1998 Oil & Gas Journal. All Rights Reserved.