U.S. Waives Sanctions on Iran Gas Deal

Resolving one of the thorniest trade disputes between the United States and Europe, President Clinton announced Monday that sanctions will be waived against companies involved in a $2-billion multinational gas project in Iran.

The president, finishing up a week in Europe with a day full of talk about trade, also tried to ease transatlantic tensions over the 1996 Helms-Burton Act, which punishes foreign companies for certain investments in Cuba, by asking Congress to exempt European Union countries from those sanctions.

The two deals, which were struck only hours before Monday morning’s U.S.-EU summit after a year of intense negotiations, provided the Clinton administration with a way out of the untenable situation of having to impose tough sanctions on important allies.

“We’ve avoided a showdown over sanctions with which we don’t agree,” British Prime Minister Tony Blair said at a news conference here with Clinton and European Commission President Jacques Santer.

But across the ocean in the U.S. capital, the Republican senators who wrote the relevant legislation voiced disapproval.

The multinational project to develop Iran’s South Pars offshore gas fields violates the Iran-Libya Sanctions Act of 1996, which mandates sanctions on any foreign company that invests more than $20 million in Iran’s energy sector.

Monday’s action on Iran concerns only one project, a consortium of three firms--France’s Total, Russia’s Gazprom and Malaysia’s Petronas--that is developing South Pars. But its significance was enhanced both because that project represents the largest investment in Iran since the 1979 revolution and because Secretary of State Madeleine Albright announced that the same decision would be made if other European companies became involved in similar deals with Iran.

Although Albright said the decision, which was hers to make, did not reflect a change of policy regarding Iran, it clearly sent a strong message about Washington’s improving disposition toward Tehran.

“The Iranians will have to be tone deaf not to understand what we’re saying,” one official said.

The White House decision to waive the sanctions is widely expected to be a major boon to Iran’s troubled economy at a critical juncture, as other European and foreign firms try to get a piece of development action in the world’s second-largest gas reserves.

This could provide a major boost to Iranian President Mohammad Khatami, who was elected a year ago and promised to “break the wall of distrust’ with the West.

Albright said that she decided to waive the penalties even though the U.S. opposes the Total project because she concluded that the sanctions would not prevent the deal from taking place but would do serious damage to U.S. relations with important allies at a critical time.

For instance, she said, it would hamper efforts to prod the Russian Duma, the lower house of parliament, to ratify the START II nuclear disarmament treaty at a time when the United States believes it is urgent that progress be made in nonproliferation to help prevent a nuclear arms race in South Asia.

In exchange for removing the threat of sanctions on the consortium, the Clinton administration won pledges from the EU and Russia to step up their efforts to deter terrorism and prevent the transfer of technology to Iran that could be used to develop weapons of mass destruction.

The Iran-Libya law’s biggest backer in Congress, Sen. Alfonse M. D’Amato (R-N.Y.) expressed his disapproval Monday.

“The decision is a mistake,” D’Amato said. “It 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.”

The strongest support for the action came, ironically, from Conoco, the firm that lost the $2-billion deal to develop Iran’s offshore gas field to the winning consortium after the White House issued an executive order banning U.S. firms from investing in Iran.

Ten days before the U.S. announcement, Conoco President Archie W. Dunham wrote Clinton urging him to waive the sanctions on the Total deal and “seize the opportunity to chart a new course in U.S.-Iran relations.”

Clinton also asked Congress to amend the Helms-Burton Act, which punishes foreign companies for investing in projects in Cuba involving property that was expropriated without compensation by withdrawing visa privileges for their top executives.

The president is asking Congress to permanently waive the visa sanction.

In an effort to sell Congress on the change, Clinton forged an agreement with the EU that its member states will cooperate with the United States to deter investment in property that has been confiscated in violation of international laws around the world, including, but not only, in Cuba.

The initial response from Congress was not supportive.

“What the EU has offered [in exchange] doesn’t even pique the interest here on Capitol Hill,” Marc Thiessen, spokesman for Sen. Jesse Helms (R-N.C.), coauthor of the law, told Associated Press.

The president seemed willing to raise the ire of congressional Republicans in order to appease the Europeans. Both Helms-Burton and the Iran-Libya Sanctions Act have enraged Europeans who criticize them as examples of the United States’ intrusive, or “extraterritorial,” policies.

Later in the day, in Geneva, the president spoke at a celebration of the 50th anniversary session of what has become the World Trade Organization. He proposed a new round of global talks to promote freer trade, inviting the group to hold an upcoming meeting in the United States. Cuban President Fidel Castro also attended the event.

“Think about the opportunity that has been presented to us, the chance to create a new international economy in which markets and open economies spark undreamed-of innovation and prosperity,” Clinton said.

Shogren reported from London and Wright from Washington.