U.S. Plans to Impose Sanctions on Foreign Firms Investing in Iran

In an effort to impede Iran’s attempted nuclear buildup, leading members of Congress, with the support of the Clinton administration, have been seeking to send a blunt message to the international business community: Choose between trade with the United States or Iran.

As Iran attempts to attract $7 billion in foreign investment to bolster its declining oil industry, the administration and Congress are working together to impose sanctions against foreign firms with substantial investments in Iran’s energy sector.

“A straight line links Iran’s oil income and its ability to sponsor terrorism, build weapons of mass destruction and acquire sophisticated armaments,” Peter Tarnoff, undersecretary of state for political affairs, recently testified before the Senate Banking Committee.

“Any government or private company that helps Iran to expand its oil [sector] must accept that it is indirectly contributing to this menace,” he said.

Iran has desperately sought foreign capital to bail out its economy and to finance its nuclear program.

Tehran hopes that foreign investment can make up for what the international community has denied in the areas of trade and credit.

Earlier this year, when the American firm Conoco entered into a contract to develop an Iranian oil field, the Clinton administration issued an executive order banning such deals. A French company, Total SA, then picked up the project.

Now, to discourage foreign companies such as Total from indirectly subsidizing Iran’s nuclear development, the administration and Congress are seeking to cut off Iran’s access to force capital.

Last week, the Senate Banking Committee unanimously approved sanctions against any foreign company that has made an investment totaling $40 million or more that “contributes significantly and materially” to Iran’s energy sector.

The measure, which has strong bipartisan support, could pass the full Senate within weeks.

In the House, Rep. Benjamin Gilman (R-N.Y.), chairman of the International Relations Committee, introduced a similar bill that now has 51 co-sponsors.

Under the Senate bill, sponsored by Sen. Alfonse M.D’Amato (R-N.Y.), sanctioned firms could be denied access to financing sponsored by the Export-Import Bank of the United States or to licenses for exports to the United States.

The president could also prohibit mergers, acquisitions or takeovers involving U.S. companies that might provide Iran with cash, as well as limit funding from American banks to sanctioned firms, according to the measure.

“If we are going to persuade the Iranian regime that its efforts to achieve nuclear status, its support for international terrorism and its horrendous human rights abuses” should all end, “we must end the funding with which they are paying for it all,” D’Amato said in introducing the legislation before the banking committee, which he heads.

Initially reluctant to approve broad sanctions, the White House agreed to support the Senate bill when D’Amato toned down an earlier call for a “trade embargo” against the companies.

But some members of Congress, particularly in the House, appear intent on restoring broader sanctions.

The prospect of sanctions does not sit well with some of America’s closest allies, including Great Britain, France and Germany. They see the legislation as unwarranted interference in the activities of foreign companies.

Moreover, some experts warn that sanctions could prompt European retaliation in the form of a trade war.

Winning approval of the sanctions has been a major lobbying focus for the American Israel public Affairs Committee, which views Iranian nuclear armament as no less than the most dangerous security threat on Israel’s horizon.

Indeed, Iran’s nuclear potential remained an issue of great concern to Israeli Prime Minister Yitzhak Rabin toward the end of his life.

It would be tragic, Rabin had said, if a nuclear Iran emerged just as the prospect of a lasting peace became possible between Israel and its Arab neighbors.

Prime Minister Shimon Peres and President Clinton discussed the issue of sanctions in Washington last week, agreeing to strengthen strategic cooperation against Iran.

Speaking at a gathering of Jewish leaders on Capitol Hill, Peres warned of the dangers of a “very strong and powerful and menacing fundamentalistic movement run and organized by Iran,” which “may get a hold of nuclear weapons.”

“God forbid, imagine that Hitler would have a nuclear bomb,” Peres said. “I don’t want to compare anything, but nuclear weapons in evil hands are a menace for us as Jews, and for free people all over the world.”