Lawmakers are set to debate whether to continue restricting foreign access to Iranian and Libyan oil resources as punishment for those countries’ support of terrorism.
The Iran-Libya Sanctions Act — commonly known as ILSA — was passed unanimously in 1996 and calls for sanctions against foreign companies investing in Iran’s and Libya’s energy sector. American oil and gas companies are barred from trading with Iran and Libya by executive order.
Intended as a deterrent to trade with the two rogue nations, ILSA appears to be effective: in the five years since the measure became law, only seven of more than 50 international deals pursued by Iran have gone through.
A five-year extension of ILSA was proposed Wednesday and already has the support of almost 200 lawmakers in the U.S. House of Representatives.
The State Department said earlier this month that Iran is “the most active state sponsor of terrorism.” Iran also is targeted because it actively opposes the Arab-Israeli peace process and seeks to acquire weapons of mass destruction.
By the Iranian government’s own account, the law has “led to the disruption of the country’s economic system, caused a decline in its gross national product, weakened the country’s ability to deal with international leaders and impeded credit transactions,” according to a 1998 report submitted to the United Nations.
Libya is included in the act because it refuses to acknowledge state responsibility for the bombing of Pan Am Flight 103 over Lockerbie, Scotland in 1988.
Howard Kohr, executive director of the American Israel Public Affairs Committee, called earlier this month for ILSA’s extension, noting that Iran continues to encourage Hezbollah and Palestinian groups to attack Israel and spends almost $100 million annually to support terrorist groups.
Proponents of the bill say ILSA also has hurt Iran’s ability to acquire weapons by cutting off its access to hard currency.
“It just is an indication that ILSA has deprived them of billions of dollars that would be going into their war machine,” D’Amato said.
In addition, because ILSA has prevented Iran from modernizing its oil development and maintenance equipment, it is believed that Iran soon will be forced to designate most of its oil supply for domestic use, possibly even becoming an importer in the next 10 years.
ILSA is set to expire in August. Lawmakers are concerned that letting it expire would signal weakness to Iran and give foreign corporations an advantage over the American oil and gas industries.
The major opponents of the legislation are the business and foreign trade communities, which argue both that the sanctions impede free trade and that — because a waiver provision creates loopholes in the sanctions — they hurt American corporations’ ability to compete with U.S. allies.
William Reinsch, a former Commerce department official in the Clinton administration and now president of the National Foreign Trade Council, said the program is counterproductive to American interests and has no chance of achieving its goals.
“The reality is that it is the world price of oil and the ability to produce it that determines Iran’s and Libya’s income from oil and gas production, not U.S. sanctions,” Reinsch said. “And it is that sustained and rising price level that is encouraging exactly the investment that ILSA sought to block.”
The organization says the sanctions policy alienates key trading partners, such as Canada and the European Union.
The Bush administration has not taken a formal position on ILSA, but is in the midst of a thorough review of policy toward the two countries.
The bill, which has bipartisan support among the House leadership, will be reviewed in committee early next month and is expected to move quickly toward a full House vote.