Libya: US Oil Sees Benefits in Possible ILSA Changes
By Jim Efstathiou
LONDON, April 11 (Dow Jones) - The Bush administration is expected to roll over the Iran-Libya Sanctions Act later this year, possibly with changes that could help open those countries' rich oil and gas fields to U.S. firms, analysts and industry sources said.
There is no consensus in Washington on modifying ILSA, a 1996 law that authorizes penalties on non-U.S. companies that invest more than $20 million annually in Iran, or over $40 million in Libya.
ILSA expires Aug.5.
Nor is there talk of relaxing executive order sanctions on Iran and Libya that bar U.S. firms from investing there.
However, Washington has recognized Iranian president Mohammad Khatami's efforts to open his society to the West, and generally favors initiating a dialog with Iran, observers say, and note that the U.S. has applauded the conviction of one Libyan suspect in the 1988 Pam Am bombing over Lockerbie, Scotland.
Senior Bush staff, including Vice President Richard Cheney and Secretary of State Colin Powell, are on record as believing the U.S. needs to rein in its use of unilateral sanctions. Extending an olive branch through ILSA could be a step in that direction, according to Kenneth Katzman, a Mideast analyst with the Congressional Research Service in Washington.
"If indeed Iran views (ILSA changes) positively, and responds in kind...that would likely have tremendous benefits for U.S. companies down the road," Katzman said.
Renewing ILSA with changes "strikes a balance between those that want a straight renewal to show Iran we're not happy...and those that say you need to do a little more to encourage Iran and Libya," Katzman said.
The Bush administration has yet to state its position on whether ILSA should be renewed. Congress is expected to take the lead on the legislation, and Senate Foreign Relations Committee Chairman Jesse Helms, R-NC, has held a hard line on maintaining the sanctions.
But observers say modifications to the act are under consideration.
One change could see ILSA divided to address country specific concerns. A more radical move would see the inclusion of language that anticipates the end of sanctions once Iran and Libya meet U.S. concerns.
Former President Clinton waived enforcement of ILSA in the interest of U.S.-European relations, and President Bush isn't expected to change course, so any changes won't affect non-U.S. companies.
Likewise, a modified ILSA won't directly benefit U.S. oil firms, which are banned from investing in either country by executive-order economic sanctions that are still on the books.
"At this juncture, it would appear the signals from Washington would not indicate a major policy shift in the use of unilateral economic sanctions," said an executive with a U.S. oil major. "Whether its simply rolled over...I don't know. They may draft new ILSA-type legislation just as onerous as the existing legislation."
And, whatever the outcome of the ILSA debate, analysts agree that allowing U.S. companies back into either country will require intense diplomacy between governments that are barely on speaking terms.
The U.S. began a trade embargo against Libya in 1982. In January 1986, then President Ronald Reagan issued executive order sanctions on Libya which forced the former Oasis Oil Company of Libya group - Conoco Inc. (COCA), USX-Marathon Oil (MRO) and Amerada Hess Corp. (AHC) - as well as Grace Petroleum and Occidental Petroleum Corp. to cease operations there.
Clinton extended Libyan sanctions by six months in January.
The Libyan government hasn't seized the Oasis group's assets, but recently informed the group it is reviewing the status of its concessions, and wants a clarification of when U.S. firms can expect to resume operations, according to the Middle East Economic Survey.
"Its remarkable for Libya to have respected these agreements since 1986," said Francis Perrin, editor and chief of Africa Energy and Mining. "Libya is very eager to work with U.S. companies."
U.S. conditions for the lifting of sanctions on Libya are clear. The government must acknowledge responsibility for the 1998 Pam Am bombing and compensate families of the victims.
"There has been the Lockerbie trial," Perrin said. "But the Bush administration will very probably try to press the Libyans to go a little further."
Iran has been barred to U.S. companies since the 1979 Islamic revolution, leaving the road to restored trade relations dotted with political land mines.
In 1995, Clinton issued executive orders banning U.S. companies from conducting business in Iran. As a result, Conoco Inc. was forced to give up a $550 million contract to develop two offshore Iranian fields, and the contracts were later awarded to France's TotalFinaElf and Malaysia's Petronas.
Clinton renewed sanctions in each of the following five years, and Bush extended them by six months March 13.
Washington wants Iran to stop supporting groups that oppose the Middle East peace process, to scale back its development of weapons of mass destruction, and to renounce state-sponsored terrorism.
But while Iran's National Oil Company may be eager to work with U.S. firms, the country's leadership is split, according to Perrin.
"Not all would like to see the U.S. return for political and ideological reasons," Perrin said. Meanwhile, from Washington's perspective, Iran has shown "no significant progress on U.S. interests," he added.
Washington's sanctions debate could also be colored by the outcome of Iran's June 8 presidential election, which reform-minded incumbent Mohammad Khatami is expected to win easily should he choose to run.
"We're trying to encourage a dialog with Iran," Katzman said. "The thinking by some is, if you allow ILSA to lapse, you essentially give Iran a concession, and it has not come to the table."
The administration is expected to review unilateral sanctions ahead of Congressional action on ILSA, but analysts say it may be difficult to loosen policy toward Iran or Libya under current conditions, including the Arab-Israeli conflict. |
