Rogue States: Why Washington May Ease Sanctions
Business Week, May 7
By Stan Crock in Washington, with Chester Dawson in Tokyo, Rose Brady
Should the U.S. overhaul or even lift economic sanctions on rogue states
such as Iran, Libya, and Iraq? A major battle will take place in Washington
in the coming months over just this issue.
The fight pits powerful interests such as the pro-Israeli lobby and
the U.S. oil industry against each other. And it is sure to preoccupy the
Bush Administration and Congress. The Administration is currently reviewing
both U.S. energy needs and its policy on sanctions. Congress is expected
to vote this summer on whether to renew the five-year-old Iran-Libya Sanctions
Act, which penalizes U.S. and foreign companies that invest in the two
countries' energy sectors. The law expires on Aug. 5. Meanwhile, because
of eroding support, the U.N. is likely to revise its tough sanctions policy
toward Iraq.
ALL BETS ARE OFF. The issue poses a dilemma for the Bush Administration.
Vice-President Richard B. Cheney, former CEO of oil equipment giant Halliburton
Co., has long considered U.S. sanctions policy ineffective. Richard N.
Haass, recently appointed chief of the policy planning office at the State
Dept., has also called for gradually easing sanctions on Iran in exchange
for better behavior.
But any Administration or congressional decision on sanctions will be
tightly bound with the politics of the targeted countries. Iran is the
most immediate problem. Presidential elections are scheduled there for
June 8. President Mohammad Khatami, who has been fighting to introduce
reforms in the Islamic Republic, hasn't yet announced his candidacy. If
he runs and loses, all bets are off. But if he runs, wins, and strengthens
his position, the U.S. would be in a better position to ease sanctions--especially
if Khatami makes a conciliatory gesture such as renouncing terrorism. The
American Israel Public Affairs Committee, a Washington-based lobby, would
do its best to block such a shift in policy before a clear change in Iran's
conduct, however.
Libya and Iraq are also troublesome. Tripoli has declined to pay damages
for the infamous Pan Am 103 bombing, even though a Libyan was convicted
for the incident. Saddam Hussein refuses to admit U.N. weapons inspectors
to Iraq.
Even so, pressure from business is intensifying. ``American farmers,
workers, and companies have sacrificed without any progress toward U.S.
foreign policy objectives,'' wrote Donald A. Deline, Halliburton's director
of government affairs, to Senate Majority Leader Trent Lott (R-Miss.) on
Apr. 18.
The reason business argues for an overhaul: massive leakage in the sanctions
regime. In March, for example, Japan's state-owned aid bank ponied up 85%
of the financing for a $3 billion oil deal with Iran, a move aimed at paving
the way for rights to develop part of the country's Azadegan oil field.
South Korea wants to bid on $5.5 billion in energy construction projects
in Iran.
Although a review of sanctions policy is under way, Administration officials
are reluctant to discuss how they plan to square their goals on energy
and foreign policy. One way may be to move from broad prohibitions on trade
to narrower curbs on items for building weapons of mass destruction such
as nuclear technology. Secretary of State Colin L. Powell has proposed
such ``smart sanctions'' for Iraq. Former National Security Adviser Robert
C. McFarlane has advised the Administration that such an approach could
also work for Iran and Libya. ``I'm optimistic the sanctions regime will
be changed,'' he says.
Signs are growing that the Bush Administration would like to go that
way. But it will have to be prepared to take a lot of short-term heat for
eventual economic gain.
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