The Middle East / May 2001
By Larry Luxner
From a nondescript office at 16th and K Streets in Washington, D.C., a little-known lobby backed by big business is working hard to abolish U.S. trade sanctions against some of the world's most despotic regimes.
The National Foreign Trade Council (NFTC) says the United States currently imposes sanctions of one form or another against 70 countries, with "significant" sanctions against seven nations: Afghanistan, Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria.
J. Daniel O'Flaherty, vice-president of the NFTC and executive director of the U.S.-South Africa Business Council, says that while refusing to trade with these countries may make people feel good, in economic terms these sanctions are not only ineffective but counter-productive.
"The United States pays a high cost for these sanctions," he said, citing a study by the Institute for International Economics that claims sanctions deprive the U.S. economy of 25,000 jobs and at least $15 billion a year in lost business.
"We don't dispute that sanctions are a useful tool. We do dispute that they are a universal solution to a foreign-policy dilemma," said O'Flaherty. "China, for example, is a repressive dictatorship. It is also a very important country, clearly in transition to something else, but we don't know to what. So, the question is how do you best influence them, by isolating them or by engaging them? Our answer is obviously the latter."
The NFTC, supported by 550 member companies, is now working hard to have sanctions against Iran lifted.
"In January 1995, our members expected that a Republican Congress would be more friendly than a Democratic Congress, and were therefore surprised when that turned out not to be the case," said O'Flaherty, explaining that U.S. economic policy toward Iran is governed by two laws: executive orders dating from 1995, which President Bush renewed in mid-March, and the 1996 Iran-Libya Sanctions Act (ILSA), which was imposed on the two Muslim countries as punishment for supporting anti-Israel terrorist activity.
O'Flaherty says the two regulations constitute a "double barrel" devised by the influential American-Israel Public Affairs Committee "for the purpose of excluding foreign oil and gas firms from Iran and Libya in order to deny them dollars for developing weapons of mass destruction."
Under ILSA, the U.S. government may levy penalties against foreign companies that make annual investments of more than $20 million in Iran's oil industry, though the Clinton administration waived the penalties in every case, arguing they could damage relations with key allies of the United States.
ILSA comes up for renewal on Aug. 5, and according to the Washington Post, many analysts believe Congress will allow it to expire or modify it to focus the embargo more narrowly around weapons-related materials. The Bush administration is considering similar changes to United Nations sanctions against Iraq.
The NFTC's 2001 agenda therefore consists of two efforts: first, lobbying against renewal of the extraterrorial sanctions imposed by ILSA, and urging the Bush administration to change the 1995 executive orders that prohibit most trade and investment with Iran. Both efforts involve engaging policy-makers and elected officials on the long-term benefits of more normal commercial ties with Iran, and the cost and ineffectiveness of the current unilateral sanctions policy.
"Iran is a very big country, Libya is somewhat less important, and Iraq is a special case," says O'Flaherty. "Our job is not to show that these countries are not that bad. U.S. policy toward Iran should not be contingent on domestic policy (either Iranian internal issues or the Arab-Israeli conflict). There are significant U.S. strategic interests in Iran that warrant an adjustment in our policy. It's not up to us to say what policy the Bush administration should adopt. But we are encouraging Congress and the Bush administration to permit an opening to Iran that would allow more commercial relations."
Such openings have been gradual. In 1999, the United States loosened regulations under the Treasury Department's Office of Foreign Assets Control to permit the export of agricultural and medical goods to Iran. In March 2000, those rules were loosened even further to allow Iranian carpets, pistachio nuts and other luxury goods into the U.S. market.
Shahriar Afshar, president and founder of the San Diego-based Iranian Trade Association, says trade between Washington and Tehran is negligible, but that in 1979 -- the last year the two countries had diplomatic relations -- U.S. agricultural exports to Iran alone came to $500 million.
"We think building an economic bridge to Iran is the best way to engage the Iranians in a dialogue. It's in the national economic interests of both countries," says Afshar, whose member companies include Exxon-Mobil, Caterpillar, Phillips Petroleum and Chevron. "We know that American companies want to export products to Iran, and Iranians are eager to export their products. We definitely have an economic common denominator we should take advantage of."
Afshar says that unlike the Cuban-American community, which generally opposes a relaxation of the U.S. trade embargo against Cuba, only a "small segment" of Iranian-Americans are against better ties with Tehran. At any rate, he said, the sanctions have been totally ineffective.
"It would be a tremendous falsehood to say that U.S. sanctions have changed Iran's domestic or foreign policies in any way, shape or form for the better. I don't think sanctions have changed anything domestically. They've had an economic impact on both American and Iranian companies, but if you can buy wheat from the Australians for the same price, or get Italian oil companies to invest in Iran under the same terms, the impact of ILSA is lost."
The most promising markets for U.S. companies in Iran are, of course, energy related -- oilfield equipment, drilling operations and the like. O'Flaherty named Halliburton, Baker Hughes, John Deere and Exxon-Mobil among the companies eager to re-establish diplomatic and trade ties between the two nations. In fact, when Vice President Dick Cheney was chief executive of Dallas-based Halliburton in the mid-90s, he blasted the Iran sanctions as "self-defeating."
In the meantime, U.S. companies have lost out as European competitors such as Total move in. "That is not unique," he said. "There are other oil development projects from which U.S. companies have been excluded."
Meanwhile, last year, Iranian trade with the European Union skyrocked by 64%, climbing to over $12 billion.
Asked if the U.S. sanctions have hurt Iran, O'Flaherty says: "Maybe a little. But in a globalized economy, the unilateral sanctions are a self-inflicting wound. We have no leverage anymore."
Adds Afshar: "The timing is bad. The Bush administration has not had a chance to come out with its own Iran policy. Iranian elections are just around the corner in June, and for AIPAC to push for ILSA renewal in the middle of these two uncertainties is just a poor exercise of power. If the administration could be given enough time to assess its Iran sanctions policy, then we'd be in better shape."