Iran Libya Sanctions Act
Alan Larson
Assistant Secretary of State
Economic and Business Affairs
23 July 1997
House International Relations Committee
Mr. Chairman and Members of the Committee, I would like to thank you
for the opportunity to brief the Committee on the first year of the
Iran and Libya Sanctions Act (ILSA). My comments today will focus on
the implementation of ILSA and its role in achieving our policy
objectives.
ILSA does not stand alone but must be viewed within the context of our
broader policy goal of inhibiting and deterring the efforts of Iran
and Libya to support global terrorism and obtain weapons of mass
destruction. In that context, ILSA underscores the seriousness with
which we view the unacceptable behavior of Iran and Libya, and our
desire to win multilateral support for our efforts to change that
behavior. We are actively working with our friends and allies to
develop common approaches to this problem, and thereby to achieve more
fully the objectives of the Act.
Looking at ILSA's first year, we believe that the Act has had a
significant deterrent effect on petroleum sector investment in Iran
and Libya. ILSA is not, of course, the only factor in investment
decisions, and the law has not eliminated petroleum-company interest
in these countries. Nevertheless, since the enactment of the law, the
information we have gathered and the analysis we have performed does
not support a determination that any "person" has made a sanctionable
investment as defined in the Act. There are, however, certain cases
that we are watching particularly closely. We will take appropriate
action under ILSA if we find that sanctionable activity has occurred.
Last November, the President delegated to the Secretary of State
responsibility for most of the functions vested in him by the Act. Our
strategy for implementing ILSA, which we have developed over the last
year, has three main elements. First, we have created internal
mechanisms and procedures to collect and analyze large amounts of
information. This activity is essential to keep abreast of
international commercial transactions related to the development of
Iran's and Libya's petroleum sectors, and to monitor possible
transfers of prohibited goods, services or technology to Libya. The
State Department's ILSA Unit, located in the Bureau of Economic and
Business Affairs, has a four-person staff dedicated full-time to
ILSA's implementation. The Unit, supported by specialists from other
bureaus of the Department and from other agencies of the federal
government, coordinates this intense analytical effort and ensures
that we are prepared to take timely and appropriate action.
Over the past year, the ILSA Unit has tracked a great many cases
involving activities potentially subject to sanctions under the Act.
In some cases, the facts are relatively straightforward. In many,
however, the evidence is fragmentary or ambiguous, and painstaking
analysis is required to determine what has occurred and whether the
actions involved meet ILSA's criteria for imposing sanctions, For
investment cases, for example, we must look carefully at such issues
as whether a contract has actually been entered into and when; whether
any previous agreement is relevant; whether the dollar-value threshold
for investment is met; whether the contract is one which "includes
responsibility for the development of petroleum resources" or one
which falls within the stated exceptions to the term "investment"; and
whether the activity has made a direct and significant contribution to
the enhancement of Iran's or Libya's ability to develop its petroleum
resources.
Under our established procedures, cases in which the evidence --
obtained from our intensive tracking of raw information -- may warrant
possible action are forwarded to State's internal ILSA Working Group.
This group reviews the evidence and makes recommendations about
further steps. Consultations with other agencies take place through an
Interagency Working Group Meeting before a cage is presented to the
Secretary for a final determination. Under the Delegation of Authority
from the President, responsibility for determining whether
sanctionable activity has occurred was vested in the Secretary of
State.
Second, we have worked hard to enhance the international business
community's awareness and understanding of ILSA. Since the law's
enactment, we have sought to inform international petroleum companies
and others about the risks of engaging in activities which might be
subject to ILSA sanctions. In cases where we have identified foreign
firms taking actions that raise questions under the Act, we have
contacted them directly to make them aware of our concerns. So far,
none of the petroleum firms contacted in this way has finalized the
investment in question, though some apparently are continuing to give
those activities serious consideration. As I have indicated, the
collection and analysis of information on relevant activities is a
continuous process, and we will of course take appropriate action if
we find that sanctionable activity has occurred.
Third, we have kept other governments informed of our efforts to deter
activities contrary to the Act. ILSA encourages consultation with
foreign governments; when we have contacted foreign firms about
questionable activities, we have also sought to engage the relevant
governments in a discussion of our concerns. In some cases, we have
raised the issue at the highest level of government. This approach
helps to underscore to others the seriousness with which we are
implementing ILSA.
What results has this strategy achieved so far? As I have said, we
believe that ILSA has had a significant deterrent impact on petroleum
sector investment in Iran and Libya. Press reporting and statements by
oil company officials suggest that concern about ILSA sanctions is an
important factor in company decision-making, and has had a chilling
effect on investment.
No foreign petroleum firm has yet invested in the eleven oil and gas
projects tendered by Iran last year, although some firms do,
apparently, remain interested.
Libya represents a somewhat different situation from Iran. Foreign
firms have been involved in Libya's ail industry for many years, and
activities may be carried out under pre-ILSA agreements. With respect
to that aspect of ILSA which deals with violations of the existing UN
sanctions against Libya, we are engaged in an intensive process of
data collection and review, building on mechanisms already in place to
track activity of this kind. We are currently investigating a number
of cases, some of which are reaching advanced stages. We will take
appropriate action whenever we find firm evidence of activities which
meet the requirements for imposing sanctions under the Act.
Our active efforts to implement ILSA have not been without cost, ILSA
has been the source of increasing friction in our bilateral relations
with some of our closest friends and allies, especially in Europe. The
threat of ILSA sanctions against firms from these countries, and their
assertion that we are using US law to impinge on their foreign policy
prerogatives and commercial interests, have prompted sharp reactions.
The European Union and its member states have voiced strong opposition
to the law, and the EU has enacted blocking legislation designed to
prevent its member states from complying with the provisions of ILSA.
We are trying to keep European countries focused on the overriding
importance of concerted action on Iran and Libya. The April 1997 US-EU
Understanding on the Libertad Act commits us and the Europeans to work
together toward the objective of meeting the terms which would warrant
waivers under Section 4(c) of ILSA with regard to Iran. Several
European countries have already taken important and useful action on
Iran. We have made clear, however, that economic measures are
necessary to justify such a waiver.
It is important to keep in mind that, despite ILSA's chilling effect
on some investment plans during the last year, there is little
likelihood that the Act alone can deter all of the investment and
commercial activity in Iran and Libya that we oppose. ILSA is only one
factor in corporate decisions about investment. Diplomatic opposition
and blocking legislation in other countries discourage cooperation
with ILSA. This is why our diplomatic efforts to encourage a common
multilateral approach on Iran are essential. By fully integrating ILSA
as an important component of our broader strategies with regard to
Iran and Libya, we can maximize its impact and move closer to
realizing the overriding policy objective of changing Iranian and
Libyan behavior. This remains our prime objective as we move into the
second year of ILSA implementation. Thank you.
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