The hearing will come to order. It is a pleasure to welcome Undersecretary Eizenstat, Dr. Acton from the Congressional Budget Office, and our distinguished panel of private sector witnesses to the first of several hearings our Committee plans to hold on U.S. economic sanctions policies.
With the nuclear genie out of the bottle on the Asian Subcontinent, the strongest possible deterrents are needed, short of military action, to ensure against any move from weapons testing to weapons deployment in this very dangerous part of the world. As the Administration searches for the best way to respond to the nuclear proliferation crisis that is emerging in South Asia, the policy tools at the ready are the economic sanctions contained in the Arms Export Control Act of 1994.
This measure, sponsored by Senator John Glenn, was supported by all Members of our Committee even though it contained no waivers or sunset provisions. It was enacted into law as part of the 1994 State Department Authorization Bill. I am sure that my good friend and colleague, Lee Hamilton will recall sitting in this room and working with the Senate on those provisions during conference. My recollection is that there was nothing but praise for the good work of Senator Glenn.
If our European Union partners would have adopted similar measures at the recent summit meeting in London, a multilateral approach might have deterred Pakistan from following India's example with tests of its own. Yet, the President didn't even try to persuade our trading partners to take these tough measures, opting instead for quiet diplomacy and strong public statements.
The President's evident decision to turn away from multilateral sanctions on nuclear proliferators raises serious questions about his long term strategy and willingness to enforce and implement the terms of other sanctions laws, including the Iran Libya Sanctions Act, or ILSA, and the Libertad Act, also known as the Helms-Burton Act.
The non-binding policy agreements and the special treatment accorded at the summit to a French, Russian and Malaysian consortium and all other foreign oil companies investing in Iran only add to these questions. Regrettably, the President secured little in the way of firm and binding commitments from the EU in exchange for his national interest waiver of sanctions against a multi-billion oil and gas investment in Iran by a consortium of French, Russian and Malaysian companies -- a decision that took the Administration eight months to reach.
When the President signed ILSA in August of 1996, he trumpeted the measure as a way to curb Iranian and Libyan support for international terrorism and promised to enforce it even though it might run into serious objections from EU member states. Yet two years later, the President has waived a sanctionable investment in Iran's South Pars gas field despite his admission that Iran, even with its change of government, continues to promote terrorism.
Moreover, at the recent summit meeting, the Administration retreated still further by essentially granting a blanket waiver for all such future projects in Iran and Libya. The failure to make any reference to the possible sanctionability of pipeline projects - as opposed to investments in the exploration and production of oil and gas resources - enabled the European Council to state on May 25th that no pipeline or infrastructure project would be subject to sanctions under ILSA.
This statement contradicts a joint U.S.-EU policy statement of May 18 whereby the U.S. insisted that investments in the construction of such pipelines might, in fact, be sanctionable under the provisions of the statute. Sending the wrong signal at the wrong time, the exercise of this waiver on the South Pars investment leaves the Administration virtually powerless to deter the full list of 100 petroleum development , refining, and pipeline projects recently released by the Iranian national oil company.
Despite President Khatemi's offer of dialogue with the American people, the words have not been matched by the deeds: that country continues to support international terrorism and to develop weapons of mass destruction. Iran remains a major terrorist threat around the world and a source of instability for our allies throughout the Middle East. Moreover, it is developing long-range missiles that will be able to reach Europe and our own shore line.
Because the Iran Libya Sanctions Act, ILSA, was designed to meet these twin threats to our troops and to our allies in the Persian Gulf region, I stand ready to work with my colleagues to begin the process of amending this law to ensure that the Administration has the leverage it needs to stop the next generation of pipeline projects transiting Iran.
Removing the national interest waiver for projects of this type would, in my mind, send the clear signal that we are implementing ILSA not only to contain terrorism and the spread of missile technology but also as part of a comprehensive strategy for the Caspian region. On the one hand, it would deter Iran's ability to act as a regional hub for the refining and transporting of its gas and oil resources and, on the other , it would enhance our ability to promote alternative pipelines in cooperation with Turkey, Azerbaijan, Georgia and other states neighboring Iran.
It is frequently asked if the Administration has any support for a sanctions-based policy toward Iran and Libya. The answer is a resounding "YES", according to a May 8th study of public attitudes on European-American Issues sponsored by the German American Marshall Fund.
Seventy-five percent of the respondents in this opinion poll indicated that we should "refuse to trade with Iran and Libya whether or not our allies do because it is the right thing to do and eventually our allies might follow suit." Sixty-eight percent rejected the argument that the sanctions "will just hurt the masses....without affecting the people on top. "
Nor has the Administration made its case, at least to this Member, on the advisability of softening its approach toward property expropriated by Cuba. On May 18th, 1998, the Administration reached a preliminary agreement with the European Union on an "Understanding with respect to disciplines for the Strengthening of Investment Protection." This political agreement would be applied around the world in exchange for a waiver of Title IV of the 1996 LIBERTAD Act.
In it, the Europeans have finally acknowledged that their nationals are profiting from stolen American property in Cuba. Notwithstanding this this admission, this agreement has a number of serious deficiencies. While I appreciate the Administration's efforts to bring the Europeans around to accepting the common sense principle that no one should trade in stolen property, this agreement, regrettably, does not represent a viable substitute for the sanctions embodied in the LIBERTAD Act.
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