May 18, 1998
PRESS BRIEFING BY SENIOR BACKGROUND OFFICIALS
3:50 P.M. (L)
THE WHITE HOUSE
Office of the Press Secretary
(Geneva, Switzerland)
_________________________________________________________________
For Immediate
Release May 18, 1998
PRESS BRIEFING
BY
SENIOR BACKGROUND OFFICIALS
Press Plane
En route to Geneva, Switzerland
3:50 P.M. (L)
SENIOR ADMINISTRATION OFFICIAL: There were four major pieces
of business that we did today between Europe and the United States, which
dealt with some of most contentious issues we've had over the last several
years. One regarding the Iran Libya Sanctions Act, ILSA; the second dealing
with Helms-Burton; the third dealing with a joint statement on political
cooperation in which we talk about ways in which we can cooperate more closely
to avoid the kinds of problems we've had over ILSA and Helms-Burton. And then
last, my colleague will give a briefing on the new trade initiative that was
announced.
With respect to ILSA, I'll try not to be too tedious. The
Secretary of State made about a dozen calls last night, culminating a year of
negotiations. And let me give you just a little bit of background. The Iran
Libya Sanctions Act was passed in 1996, and it has a range of sanctions from
denying Ex-Im Bank loans to not allowing imports or exports from foreign
companies that invest in Iran's oil and gas production in amounts over --
initially, it was $40 million and then it was dropped to $20 million. This
has been a huge bone of contention by the Europeans.
A particular transaction came to our attention that focused
everybody's energy on this issue, and there were threats of retaliation and so
forth with respect to it. And that was a deal involving three companies: a
large French company called Total; the largest Russian company, in which the
Russian government still has a 40 percent ownership, called Gazprom; and
one of the largest Malaysian companies, called Petronas. Gazprom
and Petronas had 30 percent shares, and Total a 40 percent share,
in what was a multi-billion dollar proposed contract in the South
Pars field in Iran.
We made every effort to break that deal up at the
very highest levels. The President wrote to Chirac, to Yeltsin.
The Secretary of State raised this issue. The Secretary of
Defense, myself, Tom Pickering, senior officials throughout the
government -- with all the senior officials -- to try to
encourage these three companies, or even one of the three, to
back out of the deal on the ground that as ILSA indicates, giving
Iran additional revenue will potentially allow it to acquire
weapons of mass destruction and foment terrorism. And that was
one of the purposes, although only one, as I'll describe of ILSA.
We were successful in breaking up a separate deal
involving a Canadian company called Bow Valley, and an Indonesian
company called Bakrie -- helped I might say significantly by the
Asian financial crisis -- in a different field, when Bakrie
backed out of the investment a few months ago. But Petronas,
despite the Asian financial crisis in Malaysia if fairly cash
rich, and they did not.
We then had to determine whether or not sanctions
under ILSA would be effective. We looked very hard at that and
we determined that sanctions would not deter any of the three
companies from proceeding. The reason being Total, before this
contract was formally announced, divested itself of almost all of
its U.S. assets. Gazprom, the Russian company, after the deal
was announced unilaterally canceled a $750 million line of credit
that they had with our Ex-Im Bank, which was the only lever we
had. And Petronas, the Malaysian company, had no connection to
the U.S. market of any consequence.
The statute allows two types of waivers. One is a
so-called 4-C country waiver, which if given allows any
investment from the country given the waiver to not be subject to
the sanction. A second type of waiver provided by the statute is
a 9-C waiver, which is a project-specific waiver and only covers
the particular project in question.
We were trying to find a way to use the statute to
accomplish its broader purpose. Although it is a sanction
statute, it is much more than that. The basic purpose of the
statute -- and it says so and admonishes the administration to
try to accomplish that -- is to build a multi-lateral regime to
deprive Iran of the capacity to develop weapons of mass
destruction and their delivery systems which we know Iran is very
much attempting to do, and to deter Iran's capacity to support
terrorism.
So we began working with Russia, and separately with
the European Union, on that purpose. And as a result of
breakthroughs reached this week with the European Union and with
Russia, we now have achieved a great strengthening of the export
control regimes. Let me start first with Russia.
With respect to Russia, Russia had virtually no real
export control regime. And what we had to do is almost start
from scratch. On January 22nd, an executive order was issued
which would for the first time establish a so-called catchall
export control regime that would deal with any civil or military
high tech products that could be diverted for end use. On May
14th, just a couple of days ago, a second order was issued. And
for the first time it provides real teeth to the January
executive order. It establishes supervisory bodies in all
enterprises dealing with missiles or nuclear technologies. It
gives the Space Agency control over all of their agencies that
have any product that can go to a suspect end user.
We established a joint U.S.-Russian working group to
help monitor this. Procedures were established for Russian
exporting enterprises with red flags which will indicate when a
proposed purchaser is a suspect end user. It establishes a range
of measures for licensing military exports. It is a first real
legal enterprise for a catchall export control system in Russia.
We realize it needs much more in the way of implementation. At
yesterday's bilateral meeting between President Yeltsin and
President Clinton, President Yeltsin in the strongest terms
affirmed that it was in Russia's national interest not to have
its high tech products diverted to countries which -- including
Iran -- are trying to develop weapons of mass destruction.
With the European Union, there was already a very
high level of cooperation on nonproliferation. But in a joint
statement they have gone even further and developed an enhanced
system of export controls. For example, there will be a virtual
presumption of denial for diversion to suspect end users and we
will share information about suspect end users. In a real
breakthrough for us, they specifically indicated they will give a
high priority to nonproliferation concerns regarding Iran, and
Iran is mentioned specifically.
There will be establishing new controls over
so-called intangible technology transfers; that is, transfers
done through e-mail and electronic means. We will work together
to develop export control systems for third countries that don't
have them. We will be working together, for example, to help
with the Russian system. We also got commitments from the
European Union to ratify all 11 counter-terrorism conventions by
all of their member states and all of their future member states.
As a result of this enhanced level of control of
weapons of mass destruction, we have really begun to build a
multi-lateral regime that ILSA anticipates. So as a result of
that, the Secretary of State, whose decision it is to make this
decision with respect to waivers, decided to exercise a 9-C
project waiver, both again on the ground that the sanctions would
not have been affected, and to recognize the effect we were
having in developing this tighter export control system for
Russia's WMD program.
We are required to set forth a number of national
interests because 9-C is called a national interest waiver. And
we, to summarize, set forth the following kinds of national
interests: first, the need to continue to build this
multi-lateral regime and the recognition that if we had
sanctioned some of the largest companies of the countries
involved there would have been less desire to cooperate with us
in developing further this WMD program against Iran.
Second, with respect to Russia, Yeltsin is in the
midst of a Russian ratification process in the Duma for START II.
And we were very concerned that any sanction might affect that
negatively. We also recognize that in working with the European
Union, there were a number national interest factors. We are
working with them and, to some extent with the Russians as well,
on issues ranging from Iraq to Kosovo and Bosnia.
We also do not believe we would have gotten the
second discipline that I'm going to discuss in a minute, the
Helms-Burton discipline, if we had sanctioned a European company.
It seemed to us particularly inappropriate to sanction a
Malaysian company, particularly one we would have no affect on,
in the midst of the Asian financial crisis. And so for all of
those reasons, we exercised a 9-C waiver.
With respect to the European Union, we went a step
further and we indicated that if they continued to keep their
high level of cooperation on controlling weapons of mass
destruction and helping with terrorism, that similar projects for
oil and gas production in Iran by European companies could expect
to receive like treatment, with the exception of pipeline
projects that transit Iran from the Caspian area. The reason
being that we strongly oppose such pipeline because we think a
pipeline carrying Caspian oil and gas through Iran to the West
would give Iran a disproportionate influence on the development
of economic and political events in the newly independent caucus
in Central American states.
With respect to Russian companies, we make no such
presumption, or Malaysian companies, because they have not
developed that high level of cooperation.
So the long and short of it is we at the same time
have avoided a major conflict with Europe, but we've done so in
ways that not only are compatible with the statute, but advance
the basic purposes of the statute.
Helms-Burton was also part of this multifaceted
negotiation. Permit me just to give you a very brief background
on Helms-Burton. The Helms-Burton Act was passed at a time when
Cuban MIGs shot down unarmed planes with American citizens. The
purpose of Helms-Burton -- which is one of the most widely
misunderstood acts that I've ever seen -- was simply to deter
investors from investing in illegally expropriated property in
Cuba.
The reason these became tied together in the mind of
the European Union is they called both ILSA and Helms-Burton
extra-territorial acts. We disagreed with that, but that was
their designation; that is to say that we in our sanctions don't
simply sanction our own companies or prohibit our own companies
from investing or doing business in a particular country, but we
attempt to sanction the companies of a third country.
In April of 1997, myself and Leon Brittan negotiated
what I would call a truce in which the WTO, World Trade
Organization suit that the European Union brought to challenge
Helms-Burton was postponed in return for the following framework
which we've now negotiated over the last year. And that
framework, which has now come to culmination late last night,
establishes the following equation -- and I'll go into more
detail, but the basic equation is this:
If the European Union would agree to establish
binding, legal disciplines -- for the first time internationally,
no one has ever done this before -- to bar future use of
illegally expropriated property and to deter investments in
illegally expropriated property -- if they would agree to that,
including in Cuba, then we would agree to seek waiver authority
under Title 4 of the Act. Brief summary: Title 3, we have
waiver authority which we have to exercise every six months, that
is unchanged by this agreement. Title 3 is the lawsuit title
which permits Americans to sue companies using their expropriated
property. The President has on four occasions waived that title,
meaning that it suspends those suits. But we do not have waiver
authority under the visa title and, in fact, we have imposed that
sanction, for example, on a Canadian company called Sherrit,
whose executives and their spouses and children are not permitted
into the United States.
Under the negotiation which we reached, it is really
quite path breaking and it will permit us to now seek the
amendment for Title 4 to get waiver authority, as we have for
Title 3.
The disciplines do the following. First, there's an
outright ban in investing in any illegally expropriated property
in the future. Second, a claims registry is set up -- an
international claims registry -- on which claimants who say their
property has been expropriated can file a claim. And that
already establishes a sort of yellow light for anyone thinking
about investing in that property.
Third, and this is particularly important
politically to Senator Helms and Congressman Menendez and
Congressman Burton and Senator Torricelli, and Ros-Lehtinen and
Lincoln Diaz-Balart and others -- this also applies in a very
specific way to Cuba and it applies in the following way. A
country which has a pattern or practice of expropriation is
treated in a special way. And even in cases where expropriations
occurred prior to the effective date of these new disciplines,
these disciplines can apply.
For the first time since Castro has taken power as a
result of an investigation that an expert team for the European
Union has done off of some 6,000 claims filed by Americans for
Cuba for illegally expropriated property, the European Union has
said that it appears, using a sampling of those claims, that
these expropriations appear to have been in violation of
international law and that these new disciplines would apply.
And that if in the sampling they looked at those are similar to
the others, the other 6,000 -- which will be the case because
they almost all were done under Cuban Law 851, which was clearly
in violation of international law -- that these disciplines will
apply.
Now, what does it mean the disciplines apply? It
means that if a European investor wants to invest in Cuba, in
almost every instance you have to go to a commercial assistance
agency to get risk insurance, to get investment insurance, to get
some kind of insurance because of the risk of investing in Cuba.
And the essence of this agreement is that no commercial
assistance agency in Europe can allow or can give such assistance
to an investor in cuba without satisfying itself that it's not
providing such assistance on illegally expropriated property.
We believe this will provide the greatest protection
for property rights worldwide -- quite apart from Cuba -- ever
done, and it will kill investment in the greatest way since
Castro came into power with respect to expropriated U.S.
property. And Castro is trying at fire-sale prices to sell that
property off to foreign investors to bail out his economy. This
will be a real blow for both property owners; and with the
cooperation of Europe, a real blow to Castro's efforts to use
illegally expropriated American property, to take advantage of
it. So that is the essence of both of these. There are many
more details provided in the fact sheets which myself, Assistant
Secretary Larson, who was very helpful in negotiating these; Tony
Wayne is here, our Deputy Assistant Secretary.
I'll be glad to take questions on both ILSA and
Helms-Burton and then I would turn the mic over to my colleague,
because we have a major trade initiative with the European Union
which she will brief on, as well. So perhaps we could start --
if people could come up and I'll try to repeat the question
that's asked.
Q Two questions. What does Congress have to do
on ILSA. And the second question is, in this permanent waiver
that you're granting, there's a line in there that also seems to
indicate that we would grant similar waivers to other companies
interested in doing the same thing.
SENIOR ADMINISTRATION OFFICIAL: The question was
what is Congress's role in all of this. It's important to
recognize that the waiver authority that we exercise under ILSA,
the 9-B project specific waiver, is provided for specifically by
the statute. We do not need new legislative authority. We are
exercising the authority that as given to us by Congress. No new
authority is necessary.
With respect to Helms-Burton we would need an
amendment to Title 4 to give us the waiver authority before these
new disciplines would apply. I have consulted very closely with
leading members of Congress. I can't speak for them, you'll have
to ask them. But I can say even before we got further
concessions from the European Union over the weekend that they
were quite impressed with the application of this to Cuba.
There's never been anything like this before. And our belief is
that it's much more effective to have a joint effort to deter
investment in Cuba than it is for us to try to act unilaterally;
just as we believe it's much more effective to have a
multi-lateral regime with many other countries trying to deny
Iran weapons of mass destruction than it is trying individually
to do so ourselves.
Q The second part of that question was on -- the
waiver seems to indicate you would grant similar waivers to other
companies.
SENIOR ADMINISTRATION OFFICIAL: Okay. The question
was asked about the issue of similar projects. We wanted to
provide an element of predictability so if the next contract was
announced -- and we believe that there are others that will be
announced for investment in Iran in oil and gas -- we didn't go
through this same very tortuous and difficult process.
So what we have said is that similar projects to the
Total-Gazprom-Petronas project for oil and gas production in Iran
would get like treatment so long as there is continued
cooperation of the enhanced variety we have by the European
Union, with respect to these weapons of mass destruction.
We have, however, accepted from that similar
treatment, or like treatment, any transit pipeline that transits
through Iran -- we believe that that is so fundamentally
violative of our security interests and our energy interests and
those of the caucus and central Asian states that there we would
look at it on a case-by-case basis under ILSA. We're not saying
we would or wouldn't sanction it; we would have to look at the
transaction. But we are not getting any presumption or
expectation of a waiver in that situation.
Q Regarding Helms-Burton, the only thing the EU
gets from this deal is an amendment to Title 4, there is no
change with Title 3; is that correct?
SENIOR ADMINISTRATION OFFICIAL: The question was
the only thing the European Union gets under Helms-Burton is an
effort and amendment at Title 4. The answer is yes. You will
see language in there which simply says that we'll seek soundings
with respect to Congress on Title 3, but we're under no
obligation to seek an amendment, only with respect to Title 4.
I, please, want to make it clear: the similar
treatment or like treatment for similar projects only applies to
the companies from the European Union countries, the reason being
their extremely high level of cooperation on weapons of mass
destruction, enhanced by this new agreement. We are not --
underscore not -- providing such expectations for future Russian
deals, even though the Russians have made sufficient progress for
a 9-C deal.
So what we call this -- to be sort of in our lingo
-- is a 9-C-plus waiver for Europe, a 9-c waiver, meaning that
there is an expectation with respect to similar projects for the
European companies. There is none for Russia because they have
not yet demonstrated that these new laws they put into effect for
controlling proliferation will be effectively implemented and
there are a number of issues still outstanding there.
Q When will you submit the request for the
amendment to Congress and when would you expect action on it?
SENIOR ADMINISTRATION OFFICIAL: We are going to
work on an expedited basis to draw up the amendment. We think it
will be introduced shortly. We, of course, can't control the
congressional calendar. But the disciplines applying to Cuba,
which are very effective we think, do not go into effect until
the waiver is passed.
Q First off, the waiver that you're seeking to
Title 4 would not have any time restriction? It wouldn't be a
six month waiver? And, secondly, you mentioned that one of your
national security justifications was concern over ratification of
START II. Did the Russians make any representations that they
would pass START II if they got this?
SENIOR ADMINISTRATION OFFICIAL: The question is the
length of time for the waiver under Title 4. Title 3, as I
mentioned, allows us to waive upon a certification every six
months. But that is because the President has to make a
certification and to do so will promote democracy in Cuba. And
as part of the agreement that I reached with Sir Leon Brittan in
April of '97, the European Union has something called a common
position in December of '96. And that common position says that
the European Union countries will not improve or expand their
political or economic relations with Cuba unless there are
specific improvements in human rights and democracy in Cuba.
Title 4 is different, however. Since Title 4 is
tied to these disciplines, and since these disciplines would be
permanent, under Title 4 we would seek a permanent waiver. Now,
any time the President can indicate that they're not applying;
but the effort is what we call a no-time waiver.
Now, with respect to what assurances President
Yeltsin, Foreign Minister Primakov and others -- but Yeltsin
yesterday, in a very strong statement to President Clinton said
that he was going to make every effort to assure that this new
legal regime was implemented, he was going to put his personal
backing behind it, he was going to make sure that the bureaucracy
understood the importance of this. And because Russia is, in
fact ,one of the real concerns that we have in terms of Iran's
acquiring weapons of mass destruction, this is particularly
important to us. But we have to monitor it very carefully.
we're going to make sure that this is actually implemented. And
that's why we haven't given any further expectation of Russian
deal.
Q Who's going to assess the validity of the
property claims?
SENIOR ADMINISTRATION OFFICIAL: With respect to an
applicant, say, in Europe who submits a petition or an
application to get commercial assistance to help them invest, it
will be the responsibility of the commercial assistance agency in
Europe to do the screening and to be the filter. We will provide
information. We are going to cooperate with them so that
hopefully when we get knowledge of such an application we can
submit information that we have. Claimants, U.S. claimants can
submit information. And they have to make a determination that
the property is not illegally expropriated before they can grant
the commercial assistance.
They are also under an obligation to keep us
continually informed of applications.
I think that perhaps I ought to let my colleague
come one.
SENIOR ADMINISTRATION OFFICIAL: The Transatlantic
Economic Partnership which we launched today is a major new trade
initiative. This builds on the new transatlantic agenda and it
arises from discussions that Ambassador Barshefsky had with Sir
Leon Brittan almost a year ago.
It is an initiative that is both broad-based in
scope and pragmatic in approach. It will deepen our economic
relations, reinforce our political ties and reduce trade
frictions that have plagued our bilateral relationship.
There are three basic elements to this new
initiative. First, we will reduce barriers that affect
manufacturing, agriculture and services sector. In the
manufacturing area we will focus on standards and technical
barriers that American businesses have identified as the most
significant obstacle to expanding trade.
In the agricultural area we will focus on regulatory
barriers that have inhibited the expansion of agriculture trade,
particularly in the biotechnology area. In the area of services
we will seek to open our markets further and to create new
opportunities for the number of service industries that are so
active in the European market.
The second basic element of the initiative is a
broader, cooperative approach, both short- and long-term. Under
this element we will seek innovative ways to address a wide range
of trade issues. For example, on electronic commerce we have
agreed not to impose duties on electronic transmissions, as well
as develop a work program in the WTO for this very significant
sector.
In intellectual property we will seek to adopt
common positions and effective strategies for accelerating
compliance with WTO commitments. In government procurement we
will seek to promote government procurement opportunities,
including promoting compatibility of electronic procurement
information and government contracting systems. In labor and
environment areas we will seek innovative ways to promote our
shared values around the world. In the competition area we will
seek to enhance the compatibility of our procedures with
potential significant reductions in cost for American companies.
The third significant element of this initiative is
that we will, as President Clinton stated today, engage a wide
spectrum of our public in this initiative and seek their input so
that it can shape and inform the process.
Are there any questions? None.
END 4:30 P.M. (L)
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