Secretary of State Madeleine K. Albright
Statement on "Iran and Libya Sanctions Act (ILSA): Decision in the South Pars
Case" London, United Kingdom, May 18, 1998 As released by the Office of the Spokesman
U.S. Department of State
Iran and Libya Sanctions Act (ILSA): Decision in the South Pars Case
I have determined that the investment by the firms Total (France), Gazprom
(Russia), and Petronas (Malaysia) in the development of Iran's South Pars gas field
constitutes activity covered by the Iran and Libya Sanctions Act of 1996. This
determination follows an extensive review of the actions taken by the firms in this case
as they relate to the provisions of the law.
At the same time, exercising the project waiver authority of Section 9(c) of the Act, I
have decided that it is important to the national interest to waive the imposition of
sanctions against the three firms involved. Among other factors, I considered the
significant, enhanced cooperation we have achieved with the European Union and Russia in
accomplishing ILSA's primary objective of inhibiting Iran's ability to develop weapons of
mass destruction and support of terrorism.
Granting this waiver does not mean we support this investment; we do not. In fact, we
made vigorous efforts to stop it, including representations at the highest levels of the
governments involved. When it appeared that the project would nevertheless go forward, we
closely studied the possible application of sanctions. We concluded that sanctions would
not prevent this project from proceeding.
While unsuccessful in stopping the South Pan deal, our efforts to discourage the
Indonesian firm Bakrie from proceeding with the development of the Balal oilfield
contributed to Bakrie's apparent decision to withdraw although the impact of the Asian
financial crisis was also important.
My decision to grant section 9(c) waivers in this case is based on the conclusion that,
taking all factors into account, it is the option that best serves U.S. interests. I also
decided that it would not be appropriate to grant country-wide waivers under Section 4(c)
of ILSA.
In choosing among the available options, I took into account a number of factors
relating to our national interests. In the case at hand, waivers will enhance our ability
to work with the Europeans, Russia, and Malaysia on a host of other bilateral and
multilateral concerns. For example:
Moreover, granting waivers will prevent retaliation against U.S. firms, which the
imposition of sanctions would probably engender, and avoid possible challenges based on
claims related to treaties and other international obligations. These considerations
buttress the view that a waiver in this case best serves our national interest.
We remain deeply concerned about Iran's support for terrorism and efforts to acquire
weapons of mass destruction. While there are indications that the Iranian government may
be trying to improve its relationship with the West, we have not seen substantial change
in Iranian policies of greatest concern.
ILSA has been a valuable tool in making clear to others the seriousness of our concerns
about Iran's behavior. The Act encourages the Administration to develop multilateral
cooperation to deter Iran from acquiring weapons of mass destruction and supporting
terrorism. Through vigorous diplomatic efforts, we have made progress toward these goals.
I believe that my decision in the South Pars case will promote even more progress and will
be more effective than sanctions -- which will not stop the project -- in achieving ILSA's
objectives.
We already have a very high level of cooperation with France and our other European
allies on nonproliferation issues. As reflected in the joint U.S.-EU statement announced
today, the EU is taking additional steps, separately and in cooperation with us, to
strengthen further their policies in this area. This includes a EU commitment to give high
priority to proliferation concerns regarding Iran and a commitment to stepped-up efforts
to prevent dual-use technology transfers where there is a risk of diversion to weapons of
mass destruction programs.
This new commitment also involves U.S.-EU cooperation on developing better controls
over "intangible" (e.g., electronic) technology transfers, on closer
coordination of export-control assistance to third countries, and on increasing diplomatic
efforts to stem technology exports by other countries to proliferators, including Iran.
On counterterrorism, we also enjoy a very high level of cooperation with our European
partners. We have issued a joint statement with the EU that highlights the EU's commitment
to cooperation and identifies specific common objectives. We are also working with EU
members and other countries to ensure ratification of all eleven counter-terrorism
conventions. The EU will be giving particular attention to obtaining adherence by Central
and Eastern European states that are seeking EU membership.
More can be done, and we will continue to work with our European allies to broaden our
nonproliferation and counterterrorism cooperation even further. In light of their
essential cooperation, and as long as this heightened level of cooperation is maintained,
we would expect that a review of our national interests in future ILSA cases involving
Iran similar to South Pars, involving exploration and production of Iranian oil and gas,
would result in like decisions with regard to waivers for EU companies.
The United States remains strongly opposed to oil and gas pipelines which transit Iran
and, as a policy matter, we will continue to encourage alternative routes for the
transport of Caspian energy resources, such as trans-Caspian pipelines and the Baku-Ceyhan
route, and the Caspian Pipeline Consortium route. We will carefully examine any proposals
for trans-Iranian pipeline construction across Iran for possible implications under ILSA
and take whatever action is appropriate.
Russia has announced new undertakings, including a January 22 Executive Order that
strengthens the government's authority to control missile technology and other transfers
of concern. As a result of a subsequent executive order issued on May 14, 1998, the
Russian Government is now taking significant steps to implement the earlier order to
ensure compliance, including establishing supervisory bodies in all enterprises dealing
with missile, or nuclear technologies. The positive start of our joint export control
working group is another promising step. While the Russian Government is acting to
implement fully President Yeltsin's policy, considerable work remains to be done. We will
remain closely engaged with the Russian Government at all levels to ensure effective
enforcement.
On May 17, G-8 countries, including key European countries, Canada, Japan and Russia,
made an important commitment to deny any kind of assistance to programs for weapons of
mass destruction and their means of delivery. They also committed to enhance their
cooperation on export controls, including the exchange of information. We have also made
nonproliferation progress regarding Iran with other countries. For example, Ukraine
recently agreed to forgo all nuclear cooperation with Iran, including making a commitment
not to go through with the sale of turbines destined for Iran's Bushehr nuclear plant.
Malaysia has not been actively engaged with us on nonproliferation issues, nor has it
been a source of nonproliferation concerns. It has acted as a force for moderation in
Islamic circles. Malaysia is our partner for the upcoming session of the U.S.-ASEAN
Dialogue, which will address for the first time the establishment of export control
procedures. Imposing sanctions on a major Malaysian firm would have disrupted our efforts
to work with Malaysia and other countries to address the Asian financial crisis.
We will review, periodically, the rational interest factors applicable to ILSA cases
and to our waiver policy to determine whether adjustments are needed.
We also remain intensely concerned about the potential for terrorist actions emanating
from Iran, and we would expect our friends and allies to take appropriate steps in
response to any Iranian involvement In terrorist activities.
We fully recognize the dangers to Israel of weapons of mass destruction from its
enemies in the regions dramatized by Iraq's SCUD attacks in 1991. The Administration has
worked closely with Israel to address possible missile threats and will continue to do so.
Since 1988, the U.S. has jointly funded the ARROW missile defense system; provided Israel
with space-based early warning notification of ballistic missile launches, and jointly
funded a feasibility study of the Israeli Boost Phase Intercept Concept.
Finally, I want to emphasize that our position on Iran has not changed. Although Iran's
new government has made it clear that it wants increased cultural contacts between the
U.S. and Iran, it is not clear how far it is willing to go in changing those policies of
greatest concern to us. We therefore will continue to press for enhanced international
cooperation to counter Iran's efforts to acquire weapons of mass destruction and their
delivery systems, and its support for terrorism. Today's decision is designed to
strengthen that cooperation.