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104th Congress Rept. 104-523
HOUSE OF REPRESENTATIVES
2d Session Part 1
IRAN OIL SANCTIONS ACT OF 1996
April 17, 1996.--Ordered to be printed
Mr. Gilman, from the Committee on International Relations, submitted
R E P O R T
[To accompany H.R. 3107]
[Including cost estimate of the Congressional Budget Office]
The Committee on International Relations, to whom was
referred the bill (H.R. 3107) to impose sanctions on persons
exporting certain goods or technology that would enhance Iran's
ability to explore for, extract, refine, or transport by
pipeline petroleum resources, and for other purposes, having
considered the same, report favorably thereon with amendments
and recommend that the bill as amended do pass.
The amendments are as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Iran Oil Sanctions Act of 1996''.
SEC. 2. FINDINGS.
The Congress makes the following findings:
(1) The efforts of the Government of Iran to acquire weapons
of mass destruction and the means to deliver them and its
support of international terrorism endanger potentially the
national security and foreign policy interests of the United
States and those countries with which the United States shares
common strategic and foreign policy objectives.
(2) The objective of preventing the proliferation of weapons
of mass destruction and international terrorism through
existing multilateral and bilateral initiatives requires
additional efforts to deny Iran the financial means to sustain
its nuclear, chemical, biological, and missile weapons
(3) The Government of Iran uses its diplomatic facilities and
quasi-governmental institutions outside of Iran to promote acts
of international terrorism and assist its nuclear, chemical,
biological, and missile weapons programs.
SEC. 3. DECLARATION OF POLICY.
The Congress declares that it is the policy of the United States to
deny Iran the ability to support international terrorism and to fund
the development and acquisition of weapons of mass destruction and the
means to deliver them by limiting the development of Iran's ability to
explore for, extract, refine, or transport by pipeline petroleum
resources of Iran.
SEC. 4. IMPOSITION OF SANCTIONS.
(a) In General.--Except as provided in subsection (d), the President
shall impose 2 or more of the sanctions described in paragraphs (1)
through (5) of section 5 if the President determines that a person has,
with actual knowledge or reason to know, on or after the date of the
enactment of this Act--
(1) exported, transferred, or released to Iran, nationals of
Iran, or entities owned or controlled by Iran or nationals of
Iran any items included under subparagraph (A) or (B) of
section 9(a)(1) on the List of Petroleum and Natural Gas-
Related Goods and Technology established under section 9 (in
this Act referred to as the ``List'') if the provision of such
items would significantly and materially enhance Iran's ability
to develop petroleum resources of Iran--
(A) whether or not the items are exported from the
United States; and
(B) whether or not the items are subject to the
jurisdiction of the United States; or
(2) made an investment of $40,000,000 or more (or any
combination of investments of at least $10,000,000 each, which
in the aggregate equals or exceeds $40,000,000 in any 12-month
period), that directly contributed to the enhancement of Iran's
ability to develop petroleum resources of Iran.
(b) Persons Against Which the Sanctions Are To Be Imposed.--The
sanctions described in subsection (a) shall be imposed on--
(1) any person the President determines has carried out the
activities described in subsection (a); and
(2) any person the President determines--
(A) is a successor entity to the person referred to
in paragraph (1);
(B) is a wholly owned subsidiary of the person
referred to in paragraph (1);
(C) is any other subsidiary of the person referred to
in paragraph (1) if that subsidiary, with actual
knowledge or reason to know, engaged in the activities
referred to in paragraph (1);
(D) is a parent of the person referred to in
paragraph (1) if that parent had actual knowledge or
reason to know of the activities referred to in
paragraph (1); or
(E) is an affiliate of the person referred to in
paragraph (1) if that affiliate, with actual knowledge
or reason to know, engaged in the activities referred
to in paragraph (1).
For purposes of this Act, any person or entity described in this
subsection shall be referred to as a ``sanctioned person''.
(c) Publication in Federal Register.--The President shall cause to be
published in the Federal Register a current list of sanctioned persons.
The removal of persons from, and the addition of persons to, the list,
shall also be so published.
(d) Exceptions.--The President shall not be required to apply or
maintain the sanctions under subsection (a)--
(1) in the case of procurement of defense articles or defense
(A) under existing contracts or subcontracts,
including the exercise of options for production
quantities to satisfy requirements essential to the
national security of the United States;
(B) if the President determines in writing that the
person to which the sanctions would otherwise be
applied is a sole source supplier of the defense
articles or services, that the defense articles or
services are essential, and that alternative sources
are not readily or reasonably available; or
(C) if the President determines in writing that such
articles or services are essential to the national
security under defense coproduction agreements;
(2) to products or services provided under contracts entered
into before the date on which the President publishes his
intention to impose the sanctions;
(A) spare parts which are essential to United States
products or production;
(B) component parts, but not finished products,
essential to United States products or production; or
(C) routine servicing and maintenance of products, to
the extent that alternative sources are not readily or
(4) to information and technology essential to United States
products or production; or
(5) to medicines, medical supplies, or other humanitarian
SEC. 5. DESCRIPTION OF SANCTIONS.
The sanctions to be imposed on a sanctioned person under section 4(a)
are as follows:
(1) Export-import bank assistance for exports to sanctioned
persons.--The President shall direct the Export-Import Bank of
the United States not to guarantee, insure, extend credit, or
participate in the extension of credit in connection with the
export of any goods or services to any sanctioned person.
(2) Trade sanction.--The President shall both--
(A) order the United States Government not to issue
any specific license and not to grant any other
specific permission or authority to export any goods or
technology to a sanctioned person under--
(i) the Export Administration Act of 1979;
(ii) the Arms Export Control Act;
(iii) the Atomic Energy Act of 1954; or
(iv) any other statute that requires the
prior review and approval of the United States
Government as a condition for the export or re-
export of goods or services; and
(B) prohibit the importation into the United States
of products produced by any sanctioned person.
Subparagraph (B) includes application to the importation of any
finished product or component part, whether shipped directly by
the sanctioned person or by another entity.
(3) Loans from united states financial institutions.--The
United States Government shall prohibit any United States
financial institution from making loans or providing credits to
any sanctioned person totaling more than $10,000,000 in any 12-
month period unless such person is engaged in activities to
relieve human suffering and the loans or credits are provided
for such activities.
(4) Prohibitions on financial institutions.--The following
prohibitions shall be imposed against a sanctioned person that
is a financial institution:
(A) Designation as primary dealer.--Neither the Board
of Governors of the Federal Reserve System nor the
Federal Reserve Bank of New York may designate, or
permit the continuation of any prior designation of,
such financial institution as a primary dealer in
United States Government debt instruments.
(B) Government funds.--Such financial institution
shall not serve as agent of the United States
Government or serve as repository for United States
(5) Procurement sanction.--The United States Government shall
not procure, or enter into any contract for the procurement of,
any goods or services from a sanctioned person.
SEC. 6. ADVISORY OPINIONS.
The Secretary of State may, upon the request of any person, issue an
advisory opinion to that person as to whether a proposed activity by
that person would subject that person to sanctions under this Act. Any
person who relies in good faith on such an advisory opinion which
states that the proposed activity would not subject a person to such
sanctions, and any person who thereafter engages in such activity, may
not be made subject to such sanctions on account of such activity.
SEC. 7. TERMINATION OF SANCTIONS.
(a) In General.--The requirement under section 4 to impose sanctions
shall no longer have force or effect if the President determines and
certifies to the appropriate congressional committees that Iran--
(1) has ceased its efforts to design, develop, manufacture,
(A) a nuclear explosive device or related materials
(B) chemical and biological weapons; and
(C) ballistic missiles and ballistic missile launch
(2) has been removed from the list of countries the
governments of which have been determined, for purposes of
section 6(j) of the Export Administration Act of 1979, to have
repeatedly provided support for acts of international
(b) Additional Requirement With Respect to Libya.--The requirement
under section 4 to impose sanctions shall no longer have force and
effect with respect to Libya only if the President, in addition to
making the determination required by subsection (a), determines and
certifies to the appropriate congressional committees that Libya has
fulfilled the requirements of United Nations Security Council
Resolution 731, adopted January 21, 1992.
SEC. 8. DURATION OF SANCTIONS; PRESIDENTIAL WAIVER.
(a) Delay of Sanctions.--
(1) Consultations.--If the President makes a determination
described in section 4(a) with respect to a foreign person, the
Congress urges the President to initiate consultations
immediately with the government with primary jurisdiction over
that foreign person with respect to the imposition of sanctions
under this Act.
(2) Actions by government of jurisdiction.--In order to
pursue consultations under paragraph (1) with the government
concerned, the President may delay imposition of sanctions
under this Act for up to 90 days. Following such consultations,
the President shall immediately impose sanctions unless the
President determines and certifies to the Congress that the
government has taken specific and effective actions, including,
as appropriate, the imposition of appropriate penalties, to
terminate the involvement of the foreign person in the
activities that resulted in the determination by the President
under section 4(a) concerning such person.
(3) Additional delay in imposition of sanctions.--The
President may delay the imposition of sanctions for up to an
additional 90 days if the President determines and certifies to
the Congress that the government with primary jurisdiction over
the person concerned is in the process of taking the actions
described in paragraph (2).
(4) Report to congress.--Not later than 45 days after making
a determination under section 4(a), the President shall submit
to the Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on International Relations of the
House of Representatives a report on the status of
consultations with the appropriate foreign government under
this subsection, and the basis for any determination under
(b) Duration of Sanctions.--A sanction imposed under section 4(a)
shall remain in effect for a period of not less than 2 years from the
date on which it is imposed.
(c) Presidential Waiver.--
(1) Authority.--The President may waive the requirement in
section 4(a) to impose a sanction or sanctions on a person
described in section 4(b), and may waive the continued
imposition of a sanction or sanctions under subsection (b) of
this section, 30 days or more after the President determines
and so reports to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on International
Relations of the House of Representatives that it is important
to the national interest of the United States to exercise such
(2) Contents of report.--Any report under paragraph (1) shall
provide a specific and detailed rationale for the determination
under paragraph (1), including--
(A) a description of the conduct that resulted in the
(B) in the case of a foreign person, an explanation
of the efforts to secure the cooperation of the
government with primary jurisdiction over the
sanctioned person to terminate or, as appropriate,
penalize the activities that resulted in the
(C) an estimate as to the significance of the
provision of the items described in section 4(a)(1) or
the investment described in section 4(a)(2), as the
case may be, to Iran's ability to develop its petroleum
(D) a statement as to the response of the United
States in the event that the person concerned engages
in other activities that would be subject to section
(3) Effect of report on waiver.--If the President makes a
report under paragraph (1) with respect to a waiver of
sanctions on a person described in section 4(b), sanctions need
not be imposed under section 4(a) on that person during the 30-
day period referred to in paragraph (1).
SEC. 9. GOODS AND TECHNOLOGY SUBJECT TO EXPORT CONTROL RESTRICTIONS.
(a) Control List.--
(1) Contents of list.--For purposes of the determinations to
be made under section 4(a), the President, in consultation with
the Secretary of State, the Secretary of Energy, and the heads
of other appropriate departments and agencies, shall establish
and maintain the List of Petroleum and Natural Gas-Related
Goods and Technology. The List shall consist of--
(A) all items listed in the Annex to Resolution 883
of the Security Council of the United Nations, adopted
November 11, 1993, and all types of equipment,
supplies, and grants of licenses prohibited by
paragraph 5 of that resolution; and
(B) any other goods or technology (including software
and technical data) that the President determines could
significantly or materially contribute to Iran's
ability to develop its petroleum resources, including
goods and technology that are required for the
development, production, or use of facilities
(including the repair, maintenance, or operation of
equipment) for the development of petroleum resources.
(2) Publication.--The President, within 60 days after the
date of the enactment of this Act, shall cause the List to be
published in the Federal Register, together with any
regulations issued with respect thereto. Thereafter, any
revisions to the List or amendments to the regulations shall be
published in the same manner.
(3) Advance notice to congress.--Not less than 30 days in
advance of the publication of the List, it shall be provided to
the Committee on Banking, Housing, and Urban Affairs of the
Senate and to the Committee on International Relations of the
House of Representatives. The President shall consult with each
such Committee regarding the content of the List and shall
respond to questions regarding the basis for the inclusion on,
or exclusion from, the List of specified items.
(b) Statutory Construction.--Nothing in this section prevents the
inclusion on the List of any items that may be produced in and traded
internationally by persons or entities in countries other than the
SEC. 10. REPORTS REQUIRED.
(a) Report on Certain International Initiatives.--Not later than 6
months after the date of the enactment of this Act, and every 6 months
thereafter, the President shall transmit a report to the appropriate
congressional committees describing--
(1) the efforts of the President to mount a multilateral
campaign to persuade all countries to pressure Iran to cease
its nuclear, chemical, biological, and missile weapons programs
and its support of international terrorism;
(2) the efforts of the President to persuade other
governments to ask Iran to reduce the presence of Iranian
diplomats and representatives of other government and military
or quasi-governmental institutions of Iran and to withdraw any
such diplomats or representatives who participated in the
takeover of the United States embassy in Tehran on November 4,
1979, or the subsequent holding of United States hostages for
(3) the extent to which the International Atomic Energy
Agency has established regular inspections of all nuclear
facilities in Iran, including those presently under
(4) Iran's use of Iranian diplomats and representatives of
other government and military or quasi-governmental
institutions of Iran to promote acts of terrorism or to develop
or sustain Iran's nuclear, chemical, biological, and missile
(b) Other Reports.--The President shall ensure the continued
transmittal to the Congress of reports describing--
(1) the nuclear and other military capabilities of Iran, as
required by section 601(a) of the Nuclear Non-Proliferation Act
of 1978 and section 1607 of the National Defense Authorization
Act for Fiscal Year 1993; and
(2) the support provided by Iran for acts of international
terrorism, as part of the Department of State's annual report
on international terrorism.
SEC. 11. APPLICATION OF THE ACT TO LIBYA.
(a) In General.--The sanctions of this Act, including the terms and
conditions for the imposition, duration, and termination of sanctions,
shall apply to persons making investments with respect to the
development of petroleum resources of Libya, or exporting,
transferring, or releasing of certain items to Libya, nationals of
Libya, or entities owned or controlled by Libya, in the same manner as
those sanctions apply under this Act to persons making investments with
respect to the development of petroleum resources of Iran, or
exporting, transferring, or releasing of certain items to Iran,
nationals of Iran, or entities owned or controlled by Iran.
(b) Application of Specific Provisions.--In applying the provisions
of this Act with respect to Libya under subsection (a), each reference
to ``Iran'' shall be deemed to be a reference to ``Libya''.
SEC. 12. DETERMINATIONS NOT REVIEWABLE.
A determination to impose sanctions under this Act shall not be
reviewable in any court.
SEC. 13. DEFINITIONS.
As used in this Act:
(1) Act of international terrorism.--The term ``act of
international terrorism'' means an act--
(A) which is violent or dangerous to human life and
that is a violation of the criminal laws of the United
States or of any State or that would be a criminal
violation if committed within the jurisdiction of the
United States or any State; and
(B) which appears to be intended--
(i) to intimidate or coerce a civilian
(ii) to influence the policy of a government
by intimidation or coercion; or
(iii) to affect the conduct of a government
by assassination or kidnapping.
(2) Affiliate.--For purposes of section 4(b), a person is an
``affiliate'' of another person if more than 50 percent of the
outstanding capital stock of or other beneficial interest in
both persons is owned, directly or indirectly, by a third
person or both persons are otherwise controlled by a third
(3) Appropriate congressional committees.--The term
``appropriate congressional committees'' means the Committee on
Banking, Housing, and Urban Affairs and the Committee on
Foreign Relations of the Senate and the Committee on
International Relations of the House of Representatives.
(4) Component part.--The term ``component part'' has the
meaning given that term in section 11A(e)(1) of the Export
Administration Act of 1979 (50 U.S.C. App. 2410a(e)(1)).
(5) Develop and development.--To ``develop'', or the
``development'' of, petroleum resources means the exploration
for, or the extraction, refining, or transportation by pipeline
of, petroleum resources.
(6) Financial institution.--The term ``financial
(A) a depository institution (as defined in section
3(c)(1) of the Federal Deposit Insurance Act),
including a branch or agency of a foreign bank (as
defined in section 1(b)(7) of the International Banking
Act of 1978);
(B) a credit union;
(C) a securities firm, including a broker or dealer;
(D) an insurance company, including an agency or
(E) any other company that provides financial
(F) any subsidiary of an entity described in any of
subparagraphs (A) through (E).
(7) Finished product.--The term ``finished product'' has the
meaning given that term in section 11A(e)(2) of the Export
Administration Act of 1979 (50 U.S.C. App. 2410a(e)(2)).
(8) Foreign person.--The term ``foreign person'' means--
(A) an individual who is not a United States person
or an alien lawfully admitted for permanent residence
into the United States; or
(B) a corporation, partnership, or other
nongovernment entity which is not a United States
(9) Goods and technology.--The terms ``goods'' and
``technology'' have the meanings given those terms in section
16 of the Export Administration Act of 1979 (50 U.S.C. app.
(10) Investment.--The term ``investment'' means--
(A) the entry into a contract that includes
responsibility for the development of petroleum
resources located in Iran or Libya (as the case may
be), or the entry into a contract providing for the
general supervision and guarantee of another person's
performance of such a contract;
(B) the purchase of a share of ownership in that
(C) the entry into a contract providing for the
participation in royalties, earnings, or profits in
that development, without regard to the form of the
(D) the entry into or performance of--
(i) a contract for the financing of the
development of petroleum resources located in
Iran or Libya (as the case may be); or
(ii) a guaranty of another person's
performance under such a contract.
(11) Iran.--The term ``Iran'' includes any agency or
instrumentality of Iran.
(12) Iranian diplomats and representatives of other
government and military or quasi-governmental institutions of
iran.--The term ``Iranian diplomats and representatives of
other government and military or quasi-governmental
institutions of Iran'' includes employees, representatives, or
affiliates of Iran's--
(A) Foreign Ministry;
(B) Ministry of Intelligence and Security;
(C) Revolutionary Guard Corps;
(D) Crusade for Reconstruction;
(E) Qods (Jerusalem) Forces;
(F) Interior Ministry;
(G) Foundation for the Oppressed and Disabled;
(H) Prophet's Foundation;
(I) June 5th Foundation;
(J) Martyr's Foundation;
(K) Islamic Propagation Organization; and
(L) Ministry of Islamic Guidance.
(13) Libya.--The term ``Libya'' includes any agency or
instrumentality of Libya.
(14) Nuclear explosive device.--The term ``nuclear explosive
device'' means any device, whether assembled or disassembled,
that is designed to produce an instantaneous release of an
amount of nuclear energy from special nuclear material (as
defined in section 11aa. of the Atomic Energy Act of 1954) that
is greater than the amount of energy that would be released
from the detonation of one pound of trinitrotoluene (TNT).
(15) Parent.--For purposes of section 4(b), a person is a
``parent'' of another person if that person owns, directly or
indirectly, more than 50 percent of the outstanding capital
stock of or other beneficial interest in that other person, or
otherwise controls that other person.
(16) Person.--The term ``person'' means--
(A) a natural person;
(B) a corporation, business association, partnership,
society, trust, any other nongovernmental entity,
organization, or group, and any governmental entity
operating as a business enterprise; and
(C) any successor to any entity described in
(18) Petroleum resources.--The term ``petroleum resources''
includes petroleum and natural gas resources.
(19) Subsidiary.--(A) For purposes of section 4(b), and
subject to subparagraph (B), a person is a ``subsidiary'' of
another person if that other person owns, directly or
indirectly, more than 50 percent of the outstanding capital
stock of or other beneficial interest in that person, or
otherwise controls that person.
(B) A person is a ``wholly owned'' subsidiary of another
person if that other person owns all of the outstanding capital
stock of or other beneficial interests in that person.
(20) United states or state.--The term ``United States'' or
``State'' means the several States, the District of Columbia,
the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, American Samoa, Guam, the United
States Virgin Islands, and any other territory or possession of
the United States.
(21) United states person.--The term ``United States person''
(A) a natural person who is a citizen of the United
States or who owes permanent allegiance to the United
(B) a corporation or other legal entity which is
organized under the laws of the United States, any
State or territory thereof, or the District of
Columbia, if natural persons described in subparagraph
(A) own, directly or indirectly, more than 50 percent
of the outstanding capital stock or other beneficial
interest in such legal entity.
Amend the title so as to read:
A bill to impose sanctions on persons exporting certain items
that would enhance Iran's ability to develop its petroleum resources
and on persons making certain investments directly contributing to the
enhancement of Iran's ability to develop its petroleum resources, and
for other purposes.
Background and Purpose
The ``Iran Oil Sanctions Act of 1996'' imposes sanctions on
persons exporting certain goods or technology or making
investments that would enhance the ability of Iran or Libya to
explore for, extract, refine, or transport by pipeline
petroleum resources. The bill will help deter the two countries
from supporting international terrorism or acquiring weapons of
mass destruction and associated delivery vehicles.
The measure would require the President to impose two or
more specified sanctions on persons that (1) export to Iran or
Libya any goods or technology on a list of key petroleum
technology items or (2) make investments to Iran or Libya of
$40 million or more in one year to enhance the petroleum
industries of these two countries.
The legislation directs the President to establish a list
of petroleum-related goods and technologies comprised of the
list of choke point technology already in force on Libya
pursuant to the annex of UN Security Council Resolution 883, as
well as other goods or technology that the President determines
could significantly or materially contribute to Iran's ability
to develop its petroleum resources. The sanctions are to be
imposed on any successor, parent, subsidiary, or affiliate of
the sanctioned person.
The legislation also requires the President to impose two
or more of the following penalties on a sanctioned person: (1)
denial of Eximbank assistance for any exports to the sanctioned
person; (2) denial of specific licenses for exports of
controlled technology to the sanctioned person and prohibition
on imports from that company; (3) a prohibition on a sanctioned
financial institution from serving as a primary dealer in U.S.
Government bonds or as a repository for U.S. Government funds;
(4) a prohibition on any U.S. financial institution from making
any loan to a sanctioned person over $10 million per year; and
(5) a ban on any U.S. Government procurement of any goods or
services from a sanctioned person.
The legislation allows the President the flexibility to
delay imposition of sanctions for 90 days to pursue
consultations with the government of the sanctioned person to
terminate the sanctionable activities. An additional 90-day
delay is provided for if that government is in the process of
terminating those activities. The President may waive any of
the sanctions if he determines that doing so is in the national
The Iran Oil Sanctions Act of 1996 requires the President
to continue to report to Congress on Iran's nuclear and
military capabilities, and on its support for international
terrorism. To carry out the legislation, the President is given
appropriate regulatory authority and exemption from judicial
review in regard to the imposition of sanctions.
It is the view of the committee that enactment of this
legislation will be a key element in United States policy of
cutting off sources of funding to those rogue regimes such as
Iran and Libya who continue to support acts of terrorism and
develop weapons of mass destruction.
For Libya in particular, the Committee is convinced that
there is an urgent need to increase pressure on Tripoli to gain
compliance with the UN Security Council resolutions regarding
the Pan Am 103 bombing. In regard to Iran, our current policies
limiting their revenues and petroleum resources must be
continued and further strengthened.
In his remarks before the Senate in October of last year,
Under Secretary of State Peter Tarnoff said ``A straight line
links Iran's oil income and its ability to sponsor terrorism,
build weapons of mass destruction, and acquire sophisticated
armaments''. In his testimony before the Committee on
International Relations on November 9, 1995, Under Secretary
Tarnoff spelled out these concerns in detail: ``. . . by
pressuring Iran's economy, we seek to limit the government's
finances and thereby constrict Tehran's ability to fund rogue
activities. We launched an initiative to block Iran's access to
international capital its economy needs. We have worked
bilaterally and within international financial institutions to
keep other governments from providing Iran with credit. On May
6, President Clinton issued Executive Order 12959, which
imposed an embargo against Iran. The President's decision to
sever American trade and investment with Iran signaled our
commitment to exert the maximum efforts of this country to deny
Iran financial resources. In particular, by barring American
investment in Iran and prohibiting U.S. companies from buying
Iranian oil, we have stopped the flow of money from the United
States to Iran. We are now seeking to dissuade the
international community from investing in Iran's petroleum
sector. With these efforts, we are taking advantage of Iran's
economic vulnerabilities, particularly its shortages in hard
currency. We recognize that economic pressure takes time, but
we are convinced that making Iran pay a price for its
unacceptable activities is the best way to convince the Iranian
leadership that it is in their country's best interest to
abandon these policies.''
Since the November 4, 1979 seizure of the U.S. hostages in
Tehran, economic sanctions have formed a major part of U.S.
policy toward Iran. Ten days after the seizure of the Embassy,
President Carter declared a national emergency with respect to
Iran, which the President has renewed every year since 1979.
The United States broke diplomatic relations with Iran on April
7, 1980. After an Administration determination of Iran's
involvement in the bombing of the Marine barracks in Beirut in
October 1983, Iran was placed on the U.S. list of state
sponsors of terrorism on January 19, 1984. This disqualified
Iran from receiving U.S. foreign aid, sales of items on the
U.S. munitions list, Eximbank credits, and U.S. support for
foreign loans, and requires strict licensing requirements for
any U.S. exports of controlled goods or technology.
On March 15, 1995, in response to reports that the U.S.
firm Conoco, Inc. had initialed a contract with Iran to develop
oil fields around Iran's Sirri Island, President Clinton issued
Executive Order No. 12957 (60 Fed. Reg. 14615, March 17, 1995).
The Executive order declared a national emergency with respect
to Iran pursuant to the International Emergency Economic Powers
Act (50 U.S.C. 1703(c)(IEEPA) and prohibited the financing,
management, or supervision by U.S. persons of the development
of Iranian petroleum resources. Conoco, Inc., withdrew from its
contract with Iran shortly thereafter.
Following the imposition of the new restrictions, the
Administration determined that Iran continued to engage in
activities that represent a threat to the peace and security of
all nations, including support for international terrorism and
for acts that undermine the Middle East peace process, and
intensified efforts to acquire weapons of mass destruction. On
May 6, 1995, President Clinton issued Executive Order No. 12959
(60 Fed. Reg. 24757, May 9, 1995) to further respond to the
The May 6 Executive order prohibited U.S. goods,
technology, and services to Iran and the reexport of certain
U.S. goods and technology to Iran from third countries. It also
prohibited new investments by U.S. persons in Iran and any
brokering and other dealing by U.S. persons in goods and
services of Iranian origin or owned or controlled by Iran. The
order prohibited any U.S. persons or companies from approving,
facilitating, or financing performance by any entity owned or
controlled by a U.S. person of reexport, investment, and trade
transactions that a U.S. person is prohibited from performing.
The Executive order thereby closed the loophole under which
foreign affiliates of U.S. oil companies were purchasing
approximately 25% of Iran's oil exports for overseas trade.
(Under a 1987 Executive order, no Iranian goods could be
imported into the United States; that prohibition was continued
by the May 6, 1995 order.) As justification for issuing the
trade and investment ban, the Administration had said that the
trading of large amounts of Iranian oil by U.S. companies and
their foreign affiliates, as well as continued exportation of
U.S. products to Iran, had undermined U.S. efforts to persuade
its allies to help isolate Iran.
The U.S. trade ban represented a major new step in U.S.
policy toward Iran, and the Administration stressed that the
trade ban had made Iran more isolated and that U.S. allies were
not extending Iran any new credits. Japan suspended the second
tranche of a development loan for construction of a
hydroelectric dam over Iran's Karun River. However, U.S. allies
did not join the trade and investment ban, or even
substantially alter their policy of ``critical dialogue'' with
Iran, an attempt to moderate Iranian behavior through
engagement. Administration officials testified before both
houses of Congress that Iran was able to find new buyers for
almost all the oil previously purchased by affiliates of U.S.
The most significant setback to U.S. efforts to
multilateralize the isolation of Iran was the July 13, 1995
signing of a contract between Total SA and Iran to develop the
Sirri islands--the same contract abandoned by Conoco, Inc. The
French government said it would not provide official credits to
finance the deal. Several months later, Iran opened up ten
major petroleum development projects to foreign investment,
each project exceeding $50 million. These projects and
potential investments led the Administration and many in
Congress to agree that new steps were needed to choke off
foreign investment in Iran's oil industry. It is expected that
doing so would, over the long term, deny Iran the revenues and
resources to develop weapons of mass destruction and fund
groups that commit international terrorism and acts designed to
derail the Arab-Israeli peace process.
On September 8, 1995, Senator Alfonse D'Amato introduced S.
1228 sanctioning persons that assist in the development of
Iran's petroleum resources. A subsequent version of S. 1228,
including provisions relating to Libya, passed the Senate on
December 20 of 1995. Approved without dissent, this measure has
a shorter list of sanctions and requires the President to apply
one of them on foreign companies only in the case of major
investments in Iran or Libya.
The prospect for the enactment of a comprehensive sanctions
regime in the House and Senate has already a strong deterrent
effect on potential oil field investors and suppliers in Iran
despite consistent efforts by the Government of Iran to attract
foreign capital and expertise in the development of its off-
shore petroleum resources.
The Committee would note that the prospect for the
implementation of sanctions on Libya has also refocused the
efforts of the administration to increase pressure on the
Libyan regime to comply fully with all pending UN Security
Resolutions, including the release of the two suspects in the
Pan Am 103 bombing.
On May 2, 1995, the Subcommittee on International Economic
Relations held a hearing on U.S. Policy Toward Iran and how it
can be made more effective. Witnesses included the Honorable
Peter King; Assistant Secretary of State Robert H. Pelletreau;
Patrick Clawson, Senior Fellow at the Institute for National
Strategic Studies at the National Defense University; Geoffrey
Kemp, Senior Associate at the Carnegie Endowment for
International Peace; Jeffrey Schott, Senior Fellow at the
Institute for International Economics; Arthur T. Downey, Vice
President of Baker Hughes, Inc. on behalf of the National
Foreign Trade Council, Inc.; and John H. Lichtblau, Chairman of
the Petroleum Industry Research Foundation, Inc.
On October 12, 1995, Chairman Benjamin A. Gilman introduced
H.R. 2458, a bill imposing sanctions on foreign persons
providing oilfield equipment and technology to Iran.
On November 9, 1995, the Committee on International
Relations held a hearing on U. S. Policy Toward Iran with
witnesses from the administration and the private sector
including: The Honorable Peter Tarnoff, Under Secretary of
State for Political Affairs; Mr. Bruce Reidel, Deputy Assistant
Secretary of Defense for Near East and South Asia; Mr. Patrick
Clawson with the Institute for National Strategic Studies at
the National Defense University; Mr. Geoffrey Kemp at the Nixon
Center for Peace and Freedom; Mr. Michael Eisenstadt, Senior
Fellow at the Washington Institute for Near East Policy; and
Mr. Arthur Downey representing the National Foreign Trade
On March 19, 1996, Chairman Benjamin A. Gilman introduced
H.R. 3107, The Iran Oil Sanctions Act of 1996 requiring the
President to impose two or more sanctions on any person
annually providing $40 million or more of investments to Iran
or Libya or exporting key oilfield goods and technology to
these same countries. Original cosponsors of the legislation
include Representatives Berman, Gejdenson, Burton, King, Shaw
and Forbes. Additional cosponsors of the legislation include
Representatives Lantos, Torricelli, Royce, English, Zimmer,
Filner, Fox, Bunn, Barcia, Diaz-Balart, Meehan, Ehrlich,
Cunningham, Collins (MI), Lipinski, Engel, Frank, Sanford,
Funderburk, Pryce, Kasich, Meek, McCollum, Traficant,
Knollenberg, Stark, Porter, Paxon, Deutsch, Hall, Smith (NJ),
Burton, Frazer, Metcalf, Evans, Bryant, Saxton, Houghton,
Durbin, Kaptur, Souder, McHugh, Roybal-Allard, Wyden, Markey,
Oberstar, Thurman, Sisisky, Lofgren, LoBiondo, Lowey, Shays,
LaTourette, Cardin, Kleczka, Foley, Yates, Ackerman, Torres,
Coyne, Towns, Cooley, Pelosi, DeFazio, Ward, Lewis (GA),
Frelinghuysen, and Furse.
On March 21, 1996, the Committee on International Relations
received testimony from Senator D'Amato strongly endorsing the
provisions in H.R. 3107. The Committee subsequently debated the
measure and reported out H.R. 3106 by a vote of 32 to 0.
RollCall Votes and Amendments and Final Passage
In compliance with clause (2)(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the record of committee
rollcall votes taken on final passage or amendments during the
committee's consideration of H.R. 3107, as amended, is set out
on the following pages, as is a report of the committee's final
action on the bill.
Description of Amendment, Motion, Order, or Other Proposition
By voice vote, the committee accepted several amendments
including an en bloc amendment offered by Chairman Gilman
clarifying certain definitions in the bill, specifying a two
year time frame for the duration of sanctions and making other
technical and conforming changes.
It also accepted an amendment offered by Mr. Torricelli
requiring an additional condition for the lifting of sanctions
on Libya, specifying that the two Libyan nationals indicted for
their role in the destruction of Pan American Flight 103 be
made available for prosecution pursuant United Nations Security
Council Resolution 731 of January 21, 1992.
The Committee accepted an amendment offered by Mr. Campbell
specifying that the requirement in the bill preventing a
sanctioned person from receiving a loan or credit in an amount
exceeding $10 million be modified to ensure that it is
determined on an annual basis.
The Bereuter motion that the bill be reported to the House
with the recommendation that the bill, as amended, do pass.
Totals: 32 yeas, 0 nays.
Name and State Yea Nay Name and State Yea Nay
Benjamin A. Gilman, NY., Chmn............ X ....... Lee H. Hamilton, IN.............. X .......
William F. Goodling, PA.................. X ....... Sam Gejdenson, CN................ X .......
James A. Leach, IA....................... ....... ....... Tom Lantos, CA................... X .......
Toby Roth, WI............................ X ....... Robert G. Torricelli, NJ......... X .......
Henry J. Hyde, IL........................ ....... ....... Howard L. Berman, CA............. X .......
Doug Bereuter, NE........................ X ....... Gary L. Ackerman, NY............. ....... .......
Christopher H. Smith, NJ................. ....... ....... Harry Johnston, FL............... ....... .......
Dan Burton, IN........................... ....... ....... Eliot L. Engel, NY............... X .......
Jan Meyers, KS........................... X ....... Eni F.H. Faleomavaega, Am. Samoa. ....... .......
Elton Gallegly, CA....................... ....... ....... Matthew G. Martinez, CA.......... X .......
Ileana Ros-Lehtinen, FL.................. X ....... Donald M. Payne, NJ.............. ....... .......
Cass Ballenger, NC....................... X ....... Robert E. Andrews, NJ............ X .......
Dana Rohrabacher, CA..................... X ....... Robert Menendez, NJ.............. X .......
Donald A. Manzullo, IL................... ....... ....... Sherrod Brown, OH................ X .......
Edward R. Royce, CA...................... X ....... Cynthia A. McKinney, GA.......... X .......
Peter T. King, NY........................ X ....... Alcee L. Hastings, FL............ ....... .......
Jay Kim, CA.............................. X ....... Albert Russell Wynn, MD.......... X .......
Sam Brownback, KS........................ X ....... James P. Moran, VA............... X .......
David Funderburk, NC..................... X ....... Victor O. Frazer, VI............. ....... .......
Steven J. Chabot, OH..................... X ....... Charlie Rose, NC................. ....... .......
Marshall ``Mark'' Sanford, SC............ X ....... Pat Danner, MO................... X .......
Matt Salmon, AZ.......................... X
Amo Houghton, NY......................... X
Tom Campbell, CA......................... X
The Committee notes that Messrs. Ackerman and Payne arrived
in the Committee room shortly after the conclusion of the vote
and after the Committee had adjourned and told the Chairman
that had they been present they would have voted ``aye.''
The Committee notes the receipt of the following statement
from Mr. Manzullo:
March 21, 1996.
Hon. Ben Gilman,
Chairman, Committee on International Relations,
Dear Ben: I was unavoidably detained in a meeting with
constituents from the 16th District of Illinois that prevented
me from casting the only and final vote during the committee's
mark-up of the Iranian sanctions legislation. If I were
present, I would have voted ``aye.'' I ask that my remarks
appear in the committee record reflecting my vote preference on
Thank you for your kind attention to my request.
Donald A. Manzullo,
Member of Congress.
Section 1. Short title
The title of the bill is the ``Iran Oil Sanctions Act of
Section 2. Findings
This section states that the efforts of the Government of
Iran to acquire weapons of mass destruction and the means to
deliver them as well as its support for international terrorism
endanger the interests of the United States and those countries
sharing common strategic and foreign policy objectives.
Furthermore, additional bilateral and multilateral efforts
are needed to deny Iran the financial means to develop its
nuclear, chemical, biological and missile weapons programs.
While multilateral efforts to reduce the flow of new credits,
sensitive dual use technology and new weapons systems going to
Iran are now underway, much more remains to be done by the
United States to implement its containment policy and to ensure
that Iran does not attract significant new investment from any
This section also states that Iran uses its diplomatic
facilities and quasi-governmental institutions outside that
country to promote terrorism and the acquisition of materials
and technology for its weapons of mass destruction programs.
Section 3. Declaration of policy
In this section, Congress declares that it is U.S. policy
to deny Iran the means to threaten U.S. interests and those of
our allies by limiting its ability to extract, refine, process,
store, or transport petroleum resources.
Section 4. Imposition of sanctions
This section defines those persons to be subjected to
sanctions as any person that the President determines has
exported to Iran any goods on a List of Petroleum and Natural
Gas-Related Goods and Technology. Also subject to sanctions
would be any person that the President determines has with
knowledge or reason to know made investments in Iran of at
least $40 million in any one year that directly contributed to
enhancement of Iran's ability to develop its petroleum
resources. Any person determined by the President to be a
successor or wholly owned subsidiary of the sanctioned person
also would be subject to sanctions as would any parent that
knew of the activity or affiliate that with knowledge or reason
to know engaged in the activity.
The Committee would note that the intent of the legislation
is not to apply sanctions on the transfer of all petroleum and
natural gas-related products being acquired by Iran or Libya.
The Administration is specifically given the discretion of
deciding which goods and services would significantly and
materially enhance Iran's ability to develop its petroleum
resources. In the view of the Committee, the administration has
the flexibility it needs in implementing this provision with a
view toward denying Iran those key goods and technology items
needed to develop its offshore oil resources.
In making a determination to impose the sanctions contained
in this section, the administration must use this so-called
``trade trigger'' or the $40 million investment trigger, but it
has broad latitude in making such a determination based on the
circumstances of each discrete export to or investment in Iran.
The Committee would note that the $40 million investment
threshold in Section 4(A)(2) is intended as an absolute cap on
each person's investment in any project or projects increasing
the ability of Iran to develop its petroleum resources. The
Committee does not intend that the sanctions provided in this
section would extend to portfolio investments made by any other
person in a sanctioned person.
Section 5. Description of sanctions
This section describes five specified sanctions, at least
two of which shall be imposed on a person sanctioned under the
provisions of the previous section:
denial of Eximbank assistance for exports to a
trade sanction, including denial of licenses for
exports of controlled technology to the sanctioned
person, and a prohibition on imports into the United
States of products produced by the sanctioned person;
prohibition of loans by U.S. financial institutions
totaling more than $10 million in one year to a
sanctioned person unless such person is engaged in
activities to relieve human suffering and the loans and
credits are provided for such purpose;
prohibition of sanctioned financial institutions from
serving as a primary dealer in U.S. Government debt
instruments or as a repository of U.S. Government funds
or an agent of the U.S. Government;
prohibition of U.S. government procurement from a
Section 6. Advisory opinions
This section provides an opportunity for any person to
request the Secretary of State to issue an advisory opinion as
to whether a proposed activity by that person would subject
that person to sanctions under the Act. Any person who relies
in good faith on an advisory opinion stating that the activity
would not lead to the imposition of sanctions would not be made
subject to sanctions for that specific activity.
Section 7. Termination of sanctions
This section terminates sanctions imposed pursuant to the
Act if the President determines and certifies to the
appropriate congressional committees that Iran has ceased its
efforts to acquire weapons of mass destruction and has been
removed from the U.S. list of state sponsors of terrorism
established pursuant to section 6(j) of the Export
Administration Act of 1979. It also provides a further
requirement with respect to Libya that the President certify to
the appropriate congressional committees that Libya has
fulfilled the requirements of United Nations Security Council
Resolution 731 adopted on January 21, 1992.
Section 8. Duration of sanctions; Presidential waiver
This section urges the President to begin consultations
with the government with primary jurisdiction over any foreign
person sanctioned under the provisions of this Act. The
President may delay imposition of sanctions under this Act for
up to 90 days in order to pursue consultations with this
government. He shall then immediately impose sanctions on this
person unless he can certify to Congress that the government
has taken very specific actions, including imposing appropriate
penalties, to terminate the activities giving rise to the
sanctions. The Committee would expect that certification to
establish that these actions were fully implemented and were
having a demonstrable impact on the sanctioned person.
An additional 90-day delay period is also provided if the
President determines and certifies to Congress that the
government with primary jurisdiction over the person is taking
actions to terminate the sanctionable activities. The President
is also directed to submit a report to the appropriate
congressional committees 45 days after making a determination
regarding sanctionable activities, on the status of his
negotiations with the foreign government with primary
jurisdiction. This report would also lay out in detail the
circumstances leading to any delays in the implementation of
Consistent with the sanctions provisions in previously-
enacted proliferation-related statutes, including the Iran-Iraq
Non-proliferation Act of 1992, sanctions shall be imposed for a
period of at least two years.
The President may waive the requirement to impose sanctions
30 days after reporting to the appropriate congressional
committees that doing so is important to the national interest
of the United States. In the view of the Committee, this waiver
standard and the provisions in this section permitting delay in
the implementation of sanctions should give the administration
enough flexibility and opportunity for negotiation sufficient
to avoid the imposition of sanctions in nearly all
Section 9. Goods and technology subject to export control restrictions
This section directs the President, in consultation with
the appropriate departments and agencies, to establish and
maintain a list of petroleum and natural gas-related goods and
technology consisting of a United Nations-approved list
contained in the Annex to resolution 883 of the UN Security
Council of November 11, 1993, together with other equipment and
supplies prohibited in other parts of that resolution, as well
as any other goods and technology that the President determines
could significantly and materially contribute to the ability of
Iran to develop its petroleum resources. It is the intent of
the Committee that the administration use the United Nations-
approved list as a basis for the construction of a
comprehensive and updated list of items that are essential to
Iran's ability to further develop its petroleum development
Section 10. Report required
The President is directed to continue to report to Congress
on Iran's nuclear and other military capabilities, and its
support for international terrorism.
The bill requires a new Administration report to Congress
on efforts to isolate Iran and curb its ability to promote
terrorism and Islamic revolution and clandestinely procure high
technology components of weapons of mass destruction. The
required report must describe Administration efforts to mount a
multilateral campaign to isolate Iran; Administration efforts
to persuade other governments to ask Iran to limit its
diplomatic presence; Iran's use of its diplomats, diplomatic
facilities, and quasi-governmental institutions to promote
terrorism or sustain its weapons of mass destruction programs;
and the extent to which the International Atomic Energy Agency
has established regular inspections of Iran's nuclear
The Committee is requiring this new report because the
annual report to Congress on terrorism addresses only a few of
these issues. There is no mention in the annual terrorism
report of U.S. efforts to persuade its allies in Europe to
expel certain Iranian diplomats who were allegedly linked to
the holding of the American hostages during 1979-81. Each of
the past few annual terrorism reports have addressed only a few
Iranian diplomats, usually the most well-known, alleged to be
involved in promoting terrorism. The list of Iranian ministries
allegedly involved in such activity, which are to be reported
on by the Administration, are defined in Section 13.
The annual terrorism report does not assess Iran's use of
parastatal organizations, such as the foundation for the
Oppressed, to support terrorist groups or procure technology.
The Foundation is one of many Foundations, and controls
billions of dollars in companies and financial assets. There
are consistent reports, not cited in the annual terrorism
report, that the Foundation, which is headed by the former
Minister of the Revolutionary Guard, uses its funds to procure
technology in Europe. Other such foundations, such as the June
5th Foundation that offers a $2 million reward for the killing
of Salman Rushdie, are included in a comprehensive list in
section 13 of Iranian Diplomats and Representatives of Other
Government and Military or Quasi Governmental Institutions of
Section 11. Application of the Act to Libya
This section applies all the terms and conditions of the
Act with respect to the imposition, duration, and terminations
of sanctions to persons making investments in the petroleum
resources of Libya or exporting or transferring certain items
to Libya. All the other provisions in the Act shall apply
equally to Libya, with each reference in the Act to Iran
considered to be a reference to Libya.
Section 12. Determinations not reviewable
In light of the growing threats to U.S. national security
interests posed by Iran and Libya, the Committee believes that
once a determination is made to impose sanctions under this
Act, the imposition of these sanctions should be carried out in
a timely fashion and, as in the case of similar sanctions laws,
should not be subject to judicial review. The Committee would
also note that Section 8 of the legislation provides for delays
in the imposition of sanctions and a careful and a deliberate
review of their implementation by the administration in
consultation with the Congress.
Section 13. Definitions
This section defines the terms contained in the Act,
including: act of international terrorism; appropriate
congressional committees; component part; develop and
development; financial institution; finished product; foreign
person; goods and technology; investment; Iran; Iranian
diplomats and representatives; Libya; nuclear explosive device;
parent; person; petroleum resources; subsidiary; United States
or State; and United States person.
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report. Among the principal
oversight activities which were contributed to the Committee's
formulation of H.R. 3107 were:
On May 2, and November 9, 1995 hearings were held on
U.S. policy toward Iran, and numerous consultations and
briefings took place on U.S.-Iran issues from January
through March of 1996 between staff, Committee Members
and Executive branch officials.
As a result of these oversight activities, the Committee
recommends that the House approve H.R. 3107 as reported.
Committee on government reform and oversight findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
New budget authority and tax expenditures
The Committee adopts the cost estimate of the Congressional
Budget Office, set out below, as its submission of any required
information on new budget authority, new spending authority,
new credit authority, or an increase or decrease in the
national debt required by clause 2(l)(3)(B) of rule XI of the
House of Representatives.
Inflationary Impact Statement
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of Representatives, the Committee estimates that
H.R. 3107 will have no significant inflationary impact on
prices and costs in the operation of the national economy.
Congressional Budget Office Cost Estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the Committee sets forth
with respect to H.R. 3107 the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 403 of the Budget Act of 1974:
Congressional Budget Office,
Washington, DC, March 27, 1996.
Hon. Benjamin A. Gilman,
Chairman, Committee on International Relations,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed H.R. 3107, Iran Oil Sanctions Act of 1996, as ordered
reported by the House Committee on International Relations on
March 21, 1996. The bill would require the President to impose
sanctions on any person who he determines has enhanced the
development of the petroleum resources of Iran or Libya through
the export, transfer, or release of goods or technology or
through direct investment.
The bill would not affect receipts or direct spending and
would not be subject to pay-as-you-go procedures under section
252 of the Balanced Budget and Emergency Deficit Control Act of
1985. The bill could increase spending subject to
appropriations action to cover the cost of gathering and
analyzing information, publishing lists of sanctioned persons,
and providing advisory opinions. Based on information provided
by the Administration, CBO estimates that such costs would
total less than $1 million a year.
Section 4 of the Unfunded Mandates Reform Act of 1995, P.L.
104-4, excludes legislative provisions that are necessary for
the national security from the application of that act. CBO has
determined that all provisions of H.R. 3107 fit within that
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Joseph C.
Whitehill for impacts on the federal budget, Pepper Santalucia
for impacts on state, local, and tribal governments, and Eric
Labs and Amy Downs for private sector impacts.
June E. O'Neill, Director.
H.R. 3107, as ordered reported by the Committee on
International Relations, contains several provisions which fall
within the shared jurisdiction of other committees of the
House, including the Committee on Ways and Means, Banking and
Financial Services and Government Reform and Oversight.
ADDITIONAL VIEWS OF THE HONORABLE LEE H. HAMILTON AND THE HONORABLE
JAMES P. MORAN
We supported this bill because we agree with the sponsors
that the United States should take steps to limit Iran's
earnings from exports of oil and gas, which directly contribute
to its ability to develop weapons of mass destruction and to
We have several concerns about the bill as it was reported
from the International Relations Committee, however, and we
hope those concerns will receive further consideration as this
bill moves forward.
no disagreement on objectives
When it comes to Iran, Members of the International
Relations Committee disagree neither on the problem, nor on the
goal of U.S. policy.
Iran threatens vital U.S. national interests. It is
actively pursuing weapons of mass destruction, it is a
confirmed sponsor of terrorism, and it is working to undermine
the Middle East peace process. In response to these threats,
the President last year imposed a total embargo on U.S. trade
with Iran, a step which all of us supported.
Members of the Committee agree that a key goal of U.S.
policy should be to persuade Iran's major trading partners and
creditors to take similar steps to isolate Iran and press for
changes in its policies.
Where we sometimes disagree is not on strategy, but on the
best tactics with which to pursue that strategy and our shared
policy goals in Iran.
concerns on the bill
We have three principal reservations about the bill in its
First, we are concerned that the bill could be
counterproductive to the goal of increasing multilateral
economic and political pressure on Iran.
The sanctions in the bill will penalize foreign firms for
commercial activity which, though objectionable to us, is legal
in their home countries. We understand that other governments
are likely to charge that the bill's import and government
procurement sanctions, at a minimum, violate trade and other
international agreements to which the United States is a party.
In official demarches, other governments have already
notified us that they object to these measures on sovereignty
grounds. Past experience suggests they will take blocking
measures. Retaliatory measures against U.S. trade, perhaps
authorized by international adjudicatory bodies, are also
Our concern here is not that we may offend our allies, for
we object to their unwillingness to adopt tougher measures to
isolate Iran economically and politically. Our concern is more
practical: The United States cannot adequately pressure Iran's
economy alone. A strong adverse reaction by other governments
to a U.S. effort to penalize their firms will put us at odds
with some of our closest friends. That could ultimately reduce,
rather than increase, multilateral cooperation on Iran.
We believe recent history is instructive. Western efforts
to confront another dangerous country--the former Soviet
Union--were set back in 1982 when the United States tried to
sanction firms participating in the development of a Soviet gas
The target of U.S. pressure in 1982 was subsidiaries of
U.S. firms, yet the reaction in Europe was intense. And U.S.
sanctions did not achieve their goal: the sanctions were not
sustainable, and the United States ultimately had to lift them.
The bill before us today would hit foreign firms. We can expect
at least as strong a response.
We do not object in principle to pressuring foreign firms
or their home governments to cease commercial activity that
helps Iran increase its export earnings. But we hope that as
this bill moves forward, an effort will be made to weigh likely
international responses to it, because those responses will
influence the effectiveness of our effort to change Iranian
In this regard, we would also like more attention focused
on the relative merits of sanctioning investment versus
sanctioning trade. We believe investment is more critical to
Iran's energy sector than trade. The marginal benefit of trying
to cut off trade in this area would be relatively small when
compared with the international diplomatic and economic costs
of such efforts.
Our second concern about this bill relates to the costs it
may impose on the U.S. economy.
We note that four of the five sanctions called for in this
bill will--if imposed--result in lost sales or business for
U.S. firms. That could cost jobs. Retaliation by other
governments could cost more jobs.
We believe the United States must sometimes pay an economic
price to ensure its security. But we also believe that
successful U.S. sanctions must harm the target country more
than they harm the United States. If they do not, they will not
earn public support and will be difficult to sustain.
To ensure this result, the President needs sufficient
flexibility to weigh the economic and security implications of
different sanctions measures. It is not clear to us that the
sanctions provisions of this bill give the President that
The bill requires the President to impose two of five
possible sanctions. But all of the sanctions won't be available
in each case:
Some would only apply to foreign contractors.
Some would only apply to foreign financial services
We are hopeful that Congress will be able to give the
President the full range of policy tools he needs to do what
only he can: balance U.S. foreign policy and economic
Third, we would have preferred that this bill had treated
Iran and Libya differently.
Members of the Committee agree that Libya and Iran each
threaten U.S. national interests, but they do so in different
ways, and the international response to each country has also
There is already considerable multilateral cooperation on
isolating Libya. UN sanctions are already in place. We are
concerned that new unilateral U.S. sanctions could jeopardize
current multilateral cooperation and could undercut current
U.S. efforts to expand existing UN sanctions.
Furthermore, since there is already substantial foreign
investment in Libya's energy sector, investment sanctions will
not have much of a deterrent effect.
We believe the Administration has put forward a
constructive proposal on Libya--one that treats it differently
from Iran, but with equal firmness. Under the Administration's
proposal, U.S. sanctions would be linked to compliance with
existing UN sanctions. We think this proposal deserves serious
We voted for this bill because we agree with its
fundamental objective--changing Iranian government behavior. We
would like this bill to move forward.
We raise these concerns in an effort to be constructive. We
want this legislation to be effective. It will not be effective
if it generates excessive conflict with our allies and hurts
American workers more than it hurts Iran. We do not know
whether that would be the case if the bill were enacted in its
current form, but we hope Congress and the Administration can
carefully evaluate these issues as the bill moves forward.
Lee H. Hamilton.
James P. Moran.