industry was passed 14 years ago, the United States actually sanctioned a company last week. But it was an Iranian company that happens to be incorporated in Switzerland.
The Obama Administration has been under pressure from both Republicans and Democrats in Congress to use the famous Iran-Libya Sanctions Act (ILSA) that was passed in 1996 and authorizes penalties on foreign firms that invest more than $20 million in any 12-month period in the Iranian oil and gas industry.
Presidents Bill Clinton and George W. Bush both refused to issue any sanctions for fear of setting off a furious conflict with Europe, which erupted in an uproar in the 1980s when President Ronald Reagan sanctioned European firms trading with the Soviet Union.
Clinton and Bush took advantage of a loophole in the law that called for an investigation of reports of such investments but never set a deadline for completing the investigations. No investigation has been completed in 14 years. This year, Congress plugged that loophole.
But Obama still has the authority to issue waivers, saying, in effect, that while a particular company has triggered sanctions, he judges it to be best for the United States not to impose any sanctions.
Instead, the Obama Administration had effectively played a trick on Congress. It has imposed sanctions on a European firm—but one that no European would envision as a European firm.
The Swiss firm that Obama sanctioned last week is the Naftiran Intertrade Company (NICO), an Iranian-owned firm registered in Switzerland. Its main role is to gather capital to invest in Iranian oil and gas development projects.
As a practical matter, the sanctions will have no impact. Then sanctions effectively bar NICO from doing business in the United States. But as an Iranian-owned firm, it is already barred from the US market.
This first-ever sanction under ILSA was announced last Thursday by Deputy Secretary of State James B. Steinberg, the Number Two man in the State Department—not by Secretary of State Hillary Clinton. Steinberg does not usually make statements on Iran. Some suspected he was pushed to the rostrum this time so he could take the heat if Congress and the media hooted and screamed.
But the announcement garnered little notice in the media or in Congress despite its uniqueness as the first action under ILSA in 14 years.
The few reactions from Congress expressed pleasure that the Administration had done something and disappointment that no Chinese or Russian firms were sanctioned. But there is no political impediment against sanctioning Russian or Chinese firms; many of them have been sanctioned over the years for selling Iran missile or nuclear materials. Sanctions are only a political issue in Europe.
But Obama is trying to “reset” relations with Russia and trying to induce China to change its currency relationship to the dollar. Obama might feel that those front-burner efforts would be undermined by imposing sanctions on firms from those countries just now.
Steinberg said that NICO, a wholly-owned subsidiary of the National Iranian Oil Company, “has provided hundreds of millions of dollars of financing for development projects in Iran’s petroleum sector, and sanctioning NICO today will further isolate the company from the international business community.”
At the same time that Steinberg announced the NICO sanctions, he announced that Washington will not sanction four major European firms that have had major investments in Iran because all of them have told the State Department they have ended or are in the process of ending their investments in Iran’s oil and gas sectors.
Those four firms are: Total of France; Statoil of Norway; Eni of Italy; and Royal Dutch Shell, a British-Dutch firm. All of them have made public announcements over the past several months about pulling out of Iran and the Iran Times has previously reported those announcements. This part of Steinberg’s announcement got the biggest coverage in the American media as the reporters covering Steinberg did not know he was giving them old news.
Steinberg said the pledges by the firms mean they are no longer threatened with sanctions.
He did say that other firms are being investigated for possibly meeting the ILSA trigger. But he named none of them. He refused even to give a number.
Steinberg emphasized one key point for reporters. “The goal here is not to impose sanctions for sanctions’ sake,” he said, “but to end companies from doing business within Iran. And, so, we believe the model that we would like to see every company follow, is to follow the model taken by the four European firms.”
Formally, four sanctions were imposed on NICO. It is now prohibited from receiving any export assistance from the US government’s Export-Import Bank, barred from receiving any licenses to export sensitive goods from the United States, banned from receiving loans from private US banks exceeding $10 million in any 12-month period, and excluded from signing any contracts to sell goods to any US government agencies.
A State Department lawyer, David Mortlock, told reporters “most” of those activities had been prohibited to NICO before as an Iranian firm. Pressed by reporters, he was unable to name any of those activities that NICO could previously have participated in.