THE IRANIAN
News
U.S. weighs sanctions against Gazprom
BY TOM CONNORS &
MICHAEL S. LELYVELD
JOURNAL OF COMMERCE
WASHINGTON, October 31, 1997 -- The State Department is investigating whether the U.S. law placing economic sanctions on Iran and Libya prohibits $750 million in Export-Import Bank loan guarantees to a Russian utility because of its role in Iranian gas development.
As the department reported its efforts to a Senate Banking Committee hearing Thursday, senators seeking to block guarantees for Russia's Gazprom also said they would amend the act if necessary to prevent the state-owned gas monopoly from floating $1 billion in bonds on the U.S. market.
Committee chairman Alfonse D'Amato, R-N.Y., said the Iran-Libya Sanctions Act already provides sanctions that could bar U.S. financial institutions from making loans above $10 million to any sanctioned company.
D'Amato urges review
"In view of recent developments, it's time for Congress to revisit . . . (the act) and examine whether companies like Gazprom should be denied access to our financial markets and whether U.S. commercial and investment banks should assist in their financing," Mr. D'Amato said.
Sen. Lauch Faircloth, R-N.C., said, "Wall Street should say no to this deal and, if it doesn't, we should block it by legislation." In regard to the pending Export-Import Bank guarantees, Mr. D'Amato and other senators have been briefed by the State Department on its discussions thus far with the countries and companies involved in the $2 billion development of Iran's South Pars gas field.
Mr. D'Amato told William C. Ramsay, a deputy assistant secretary of state involved in those discussions, that "I am heartened by your activity."
Mr. Ramsay declined to estimate when the department would complete its discussions and reach a determination. But he promised the committee that "we will take appropriate action once our deliberations are complete. Sanctions are a very real option if we determine that sanctionable activity has occurred."
Several loans at issue
The Export-Import Bank, which deferred to State on the sanctions issue, said it formally approved $134.7 million in one loan guarantee package for Gazprom in December 1996.
The bank has not reached a final decision on two other loan guarantees covering the remainder of the $750 million provided in a 1994 memo of understanding with Gazprom, said Ex-Im's chairman, James Harmon.
The D'Amato sanctions have been strongly opposed by the European Union, which has temporarily suspended a complaint to the World Trade Organization until some compromise can be reached with the United States.
Motives may be complex
But one of the biggest unexpected complications facing both the State Department and the pro-Israel lobby is that Gazprom may actually be inviting sanctions intentionally. By involving itself in Iran, Gazprom has stoked U.S. fears about a trans-Iran pipeline that would join gas-rich Turkmenistan with buyers in Turkey.
In July, the administration leaned toward a decision that the D'Amato sanctions should not apply to the pipeline, primarily because it would link two friendly nations, Turkmenistan and Turkey. But the Gazprom flap is gradually forcing a reversal of that decision. All Iran projects have again become sanctions-bait to avoid implications that the administration is going soft on Iran.
The big beneficiary is Gazprom, which has a virtual monopoly on gas sales to Turkey and wants no competition from Turkmenistan. While Gazprom could lose over $1 billion in U.S. financing, it has far more to gain by cornering the Turkish gas market. The situation is analogous to a batter trying to get hit by a pitch to get on base.
The trap is a dilemma for Israel's advocates because the country's newest military ally is Turkey, which could be under Russia's thumb for energy supplies if the administration is pushed into sanctioning both the South Pars deal and the pipeline.
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