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Date: 4/28/2001

Published In: National Journal

Author/Reporter: Peter H. Stone

Oil industry lobbyists weren't particularly fazed on April 19 when President Bush downplayed news reports that his energy task force might soon recommend that U.S. companies be allowed to do business in Iran and Libya. They're hopeful that their time will come later this year.

Buoyed by earlier statements critical of sanctions by Vice President Dick Cheney and other key Administration officials, oil industry lobbyists say that the Administration may well side with them after Iran holds its presidential elections in June. "Those elections may send some encouraging signals," says Red Cavaney, the president of the American Petroleum Institute.

Cavaney and his allies are in the midst of a lobbying campaign aimed at persuading members of Congress and Administration officials to relax sanctions against investments in Iran and Libya on the grounds that they hurt both U.S. business interests and the nation's energy security.
The lobbying blitz underscores the huge stakes for American oil companies and other business interests in trying to reverse U.S. policy toward these two oil-rich Middle Eastern pariahs. Oil behemoths such as Chevron Corp., Conoco, ExxonMobil Corp., and Phillips Petroleum Co. have been working aggressively alongside big business coalitions, such as USA*Engage, a group of 670 U.S. companies, to fight unilateral sanctions. Industry lobbyists want Congress to resist appeals from the American Israel Public Affairs Committee for a five-year renewal of the Iran-Libya Sanctions Act, which is aimed at curbing foreign energy investments in those two countries. The lobbyists are also asking the Bush Administration to overturn separate executive orders that block most U.S. companies from doing business in Iran and Libya.

And lobbyists want the Administration and Congress to back new Caspian-area policies that could benefit U.S. energy interests and their own bottom lines.

Congress passed the Iran-Libya Sanctions Act in 1996 to discourage foreign energy firms, including European ones, from making investments in either country. The act gives the President the authority to limit the ability of offending companies to export goods to the United States.

By contrast, the executive orders, which were first imposed by President Clinton in 1995 and have been renewed yearly, hit American companies directly by barring U.S. energy firms and other American multinationals from investing in either Iran or Libya.

Industry lobbyists say they have been heartened by statements critical of sanctions by Secretary of State Colin Powell and Cheney, the former chief executive of Halliburton Co. who chairs the Administration's energy task force.

Although the fight to block congressional renewal of the Iran-Libya Sanctions Act, which expires in August, has received more media attention, USA*Engage Chairman Don Deline says that the executive orders are in some ways more important to U.S. companies. Bush signed a measure in mid-March that renewed the executive orders for a year.

USA*Engage lobbyists have had meetings with top Bush Administration officials, including Lewis Libby, Cheney's chief of staff, Richard Haass, the State Department's director of policy and planning, and Ted Kassinger, the general counsel at the Commerce Department, to press their concerns. USA*Engage and the National Foreign Trade Council, another large business coalition seeking to end the sanctions, have visited about 50 congressional offices since early March to make their case. "Our overall philosophy is that being engaged with a country is better than running away," says Deline, who also lobbies for Halliburton. USA*Engage is also weighing whether to launch advertising efforts in some key congressional districts. The coalition is using the Fratelli Group, a public affairs firm, to help get its message out to the media.

Prominent oil industry executives, such as Archie Dunham, the chief executive officer of Houston-based Conoco, have also weighed in. On March 21, Dunham visited Washington to meet with Cheney. Dunham pushed for an energy policy that would spur more oil production both in the United States and overseas, in such countries as Iran and Libya. "We need a diversity of supply from different parts of the world," said Dunham, a board member of the American Petroleum Institute, in a phone interview. "We need that to increase our capacity." Dunham says that the current sanctions just "don't work." Conoco and two other oil companies recently hired the Duberstein Group to help make the case for lifting the Libya sanctions.

Other industry executives have also been engaged in the anti-sanctions drive. "There's no [oil] field or undertaking that hasn't gone forward because of the lack of U.S. participation," says Cavaney, whose association belongs to USA*Engage. "What they do is remove U.S. companies from commercial considerations."

The fight against the Iran-Libya sanctions has also garnered support from an ex-member of Congress who sits on Chevron's board. J. Bennett Johnston, a Louisiana Democrat who used to chair the Senate Energy Committee and was part of a Chevron contingent that visited Iran earlier this year, says the sanctions are counterproductive. "The sanctions policy serves the interest of the mullahs, while the vast majority of the society would like to do business with the West." Johnston says he's not lobbying the issue for Chevron or any clients through his company, Johnston & Associates, but that he's talked "informally" to friends in the Administration about his views.

For extra help on the issue, oil companies are also banking on a grassroots organization of Iranian-Americans to lend a hand. The Iranian Trade Association, which was started in 1997, is a San Diego-based group of Iranian-American business professionals that wants to see ties between Iran and the United States improved. The group's funding comes partly from such corporations as Caterpillar, Chevron, Conoco, and ExxonMobil. "We're working to generate letters and phone calls," says ITA President Shahriar Afshar. He said the U.S. sanctions are viewed in Iran as a "hostile attempt to torpedo the economy."

On the other side, AIPAC, with its famously strong Capitol Hill connections, has spearheaded the effort to keep sanctions in place. The group's lobbyists, along with its 50- member board, have visited dozens of congressional offices, arguing that sanctions are necessary to help curb Iranian-backed terrorism. AIPAC argues that sanctions are needed because Libya and Iran, despite some signs of liberalization, still threaten Israel and the West.

"Reducing sanctions in any form against Iran now would be providing the country with a unilateral gesture of goodwill that it doesn't deserve," says Ken Bricker, an AIPAC spokesperson. "Without the sanctions regime it's entirely likely that Iran would already possess nuclear weapons and the ballistic missile technology capable of delivering them to the U.S."

AIPAC has been helping circulate two "Dear Colleague" letters designed to gain co-sponsors for bills that would renew the Iran-Libya Sanctions Act for five more years. In the Senate, the bill will be introduced by Sens. Charles E. Schumer, D-N.Y., and Gordon H. Smith, R-Ore. In the House, it will be co-sponsored by Reps. Benjamin A. Gilman, R-N.Y., and Howard L. Berman, D- Calif.

Oil industry officials are also using the Administration's efforts to develop a national energy policy as an opening to push for closer U.S. ties with such oil-rich Caspian nations as Azerbaijan and Kazakhstan, where U.S. firms have invested heavily in drilling operations. Several oil companies are launching efforts to secure permanent normal trade relations for Kazakhstan, a move that some analysts say may have been prompted by a desire to shore up Kazakhstan's on-again, off- again support for a proposed oil pipeline that could carry vast volumes of oil from Caspian fields to Turkey and the West.

The controversial pipeline project would allow Caspian oil to move from Baku in Azerbaijan to the Turkish port of Ceyhan. The Baku-Ceyhan route was backed heavily by the Clinton Administration, for geopolitical reasons, as a bulwark against Russian and Iranian influence in the region. But the proposal has been stymied in part by persistent oil industry concerns that the pipeline would prove too costly. But recently the industry has warmed to the project as more economically feasible, and some view a stronger commitment from Kazakhstan to provide oil for the pipeline as crucial to its long- range success.

The biggest players in the Kazakhstan oil fields belong to the U.S.-Kazakhstan Business Association, which is expected to back granting permanent normal trade relations to Kazakhstan. Its members include Chevron, ExxonMobil, and Phillips. Bills to provide permanent normal trade relations were introduced in Congress for the first time earlier this year by Sen. Sam Brownback, R-Kan., and Rep. Joseph R. Pitts, R-Pa.

Still, the odds of success seem long, and Administration support doesn't seem likely for now. Kazakhstan's image has been sullied in recent years by its continuing lack of freedoms, suppression of dissidents, and government corruption.

Separately, the Bush Administration has been working to settle a long-running political dispute between Azerbaijan and its neighbor Armenia. A settlement could result in ending the ban on American aid to Azerbaijan and improving oil company fortunes in the area. The Administration's efforts have impressed oil industry and other lobbyists, who in recent years have worked in vain to end the ban.

Former Rep. Robert Livingston, R-La., who was an ally of the oil industry and Azerbaijan when he was in the House, says a breakthrough is possible. Livingston, who through the Livingston Group now represents Turkey, which backs the Baku-Ceyhan pipeline, calls the ban "an arbitrary and capricious penalty on a nation that is critical" to America's developing more sources of energy. "I think that's got to change."

Although he's not lobbying now on the issue, Livingston said he might get involved later this year. Livingston and former Rep. Toby Moffett, D-Conn., his partner in Livingston Moffett Global Consulting, a new venture, have been soliciting oil companies about starting a new Caspian coalition that could work on several high-profile issues.

Moffett thinks that business prospects may brighten this year because of congressional opposition to drilling domestically in such environmentally sensitive areas as the Arctic National Wildlife Refuge. "My feeling is that ANWR won't happen, and that this [killing the Azerbaijan aid ban] might be a nice pro- production vote."  

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