Order Code RS20871
Updated October 11, 2006
CRS Report for Congress
Received through the CRS WebJanuary 25, 2007
The Iran-Libya Sanctions Act (ILSAISA)
Kenneth Katzman
Specialist in Middle Eastern Affairs
Foreign Affairs, Defense, and Trade Division
Summary
No firms have been sanctioned under the Iran-Libya Sanctions Act (ILSA), and it
has terminated with respect to Libya. Renewed in August 2001 for another five years
(P.L. 107-24), ILSA was scheduled Sanctions Act (ISA). Set to expire
in August 2006. In, bills in the 109th Congress,
H.R. 282 (passed by the House on April 26,
2006), S. 333, and H.R. 6198 would tighten
some provisions. The latter, which extends ILSA until December 31, 2011, but allows
substantial Administration flexibility, was passed and signed (P.L. 109-293). This
report will be updated. See also CRS Report RL32048, Iran: U.S. Concerns and Policy
extended it and added provisions to apply it more strictly.
The latter bill, (P.L. 109-293, signed September 30, 2006), extended it until December
31, 2011, changed its name from the Iran-Libya Sanctions Act (ILSA) to ISA by
terminating application to Libya, and allows substantial Administration flexibility in
applying the new provisions. This report will be updated. See also CRS Report
RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman.
Background and Original Passage of ILSA
ILSA was introduced in the context of a tightening of U.S. sanctions on Iran during
the first term of the Clinton Administration. In response to Iran’s stepped up nuclear
program and its support to terrorist organizations (Hizbollah, Hamas, and Palestine
Islamic Jihad), President Clinton issued Executive Order 12957 (March 15, 1995), which
banned U.S. investment in Iran’s energy sector, and Executive Order 12959 (May 6,
1995), which banned U.S. trade with and investment in that country. The Clinton
Administration and many in Congress maintained that these sanctions would deprive Iran
of the ability to acquire weapons of mass destruction (WMD) and to fund terrorist groups
by hindering its ability to modernize its key petroleum sector. That sector generates about
20% of Iran’s GDP. Iran’s onshore oil fields, as well as its oil industry infrastructure,
were aging and needed substantial investment, and its large natural gas resources (940
trillion cubic feet, exceeded only by those of Russia) were not developed at all at the time
ILSA was first considered.
U.S. allies refused to sanction Iran in the mid-1990s, and the Clinton Administration
and Congress believed that it might be necessary for the United States to try to deter
foreign investment in Iran. The opportunity to do so came in November 1995, when Iran
launched its first major effort to open its energy sector to foreign investment, which Iran
had banned after the February 1979 Islamic revolution on the grounds that foreign firms
would gain undue control over Iran’s resources. To accommodate that philosophy while
CRS-2
attracting needed foreign help, Iran developed a “buy-back” investment program under
Congressional Research Service ˜ The Library of Congress
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which foreign firms recoup their investments from the proceeds of oil and gas discoveries
but do not receive equity stakes.
As Iran was announcing its plans, someSome in Congress, with input from the Clinton
Administration, developed legislation
to sanction such investment. On September 8,
1995, Senator Alfonse D’Amato
introduced the Iran Foreign Oil Sanctions Act of 1995
to sanction foreign firms’ export
to Iran of energy technology. The bill passed the Senate
on December 18, 1995 (voice
vote) but, in contrast to the introduced version, imposed
sanctions on foreign investment in Iran’s energy sector. The Clinton Administration was
concernedresponse to criticism that U.S. monitoring of foreign exports to Iran would
be too difficult to
implement. On implement, sanctioned foreign investment in Iran’s energy sector. On
December 20, 1995, the Senate passed still another version with an
amendment, sponsored by Senator Edward Kennedy, that applied all provisions to Libya
Libya as well, which at the time was still refusing to yield for trial the two suspects in the
Libyan
intelligence agents suspected in the December 21, 1988, bombing of Pan Am 103, both allegedly agents of Libyan
intelligence. The . The
House passed its version of the bill, H.R. 3107, on June 19, 1996 (4150415-0). The Senate
passed a slightly different version on July 16, 1996 (unanimous consent);
the House
concurred, and the President signed it into law (P.L. 104-172, August 5, 1996).
ILSA was to sunset on August 5, 2001 (5 years after enactment), in the context of
somewhat improved U.S. relations with both Iran and Libya. During 1999 and 2000, the
Clinton Administration had eased the trade ban on Iran somewhat in response to the more
moderate policies of Iran’s President Mohammad Khatemi. In 1999, Libya yielded for
trial of the Libyan suspects in Pan Am 103. However, proponents of ILSA renewal
maintained that ILSA was slowing investment in both countries and that both would view
renewal maintained
that both countries would view ILSA’s expiration as a concession, reducing their incentive for
further moderation.
Legislation to renew ILSA Renewal legislation (H.R. 1954) was enacted in the 107th Congress
(P.L. 107-24,
August 3, 2001). The renewal law; it changed the definition of investment to treat any
additions to pre-existing investment as a new investment, and required an Administration
report on ILSA’s effectiveness within 24 to 30 months of enactment; that. That report was
submitted to Congress in January 2004 and did not recommend that ILSA be repealed.
Key Provisions
. ILSA requires the President to impose at least two out of a menu
of six sanctions on
foreign companies (entities, persons) that make an “investment” of
more than $20 million
in one year in Iran’s energy sector.1 The six sanctions available (Section 6) are
are: (1) denial
of Export-Import Bank loans, credits, or credit guarantees for U.S. exports
to the
sanctioned entity; (2) denial of licenses for the U.S. export of military or militarily-useful
militarilyuseful technology to thatthe entity; (3) denial of U.S. bank loans exceeding $10 million in one year
year to the entity; (4) if the entity is a financial institution, a prohibition on its service as a
a primary dealer in U.S. government bonds; and/or a prohibition on its serviceserving as a
repository for U.S. government funds (each counts as one sanction); (5) prohibition on
U.S. government procurement from the entity; and (6) a restriction on imports from the
entity, in accordance with the International Emergency Economic Powers Act (IEEPA,
50 U.S.C. 1701 and following).
The President may waive the sanctions on Iran if the parent country of the violating
firm agrees to impose economic sanctions on Iran (Section 4(c)) or if he certifies that
doing so is important to the U.S. national interest (Section 9(c)). ILSA terminates for Iran
1
For Libya, the threshold was $40 million, and sanctionable activity included exportation to
Libya of a broad range of technology of which the export to Libya was banned by Pan Am 103related Security Council Resolutions 748 (Mar. 31, 1992) and 883 (Nov. 11, 1993).
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Waiver/Expiration Provisions. The President may waive ILSA sanctions on
Iran if the parent country of the violating firm agrees to impose economic sanctions on
Iran (Section 4(c)) or if he certifies that doing so is important to the U.S. national interest
(Section 9(c)). ILSA terminates for Iran if Iran ceases its efforts to acquire WMD and is
removed from the U.S. list of state
sponsors of terrorism. For Libya, ILSA terminates if
ILSA no longer applies to Libya if the President determines that
Libya has fulfilled the requirements of all U.N. resolutions
relating to the downing of Pan
Am 103. (President Bush made that Libya certification on April
23, 2004, terminating ILSA for Libya.)
Implementation and Effectiveness
23, 2004.)
Early Reaction. Traditionally skeptical of economic sanctions as a policy tool, the
European Union
states opposed ILSA, at first enactment, as an extraterritorial application
of U.S. law. The EU countries
threatened formal counter-action in the World Trade Organization
(WTO), and in April
1997, the United States and the EU formally agreed to try to avoid
a trade confrontation
over ILSAit (and a separate “Helms-Burton” Cuba sanctions law, P.L.
104-114). The
agreement contributed to a May 18, 1998, decision by the Clinton
Administration to waive ILSA
sanctions sanctions (“national interest” grounds under Section 9(c))
on the first project determined to be in violation: a $2 billion2 contract, signed
in in
September 1997, for Total SA of France and its minority partners, Gazprom of Russia
and and
Petronas of Malaysia to develop phases 2 and 3 of the 25-phase South Pars gas field.
The Administration announced the “national interest” waiver (Section 9(c) of ILSA) on
May 18, 1998, after For
its part, the EU pledged to increase cooperation with the United States on
non-proliferation nonproliferation and counter-terrorism. The announcementAdministration indicated that EU firms
would would
likely receive waivers for future projects that were similar.
As did its predecessor, the
Bush Administration sought to work cooperatively with
the EU to curb Iran’s nuclear
program and limit its support for terrorism rather than risk
a rift by imposing sanctions
on EU (or other) firms. Some believe ILSA did slow Iran’s
energy development initially, but, as shown by the projects agreed to below, its deterrent
effect weakened as foreign companies began to perceive that ILSA sanctions would not
likely be imposed. Since that sanctions waiver, about $11.5 billion in foreign investments
in Iran’s energy sector have been agreed to. The new investment has not boosted Iran’s
sustainable oil production significantly — it is still about 4 million barrels per day (mbd)3
— but the foreign investment apparently has slowed any deterioration. In addition,
Iran’s gas sector, non-existent prior to the late 1990s, is becoming an increasingly
important factor in Iran’s energy future as a result of foreign investment.
Since the South Pars case, a number of investments in Iran have been formally
placed under review for ILSA sanctions by the State Department (Bureau of Economic
Affairs). State Department reports to Congress on ILSA, required every six months, state
that U.S. diplomats raise U.S. policy concerns about Iran with both investing companies
and their parent countries. However, no sanctions determinations have been announced
since the South Pars case. Table 1 shows reported post-1999 energy investments in Iran.
2
Dollar figures for energy investment contracts with Iran represent public estimates of the
amounts investing firms are expected to spend during the life of the project, which might in some
cases be several decades.
3
Testimony of Deputy Assistant Secretary of State Anna Borg before the House International
Relations Committee, Subcommittee on the Middle East and Central Asia. June 17, 2003.
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Table 1. Post-1999 Foreign Investment in Iran Energy Sector
Date
Field
Company(ies)
Value
Output Goal
Feb. 1999 Doroud (oil)
Totalfina Elf/ENI
$1 billion
205,000 bpd
Apr. 1999 Balal (oil)
Totalfina Elf/ Bow
Valley (Canada)/ENI
$300 million
40,000 bpd
Nov. 1999 Soroush and Nowruz (oil)
Royal Dutch Shell
$800 million
190,000 bpd
Apr. 2000 Anaran (oil)
Norsk Hydro (Norway)
July 2000 Phase 4 and 5, South Pars (gas)
ENI
$1.9 billion
2 billion cu.ft./day
Mar. 2001 Caspian Sea oil exploration
GVA Consultants
(Sweden)
$225 million
June 2001 Darkhovin (oil)
ENI
May 2002 Masjid-e-Soleyman (oil)
Sheer Energy (Canada)
$1 billion
160,000 bpd
$80 million
25,000 bpd
Sep. 2002 Phase 9 and 10, South Pars (gas) LG (South Korea)
$1.6 billion
Oct. 2002 Phase 6, 7, 8, South Pars (gas)
$2.65 billion
Statoil (Norway)
Azadegan (oil) (Iran is
threatening to cancel this deal as
Inpex (Japan)
Feb. 2004
of October 2006 for Inpex’s
refusal to agree on final terms.)
Totals
3 billion cu.ft./day
$2 billion
$11.5 billion
300,000 bpd
Oil: 920,000 bpd
Gas: 5 billion cu.ft/day
ILSA and Emerging Energy Relationships. ILSA’s definition of “investment”
does not specifically mention as violations of ILSA long-term oil or gas purchases from
Iran, or the building of energy transit routes to or through Iran. However, the Clinton
Administration position was that the construction of energy routes might violate ILSA,
because these routes would “directly and significantly contribut[e] to the enhancement
of Iran’s ability to develop petroleum resources.”4 The Clinton Administration used that
argument to deter energy routes involving Iran and thereby successfully promote an
alternate Caspian energy route from Azerbaijan (Baku) to Turkey (Ceyhan). This route,
which became operational in 2005, bypasses both Iran and Russia.
At the same time, the Clinton and Bush Administrations have adopted flexible
interpretations of ILSA to accommodate the needs of key regional allies for energy
supplies. A few weeks after ILSA was enacted, Turkey and Iran agreed to construct a
natural gas pipeline from Iran to Turkey (each country constructing the pipeline on its
side of their border). Turkey later announced that, at least initially, it would import gas
only from Turkmenistan through this pipeline. In July 1997, the State Department said
that the project did not violate ILSA because Turkey would be importing gas from
Turkmenistan, not Iran, and the project would therefore not benefit Iran’s energy sector
directly. Direct Iranian gas exports to Turkey began in 2001, in apparent contravention
of Turkey’s pledges not to buy Iranian gas directly, but the Bush Administration has not
imposed ILSA sanctions on the project.
4
This definition of sanctionable activity is contained in Section 5(a) of ILSA.
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Further tests of ILSA are looming as Pakistan, India and China build energy ties to
Iran; some deals might include pipeline projects to Iran. In October 2004, Iran negotiated
a long-term agreement to allow China (Sinopec) and India (Oil and Natural Gas Corp.,
ONGC) to develop Iran’s Yadavaran oil field, which might be able to produce 300,000
barrels per day, in exchange for agreeing to purchase 10 million tons of Iranian LNG
annually for 25 years. Under the preliminary agreement, Sinopec would obtain a 51%
stake in Yadavaran and ONGC would get a 20% stake. Iran’s National Iranian Oil
Company would obtain the remaining stake. In February 2006, China and Iran tried to
finalize the deal in advance of any potential United Nations sanctions that might be
imposed on Iran for its nuclear program. A related deal would allow the state-owned
Indian Oil Company to develop part of South Pars and build an LNG plant in Iran. If
implemented for the full duration of the agreements, these deals could total over $100
billion, although some question whether such deals would go to their full term.
The agreements to import Iranian LNG would not appear to constitute an
“investment” in Iran’s energy sector, as defined by ILSA. However, a related aspect of
these deals, particularly those involving Indian firms,5 is the construction of a gas pipeline
from Iran to India, through Pakistan, with a possible extension to China. All three
governments have repeatedly reiterated their commitment to the $4 billion to $7 billion
project, which is planned to begin construction in 2007 and to be completed by 2010.
Pakistan’s President Musharraf said in January 2006 that there is enough demand in
Pakistan for Iranian gas to make the project feasible, even if India declines to join it.
During her visit to Asia in March 2005, Secretary of State Rice “expressed U.S. concern”
about the pipeline deal; other U.S. officials have called the project “unacceptable.” No
U.S. official has directly stated that it would be considered a violation of ILSA. During
his trip to India and Pakistan in March 2006, President Bush said the United States
“understand[s]” Pakistan’s need for gas, appearing to suggest he would not oppose the
pipeline, but Administration officials later said that there was no change in Administration
opposition to it. Aside from commercial considerations, the volatility of relations
between India and Pakistan, particularly the status of Jammu and Kashmir, could derail
the project at any time. A House resolution (H.Res. 353), introduced July 11, 2005,
expresses support for the gas pipeline project as a facilitator of India-Pakistan peace.
Proposed ILSA Modifications and Extensions
ILSA was to terminate on August 5, 2006, unless renewed by Congress. ILSArelated legislation in the 109th Congress includes the Iran Freedom and Support Act of
2005, H.R. 282 (Ros-Lehtinen) and a companion, S. 333 (Santorum). These bills would
not only extend ILSA (indefinitely) but would also close some perceived ILSA loopholes
and authorize funding for pro-democracy activities in Iran. A House bill, H.R. 6198,
similar to H.R. 282 but, as discussed below, allowing more Administration flexibility,
was introduced on September 27, 2006. H.R. 282 was reported out by the House
International Committee on March 15, 2006, by a vote of 37-3, with slight amendment.
5
Some of the Indian companies that reportedly might take part in the pipeline project are ONGC
Corp.; GAIL Ltd.; Indian Oil Corp.; and Bharat Petroleum Corp. Some large European
companies have also expressed interest. See Solomon, Jay and Neil King. “U.S. Tries to
Balance Encouraging India-Pakistan Rapprochement With Isolating Tehran.” Wall Street
Journal, June 24, 2005, p. A4.
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The House passed it on April 26, 397-21. S. 333 had 61 co-sponsors as of June 21, but
a version of the bill, submitted as an amendment to the FY2007 defense authorization bill
(S. 2766), was not adopted (June 14). To prevent ILSA expiration while these bills were
being further considered, H.R. 5877, extending ILSA until September 29, 2006, was
passed by both chambers and signed on August 4, 2006 (P.L. 109-267). A Senate bill, S.
2657, would extend ILSA until August 5, 2011. The most significant ILSA-related
provisions of the bills are as follows:
!
!
!
!
increasing the requirements on the Administration to justify waiving
sanctions on companies determined to have violated ILSA provisions
(under Section 4(c) of ILSA, referring to parent countries’ cooperation
with U.S. sanctions on Iran);
making exports to Iran of WMD-useful technology or “destabilizing
numbers and types of” advanced conventional weaponry sanctionable;
setting a 90-day time limit (urging a 180-day limit in H.R. 6198) for the
Administration to determine whether an investment constitutes a
violation of ILSA. (There was no time limit previously); and
increasing the threshold for terminating ILSA by requiring the
Administration to certify, in addition to existing termination
requirements, that Iran “poses no threat” to the United States, its
interests, and its allies.
H.R. 282 and H.R. 6198 also
!
!
!
cut U.S. foreign assistance to countries whose companies have violated
ILSA’s provisions (H.R. 282) or recommend against U.S. nuclear
agreements with countries that have supplied nuclear technology to Iran
(H.R. 6198);
apply ILSA’s provisions to foreign subsidiaries of U.S. companies (H.R.
282 only); and
require public disclosure of investment funds that have investments in
companies that have invested in Iran’s energy sector (H.R. 282 only);
In addition, H.R. 6198 would extend ILSA until December 31, 2011, and contains
a provision to try to prevent money-laundering by criminal groups, terrorists, or entities
involved in proliferating WMD. It also drops Libya from ILSA, as requested by the
Administration. H.R. 6198 was passed by voice vote and unanimous consent in the
House (September 28) and Senate (September 30). The Administration had opposed H.R.
282 and S. 333 on the grounds that Administration flexibility would be limited and the
bills would hurt the U.S. effort to work with its allies to curb Iran’s nuclear program.
Supporters of these bills believe that continued investment in Iran’s energy sector
undermines containment of Iran’s nuclear program. In part because H.R. 6198 gives the
Administration more flexibility than did the other bills, President Bush signed it into law
on September 30, 2006 (P.L. 109-293) firms.
Modifications in the 109th Congress
As the 109th Congress expressed increasing concern about Iran’s expanding nuclear
program, ILSA was to terminate on August 5, 2006, unless renewed. Some Members
were also concerned that its provisions were not being applied to purported violators
because of Administration diplomatic considerations. ILSA-related legislation in the
109th Congress included the “Iran Freedom and Support Act,” H.R. 282 (Rep. RosLehtinen) and a companion, S. 333 (Sen. Santorum). These bills would not only extend
ILSA indefinitely but would also close some perceived ILSA loopholes and authorize
funding for pro-democracy activities in Iran. In particular, these bills increased the
requirements on the Administration to justify waiving sanctions on companies determined
to have violated ILSA provisions; made exports to Iran of WMD-useful technology or
“destabilizing numbers and types of” advanced conventional weaponry sanctionable; set
a 90-day time limit for the Administration to determine whether an investment constitutes
a violation of ILSA (there was no time limit previously); and increased the threshold for
terminating ILSA by requiring the Administration to certify, in addition to existing
termination requirements, that Iran “poses no threat” to the United States, its interests, and
its allies. H.R. 282 also cut U.S. foreign assistance to countries whose companies have
violated ILSA’s provisions and applied the U.S. trade ban on Iran to foreign subsidiaries
of U.S. companies. H.R. 282 was reported out by the House International Committee on
March 15, 2006, by a vote of 37-3, with slight amendment. The House passed it on April
26, 397-21. S. 333 had 61 co-sponsors as of June 21, 2006. To prevent ILSA expiration
2
Dollar figures for energy investment contracts with Iran represent public estimates of the
amounts investing firms are expected to spend during the life of the project, which might in some
cases be several decades.
CRS-4
while these bills were being considered, H.R. 5877, extending ILSA until September 29,
2006, was passed by both chambers and signed on August 4, 2006 (P.L. 109-267).
As the 109th Congress was completing its work, a House bill, H.R. 6198, addressed
the Administration’s concerns that H.R. 282 and S. 333 did not allow sufficient
Administration flexibility in their application. H.R. 6198, introduced on September 27,
2006, recommends, but does not require, a 180-day time limit for a determination of
violation. It also recommends against U.S. nuclear agreements with countries that have
supplied nuclear technology to Iran. It does not apply the trade ban to foreign subsidiaries
of U.S. firms, but it does make sanctionable sales of WMD-useful technology or
“destabilizing numbers and types of” advanced conventional weaponry. H.R. 6198 also
extends ILSA until December 31, 2011, and contains a provision to try to prevent moneylaundering by criminal groups, terrorists, or entities involved in proliferating WMD, and
it drops Libya from ILSA, as requested by the Administration. H.R. 6198 was passed by
the House and Senate by voice vote and unanimous consent, respectively, and President
Bush signed it on September 30, 2006 (P.L. 109-293). It formally changes the name of
the law to the Iran Sanctions Act (ISA).
Effectiveness and Ongoing Challenges
Some believe ILSA did slow Iran’s energy development initially, but, as shown by
the projects agreed to below, its deterrent effect weakened as foreign companies began
to perceive that actual sanctions would not likely be imposed. Since the 1998 Total SA
case, a number of investments in Iran have been formally placed under review for ILSA
sanctions by the State Department (Bureau of Economic Affairs). State Department
reports to Congress on ILSA, required every six months, state that U.S. diplomats raise
U.S. policy concerns about Iran with both investing companies and their parent countries.
However, no projects have been determined to be violations or not since then. Still, some
energy experts believe that investment would have been much more extensive if not for
both ILSA as well as Iran’s stringent terms and purported aggressive negotiating style.
The new investment has not boosted Iran’s sustainable oil production significantly — it
is still about 4 million barrels per day (mbd)3 — and an analysis published by the National
Academy of Sciences says that Iranian oil exports are declining to the point where Iran
might have negligible exports of oil by 2015.4 Some questioned the study’s conclusions,
and others maintain that Iran’s gas sector, virtually non-existent in 1998, is becoming an
increasingly important factor in Iran’s energy future as a result of foreign investment.
Successive Administrations have wrestled with applications of ISA to some kinds
of international dealings with Iran. ISA’s definition of “investment” does not specifically
mention as violations long-term oil or gas purchases from Iran, or the building of energy
transit routes to or through Iran. However, the Clinton Administration position was that
the construction of energy routes might violate the law, because these routes would
“directly and significantly contribut[e] to the enhancement of Iran’s ability to develop
3
Testimony of Deputy Assistant Secretary of State Anna Borg before the House International
Relations Committee, Subcommittee on the Middle East and Central Asia. June 17, 2003.
4
Stern, Roger. “The Iranian Petroleum Crisis and United States National Security,” Proceedings
of the National Academy of Sciences of the United States of America. Dec. 26, 2006.
CRS-5
petroleum resources.”5 The Clinton Administration used that argument to deter energy
routes involving Iran and thereby successfully promote an alternate route from Azerbaijan
(Baku) to Turkey (Ceyhan). This route, which became operational in 2005, bypasses both
Iran and Russia.
At the same time, the Clinton and Bush Administrations have adopted flexible
interpretations of ISA to accommodate the needs of key regional allies for energy
supplies. A few weeks after ILSA was first enacted, Turkey and Iran agreed to construct
a natural gas pipeline from Iran to Turkey (each country constructing the pipeline on its
side of their border). Turkey later announced that, at least initially, it would import gas
only from Turkmenistan through this pipeline. In July 1997, the State Department said
that the project did not violate the law because Turkey would be importing gas from
Turkmenistan, not Iran, and the project would therefore not benefit Iran’s energy sector
directly. Direct Iranian gas exports to Turkey began in 2001, in apparent contravention
of Turkey’s pledges not to buy Iranian gas directly, but the Bush Administration has not
imposed sanctions on the project.
Further tests of ISA are looming, and some of the large, long-term deals between Iran
and Indian, Chinese, and Malaysian firms, listed below, have the potential to significantly
enhance Iran’s energy export prospects. The value of some of these agreements appears
to include long-term contracts to purchase Iranian oil and gas. A related deal, particularly
those involving Indian firms,6 is the construction of a gas pipeline from Iran to India,
through Pakistan, with a possible extension to China. All three governments have
repeatedly reiterated their commitment to the $4 billion to $7 billion project, which is
planned to begin construction in 2007 and to be completed by 2010. Pakistan’s President
Musharraf said in January 2006 that there is enough demand in Pakistan for Iranian gas
to make the project feasible, even if India declines to join it. During her visit to Asia in
March 2005, Secretary of State Rice “expressed U.S. concern” about the pipeline deal;
other U.S. officials have called the project “unacceptable.” No U.S. official has directly
stated that it would be considered a violation of ILSA. During his trip to India and
Pakistan in March 2006, President Bush said the United States “understand[s]” Pakistan’s
need for gas, appearing to suggest he would not oppose the pipeline, but Administration
officials later said that there was no change in Administration opposition to it. Aside
from commercial considerations, the volatility of relations between India and Pakistan
could derail the project at any time.
The ISA is not the only mechanism available to the United States to try to limit
investment in Iran. The U.S. Treasury and State Departments have begun using U.S. trade
regulations to pressure European banks not to do business with Iran, with significant
effect on Iran. On December 20, 2005, the Treasury Department had fined Dutch bank
ABN Amro $80 million for failing to fully report the processing of financial transactions
involving Iran’s Bank Melli (and another bank partially owned by Libya). In 2004, the
5
6
This definition of sanctionable activity is contained in Section 5(a) of ILSA.
Some of the Indian companies that reportedly might take part in the pipeline project are ONGC
Corp.; GAIL Ltd.; Indian Oil Corp.; and Bharat Petroleum Corp. Some large European
companies have also expressed interest. See Solomon, Jay and Neil King. “U.S. Tries to
Balance Encouraging India-Pakistan Rapprochement With Isolating Tehran.” Wall Street
Journal, June 24, 2005, p. A4.
CRS-6
Treasury Department fined UBS $100 million for the unauthorized movement of U.S.
dollars to Iran and other sanctioned countries, and it and three other European banks,
HSBC (Britain), Credit Suisse (Switzerland), and Germany’s Commerzbank A.G, have
stopped dollar transactions from within Iran or pursuit of new business in Iran. The
restrictions on financing are, according to Iranian and outside observers, making it more
difficult to fund energy industry and other projects in Iran. On December 20, 2006, Iran’s
Oil Minister, Kazem Vaziri-Hamaneh, said “Currently, overseas banks and financiers
have decreased their co-operation,” and Iran would need to tap into a reserve fund to
finance some pending projects.
Post-1999 Foreign Investment in Iran Energy Sector
Date
Field
Company(ies)
Feb. 1999 Doroud (oil)
Totalfina Elf/ENI
Apr. 1999 Balal (oil)
Value
Output Goal
$1 billion
205,000 bpd
Totalfina Elf/ Bow Valley
(Canada)/ENI
$300 million
40,000 bpd
Nov. 1999 Soroush and Nowruz (oil)
Royal Dutch Shell
$800 million
190,000 bpd
Apr. 2000 Anaran (oil)
Norsk Hydro (Norway)
$1.9 billion
2 billion cu.ft./day
July 2000
Phase 4 and 5, South Pars
(gas)
ENI
Mar. 2001 Caspian Sea oil exploration
GVA Consultants (Sweden) $225 million
June 2001 Darkhovin (oil)
ENI
May 2002 Masjid-e-Soleyman (oil)
Sep. 2002
Phase 9 and 10, South Pars
(gas)
$1 billion
160,000 bpd
Sheer Energy (Canada)
$80 million
25,000 bpd
LG (South Korea)
$1.6 billion
Oct. 2002 Phase 6, 7, 8, South Pars (gas) Statoil (Norway)
$2.65 billion
3 billion cu.ft./day
Feb. 2004 Azadegan (oil)
Inpex (Japan) 10% stake
$200 million
Japan stake
260,000 bpd
Oct. 2004 Yadavaran (oil)
Sinopec (China) and
ONGC (India)
$70 billion
(includes gas
purchases for
30 years)
300,000 bpd
June 2006 Gamsar block (oil)
Sinopec (China)
Jan. 2007
Golshan and Ferdows
(offshore gas)
SKS Ventures (Malaysia)
Totals
$50 million
unknown
$20 billion
(includes
downstream
development
and
transportation)
100 million cu.ft/day
$100 billion+
Oil: 1.2 million bpd
Gas: 5.1 billion
cu.ft/day+
$16 billion
3.6 billion cu.ft/day
Pending Deals
North Pars Gas Field (offshore gas)
China National Offshore
Oil Co.