Title: U.S.-Iran Foreign Policy: Global Energy Independence From Iran is Not the Solution
1U.S.-Iran Foreign Policy Global Energy
Independence From Iran is Not the Solution
- By Adnan Bohri
- April 25, 2007
2Agenda
- Background
- Iranian Revolution, why sanctions exist
- The Iran-Libya Sanctions Act of 1996
- Do sanctions apply to the IPI pipeline?
- Why sanctions and energy independence from Iran
are not the solution.
3Background and Fun Facts
- Capital Tehran
- Population 70,049,262
- GDP 610.4 billion
- Language Persian (Farsi)
Source http//encarta.msn.com/encyclopedia_761567
300/Iran.html
4Iran Pre-1979
- Ruled by the Shah, Mohammad Raza Pahlavi
- Allies with U.S. during the Cold War
- Regime fell in the Iranian revolution of 1979
Source http//encarta.msn.com/encyclopedia_761567
300/Iran.html
5Iranian Revolution
- After the overthrow of the Shah, Aytollah
Ruhollah Khomeini came to power - Known as the Supreme Leader of Iran
- Established Islamic Republic of Iran
Source http//encarta.msn.com/encyclopedia_761567
300/Iran.html
6Iran Hostage Crisis
- U.S. Embassy in Tehran seized on 11/4/1979
- 63 American citizens taken hostage
- 50 hostages held prisoner for 444 days
- Supported by Khomeini under the slogan America
cant do a damn thing
Source http//encarta.msn.com/encyclopedia_761567
300/Iran.html
7Overview of sanctions against Iran
- Began after 1979 Iran Hostage Crisis
- Iranian Transactions Regulations - 31 C.F.R.
560 - Import embargo on Iranian-origin goods and
services - No direct trade with the U.S. since 1995, when
the U.S. government banned all commercial and
financial transactions between U.S. companies and
Iranian public and private entities - Iran-Libya Sanctions Act of 1996
- Current Nuclear Standoff with Iran
- Could lead to additional sanctions by U.N.
- Source http//www.treas.gov/offices/enforcement/
ofac/programs/iran/iran.pdf
8How Much Energy Does Iran Have?
- Possesses worlds 2nd largest natural gas
reserves - 10 of worlds known oil reserves (4th largest)
- 2nd largest oil producer in OPEC
Source http//www.eia.doe.gov/emeu/cabs/Iran/Back
ground.html
9Iran-Libya Sanctions Act of 1996 (ILSA)
- Allows the President to impose sanctions if a
person has made an investment of more than 20
million that directly and significantly
contributes to the enhancement of Irans ability
to develop petroleum resources of Iran. - Controversial because it allows the President to
impose unilateral sanctions on foreign companies
or entities
Source Iran-Libya Sanctions Act, 50 U.S.C.
1701 note (1996)
10ILSA Continued
- Investment" defined as the entry into a contract
that includes responsibility for the development
of petroleum resources in Iran or Libya - Statute silent as to whether the construction of
energy transit routes from Iran might be
considered an investment - However, Clinton Administration position was
that, under certain conditions, the construction
of such routes could be a sanctionable investment
Source Kenneth Katzman, The Iran-Libya
Sanctions Act (ILSA), Congressional Research
Service Report for Congress, updated Apr. 26,
2006.
11ILSAs First Test
- The French oil company, Total
SA, struck a 2 billion deal with Iran in
September 1997, to develop natural gas reserves
in Irans South Pars field - This was the largest single foreign investment in
Iran since the U.S. Embassy in Tehran was sacked
in 1979 - Clinton Adm. found that deal violated ILSA, but
ultimately decided to waive sanctions
Source Kenneth Katzman, The Iran-Libya
Sanctions Act (ILSA), Congressional Research
Service Report for Congress, updated Apr. 26,
2006.
12The Iran-Pakistan-India Natural Gas Pipeline
- 4-7 billion project
- 2100 km in length from Iran to India
- Would supply 60 million cubic meters of gas a
day to India and up to 30 million cubic meters a
day to Pakistan. - Officials of India, Pakistan Iran met in August
2006 to discuss pricing of gas - Tentatively scheduled to
begin construction in 2007
and be completed by 2010
Source George Perkovich and Revati Prasad, A
Pipeline to Peace, N.Y. Times, Apr. 18, 2005.
13The Need for the Pipeline
- Pakistan would benefit from Iranian natural gas
exports, and Pakistani territory would be used as
a transit route to export natural gas to India - Would bring in 700 million per year in
transport fees - Indias Energy needs will surpass
Chinas in the next 50 years - Cooperation between Pakistan and India
would increase stability in South Asia
Source George Perkovich and Revati Prasad, A
Pipeline to Peace, N.Y. Times, Apr. 18, 2005.
14Would the Pipeline be an investment under ILSA?
- The Iranian side of the project will be financed
entirely by Iran and a group of multi-national
investors Iran will be required to put together - Pakistan's investment in the project will start
only after the pipeline reaches Pakistani
territory - Applying a plain-meaning interpretation of ILSA,
Pakistans and Indias involvement could be
interpreted as one that does not directly
contribute to the enhancement of Irans ability
to develop petroleum resources of Iran.
15Comparing Totals case with Pakistans
- 7-10 billion proposed project
- Natural gas transit route
- No direct development by Pakistan
- Pakistani ownership of the pipeline would begin
at its border - However, deal would provide incentive and funding
for Iran to develop its gas resources
- 2 billion investment
- Direct development of oil fields within Iran
16Recent Developments
- ILSA expired on August 5, 2006
- Iran Freedom and Support Act
- Bill passed by Congress that tightens the
sanctions imposed on entities that invest in
Irans energy sector - Includes stricter provisions regarding the
waiving of sanctions by the president
17Congresss View
- Agreement in Congress that ILSA shouldnt be
allowed to expire - U.S. must continue to look at economic sanctions
as a method for
keeping Iran in
check and isolating
them
Source Hearing of the Senate Banking, Housing,
Urban Affairs Committee on June 22, 2006
18Bush Administrations View
- The Bush Adm. sees the value of ILSA, but did not
support significant changes to the statute - Did not support the tightening of the ILSA
sanctions as contained in the Iran Freedom
Support Act - Restrictions would weaken the Presidents
flexibility to pursue diplomacy with Allies
- Source R. Nicholas Burns, Under Secretary of
State for Political Affairs, Testimony Before the
Senate Committee on Banking, Housing and Urban
Affairs, June 22, 2006 and March 21, 2007.
19Have Sanctions Been Effective and should they
continue to be used?
- 27 years of sanctions and isolation have not
dissuaded Iran from pursuing its nuclear program
or driven the cleric-led government from power. - ? instead have convinced Iran that only nuclear
technology can protect them from American
hostility
- Source R. Nicholas Burns, Under Secretary of
State for Political Affairs, Testimony Before the
Senate Committee on Banking, Housing and Urban
Affairs, June 22, 2006 and March 21, 2007.
20Effects of Sanctions Continued
- Since the Total waiver, 11.5b in foreign
investments in Irans energy sector have been
agreed upon. - Irans natural gas sector, non-existent prior to
the late 1990s, is becoming an increasingly
important factor in Irans energy future as a
result of foreign investment. - E.U. threatened formal counter-action over ILSA
in the WTO, and in April 1997, the U.S. and E.U.
formally agreed to try to avoid a trade
confrontation.
Source Kenneth Katzman, The Iran-Libya
Sanctions Act (ILSA), Congressional Research
Service Report for Congress, updated Apr. 26,
2006.
21Why Iranian Sanctions are Detrimental for
American Interests
- Sanctions on Iran? higher global energy prices ?
higher U.S. energy prices - Energy prices are set by the global market, so
doesnt matter whether its coming from Texas or
Tehran - Increases in oil prices correspond closely to
downturns in the economy. The last four
recessions all correlated with restrictions in
the oil supply. - When energy prices spike, the market slows down
when prices decrease, the market speeds up. - Lower oil and gas prices allow us to invest in
alternative energies and gives us time and
breathing room to develop those technologies.
Source Mark Zupan, Dean of Graduate School of
Business Administration at the University of
Rochester, New York. Available at
http//analysisonline.org/energy/zupan.html
22Continued...
- Numerous Western oil companies have shied from
investing in Iran for fear of incurring Americas
wrath - Imposing sanctions on companies that develop
Irans petroleum resources would isolate America
from its European allies, as well as China and
India - Best way to engage Iran is to bring them into the
global community - Lifting economic sanctions, or at the very least
allowing American allies to invest, should be
seen as real priority.
23Conclusions
- U.S. made historic offer in June 06 when Sec.
Rice first offered to engage in direct
discussions with Iran provided Iran completely,
verifiably suspends its enrichment activities. - Instead of energy independence, the goal should
be an effort to improve relations with Irans
regime and bring them into the global community. - U.S. unilateral sanctions on Iran undermine this
goal.
24The End