Royal Dutch Shell Plc  .com Rotating Header Image Sanctions only work if they are enforced

By David Peyman
In a recent report, the Government Accountability Office (GAO) challenged the impact of U.S. sanctions against Iran, noting Iran’s ability to negotiate $20 billion in contracts with foreign firms since 2003 to develop its energy resources. The GAO correctly recognizes that “Iran’s overall trade with the world has grown since the U.S. imposed sanctions.”

What the GAO fails to recognize is that the most important provisions of the cornerstone of America’s sanction against Iran, the Iran Libya Sanctions Act (ILSA) of 1995, have not been implemented, and it is precisely these provisions that sought to cripple Iran’s ability to trade with the rest of the world.

The authors of ILSA recognized that many countries, including France, Russia and China, do not possess America’s clear moral compass when it comes to doing business with regimes sponsoring terrorism, and sought to cripple such trade. For example, ILSA allows the president to sanction any entity or person, foreign or domestic, who invests in Iran’s oil industry, the backbone and last leg of its faltering economy. Accordingly, the GAO’s claim that “Iran’s global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation and support for terrorism” is misleading and ignores ILSA’s most effective provisions. Indeed, one can argue that Iran’s increased global trade makes it more vulnerable to United States sanctions if the sanctions were actually enforced, since ILSA forces foreign companies to either do business with Iran or the U.S. How many corporations would give up relations with the world’s sole economic superpower to get into bed with a bunch of mullahs in Iran?

What the GAO report does reveal is that even foreign policy legislation has loopholes that can be used to play politics with our national security. Although President Clinton hailed ILSA as a strong measure to contain the Iranian threat, he then went on to ignore the multibillion dollar investment in Iran’s oil sector by European, Russian and Asian firms.

According to a report prepared by the Congressional Research Service, Clinton buckled to European Union threats of retaliation if he did not waive ILSA’s provisions. Of course, Clinton’s capitulation led to a floodgate of foreign entities investing billions of dollars in Iran. For all his bravado, President Bush maintained Clinton’s appeasement policy, and today the list of foreign companies (including our strongest allies) investing in Iran is mind numbing.

Deals include:

  • A 1997 award to France’s Total SA $2 billion deal to South Pars gas field.
  • A February 1999 award to France’s Elf Aquitaine (now merged with Totalfina) and Italy’s ENI to develop the Doroud oil field. The estimated value of the investment is $1 billion.
  • A project, run by Elf Aquitaine and Canada’s Bow Valley, to develop the Balal oil field. The estimated value is $300 million.
  • A November 1999 contract for Royal Dutch/Shell (United Kingdom and the Netherlands) to develop the Soroush and Nowruz oil fields. The estimated value is $800 million.
  • A July 2000 award to ENI to develop phases four and five of South Pars oil fields. The estimated value is $3.8 billion.
  • An exploration contract for Norway’s Norsk Hydro to develop the Anaran oil field, signed in April 2000.
  • In January 2001, a United Kingdom firm, Enterprise Oil, took a 20 percent stake in phases six, seven, and eight of South Pars.
  • In March 2001, Iran announced it had signed a $226 million contract for a consortium led by Sweden’s GVA Consultants to explore for oil in Iran’s portion of the Caspian Sea.
  • On June 30, 2001, ENI signed a deal, estimated to be worth $550 million to $1 billion, to develop Iran’s Darkhovin oil field.
  • In May 2002, Canada’s Sheer Energy took a 49 percent stake in an $88 million project to develop the Masjid-e-Soleyman onshore oil field.
  • In September 2002, South Korea’s LG Engineering Group, in partnership with two Iranian firms, was given a $1.6 billion stake in phases nine and 10 of South Pars.
  • In October 2002, the Norwegian firm Statoil signed an agreement to invest $300 million in phases six, seven, and eight of South Pars.

Three things are clear from the GAO report. First, international investment in Iran is growing. Second, if Presidents Clinton and Bush had actually enforced the sanctions legislation they signed into law, the United States might very well have prevented the multibillion dollar investments in Iran that have allowed it to brazenly defy UN Security Council demands to halt its nuclear program. Third, it seems that unelected career bureaucrats have come full circle in hijacking policymaking from our elected officials.

A few months ago, the National Intelligence Estimate misleadingly portrayed Iran as having stopped its race for a nuclear weapon. And now, the GAO misleadingly claims that sanctions do not work, while failing to acknowledge that they have not even been implemented. It is not too late, however, to reverse course and salvage whatever credibility America still has in the international community.

We must forcefully lobby our political leaders and demand that they implement all provisions of the ILSA and not buckle to foreign pressure when it comes to enforcing our laws.

David Peyman is an attorney at the law firm of Skadden, Arps in Los Angeles. He has worked for the Clinton Administration as an assistant to the Secretary of the Cabinet and as a research associate to AIPAC’s Senior Middle East Analyst in Washington. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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