US’ censure of Total’s investment in Iran imminent

Date: 26/02/1998

By Mark Turner

EU TRADE officials are bracing themselves for a declaration by Washington next month that French petrochemicals giant Total is in breach of an American law banning investment in Iran.

Although both EU and US officials are reluctant to comment publicly at this stage, they privately expect the US administration to rule that Total's 2-billion-ecu investment in Iranian gas contravenes the country's Iran-Libya Sanctions Act (ILSA).

The law, known as the D'Amato act after the US senator who drafted it, forbids any company in the world from investing more than $20 million (18 million ecu) in Iran.

Should the US choose to apply it, it would probably send a letter to the French government warning that one of its companies was in breach of the legislation.

But Washington officials say that there are last-minute doubts over whether the administration really wishes to begin such a potentially damaging process. "This is a very delicate issue, and subject to intense discussions in Washington," said Donald Kursch, the US' deputy chief of mission to the Union. But he added: "We have a law we cannot ignore."

EU officials say they cannot predict precisely how the Union would react to the decision until it is announced. "This is very sensitive, and we are not ready to state our exact position," said one Commission insider. "It will largely depend on how the decision is phrased whether it is made clear that sanctions are not the only option."

However, France is certain to condemn the move. "We contest fundamentally the capacity of the US to impose its concerns upon us," said a Paris spokeswoman. "We have always said that the day a company is sanctioned, we will take the US to a World Trade Organisation panel."

If a firm is found guilty, the US administration has 90 days to choose at least two sanctions from a list, which includes the denial of export/import bank assistance, the refusal to grant US export licences, import restrictions, or a ban on winning government procurement contracts. The American president then has another 90 days to consider waiving the sanctions.

Washington officials say that only a few of the possible penalties are applicable to Total and they may choose one of two other options. The first would be to exempt France and the EU from ILSA by virtue of their efforts to halt the proliferation of weapons in Iran. The second would be to enter into intense negotiations to see "if we can reconcile our positions".

The Union remains adamant that the legislation, which gives the US extra-territorial jurisdiction over European firms, is illegal. The question is whether President Bill Clinton can afford politically to bow to European pressure at a time when US policy towards Iran, as well as Iraq, is under intense domestic scrutiny.

Ironically, EU foreign ministers decided only this week to resume bilateral ministerial contacts with Tehran in recognition of reforms initiated by President Mohammed Khatami.

US to rule whether French company Total's investment in Iran is in breach of the US's Iran-Libya Sanctions Act (the D'Amato Act).