An Israeli Victory, An American Defeat: ILSA Extended Another Five Years

By Andrew I. Killgore

“The American Israeli Public Affairs Committee (AIPAC)…pushed for a five-year extension on ILSA.”

—Financial Times, July 26, 2001

In 1993 Israel started using what The Washington Post called “its vaunted powers of persuasion” to convince the United States that Iran was threatening Western interests. Israel’s ulterior motive was actually to pressure Iran to stop supporting Hezbollah guerrillas fighting Israel’s occupation of southern Lebanon.

Two years later, in 1995, President Bill Clinton issued, by executive order, a trade embargo against Iran. Clinton’s two year-delay in picking up Israel’s warnings about a “threatening” Iran shows that the always-happy-to-please-Israel president was not really convinced.

Pushed by then-Sen. Alphonse D’Amato (R-NY), one of Israel’s most slavish supporters in the Congress, the Iran-Libya Sanctions Act (ILSA) was passed in 1996. ILSA required the president to impose sanctions on any foreign country spending more than $20 million a year on Iran’s and/or Libya’s oil or gas industry.

In defiance of ILSA, however, international companies such as France’s Total, Russia’s Gazprom and Malaysia’s Petronas in 1997 entered into a contract to invest $2 billion for the purpose of developing Iran’s huge offshore (in the Arabian Gulf) South Pars gas field. The American foreign policy staff, including the president and Secretary of State Madeleine Albright, decided in a late-night session (as reported by the March 6, 1998 Washington Post) that Washington would not impose sanctions on these foreign companies—in other words, that ILSA was not a formal, binding part of U.S. policy. The damage, however, had been done.

The trade embargo that Clinton instituted is yet another example of how the United States ends up shooting itself in the foot in trying to fulfill Israel’s demands. With the significant exception of the U.S., almost all First World countries have committed themselves to developing Iran’s oil and gas industry, effectively putting themselves in the position to cash in on the vast economic windfall expected from the development of Iran’s natural resources. Japan, for instance, has just signed a contract with Iran. According to Washington’s Petroleum Finance Company, even tiny Austria is moving toward such an agreement.

How, then, to explain the fact that Congress—pushed by AIPAC—voted to extend ILSA for another five years? President George W. Bush favored a two-year renewal, with the obvious intent of dropping at least the Iran portion when the extension expired. Caught off guard by AIPAC’s early and intense lobbying for renewal, however, he didn’t push very hard. Exxon Mobil did lobby to end ILSA, but the American oil giant lost out to Israel’s determination to prevent an export route for Caspian Sea oil via Iran, the most economically viable route.

For Israel—regardless of the cost—it must be the Baku (Azerbaijan)-Ceyhan (Turkey) oil pipeline route, no matter what. Of course, the bulk of the addional cost for Baku-Ceyhan would be borne, directly or indirectly, by the United States. If Israel can pressure the U.S. to make Baku-Ceyhan a reality the Jewish state will have shown Turkey that it can “deliver” the U.S., and that the Israel-Turkey alliance is in Ankara’s interests.

It’s safe to say that President Bush certainly will not try to enforce ILSA-mandated sanctions. He could do even more, however, and, following his predecessor’s precedent, issue an executive order—but this time removing, or at least relaxing, the trade embargo against Iran.

This would be one way Bush could reassert U.S. interests and regain at least some positive role in Iranian-American affairs, presently monopolized by Israel.

The question is: will he do it?

Andrew I. Killgore, a retired career foreign service officer and former U.S. ambassador to Qatar, is publisher of the Washington Report.