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19 May 1998

Date:         Tue, 19 May 1998 13:37:15 CDT
From: "U.S. Dept of State Listserver" <U09885@UICVM.UIC.EDU>
Subject:      980518 on Iran and Libya Sanctions Act

                        U.S. DEPARTMENT OF STATE
                         Office of the Spokesman
For Immediate Release                                     May 18, 1998

                             Statement by
            Secretary of State Madeleine K. Albright

  Iran and Libya Sanctions Act (ILSA): Decision in the South Pars Case

                         London, United Kingdom
                             May 18, 1998

I have determined that the investment by the firms Total (France),
Gazprom (Russia), and Petronas (Malaysia) in the development of Iran's
South Pars gas field constitutes activity covered by the Iran and Libya
Sanctions Act of 1996. This determination follows an extensive review
of the actions taken by the firms in this case as they relate to the
provisions of the law.

At the same time, exercising the project waiver authority of Section
9(c) of the Act, I have decided that it is important to the national
interest to waive the imposition of sanctions against the three firms
involved. Among other factors, I considered the significant, enhanced
cooperation we have achieved with the European Union and Russia in
accomplishing ILSA's primary objective of inhibiting Iran's ability to
develop weapons of mass destruction and support of terrorism.

Granting this waiver does not mean we support this investment; we do
not. In fact, we made vigorous efforts to stop it, including
representations at the highest levels of the governments involved. When
it appeared that the project would nevertheless go forward, we closely
studied the possible application of sanctions. We concluded that
sanctions would not prevent this project from proceeding.

While unsuccessful in stopping the South Pan deal, our efforts to
discourage the Indonesian firm Bakrie from proceeding with the
development of the Balal oilfield contributed to Bakrie's apparent
decision to withdraw although the impact of the Asian financial crisis
was also important.

My decision to grant section 9(c) waivers in this case is based on the
conclusion that, taking all factors into account, it is the option that
best serves U.S. interests. I also decided that it would not be
appropriate to grant country-wide waivers under Section 4(c) of ILSA.

In choosing among the available options, I took into account a number
of factors relating to our national interests. In the case at hand,
waivers will enhance our ability to work with the Europeans, Russia,
and Malaysia on a host of other bilateral and multilateral concerns.
For example:

-- Russian ratification of START II, cooperation on nonproliferation,
and progress on internal economic reform.

-- Resolution of differences over Helms-Burton, including a new
discipline to deter investment in illegally expropriated property
worldwide, including in Cuba, and further EU support for democratic
change and human rights in Cuba, and creation of a new U.S.-EU
initiative to liberalize trade.

-- Multilateral cooperation on Iraq to maintain isolation of Saddam
Hussein and to bring about compliance with UNSCR obligations, including

cooperation with UNSCOM/IAEA inspections.

-- Progress on Kosovo and Bosnia, where cooperation of our NATO allies
is essential, and on other European security issues.

-- Cooperation with European and Asian partners, including Malaysia, in
addressing the Asian financial crisis and the rapidly unfolding events
in Indonesia. We were also concerned about the effect of sanctions on a
major Malaysian company at a time when Malaysia is feeling the serious
effects of the crisis.

Moreover, granting waivers will prevent retaliation against U.S. firms,
which the imposition of sanctions would probably engender, and avoid
possible challenges based on claims related to treaties and other
international obligations. These considerations buttress the view that
a waiver in this case best serves our national interest.

We remain deeply concerned about Iran's support for terrorism and
efforts to acquire weapons of mass destruction. While there are
indications that the Iranian government may be trying to improve its
relationship with the West, we have not seen substantial change in
Iranian policies of greatest concern.

ILSA has been a valuable tool in making clear to others the seriousness
of our concerns about Iran's behavior. The Act encourages the
Administration to develop multilateral cooperation to deter Iran from
acquiring weapons of mass destruction and supporting terrorism. Through
vigorous diplomatic efforts, we have made progress toward these goals.
I believe that my decision in the South Pars case will promote even
more progress and will be more effective than sanctions -- which will
not stop the project -- in achieving ILSA's objectives.

We already have a very high level of cooperation with France and our
other European allies on nonproliferation issues. As reflected in the
joint U.S.-EU statement announced today, the EU is taking additional
steps, separately and in cooperation with us, to strengthen further
their policies in this area. This includes a EU commitment to give high
priority to proliferation concerns regarding Iran and a commitment to
stepped-up efforts to prevent dual-use technology transfers where there
is a risk of diversion to weapons of mass destruction programs.

This new commitment also involves U.S.-EU cooperation on developing
better controls over "intangible" (e.g., electronic) technology
transfers, on closer coordination of export-control assistance to third
countries, and on increasing diplomatic efforts to stem technology
exports by other countries to proliferators, including Iran.

On counterterrorism, we also enjoy a very high level of cooperation
with our European partners. We have issued a joint statement with the
EU that highlights the EU's commitment to cooperation and identifies
specific common objectives. We are also working with EU members and
other countries to ensure ratification of all eleven counter-terrorism
conventions. The EU will be giving particular attention to obtaining
adherence by Central and Eastern European states that are seeking EU

More can be done, and we will continue to work with our European allies
to broaden our nonproliferation and counterterrorism cooperation even

further. In light of their essential cooperation, and as long as this
heightened level of cooperation is maintained, we would expect that a
review of our national interests in future ILSA cases involving Iran
similar to South Pars, involving exploration and production of Iranian
oil and gas, would result in like decisions with regard to waivers for
EU companies.

The United States remains strongly opposed to oil and gas pipelines
which transit Iran and, as a policy matter, we will continue to
encourage alternative routes for the transport of Caspian energy
resources, such as trans-Caspian pipelines and the Baku-Ceyhan route,
and the Caspian Pipeline Consortium route. We will carefully examine
any proposals for trans-Iranian pipeline construction across Iran for
possible implications under ILSA and take whatever action is

Russia has announced new undertakings, including a January 22 Executive
Order that strengthens the government's authority to control missile
technology and other transfers of concern. As a result of a subsequent
executive order issued on May 14, 1998, the Russian Government is now
taking significant steps to implement the earlier order to ensure
compliance, including establishing supervisory bodies in all
enterprises dealing with missile, or nuclear technologies. The positive
start of our joint export control working group is another promising
step. While the Russian Government is acting to implement fully
President Yeltsin's policy, considerable work remains to be done. We
will remain closely engaged with the Russian Government at all levels
to ensure effective enforcement.

On May 17, G-8 countries, including key European countries, Canada,
Japan and Russia, made an important commitment to deny any kind of
assistance to programs for weapons of mass destruction and their means
of delivery. They also committed to enhance their cooperation on export
controls, including the exchange of information. We have also made
nonproliferation progress regarding Iran with other countries. For
example, Ukraine recently agreed to forgo all nuclear cooperation with
Iran, including making a commitment not to go through with the sale of
turbines destined for Iran's Bushehr nuclear plant.

Malaysia has not been actively engaged with us on nonproliferation
issues, nor has it been a source of nonproliferation concerns. It has
acted as a force for moderation in Islamic circles. Malaysia is our
partner for the upcoming session of the U.S.-ASEAN Dialogue, which will
address for the first time the establishment of export control
procedures. Imposing sanctions on a major Malaysian firm would have
disrupted our efforts to work with Malaysia and other countries to
address the Asian financial crisis.

We will review, periodically, the rational interest factors applicable
to ILSA cases and to our waiver policy to determine whether adjustments
are needed.

We also remain intensely concerned about the potential for terrorist
actions emanating from Iran, and we would expect our friends and allies
to take appropriate steps in response to any Iranian involvement In
terrorist activities.

We fully recognize the dangers to Israel of weapons of mass destruction
from its enemies in the regions dramatized by Iraq's SCUD attacks in
1991. The Administration has worked closely with Israel to address
possible missile threats and will continue to do so. Since 1988, the
U.S. has jointly funded the ARROW missile defense system; provided
Israel with space-based early warning notification of ballistic missile
launches, and jointly funded a feasibility study of the Israeli Boost
Phase Intercept Concept.

Finally, I want to emphasize that our position on Iran has not changed.
Although Iran's new government has made it clear that it wants
increased cultural contacts between the U.S. and Iran, it is not clear
how far it is willing to go in changing those policies of greatest
concern to us. We therefore will continue to press for enhanced
international cooperation to counter Iran's efforts to acquire weapons
of mass destruction and their delivery systems, and its support for
terrorism. Today's decision is designed to strengthen that cooperation.