Under Secretary of State for Economic, Business, and Agricultural Affairs Stuart Eizenstat on-the-record briefing with Rick Newcomb Director, Office of Foreign Assets Control, Treasury Department
Under Secretary Eizenstat:
Good afternoon. For two years now, the Administration has been working to ensure that sanctions are carefully targeted, advance our foreign policy goals and avoid, as far as possible, damage to other US interests. We have had and continue to have extensive discussions of these issues with the Congress with the goal of comprehensive sanctions reform, by both Congress and the Executive Branch.On July 23 of last year, a key moment in our Administration's two-year effort to rationalize our sanctions policy, the President stated that food should not be used as a tool of foreign policy, except under the most compelling circumstances. Today in another key move,the president announced that the Administration will exempt commercial sales of food, medicines and medical equipment from future unilateral sanctions regimes where we have the authority to do so. The Administration will also extend this policy to allow such commercial sales to currently embargoed countries.
Why this change now? It's been implemented as part of our overall approach to sanctions reform, and it is not directed at any specific country. In fact the national security and foreign policy concerns that led to the original decisions to impose comprehensive sanctions on those countries still pertain.
What has changed is our calculation of the impact on our overall policy objectives of including food and medicine and unilateral sanctions. Sales of food, medicine and other human necessities do not generally enhance a nation's military capabilities or support terrorism. On the contrary, funds spent on agricultural commodities and products are not available for other less desirable uses.
Our purpose in applying sanctions is to influence the behavior of regimes, not to deny people their basic humanitarian needs. The change does not provide for the automatic approval of agricultural and medical sales. Instead, it shifts the presumption in favor of such sales. Each contract will still have to pay us through a policy filter. To guide the case-by-case review process, we're developing country-specific licensing criteria, based on the principle that the sanctioned government should not benefit from the adjustment of our sanctions policy. Mr. Newcomb, at OFAC, will be developing those detailed criteria.
But we can say this at this point -- only fully negotiated contracts, as opposed to open-ended proposals will be considered; all sales will have to be conducted at prevailing market prices; and sales will be restricted to non-government entities or to governmental procurement bodies not affiliated with the coercive organs of the state. Thus, licensing commercial exports of agricultural commodities and products, medicine and medical equipment on a case-by-case basis to -- para-statals -- and government purchasing agencies could be authorized. It is also a requirement that there be no US Government funding, financing or guarantees in support of the sales authorized by this changed policy.
There are, of course, circumstances under which we will not allow commercial sales of agricultural products and commodities, medicines and medical equipment. Such circumstances, for example, might include armed conflict involving the United States or its allies, the diversion by a regime of agricultural or medical imports to its armed forces or its political supporters or to terrorist groups, or situations where the regime or its officials would derive an unjustifiable economic benefit from those exports from us and imports to them.
Sanctions are a legitimate tool of foreign policy, but must be used in ways that advance US interests. This is particularly the case with unilateral economic sanctions. In general, we should have the following hierarchy in responding, short of military force, to actions by countries that are contrary to our national interest.
First, diplomatic and political efforts. If those don't succeed, multilateral sanctions, which are more likely to be effective at less cost to US interests. If neither is successful, there are instances where unilateral sanctions may be necessary. The change announced today reflects the basic objectives of our overall sanctions reform effort to ensure that when we do unilateral economic sanctions, that they're effective; that the cost to US interests of imposing unilateral sanctions are minimized; and that the President retain the flexibility to impose sanctions even on food and medicine, should circumstances warrant it.
Thank you, and Mr. Newcomb and I will be glad to take your questions.
Question:
You said only fully negotiated contracts as opposed to open-ended proposals. Does that mean that the proposal by the Nikki trading corporation to purchase a half billion dollars worth of US foodstuffs -- is that a fully negotiated contract, as far as you're concerned?Under Secretary Eizenstat:
Nikki Trading has a proposal for a license application before OFAC. By our announcement today, we are neither approving nor denying that application. It will be judged by the criteria that we have set out -- whether it is fully negotiated, whether it is to an appropriate entity, whether it is market value and so forth. So Mr. Newcomb will make the decision based on that set of criteria.Mr. Newcomb
I have nothing to add to the comments of the Undersecretary, other than to say that these criteria will be applied in that and other situations.Question:
How do you think these decision will be made? Mr. Bliss of Nikki says that within 30 to 60 days after this becomes formal, he can have ships sailing on the high seas.Mr. Newcomb:
Between now and that period of time you've mentioned, we'll be moving to developed-country specific licensing criteria on the countries affected, depending on the policy considerations, and have those published in regulations so that all parties will have the information available to them.Under Secretary Eizenstat:
I want to emphasize now, also, when we talk about food, we're talking about bulk commodities, processed or semi-processed. They include such things as wheat, corn, feeds and fodders, rice, sugar, soybeans, edible oils, meat and fish, seeds and processed food and would extend to consumer products such as baby food and formula. At this point, we have not made a decision as to whether it would extend to agricultural inputs such as fertilizers, herbicides, pesticides or agricultural equipment such as tractors; although the relevant agencies will be working out a precise definition of these terms as well.Question:
After the nuclear test by India and Pakistan, you needed -- got authorization specifically from Congress. Under the Glen Amendment, I gather that that would have covered food and medicine as well. What's the legal framework under which this was done?Under Secretary Eizenstat:
This is being announced as a matter of Executive Branch policy and OFAC licensing policy. There are now six countries where we have prohibitions or restrictions on commercial sales: Cuba, Iran, Iraq, Libya, North Korea and Sudan. This policy really has no effect on Cuba, on Iraq and on North Korea. For those countries, we already have the following. Humanitarian donations to relieve human suffering are allowed with respect to those countries.With respect to Iraq, commercial sales of food are already bounded by and permitted under UN Security Council Resolution 986, the Oil-for-Food program, and subsequent resolutions which have expanded that program. With respect to North Korea, applications for commercial sales of humanitarian items are reviewed already on a case-by-case basis by Mr. Newcomb and his office. Since 1996, they have approved several licenses for U.S. companies to broker commercial sales to the DPRK of corn, wheat, rice and sugar. With respect to Cuba, the sale of medicine, medical supplies and equipment is governed by the 1992 Cuban Democracy Act. Such sales are permitted subject to specified conditions and end use verification to guard against diversion. Food is covered as well by Helms-Burton. So this does not change it in those instances. This has most effect in those three cases -- Iran, Libya and Sudan -- where there are no such exceptions or allowances at this point.
Again, it was not targeted to any particular country. It was not intended to send a signal to any particular country. It is part of our overall sanctions reform and to make sure that they're as effective as possible. That is, indeed, the first principle of our sanctions policy, effectiveness. They are ineffective if they impose substantially more cost on US interests than on the sanctioned country; if they're unable to garner broad support; and if they have a disproportionate impact on US interests relative to the target country.
Question:
Did you say against how many countries the United States has sanctions? You mentioned six.Under Secretary Eizenstat:
There are seven countries that are on so-called terrorism list -- the six that I mentioned, plus Syria. But Syria is not subject to comprehensive economic sanctions, so this would affect the six that I mentioned. But of those six, the policy is already set or bounded by either, UN resolutions or existing practices, as in North Korea, or by legal restrictions. The President, for example, in Cuba already on January 5 suggested that he would permit sales under appropriate licensing procedures that Mr. Newcomb's office handles, if they go to purely private entities. Here, with respect to these countries, we're allowing sales to public entities, governmental entities as well, if they're not connected to the coercive organs of the state.Question:
There are a number of other countries, like Burma, et cetera, against which the United States has sanctions. Do you have a rough figure as to how many there are in that category?Under Secretary Eizenstat:
Well, it depends on how you measure it. I mean, according to some of our business interests who have done studies, there are sanctions on several scores of countries. That can be withholding foreign assistance; it can be a whole variety of things. Like the sanctions on Burma, they are mostly in the oil and gas area; they're not comprehensive. But if you take all the countries, there are probably 40 or 50 countries that have some form of restriction, and possibly even more. With respect to food and general prohibitions, it is these countries that I've referred to.Question:
The reason I'm asking is that you indicated unilateral sanctions will be a last resort option after those whole series of steps is exhausted. So it seems to me that maybe far fewer countries targeted by unilateral sanctions, under what you call this comprehensive sanctions reform. Is that a fair statement?Under Secretary Eizenstat:
Well, we're not trying to play numbers. What we wanted to make sure of is effectiveness. If we find that unilateral sanctions are ineffective, then we ought to resort to other means to change conduct. Clearly, some of the unilateral sanctions have diminishing impact; some remain useful. Some, for example -- Burma's a good example -- where we have unilateral sanctions but that in turn encouraged the European Union to impose its own unilateral sanctions, even though they're multilateral in the sense of being under UN auspices.Question:
You say you're not intending to send a signal, but if Iran chooses to interpret this as a signal, would you be displeased?Under Secretary Eizenstat:
Well, they can interpret it however they wish. They will be affected by the decision in the sense that they would become eligible under the circumstances we've laid out for food and medical sales. It was not intended to send a signal to them; it was not intended to send a signal to Libya or to the Sudan. But it will have an effect on them.Let me just go back again on this issue of effectiveness. One of the reasons, again, that we're taking this action is that in terms of a cost-gain analysis, unilateral sanctions which contain prohibitions on the sale of humanitarian products, medicines, food, etc., tend to have potentially negative impacts. The first is that it can create a counter- reaction in the world community, if it appears that it is punishing innocent people as opposed to dictatorial regimes, and make it more difficult to get the cooperation of even our closest allies for their sanctions.
Second, it also has negative impacts on U.S. interests; for example, in the agricultural community. Our farm community is hurting at this point; exports are likely to be down by anywhere from $10 billion to $15 billion from just a few years ago. We want to be sensitive to those interests as well.
The potential gain, on the other hand, from including these kinds of products is quite minimal, measured against those costs. If anything -- and Iran would be an example, as would Libya or Sudan -- better to have them purchasing food and medicine and using their scarce funds for that purpose than using it for weapons of mass destruction, missile delivery systems and support of terrorism.
Now, I want to again indicate that there may be some compelling circumstances or extraordinary circumstances where, even with this general principle, with the presumption that we would go forward, there still might be a desire not to exempt such products and include them in a sanctions regime. If we're in armed conflict, for example, with a country; if the regime is diverting imports of these products to its armed forces, to its political supporters or to terrorist groups; if there's an unjustifiable economic benefit - for example, if they monetize it and then put the money in their pocket instead of giving it to their people, then we still would want the flexibility to be able to include them. But the presumption is that in most instances, these sales would go forward.
Question:
The practical effect of the restriction on no U.S. Government money is allowed to be -- I didn't catch the whole thing. It was something -- U.S. Government --Under Secretary Eizenstat:
It means, in other words, that we can't have any U.S. government funding or subsidized credit for such sales; they have to be commercial sales. A private bank could extend a letter of credit, but not a U.S. Government entity.Question:
I don't know if this would apply, but the Ex-Im Bank or OPIC or anything like that?Under Secretary Eizenstat:
No Ex-Im Bank, no OPIC, no CCC credits, no PO-480.Question:
Do you have idea if that would substantially reduce the number of possible sales that might be eligible?Under Secretary Eizenstat:
It is possible, but we didn't want the U.S. Government subsidizing those kinds of sales. Now, our estimates in terms of value -- the Department of Agriculture has estimated that the countries subject to existing sanctions -- that's Cuba, Iraq, North Korea, Libya, Iran and Sudan -- imported $6.3 billion of agricultural commodities in 1996, which is the last year we have figures, or about 2% of world trade in agriculture. If U.S. exporters were as competitive in those markets as they are in the larger world market and if those countries chose to purchase from the U.S., potential sales would amount to about $500 million, primarily in bulk commodities, such as wheat, corn, feeds and fodder, rice and vegetable oils.Question:
Every year?Under Secretary Eizenstat:
Yes, on an annual basis.Question:
This decision deals with only part of the sanctions policy. When do you think that you may be completing an overall review, and specifically on the energy sectors?Under Secretary Eizenstat:
Well, first, we would like to have comprehensive sanctions reform, and we're working with a variety of senators - Senator Dodd, Senator Hagel, Senator Biden, Senator Lugar and others - to try to develop a comprehensive framework. We have already indicated that if the Congress is willing to restrain itself and put a filter, a sort of cost-gain analysis -- not that you end sanctions, but at least you put it through a cost-gain analysis -- that we would then be willing to do an executive order ourselves on a comprehensive basis, also with a cost-gain analysis. We think there ought to be comity and symmetry between the branches; that Congress ought to put itself under the same kind of limitations as we're putting ourselves. I want to make it very clear we do not see the action we're taking today as a substitute for that comprehensive action. Quite the contrary, we hope it will be a goad and a prod to comprehensive reform.Question:
When do you expect comprehensive reform to happen, though?Under Secretary Eizenstat:
Well, Congress is already introducing legislation. We're working with them now. We have some concerns with some features of the Lugar legislation because we don't think it grants the President the kind of waiver authority over sanctions that we have under the Iran-Libya Sanctions Act and Helms Burton, which we've used effectively to effectuate the purposes of the act. But we are working with Senator Lugar and we're working, again, with Dodd and Hagel and others. We hope at this session there can be legislation that passes.Question:
So even though you're doing this piece as an Executive administrative act, comprehensive reform will have to be legislative?
Under Secretary Eizenstat:
We can potentially do comprehensive Executive Branch reform by an executive order, but what we prefer to do is to have that part of a package with the Congress acting legislatively, in terms of limiting its own capacity to do sanctions by putting it through this kind of a cost-gain filter.Question:
So you envision, then, a comprehensive legislation capturing the Helms-Burton legislation, the Iran-Libya Sanctions Act?Under Secretary Eizenstat:
We would expect that that legislation would be prospective not retroactive and that it would not affect Helms-Burton or ILSA.Question:
If I could just follow up on Carole's question, why was the decision made for this to be an executive order?Under Secretary Eizenstat: Well, first, it's not being done by executive order; it's being done by licensing criteria, which, again, I'm going to let him talk about the process that he'll now follow. It was decided because we thought that it was important that we act now. We are seeing our unilateral sanctions -- the effort compromised by the arguments made that it is impacting on the average citizen and not being properly targeted to the regimes -- we're seeing our agricultural sector suffer under those. We see very little useful benefit in terms of the goals of the sanction. So rather than wait for comprehensive legislation, which could take much longer, we thought it was important to act now without further delay. Rick, do you want to talk about the process you'll use, in terms of developing the criteria?
Mr. Newcomb:
Following today's announcement, we will be meeting with the State Department and other relevant agencies on a country- by-country basis where this applies to be developing the licensing criteria so that on a case-by-case basis we're able to review these ales according to the criteria, which Under Secretary Eizenstat has laid out. We will clearly need to be looking at other issues as well so we have a comprehensive package for each country affected that is able to be applied uniformly.Question:
May I just follow up, please? I'm sorry, would you elaborate, please, on how our unilateral sanctions have been compromised? Can you give any examples?Under Secretary Eizenstat:
Well, our basic point is that when you look at the unilateral sanctions that are now being applied to Iran, Libya and Sudan insofar as they effect food and medicine, it's very difficult to say that they've accomplished the purposes of including those products. The conduct hasn't changed. They simply use it as an argument that we're hurting the average citizen. This is also an argument that Iraq has made and that's garnered a lot of sympathy for Iraq. And, in effect, one of the reasons we championed the Oil- for-Food program is to mitigate that kind of an argument which can be made.Question:
As you know, Secretary Albright announced a change in policy toward Cuba, permitting sales of food and agricultural imports -- this was 3 or 4 months ago. What has happened since then? Have the regulations been written; have the U.S. exporters shown interest; have the Cubans shown interest?Mr. Newcomb: Those regulations have been written. They're in the final review stages, and we anticipate their publication within the coming weeks.
Question:
What about the exporters and what about the Cuban Government?Mr. Newcomb:
We've not consulted with the Cuban Government. We certainly have heard from people that have potential issues relating to the policy changes announced on January 5, and have taken their views into consideration in developing policies with the State Department.Question:
We certainly know that Nikki has an interest in selling to Iran, but have you gotten any other proposals or contracts from other companies on any of those countries?Under Secretary Eizenstat:
No, but in part that is because there has been a general prohibition. We would expect and anticipate that there will be others that will apply, and I think our own farm community would be very interested in this as well.Question:
I know that you said that you're not trying to send a signal to anybody and we shouldn't read more into it than that, but we can't help it; that's what we do. What's the relationship or the timing of this announcement to the release of the State terrorism report, if any?Under Secretary Eizenstat:
Well, I had been asked in a different context also, does this somehow relate to the turning over of the two suspects in Libya. I really can categorically say we have been working on this without respect to that -- this is not meant as a reward to Libya. It had its own track and its own dynamic. It wasn't either speeded up or slowed down because of that. That process has been going on for years. We had no idea it was going to break open and have a breakthrough now. This process has been driven on a completely separate track.Again, in terms of signals, we're not intending to signal to any particular country change in policy. At the same time, it does have an affect on countries like Iran, in the sense that it will potentially permit, subject to these criteria, the sales of food and medicine. So obviously it does have an effect, but we're not trying to signal a change in policy. That policy has been laid out very clearly.
We've talked about trying to normalize relations under the conditions that the Secretary laid out - the road map and so forth. We remain very concerned, with respect to Iran, about their policies supporting terrorism, procuring weapons of mass destruction, missile delivery technology, their opposition of the Middle East peace process. We see no change at all in that policy. So those policies aren't addressed. What has changed is our calculation of the impact on of the inclusion of food and medicine in unilateral sanctions regimes and the impact that has on our overall policy objective.
And again I would reiterate -- and this is particularly the case with respect to Iran, but would be true with other countries on the list as well - and that is sales of food, medicine and other human necessities don't generally contribute to a nation's capacity to pursue enhanced military capabilities or weapons of mass destruction and missile development programs or to support terrorism. On the contrary, money spent on these will be diverted from those uses.
Thank you very much.
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