26 January 1998
The Washington Post
Thomas W. Lippman

U.S. Rethinking Economic Sanctions

State Dept. Team Weighs Costs, Impact of Trade Restriction

Lucio A. Noto, the outspoken chairman of Mobil Corp., warned President Clinton a few months ago that the United States "will lose strategically and economically" if the U.S. embargo on trade with Iran limits the ability of American firms to explore for oil in the Persian Gulf and Caspian Sea while foreign competitors have free rein.

As a global company, Mobil chafes at restrictions imposed for strategic or political reasons that block its efforts to find oil and natural gas. But rather than dismiss the arguments of Mobil and other U.S. international companies as special pleading, the Clinton administration has decided they have a point.

According to senior officials, the proliferating use of economic sanctions as a foreign policy tool is creating regulatory chaos, confusion about objectives, strains in relations with allies and sometimes counterproductive responses -- often without achieving the purpose for which the sanctions were designed.

In addition, some administration officials fear that opposition by other nations to U.S. efforts to impose its policies on them through trade constraints could lead to a successful challenge through the World Trade Organization.

Enforcing and defending sanctions consumes vast amounts of time and effort from U.S. officials. Last week, Pope John Paul II called for an end to the long-standing U.S. embargo on trade with Cuba. In New York, American diplomats were shoring up support for stringent economic sanctions on Iraq. At the State Department, officials were preparing for a visit by British Prime Minister Tony Blair, who is expected to ask on behalf of the European Union that Washington refrain from imposing sanctions on a French oil company doing business with Iran.

The United States maintains a trade embargo, export or import restrictions or other forms of economic sanctions on at least 73 countries, according to trade groups. The purposes of the measures range from curbing the spread of nuclear weapons to discouraging the practice of female genital mutilation. No government agency maintains a comprehensive list.

Some sanctions involve billions of dollars in lost business for U.S. companies, such as the ban on doing business with Iran. Others are virtually cost-free, such as a ban on flights to the United States by Nigeria Airways because of Nigeria's alleged failure to curb international drug traffic.

In an effort to bring order out of this chaos, the State Department recently created a "sanctions team" to run an administration-wide examination of the purpose, scope, cost and effectiveness of the existing sanctions and try to develop standards for using sanctions in the future.

"The challenge," said Stuart E. Eizenstat, undersecretary of state for economic affairs, "is to find a way to improve the way we make sanctions decisions, to ensure that sanctions are part of a coherent strategy, to accurately measure the costs and effects of sanctions measures, to seek multilateral support where possible and to improve coordination between the administration and Congress."

Eizenstat, who chaired the sanctions team's first meeting last week, said the purpose of the exercise is "not to decrease the use of sanctions but to increase their effectiveness."

The use of trade and investment restrictions to advance political or strategic interests has been a staple of U.S. policy for many years, usually provoking outrage from the affected business groups.

President Jimmy Carter, for example, banned the sale of U.S. grain to the Soviet Union after the 1979 Soviet invasion of Afghanistan, a move that farm groups said had no impact on Moscow but cost U.S. farmers billions in sales and stimulated the growth of competing growers in Australia and Brazil. President Ronald Reagan prohibited U.S. suppliers from participating in the development of a natural gas pipeline from the Soviet Union to Western Europe, irritating NATO allies and sending potential U.S. construction contracts to suppliers in South Korea.

In recent years, however, the number and scope of sanctions has proliferated, according to several analysts, often mandated by a Congress concerned not just about such traditional issues as weapons proliferation but also about the environment, human rights or religious freedom.

"My membership in the past five years has seen an explosion in the legislative and executive [branches] of using economic sanctions unilaterally to moderate some other country's behavior. It has become the weapon of choice," said Willard Workman, international vice president of the U.S. Chamber of Commerce, one of the most influential national business organizations. "We're at the point of saying, 'Enough, already.' " Workman's group, the National Association of Manufacturers and an anti-sanctions coalition of trade and farm organizations known as USA*Engage are supporting legislation sponsored by Sen. Richard G. Lugar (R-Ind.) and Reps. Lee H. Hamilton (D-Ind.) and Philip M. Crane (R-Ill.) that would try to do on Capitol Hill what Eizenstat is trying to do in the executive branch.

The bill would require that sanctions mandated by Congress be focused as narrowly as possible, be tied to a specific foreign policy objective and protect contracts already signed. It would authorize the president to issue waivers and sanctions would expire after two years unless reauthorized. The president would be required to report periodically to Congress on a sanction's economic cost to the United States and on the likelihood that it would achieve its objectives.

"Sanctions should not be abandoned as a tool of foreign policy," Lugar said when he introduced the bill last fall. But he expressed "disquiet" over their proliferation, noting that between 1993 and 1996 "there were some 63 instances involving 35 countries" in which the United States imposed some kind of economic sanction.

In an assessment widely shared by academic analysts and trade specialists, Lugar said unilateral sanctions "rarely succeed in altering the behavior" of the targeted country and "may inflict more harm on the U.S. than on the target country." In addition, he said, unilateral sanctions "frequently create the illusion of action by substituting for more decisive action or serving as a palliative for those who demand some action, any action, be taken by the United States against another country."

Lugar emphasized unilateral sanctions because there is general agreement that multilateral sanctions, such as those imposed by the U.N. Security Council on Iraq after the 1991 Persian Gulf War, are more likely to be effective and have less potential for damaging U.S. interests.

"Unilateral sanctions never work," said former U.S. trade representative Carla A. Hills. "They may impoverish people, but if you have a country that's governed by a tyrant like Saddam Hussein or [Fidel] Castro, the tyrant doesn't care about the people. Multilateral sanctions may take a long time, as they did in [apartheid] South Africa, but you have a better chance." Eizenstat said the administration fully agrees that multilateral sanctions are preferable, but it may still be difficult to achieve agreement between the administration and Congress on when or why sanctions should be imposed. The reason is that Congress -- especially when controlled by a different party than the White House -- often has different international objectives from those of the president.

For example, Congress is prepared to cut aid to Russia because of restrictions on religious freedom there and because of Russian assistance to Iran's development of ballistic missiles. The administration, while supporting religious freedom and opposing the missile technology traffic, is opposed to sanctions on Russia because of a wider policy of developing long-term cooperation with Moscow.

On the other hand, the administration wants the freedom to impose unilateral sanctions, as it did last year on Burma and Sudan, whether Congress acts or not.

Mobil's Noto, in his letter to Clinton, addressed a different problem: the conflict between competing objectives inherent in the ban on doing business with Iran.

Clinton is a committed free trader. But he also banned all U.S. trade with Iran and signed the Iran-Libya Sanctions Act, which requires him to impose sanctions on foreign firms that invest $20 million or more in Iran's petroleum industry. Those actions have cut U.S. oil companies out of several deals in the fast-developing Caspian Sea oil fields, for which the logical pipeline export routes run through Iran.

The law appears to require the president to impose sanctions on the French oil firm Total and the giant Russian natural gas company Gazprom, which last year joined forces to develop Iran's huge South Pars gas field. For foreign policy reasons, the president is reluctant to sanction Total and Gazprom. But if he waives sanctions, as Noto pointed out, he will have excluded U.S. firms from the South Pars bonanza while opening the door to their foreign competitors.

"If these issues are resolved such that U.S. industry cannot compete on an equal basis for business opportunities in the Middle East, as well as in the Caspian Sea region," Noto wrote, "not only will U.S. foreign policy be damaged but U.S. jobs and investment will be lost."

That was in October. The administration is still considering what to do in the Total-Gazprom case. But meanwhile, Eizenstat said, the "sanctions team" has begun an effort to spell out the basis on which such decisions will be made in the future.

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