LEGISLATION SANCTIONING PETROLEUM INVESTMENTS IN IRAN AND LIBYA
By:
Preston Brown
Washington, D.C.
On December 20, 1995, the U.S. Senate passed a bill authorizing the President to impose specific sanctions on persons (including foreign entities) making investments over specified levels that "significantly and materially contributed to the development of petroleum resources in Iran" and, as a result of a last minute amendment, Libya.
The bill is a modified version of legislation proposed earlier by Senator D'Amato directed solely to Iran. In its modified form it is reported to have the support of the Administration - and the opposition of the industrialized allies of the United States. The House will consider similar legislation early this year. If the House passes a bill differing from that passed by the Senate, there will be a conference to reconcile the two versions of the legislation.
The Senate bill would authorize sanctions to be imposed on any person the President determines has, with actual knowledge, made "an investment of more than $40,000,000 (or any combination of investments of at least $10,000,000 each, which in the aggregate exceeds $40,000,000 in any 12-month period), that significantly and materially contributed to the development of petroleum resources in Iran [and Libya]." (Sec. 4(a); Sec. 11.)
An "investment" is defined to mean:
The entry into a contract which includes responsibility for the development of petroleum resources located in Iran or Libya or the entry into a contract providing for the general supervision and guarantee of another person's performance of such a contract;
The purchase of a share ownership in that development; or
The entry into a contract providing for participation in royalties, earnings or profits in that development, without regard to the form of the participation. (Sec. 10(3); Sec. 11.)
The authorized sanctions would be imposed on any person the President determines has made prohibited investments, on successor entities to such person and, under specified circumstances, on parents, subsidiaries or affiliates of such person. A current list of persons subject to sanctions will be published in the Federal Register and names will be added or removed from that list as necessary (Sec. 4(c)).
The sanctions authorized would be as follows:
The President may direct the Export-Import Bank of the United States not to insure, guarantee, extend credit or participate in the extension of credit in connection with the export of any U.S. goods or services to a sanctioned person.
The President may deny an export license or other specific authorization to export any goods or technology from the United States (or, if U.S. approval is required, their re-export) to a sanctioned person.
The U.S. government may prohibit any U.S. financial institution (broadly defined to include depository institutions, credit unions, securities firms, insurance companies, financial service companies and subsidiaries of the foregoing) from making any loans or extending any credit to a sanctioned person in an amount exceeding $10 million in any 12-month period (or two or more loans of more than $5 million each in any such period), unless such person is engaged in defined activities to relieve human suffering.
In addition, if a financial institution is itself sanctioned for making prohibited "investments," such financial institution may not be designated as a primary dealer in U.S. government debt instruments and may not serve as an agent of the U.S. government or as a repository for U.S. government funds.
If a Presidential determination is made with respect to a foreign person, the bill urges the President to initiate immediate consultation with the government with primary jurisdiction over that foreign person with a view towards persuading that government to take appropriate action as contemplated in the bill. In this regard, the President may delay application of sanctions for certain periods or, subject to a report to Congress, waive such application if national interest so requires (Sec. 7). The bill also provides for the issuance of advisory opinions by the Secretary of State (Sec. 6).
