DUAL CONTAINMENT AND TRADE SANCTIONS RENEWAL (1993-1995)

This is a piece of an article written 1999 Author Hooman Estelami. He wrote A STUDY OF IRAN’s RESPONSES TO U.S. ECONOMIC SANCTIONS

Mr. Estelami wrote, "Editor’s Note: This article explains how Iran has responded to U.S. economic sanctions, filling a generally ignored dimension in the discussion of sanctions’ policy. It also presents a good picture of the contemporary Iranian economy.

In 1993, the so-called “dual containment” policy was initiated by the Clinton administration focusing on the twin threats of Iraq and Iran. However, with the weakening of Iraq following the 1991 Persian Gulf war, the United States looked to balance regional powers by weakening Iran through various means such as trade sanctions and political isolation. The Clinton administration began to persuade Europe and Japan to limit their involvement in Iran. With no formal mechanisms in place to force such a policy on its allies, persuasion was typically achieved through diplomatic discussions.

To slow the momentum of dual containment, Iran attempted to offer lucrative contracts to American companies and to improve trade relations with the West during the early and mid-1990s. As a result, by 1994, the United States had become Iran’s fifth-largest supplier of imports, and American oil companies had become the primary purchaser of its crude oil. However, during this period Iran also placed greater emphasis on developing long-term regional economic partnerships with neighboring countries. In 1989 Iran had signed a series of long-term economic and military cooperation agreements with Russia, which in subsequent years made Russia the primary supplier of combat aircraft for Iran’s air force, and the supplier of three diesel powered submarines for the Iranian navy. Despite U.S. concerns, Russia also began construction of an $800 million nuclear power reactor in southern Iran, and the two countries agreed to set up joint companies to explore and produce Caspian Sea oil.

Iran’s regional partnerships were also facilitated by the breakup of the Soviet Union and by the common economic interests shared by the former Soviet republics. As a result, Iran assertively developed economic relationships with the republics of the former Soviet Union to the north, aiming to become a regional transit point for gas and oil sourced from Central Asia.

Due to unique geographical conditions, much of the oil and gas extracted from Central Asia would be exported more efficiently if shipped through Iranian pipelines or swap agreements. As a result, relations with neighbors such as Turkmenistan and Kazakhstan have pivoted primarily on these grounds. A notable agreement was reached with Turkmenistan and Turkey, whereby a 900-mile natural gas pipeline will link Iran to Turkey and is to be extended northward to Turkmenistan in order to help export Turkmen gas to Turkey. It will eventually reach Europe by early next century. Iran and Kazakhstan have also agreed to an oil swap deal, whereby Iranian refineries in the north are supplied with Kazakh oil, in return for shipments of crude oil in the Persian Gulf to Kazakh customers, thereby facilitating Kazakh oil exports through Iranian territory.

During this period, Iran also strengthened its regional partnerships to the east. With the 1995 visit by President Ali Akbar Rafsanjani to New Delhi, and the launch of the India-Iran chamber of commerce in that same year, economic activity between Iran and India increased. The two countries have also formed a joint shipping company, and finalized plans for a $400 million fertilizer project in Iran.

Iran has also proposed an extensive pipeline project to both India and Pakistan that would facilitate the export of Iranian gas using an undersea pipeline passing through Pakistan. Iran’s relations with its neighbors in the Persian Gulf and with Turkey have also proven effective for dodging Western trade sanctions. These countries have played an instrumental role by becoming re-export centers for Iranian imports.For example, the volume of exports from United Arab Emirates (UAE) to Iran between 1978 and 1996 grew more than fivefold, most of which consists of re-exports of western-made products. Iran’s relations with Turkey have also pivoted on common regional interests. While both countries share security concerns with their respective Kurdish communities, and although Kurdish intrusions into each other’s territories and internal interferences have for decades been a source of diplomatic tensions, the common economic interest in the energy resources of the area have often dominated bilateral relations.

Other countries with which Iran developed closer partnerships during this period include China, Malaysia, and South Africa. China is cooperating with Iran in building Tehran’s subway system and is also a supplier of military hardware, Malaysia has played a pivotal role in Iran’s petroleum industry, partnering with a French oil concern, Total, in developing two Iranian off-shore oil and gas fields in the Persian Gulf. Iran and South Africa have also exchanged high-level visits and South Africa, which in 1994 began its purchases of Iranian crude for the first time in over a decade, now obtains most of its crude oil from Iran.

While the Iranian constitution does not allow production sharing with foreign investors in the oil sector, by the mid-1990s mechanisms for encouraging foreign involvement in petroleum projects were developed as an alternative. In 1995 a buy-back production sharing system was developed by the National Iranian Oil Company (NIOC) whereby foreign oil companies can invest in an Iranian oil field and recover their investments and associated profits though the sale of the produced oil.In what some analysts consider as an olive branch extended to the United States, such a contract worth $600 million was agreed upon between NIOC and Conoco, a subsidiary of Dupont Corporation, for the development of two offshore oil and gas fields in the Persian Gulf. Although the Conoco deal was later canceled by the U.S. government, from a symbolic point of view, it could have created a significant shift in U.S.-Iran relations. The deal would have been the first contract awarded by Tehran involving a foreign entity in both exploration and development of Iranian oil since the 1979 revolution. As Conoco is an American firm, improved economic relations between the two countries was a conceivable outcome.

However, the Conoco deal would have also created a contradiction in U.S. foreign policy at a time when the United States was persuading its allies to restrict their business dealings with Iran. The Conoco deal also highlighted policy differences between the Clinton administration and the Republican-dominated Congress. These differences further accelerated the momentum of trade sanctions, such that in early 1995 an executive order prohibiting all American companies from any involvement in developing Iran’s petroleum industry was issued, and shortly after a total trade ban on Iran went into effect. American companies were prevented by law to conduct any kind of trade with Iran–oil or non-oil–with criminal penalties for violating corporations ranging up to $500,000. Moreover, the export of American goods and services to Iran, and brokering or financing of such trade has since been prohibited."

The full article shows how history is repeating itself. 2012 Benghazi was an undercover operation for the procurement of black market oil sanctioned by then Secretary of State, Hillary Clinton. Ambassador Stevens was proven by sanction hearings as a true believer and from his heart, wanted to make things better for all. Was he exploited for his belief?

Personally, all her supporters want to cry about what Trump said. Sad, really. Can't have people shining the light in the dark corners, they cry that you're too mean. Make baseless allegations filled with false rhetoric so they themselves don't have to confront the real issues at hand.

How far will the Clinton's go? Do they want to go down in history? Or, do they want to go to the deathbed full of money? A legacy to proud of may be, just out of reach for that bunch.