The Cable

Congress Warns Oil Companies: Don’t Get So Cozy With Iran

Congressional leaders are warning international oil companies looking to invest in Iran that severe financial penalties await them if they move too soon.

The ink is barely dry on world powers' interim deal with Iran to ease sanctions in exchange for a slowdown of Tehran's nuclear program. The primary sanctions on Iran's oil business remain in place. That hasn't stopped petro-giants like Royal Dutch Shell, Italian company Eni, and Austrian oil and gas company OMV from exploring the possibility of renewing their operations in Iran. And those moves have both Democratic and Republican lawmakers livid.

"Companies examining their options for resuming business relationships with the Iranian regime are acting prematurely at best," Rep. Michael McCaul, chairman of the House Homeland Security Committee, told Foreign Policy.

The European oil companies have been meeting with Iranian officials this week, on the sidelines of an OPEC meeting in Vienna, to discuss business opportunities that could open up if sanctions are lifted. An interim agreement between the U.S. and Iran reached two weeks ago in Geneva has raised hopes in the oil industry that Iranian oil could be coming back, after being virtually shut out over the global market because of strict U.S. sanctions.

The meetings come at a sensitive time for politicians in Washington, who are still wary of the deal and weighing the possibility of passing further restrictions on trade with Iran. On Friday, top Senate Democrats requested routine briefings from the administration on the consequences of passing additional sanctions and the Senate Banking committee is holding a hearing on the interim deal next week.

The oil companies' interest in returning to Iran could play into arguments by Iran hawks in Washington that the U.S. needs to pass new sanctions legislation now -- something the White House says would torpedo the delicate nuclear talks in Geneva.

"This is exactly why the Senate should move quickly to pass legislation that would impose new sanctions if Iran violates the interim agreement and prevent endless negotiations," Sen. Mark Kirk (R-IL) told FP. "Foreign firms must be on notice that sanctions are coming back stronger than ever if this process doesn't lead to the dismantlement of Iran's nuclear program."

The interim deal includes the easing of some parts of the sanctions over the next six months if Iran curtails its nuclear program. If U.S. and Iranian negotiators can work out a long-term deal in the next six months, there is the possibility that oil sanctions could be lifted then.

The Wall Street Journal reported that Shell, Eni, and OMV all met with the Iranian oil minister this week in Vienna.

"We discussed specific projects that we had been looking at for many years before sanctions were imposed," Eni Chief Executive Paolo Scaroni told the Financial Times. He said he would be looking for opportunities over the next six months while Iran and the U.S. try to negotiate a final deal and he hopes sanctions will be lifted soon.

"It's not surprising that we're seeing this from the companies that have some experience in Iran like Eni and Total," said Suzanne Maloney, a former State Department official who is now a senior fellow with the Saban Center at the Brookings Institution.

While U.S. companies have been barred for decades from doing business with Iran, European firms have only recently been forced out of Iran, as the U.S. has tightened sanctions. Eni still has a foothold in Iran, with limited operations that have been exempted by the U.S. and EU.

Maloney said the talks raise anxieties in Washington about the possibility of European and U.S. views diverging as negotiations with Iran continue.

"As the political situation improves, there is the possibility of additional distance between Washington and Europe and I think that would be deeply problematic," Maloney added.

Eni has a history of raising the ire of U.S. officials with its business dealings in Iran. In early 2010, House Foreign Affairs staffers warned Eni that its business with Iran could put its U.S. investments at risk, according to diplomatic cable released by Wikileaks.

Critics of the Obama administration's negotiations with Iran were quick to see the talks as proof that continued vigilance is necessary. A GOP aide said the renewed interest in Iran's oil industry by foreign businesses is the type of secondary effect that Republicans warned could happen with the loosening of sanctions.

A spokesman for House Majority Leader Eric Cantor said that he "thinks loosening sanctions and recognizing Iran's enrichment program was a mistake, and it will not stop Iran's march toward nuclear capability." 

Anxieties over renewed business interest in Iran comes amid liberal fears that Democratic leaders in the House may join with GOP counterparts to undercut the Obama administration's negotiations with Tehran. Congressional aides tell The Cable that Rep. Steny Hoyer, the no. 2 Democrat in the House, is considering legislation authored by House Majority Leader Eric Cantor that would insist any final deal on Iran prohibit all enrichment of uranium on Iranian soil.

Since Tehran is unlikely to accept such a demand, some fear that the legislation is designed to undermine the international talks. "Everyone knows that the Iranians will not tolerate a deal without some enriching of uranium," said one Congressional aide. "It's an effort to torpedo the talks." Additionally, if Cantor's bill receives bipartisan support in the House, it would place pressure on the Senate to pass corresponding legislation.

But Hoyer spokeswoman Stephanie Young rejected allegations that her boss would do anything to hurt the White House's negotiating position. "Mr. Cantor has a resolution, it's being reviewed and absolutely no decisions have been made," she said. "It's preposterous to think that Mr. Hoyer would sign onto any resolution he believes would undermine the White House or negotiations."

One thing Congress does agree on: swift punishment for any international firm looking to enter the Iranian oil market in the next six months. "It is far too premature for any international energy company to contemplate re-entering the Iranian market," a spokesman for Rep. Eliot Engel, the top Democrat on the House Foreign Affairs Committee, told FP.

The Cable

'It's Never Going to Happen': Why Syria's Chemical Deadline May Not Be Met

The Obama administration and its allies are struggling to find a safe place to store Syria's chemical weapons after they've been shipped out of the country, raising new questions about when the U.S. military will actually begin destroying the deadly munitions.

The Organization for the Prohibition of Chemical Weapons (OPCW) has set an ambitious Dec. 31 deadline for Syria to hand over the deadliest of its chemical armaments, which are supposed to be packed into roughly 150 shipping containers, driven to the Syrian port city of Latakia, loaded onto Norwegian and Danish cargo ships and then transported to a location outside of Syria. Once there, they will be transferred to an American vessel called the Cape Ray for destruction. Senior American defense officials stressed Thursday that the Cape Ray itself won't dock at Latakia and that no U.S. personnel would set foot in Syria.

That, at least, is how the plan is supposed to work in theory. In practice, the effort faces an array of technical, diplomatic, security, and financial challenges. The disposal equipment being installed onto the Cape Ray has never been tested at sea, and it's not clear that it will be capable of operating continuously for months without breaking down. The U.S. and its allies will also need to find a way of ensuring that none of the weapons are stolen or damaged on their way to the Cape Ray or during the actual destruction work. To say it will be a challenge is the grossest of understatements.

"I know we have a deadline in three weeks but the operations have not yet started," said one diplomat familiar with the U.N.'s internal discussions. "It's never going to happen."

The Obama administration's more immediate task is to find an allied government willing to allow the ship from Latakia to land at one its ports and unload the weapons before they're transferred to the Cape Ray. It would take roughly two days to load the weapons onto the American vessel, which means they'd need to be stored at the port temporarily, posing a potential security risk to the host country. Not surprisingly, it's been hard to convince a government to let a weapons-laden cargo ship unload at one of its ports. That makes it highly unlikely that the U.S. and its allies will be able to meet the Dec. 31 deadline, set by the OPCW, to remove Syria's chemical arsenal.

Washington recently informed one ally that it was considering using a port servicing a U.S. naval base in Naples, Italy. Talks are also underway with Morocco and Spain to see whether the materials could be unloaded there. Sigrid Kaag, the Dutch head of a joint mission of experts from the United Nations and the OPCW overseeing the elimination of Syria's chemical weapons, said she wouldn't speculate about whether the armaments would be transferred to American custody in a Mediterranean port. Pentagon officials said negotiations with foreign governments were ongoing but declined to comment on which countries could ultimately take the weapons before they were transferred to the Cape Ray.

There's also considerable uncertainty about how the materials will get to Latakia in the first place. The U.S. and other Western powers responded coolly to a Syrian request for armored vehicles and other protective equipment Damascus claimed it needed to carry out a successful operation. In a November 15 letter to the Security Council, Kaag said that Syria would have to reach out to friendly countries for assistance in securing the route. Russia, one of Syria's closest diplomatic allies, is looking into the possibility of supplying up to 200 trucks to transport the materials. A spokesman for the OPCW, Christian Chartier, said Kaag was trying to act as a "go between" to encourage other states to help Syria with its security needs.

Renewed combat along the route to the port city poses another challenge. During a recent visit to Syria, Kaag told the U.N. Security Council in a closed-door briefing, she was not able to reach Latakia by the main road from Homs -- a key hub on the chemical weapons route -- because of fighting, forcing her to travel by helicopter from Beirut.

"It's a main artery, as you know. If we cannot travel there, it's a real issue," said Kaag, who is required to travel in the region with a Romanian close protection detail. Kaag insisted that the mission was "all very manageable," but conceded she could not certain it would go smoothly. 

"I'm not aware that this operation has ever been carried out in this way," she said.

Sending the chemical weapons out of Syria marks the most dangerous, and the most expensive phase of a landmark Sept. 14 pact between U.S. Secretary of State John F. Kerry and Russian Foreign Minister Sergei Lavrov calling for the destruction of Syria's chemical weapons program by the middle of 2014. (Merely destroying the waste products could cost an estimated 35 to 40 million Euros; the full cost of transporting the armaments out of Syria and destroying them is likely to be exponentially higher).

The accord -- which averted a U.S. strike against Syria in retaliation for using sarin to kill hundreds of its own civilians in late August -- has proceeded smoothly. On October, 31, Syria effectively destroyed its declared chemical weapons production facilities and mixing and filling plants, the OPCW confirmed.

The U.N. has said the chemical weapons should be packed for transport by Dec. 13 and then moved out of Syria altogether by Dec. 31. A senior U.S. defense official called that timeline "ambitious," but expressed confidence that it could be met. The destruction efforts would begin aboard the Cape Ray in early January.

Senior defense officials said it would take 45-90 days to turn the weapons into non-harmful waste using two of the so-called "Field Deployable Hydrolysis Systems" that are being installed in the Cape Ray's cargo holds. The equipment will operate inside of a sealed tent to prevent any of the chemical agents from being accidentally dispersed while they're being turned into waste. The resulting sludge, in turn, will be brought to a commercial destruction facility elsewhere in the world and then incinerated.

Beyond the difficulty in finding a port where the weapons can be unloaded, U.N.-based diplomats say the United States has also been unable to help secure sufficient funding to hire companies to dispose of the toxic waste products.

"The U.S. or Paris can say that we need to make the deadline but will they ensure they can make it possible?" another official asked, adding that governments "have to be realistic and feasible about the deadlines they impose."

As of Nov. 30, 35 companies had submitted expressions of interest in securing a contract to collect the waste product from the United States and transfer it to a facility for incineration. But OPCW officials noted that there isn't enough money in a trust fund established for the destruction of Syria's chemical weapons to put out formal requests for bids from the firms.

"What I know is that what we have by now is just not enough; it's far away from being enough," said Chartier, the organization's spokesman. "We need to be certain of our financial commitments in order to start the tender process."

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