A sure way to scuttle diplomacy


By Jake Colvin and Carah Ong

While the United States prepared to meet last week in the first of a series of planned gatherings on Iraq with Iran at the same table, Congress began the process of constructing what would be an enormous roadblock to the Bush administration's diplomatic initiative.

U.S. Rep. Tom Lantos, D-San Mateo, chairman of the House Foreign Affairs Committee, introduced legislation that would attempt to sanction foreign companies doing business in Iran, reinstitute a total ban on Iranian imports and influence pension fund investments involving companies that do business in Iran.

While the bill's sponsors have the best of intentions, this legislation would invite conflict with Russia, China, Japan and Europe at the exact time when the United States needs their support most.

Attempting to toughen U.S. sanctions on Iran has become a pastime of sorts for Congress over the past decade. But efforts to mandate sanctions against companies that are incorporated in foreign countries have failed over the past few years -- for good reason. Such sanctions would tie the administration's hands when pursuing a diplomatic initiative with Iran and would leave us open to foreign commercial complaints.

Extraterritorial sanctions make U.S. diplomacy much more difficult. Foreign governments are not particularly tolerant of attempts by another country to regulate the activities of corporations established under their laws.

In response to U.S. sanctions aimed at foreign companies, some countries have enacted blocking statutes specifically to prevent firms from complying with the extraterritorial measures. For example, the European Union passed a blocking statute in 1996 that makes it illegal for an EU company to comply with U.S. sanctions regarding Iran. In other countries, the extraterritorial reach of U.S. sanctions can conflict with pre-existing local laws.

The Hilton Hotels Corporation is all too familiar with the complications caused by such measures. In January, one of its hotels in Oslo faced threats of boycotts and anti-discrimination sanctions by the Norwegian government when it refused to book a room for a visiting delegation of Cuban officials.

Hilton maintained that it could not fulfill the reservation because it would violate the U.S. embargo against Cuba but, in doing so, the hotel managed to violate Norwegian antidiscrimination laws.

As this example suggests, enforcing measures that attempt to influence the behavior of foreign companies operating in places like Iran -- as Lantos seeks to do with his legislation - puts U.S. and foreign companies between a rock and a hard place by forcing them to comply with conflicting laws.

Such legislation also takes away attention from the issue at hand -- the behavior of the Iranian government. By attempting to target the behavior of foreign companies in Iran, Congress will create controversy and conflict between the United States and countries around the negotiating table.

The United States already prohibits most trade and investment in Iran by American firms, which is well within the prerogative of Congress. (Whether or not these sanctions have been an effective policy tool is another matter.) But Congress should not take on the role of extending U.S. sanctions to foreign-based companies.

Our trading partners are likely to remind us of our very limited ability to enforce such extraterritorial measures by passing more statutes to block them, submitting complaints to the World Trade Organization and lodging diplomatic objections at exactly the time when we need their support at the negotiating table.

Lantos should be commended for calling for direct talks with Iran, and he is right to suggest that strong international pressure must support such diplomacy. However, he substitutes counterproductive extraterritorial sanctions for the kind of true international pressure that must be brought to bear.

The Bush administration is attempting to foster this international pressure by building support among U.N. Security Council members for a strong second resolution regarding Iran's nuclear program. And by sitting down at the same table with Iran over the weekend, the administration has taken an encouraging first step toward diplomatic engagement.

Congress should create space for these diplomatic efforts to work, not entangle the United States in a diplomatic and legal nightmare involving the very countries whose cooperation is essential to ensure a successful diplomatic solution.

Jake Colvin is director of USA*Engage, a business coalition that advocates dialogue and engagement abroad. Carah Ong is the Iran policy analyst at the Center for Arms Control and Nonproliferation and is coordinating a broad alliance calling for dialogue to resolve tensions with Iran.