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Calendar No. 280
104th Congress Report
1st Session 104-187
IRAN OIL SANCTIONS ACT OF 1995
December 15, 1995.--Ordered to be printed
Mr. D'Amato, from the Committee on Banking, Housing and Urban Affairs,
submitted the following
R E P O R T
[To accompany S. 1228]
The Committee on Banking, Housing and Urban Affairs, to
which was referred to bill (S. 1228) to impose sanctions on
foreign persons exporting petroleum products, natural gas, or
related technology to Iran, having considered the same, reports
favorably thereon with an amendment in the nature of a
substitute and recommends that the bill as amended do pass.
On December 12, 1995, the Senate Committee on Banking,
Housing and Urban Affairs marked up and ordered to be reported
S. 1228, a bill that requires the President to place one or
more sanctions on any person who makes an investment that
significantly and materially contributes to the development of
Iranian petroleum resources.
Paragraph 7(b) of rule XXVI of the Standing Rules of the
Senate requires the committee report accompanying a measure
reported from the committee to include the results of each roll
call vote taken on the measure and any amendments thereto. In
addition, the report will include the votes cast by each member
of the committee on the question of reporting the measure. In
accordance with that requirement, the following is the
tabulation of the Tuesday, December 12, 1995 committee vote to
report S. 1228.
Measure adopted by: yeas 15, nays 0.
HISTORY OF S. 1228
As part of its deliberations on S. 1228, the Iran Oil
Sanctions Act of 1995 and related issues, the Senate Banking
Committee held two legislative hearings on the United States'
foreign policy towards Iran.
March 16, 1995 hearing
The following witnesses testified before the Committee:
State Department Under Secretary for Political Affairs Peter
Tarnoff, John H. Lichtblau, Chairman of the Petroleum Industry
Research Foundation, Inc., Kenneth Timmerman, Published of the
Iran Brief, Patrick Clawson, Senior fellow at the Institute for
National Strategic Studies of the National Defense University.
The hearing was called to explore and discuss S. 277, the
Comprehensive Iran Sanctions Act of 1995, the Administration's
Iran policy, and the Administration's view of a contract
between the National Iranian Oil Company [NICO] and Conoco, a
U.S. company to develop off-shore oil fields in Iran.
The issues the Committee considered during the hearing
1. The economic effect of the existing U.S. sanctions on
2. The Administration's policy of ``Dual Containment''
3. Iran's Human Rights record and its support for
October 11, 1995 hearing
At its October hearing, the Committee considered U.S.
sanctions placed on Iran, international cooperation with the
sanctions and proposals for future sanctions, including those
in S. 1228. The following witnesses testified before the
Committee: State Department Under Secretary for Political
Affairs Peter Tarnoff and Central Intelligence Agency Deputy
Director of Intelligence John C. Gannon.
Since the 1979 Islamic revolution in Iran, the United
States has sought to contain Iran's aggressive behavior,
including its military buildup, development of weapons of mass
destruction, and its support for international terrorism and
groups opposed to the Arab-Israeli peace process.
In May 1993 the Clinton Administration articulated a policy
of ``dual containment'' of Iran and Iraq. The Administration
sought to increase the effectiveness of U.S. sanctions on both
regimes by trying persuade U.S. allies and other countries to
deny Iran credits, aid, and arms and technology exports.
On January 25, 1995 Chairman D'Amato introduced S. 277
which called for a total U.S. trade embargo on Iran,. On March
7, 1995 the Conoco Company and the Government of Iran announced
an agreement whereby a foreign subsidiary of the U.S. company
would assist Iran in developing two new oil fields in the
Persian Gulf. On March 14, two days before to the Committee's
hearing on S. 277, the Administration announced it would issue
an Executive Order preventing Conoco or any other U.S. company
from investing in Iran's petroleum industry. That Order, No,
12957, issued on March 15, 1995, forbade any U.S. person from
entering into contracts for the financing of or the overall
management or supervision of the development of petroleum
resources located in Iran.
During the March 16 hearing, Chairman, D'Amato recognized
the significance of the Executive Order but argued that further
steps were necessary, such as a total trade embargo between the
United States and Iran as called for in his bill S. 277. On
March 27, 1995 Chairman D'Amato introduced new Iran sanctions,
bill S. 630 that placed procurement and export sanctions on any
foreign person or corporation engaging in any trade with Iran
in any goods or technology as defined in the Export
Administration Act of 1979. The bill was designed to stop
foreign companies from helping Iran increase its foreign
On May 6. 1995 President Clinton signed Executive Order No.
12959 imposing virtually a total U.S. economic embargo on Iran.
In doing so the President stated:
Responding to the country's sponsorship of
international terrorism and its active pursuit of
weapons of mass destruction, the new sanctions prohibit
trade with Iran, as well as trade financing, loans and
related financial service * * * New investment in Iran
is also prohibited.
At the G7 summit meeting in Halifax this past June, the
Administration urged our allies to support U.S. efforts to use
economic means to pressure Iran. While most governments refused
to join in a multilateral trade embargo against Iran, G7
leaders did condemn the behavior of the Iranian government and
called on states to avoid any collaboration with Iran which
might help it develop a nuclear weapons capability.
Some countries and companies, however, have not cooperated
with the U.S. embargo. On July 13, 1995 the French oil company
Total signed a contract with Iran to develop two oil fields off
Siri Island. Total replaced the U.S. firm Conoco, which
withdraw from a similar business arrangement with Iran in March
1995 after President Clinton issued his Executive Order. The
French Government, which owns 5 percent of Total's stock, said
it had no authority to block the Total deal, but at the request
of the U.S. is not providing official credits to help Total
finance the project.
On September 1, 1995 The Wall Street Journal reported that
Iran badly needed revenues to repay foreign debts and modernize
its oil fields. It noted that Iran has not been able to find
customers for 200,000 of the 600,000 barrels a day of crude oil
that U.S. companies had been purchasing. That same article
reported that the Iranian Government, desperate for cash, had
invited about 100 European and Asian companies to Tehran in
November to seek about $6.5 billion dollars worth of investment
in energy projects in return for a share of the oil and gas
produced. The Journal of Commerce on that same date published a
On September 8, Chairman D'Amato and others introduced S.
1228, a bill aimed at foreign companies that help Iran develop
its oil and gas resources. It set forth a series of mandatory
and discretionary sanctions that the President would impose on
any foreign company that assists Iran to increase its revenues
by extracting petroleum or natural gas.
At the October 11 Senate Banking Committee hearing, State
Department Under Secretary Peter Tarnoff testified that:
The biggest economic problem faced by Iran today is
the Government's shortage of hard currency. Without
adequate funds, the Iranian Government cannot buy the
imports necessary to properly sustain Iran's industry
and maintain its infrastructure. Nor can the Government
fully pay the billions of dollars it owes in foreign
debt. * * * Because of these cutbacks in imports,
Iran's economy suffers from inflation and recession.
Iran has made efforts to attract foreign investors to help
it develop its oil and gas resources in order to increase its
inflow of hard currency. In November 1995, the National Iranian
Oil Company [NIOC] held an international oil and gas seminar at
which the NIOC presented eleven large oil and gas proposals to
a gathering of foreign investors, proposals to help Iran
dramatically increase its oil and gas production. If the
proposals were acted on it would pose a direct threat to the
United States' national security interests. For as Under
Secretary Tarnoff stated at the October 11 hearing on S. 1228,
``a straight line links Iran's oil income and its ability to
sponsor terrorism (and) build weapons of mass destruction'' and
that any ``private company that helps Iran to expand its oil
(sector) must accept that it is indirectly contributing to this
Iran is also in the process of acquiring four nuclear
reactors from Russia and increased oil revenues could help it
finance the purchase. On Thursday, September 7, 1995, Russia
announced that it would proceed with the sale despite strong
U.S. opposition which included a personal plea from President
Clinton during his visit with Russian President Boris Yeltsin
earlier this year. Russian and Iranian officials have claimed
that these reactors are only for ``research.'' (Washington
Post, 9/7/95) Iran has made substantial gains toward developing
a nuclear weapon. Earlier this year, a senior U.S. official
said, ``Until fairly recently there wasn't a lot of evidence
that (Iran's nuclear program) was beyond a basic stage, but now
it is beyond a basic stage'' and that Iran's ``quest for
centrifuge equipment marks a new intensity in Iran's effort to
acquire nuclear technology.'' (Washington Post, 4/17/95)
objective of this legislation
Passage of S. 1228 is important to slow Iran's development
of its oil and gas resources and its access to revenues to fund
behavior harmful to the international community. Total S.A., a
French company, wants to help Iran develop its oil resources.
S. 1228 would make it vastly more difficult for Total S.A. or
other companies to do so. Total S.A. and all other foreign
companies that invest in Iran under this bill would be forced
to make a choice whether they want to conduct business with the
U.S. or Iran. As Chairman D'Amato said, ``Simply put, a foreign
corporation or person will have to choose between * * * the
United States or Iran.'' (3/27/95)
The U.S. needs other nations to join our embargo of Iran in
order to effectively stop Iran from using oil revenues to
finance terrorist activities and its pursuit of weapons of mass
destruction. During a May 7, 1995 address, President Clinton
stated that we must do everything to convince other nations and
foreign companies to join the U.S. in the fight against Iranian
sponsored terrorism and nuclearization. The legislation is
designed to help obtain such cooperation from other nations.
The current U.S. embargo has produced results as shown by
Iran's declining economy and shortage of hard currency, but
constant pressure must be applied in order to force Iran to
change its ways. Multi-lateral cooperation with economic
sanctions on Iran is the most effective way to not only reduce,
but eliminate Iran's ability to support terrorism and to
acquire nuclear weapons.
After discussions between the Administration and the
Majority and Minority members of the Senate Banking Committee,
the bill targets new investment contracts because it is these
significant investments that are crucial to Iran's ability to
develop new oil and gas fields. The bill also provides the
President the necessary flexibility to determine the best mix
of sanctions by which to deter companies from investing in
Iran's oil fields. In using this authority, the President
should consider factors such as the significance of an
investment, the prospects for cooperation with other
governments, U.S. international commitments, and the effect of
sanctions on U.S. economic interests and regional policies.
Finally, the bill authorizes the Secretary of State to provide
advisory opinions on whether a proposed activity would be
covered to avoid unnecessary uncertainty on the part of
companies and friction with allies.
section-by section analysis
The bill is designed to prevent Iran from being able to
increase its revenue through the development of petroleum
resources in Iran. Any significant increase in the revenue to
support its weapons of mass destruction and terrorism policies
should be viewed as a threat to the national security and
foreign policy interests of the United States.
The bill provides a series of sanctions that the President
of the United States shall choose from and place upon any
person who invest $40,000,000 or more that significantly and
materially contributes to the development of oil revenues in
Iran. Such investments encompass ``into a contract that
includes responsibility for the development of petroleum
resources located in Iran, or the entry into a contract
providing for the general supervision and guarantee of another
person's performance of such a contract.'' The President is
required to choose one or more sanctions that are specified.
Section 1. Short title.
This Act may be cited as the ``Iran Oil Sanctions Act of
Section 2. Findings.
The Government of Iran's efforts to acquire weapons of mass
destruction and the means to deliver them and its support of
international terrorism endangers the national security and
foreign policy interests of the United States and its allies.
Additional efforts are needed to deny Iran the financial means
to sustain its efforts to acquire weapons of mass destruction
and the means to deliver them and its support of international
Section 3. Declaration of policy.
It is the policy of the United States to deny Iran the
ability to support its terrorist activities and its attempt to
acquire weapons of mass destruction and the means to deliver
them by limiting the revenue from development of petroleum
resources in Iran.
Section 4. Imposition of sanctions.
Section 4(a) requires the President to impose one or more
of the sanctions described in Section 5 on any person making an
investment of more than $40,000,000 (or any combination of
$10,000,000 investments of at least $10,000,000 each, which
exceeds $40,000,000 in any 12 month period) that significantly
and materially contributes to the development of petroleum
resources in Iran.
Section 4(b) details that the sanctions may be imposed on
any person that: (1) has carried out the activities described
subsection (a); (2) is a successor entity to that person; (3)
is a person that is a parent or subsidiary of the person if
that parent with actual knowledge engaged in the sanctioned
activities; and (4) is a person that is an affiliate of that
person if that affiliate with actual knowledge engaged in the
activities and if that affiliate is controlled in fact by that
Section 4(c) requires the President to publish the names of
persons that are subject to sanction.
Section 4(d) states that: (1) any products or services
provided under contracts entered into prior to the date on
which the President publishes his intention to impose the
sanctions; or (2) medicines, medical supplies, or other
humanitarian items are not subject to sanctions under
Section 5. Description of sanctions that may be imposed under section
(1) Prohibition against Export-Import Bank assistance for
exports to sanctioned persons
No Ex-Im guarantees, credit, or insurance for goods or
services to sanctioned companies or persons.
(2) Export sanction
The President may order not to issue any specific license
or grant any other specific permission or authority to export
any goods or technology to a sanctioned person or company.
(3) Loans from U.S. financial institutions
The U.S. government may prohibit U.S. financial
institutions from making any loan or providing any credit in an
amount exceeding $10,000,000 in any 12-month period (or two or
more loans of more than $5,000,000 each totaling more than
$10,000,000 in such period) to any sanctioned person or
company, except to relieve human suffering.
(4) Prohibitions on financial institutions
(A) A sanctioned financial institution will lose its
designation as a primary dealer in U.S. government debt
(B) A sanctioned financial institution shall not serve as
an agent of the U.S. Government or serve as repository of U.S.
Section 6. Advisory opinions
The Secretary of State may, upon the request of any person,
issue an advisory opinion to that person a to whether a
proposed activity by that person would subject that person to
sanctions under this Act.
Section 7. duration of sanctions; Presidential waiver
Section 7(a)(1) If the President makes a determination
under section 4(a), he is urged to consult with the government
with primary jurisdiction over a person with respect to the
imposition of sanctions under this Act.
Section 7(a)(2) allows the President to delay the
imposition of the sanctions for 90 days if the President finds
that the appropriate government with primary jurisdiction over
that foreign person has taken specific and effective actions,
including the imposition of appropriate penalties, to terminate
the involvement of the person in the activities that led to
sanctions concerning such person.
Section 7(a)(3) allows the President to delay the
imposition of the sanctions an additional 90 days if the
President determines and certifies to the Congress that the
appropriate government is in the process of taking actions
described in paragraph (2).
Section 7(a)(4) requires the President to submit to the
Committee on Banking, Housing and Urban Affairs of the Senate
and the Committee on International Relations of the House of
Representatives a report which shall include information
Section 7(b) requires the sanctions to remain in effect
until the President determines that the sanctioned person is no
longer engaging in the activity that led to the imposition of
Section 7(c)(1) allows the president to waive the
imposition of sanctions or the continued imposition of
sanctions 15 days after it is determined and reported to the
Committee on Banking, Housing, and Urban Affairs and the
Committee on International Relations of the House of
Representatives that it is important to the national interest
of the United States to exercise such waiver authority.
Section 7(c)(2) states that any report shall provide a
specific and detailed rationale for such determination that
will include: (A) a description of the conduct that resulted in
the determination; (B) in the case of a foreign person, an
explanation of the efforts to secure the cooperation of the
government with primary jurisdiction of the sanctioned person
to terminate or, as appropriate, penalize the activities that
resulted in the determination; (C) an estimate as to the
significance of the investment to Iran's ability to develop its
petroleum resources and (D) a statement as to the response of
the United States in the event that such person engages in
other activities that would be subject to section 4(a).
Section 8. Termination of sanctions against Iran
Section 8 (1) provides for termination of the sanctions if
the President determines that Iran has ceased its efforts to
design, develop, manufacture, or acquire (A) a nuclear
explosive device or related materials and technology; (B)
chemical and biological weapons; or (C) ballistic missiles and
ballistic missile launch technology; and (2) if Iran has been
removed from the list of state sponsors of international
terrorism under section 6(j) of the Export Administration Act
Section 9. Report required
The President shall continue to transmit reports to
congress describing the nuclear and other military capabilities
of Iran and Iran's support of international terrorism.
The following terms are defined in this section:
(1) The appropriate congressional committees means
the Committees on Banking, Housing and Urban Affairs
and Foreign Relations of the Senate and the Committees
on Banking and Financial Services and International
Relations of the House of Representatives.
(2) Financial institutions include (A) a depository
institution (as defined in section 3(c)(1) of the
Federal Deposit Insurance Act), including a branch or
agency of a foreign bank (as defined in section 1(b)(7)
of the International Banking Act of 1978); (B) a credit
union; (C) a securities firm, including a broker or
dealer; (D) an insurance company, including an agency
or underwriter; (E) any other company that provides
financial services; or (F) any subsidiary of such
(3) Investment means (A) the entry into a contract
that includes responsibility for the development of
petroleum resources located in Iran, or the entry into
a contract providing for the general supervision and
guarantee of another person's performance of such a
contract; (B) the purchase of a share of ownership in
that development; or (C) the entry into contract
providing for participation in royalties, earnings, or
profits in that development, without regard to the form
of the participation.
(4) person means a natural person as well as a
corporation, business association, partnership,
society, trust, any other non-governmental entity,
organization, or group, and any governmental entity
operating as a business enterprise, and any successor
of any such entity.
(5) petroleum resources includes petroleum and
natural gas resources.
regulatory impact statement
Pursuant to rule XXVI, paragraph 11(b), of the Standing
Rules of the Senate, the Committee has evaluated the regulatory
impact of the bill and concludes it would result in no net
increase in the regulatory burden imposed by the Government.
changes in existing law
The Committee has determined that it is necessary, in order
to expedite the business of the Senate, to dispense with the
requirements of rule XXVI, paragraph 12, of the Standing Rules
of the Senate, with respect to this legislation.
cost of legislation
The cost estimate of the Congressional Budget Office
Congressional Budget Office,
Washington, DC, December 13, 1995.
Hon. Alfonse M. D'Amato,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 1228, Iran Oil Sanctions Act of 1995, as ordered
reported by the Senate Committee on Banking, Housing, and Urban
Affairs on December 12, 1995. The bill would have no
significant budgetary impact.
The bill would require the President to impose one or more
sanctions against any person that invests $40 million or more
in the development of the petroleum resources of Iran. The
President would be able to deny a sanctioned person financing
under the Export-Import Bank Act or deny an export license
under any statute that requires prior review and approval by
the U.S. government. The President also would be empowered to
prohibit U.S. financial institutions from providing credits to
a sanctioned person and to prevent a sanctioned financial
institution from acting as a primary dealer in U.S. government
debt instruments or as a repository for U.S. government funds.
Existing monitoring and compliance activities could be
modified to accommodate the new sanctions at no significant
cost. The bill would not affect direct spending or revenues of
the federal government and thus would not be subject to pay-as-
you-go procedures under section 252 of the Balanced Budget and
Emergency Deficit Control Act of 1985. It would not affect the
budgets of state or local governments.
If you wish further details on this estimate, the CBO staff
contact is Joseph C. Whitehill.
James L. Blum
(For June E. O'Neill, Director).