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Clinton Kills Pending Iran-Conoco Oil Deal : Policy: Order will bar development in Mideast nation and reassert hard-line stance taken since '79 hostage crisis.

March 15, 1995|PAUL RICHTER and ROBIN WRIGHT | TIMES STAFF WRITERS

WASHINGTON — President Clinton said Tuesday that he will bar U.S. oil companies from developing Iranian oil fields, thus killing a pending $1-billion deal and reasserting the United States' hard-line policy toward its longtime adversary.

Administration officials said oil giant Conoco's plans to develop two offshore oil fields would set back U.S. efforts to isolate a country that has sponsored terrorism, undermined Middle East peace efforts and sought to hasten the spread of nuclear weapons.

"We need to send a clear and unequivocal message to Iran: There cannot be normal relations until Iran's unacceptable behavior changes," said White House Press Secretary Michael D. McCurry.

As Clinton announced plans to issue an executive order, Conoco officials said they would back off their planned deal, helping to calm a weeklong chorus of criticism from congressional Republicans and others. The deal would have been the first major investment by an oil company in Iran since 1979, when the United States broke off trade with the country after the seizure of the U.S. Embassy in Teheran by Islamic militants.

Some outside analysts had interpreted Iran's eagerness to hire an American company over foreign competitors as a sign that a country facing economic collapse wished for normalized relations.

Conoco's withdrawal came after some dramatic behind-the-scenes corporate maneuvering by the Bronfman family, who are active in major Jewish organizations and are strong supporters of the Clinton Administration's efforts to isolate Iran. Through the Seagram Co., which they run, the Bronfmans hold a 24% stake in the DuPont Co., the parent firm of Houston-based Conoco.

As Administration officials reviewed the deal in recent days, the Bronfmans conveyed to DuPont board members their displeasure over the idea of a Conoco deal with Iran. "It just wouldn't sit well with them," said one source close to the family.

The Bronfmans are major political supporters of the Clintons. Edgar Bronfman Jr., Seagram's president and chief executive, attended a White House state dinner last month and has contributed to Clinton's legal defense fund.

Yet even with the deal's hasty unraveling, the Administration did not escape criticism. Some analysts argued that the Administration should have foreseen the problem much earlier and moved to block it. Some critics contended that the move again showed more vividly than ever the inconsistencies of U.S. policy toward Iran.

Even as the Clinton Administration has pressed allies to stop trading with the fundamentalist nation, the United States has become one of its largest trading partners. While U.S. law forbids sale of weapons and some other strategic products to Iran, U.S. companies sell it a wide array of consumer products, aerospace and high-tech goods. U.S. oil concerns buy about a quarter of Iran's crude oil for resale elsewhere.

These contradictions have been seized upon by hard-liners such as Senate Banking, Housing and Urban Affairs Committee Chairman Alfonse M. D'Amato (R-N.Y.), a strong supporter of Israel who has proposed blocking all U.S. commerce with Iran. Clinton Administration officials, who have been under heavy political pressure from D'Amato, Senate Majority Leader Bob Dole (R-Kan.) and other hawks, said they will look over current economic ties to see if other embargo-tightening steps should be taken.

"I would not rule out further measures on our part in the future," said Peter Tarnoff, undersecretary of state.

One U.S. official, acknowledging the intense political pressures involved in the issue, called Clinton's move "the politically correct thing to do."

But outside analysts said they wonder whether U.S. efforts to further impoverish Iran may make the "rogue state" an even more dangerous enemy--both for its neighbors and the United States. "Our interest is in a stable Iran," said Judith Kipper, a Middle East specialist at the Brookings Institution. "Our policy is foolish--childish--still driven by our hurt feelings from years ago."

Administration officials and senior Conoco executives spent long hours last weekend reviewing the deal and discussing their plans. But their accounts differed sharply on what guidance Conoco had received from the government on the acceptability of its deal.

Undersecretary of State Tarnoff said U.S. officials had indicated their displeasure with the idea from the time they were first approached. "The Administration has been clear," he said.

But Jim Felder, a spokesman for Conoco, said opinions of federal officials varied greatly, even within agencies. U.S. officials, he said, even approved the visit of an Iranian trade delegation to Texas to discuss the deal.

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