Date: 07 Mar 2000
Time: 22:03:40
Remote Name: 24.30.137.96
By Tom Doggett
03/07/2000 Reuters English News Service (C) Reuters Limited 2000.
WASHINGTON, March 7 (Reuters) - The Clinton administration's efforts to improve relations with Iran does not mean relaxing sanctions on U.S. investment in Iran 's energy industry any time soon, a State Department official said on Tuesday.
In what could be a breakthrough in relations between the two countries that went sour two decades, the White House is reportedly considering allowing U.S. consumers and businesses to buy Iran 's carpets, caviar and pistachios.
Noticeably absent from the list is any easing in sanctions against Iran 's oil industry, Tehran's economic engine.
"There are some ideas under consideration," a State Department official, who spoke on condition of anonymity, told Reuters. "None of them include... lifting restrictions on energy sales (and investment)."
Iran is a pivotal player in OPEC, which is under growing pressure from Washington and other industrialised countries to pump more oil to ease world prices.
Tehran is a price hawk, aligning itself with Algeria and Libya which oppose any immediate production increase in order to continue banking profits from oil prices that have soared to nine-year highs. Iran 's oil minister was due to visit his influential Saudi Arabian counterpart on Wednesday for talks closely monitored by industry analysts and traders.
The State Department official also declined to confirm that trade in carpets, caviar and pistachios may be eased, saying only that the administration is seeking ways to open a dialogue with Iran .
Such a policy change would be a goodwill gesture toward Iran after the country's recent parliamentary elections that saw many reform-minded politicians elected, but not a signal U.S. firms will be allowed to invest in Iran , analysts said.
However, analysts said they would be closely watching to see whether Washington offers any other goodwill gestures to Iran before OPEC meets on March 27 to decide whether to increase oil production.
The Clinton administration has been blasted by dozens of U.S. lawmakers, who contend more action is needed to prod OPEC to increase its output.
Oil futures galloped above $34 a barrel on Tuesday at the New York Mercantile Exchange, rising $2, for the first time since November 1990 after Iraq invaded Kuwait.
"From a U.S. perspective, lifting of sanctions on the three (carpets, caviar and pistachios) is more likely to help Iran than the United States," said Cyrus Tahmassebi, president of Bethesda, Md.-based Energy Trends Inc.
Oil sanctions, however, hurt both countries, he said, noting Tehran needs foreign investment and equipment to increase oil production, while American consumers are currently experiencing the downside of low oil supplies.
"Oil sanctions are detrimental to U.S interests in both the short and long-term. Maybe now they can see it more clearly," Tahmassebi said.
The White House is likely to wait to see how Iran responds to eased trade restrictions before considering a major step like allowing energy investments, said Julia Nanay, a director of Washington-based Petroleum Finance Company.
"The way the U.S. government looks at it, that's the ultimate bargaining chip it has to extract what it wants from Iran ," Nanay said.
Indeed, the U.S. continues to believe that Iran sponsors international terrorism and is seeking to develop weapons of mass destruction, the State Department official said.
Still, he said, "The elections were clearly a sign that the people of Iran want to move to a more open society, and we're (the United States) trying to find ways to respond to that."
Nanay said there are "interim steps" the White House could take to give U.S. energy firms access to Iran before lifting investment sanctions altogether.
For example, she said because U.S. law allows foreign companies to invest up to $20 million a year in Iran 's energy sector without being hit with sanctions, American firms should be able to invest at that level as well.
"U.S. companies should be allowed to do at least that much, which would permit them to go and start doing some basic work in Iran ," she said. "So that's what (U.S.) companies, as a first sign, would hope for."
((additional reporting by Patrick Connole