[Congressional Record Volume 141, Number 49 (Thursday, March 16, 1995)]
[Senate]
[Pages S4116-S4118]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S4116]]
                         ADDITIONAL STATEMENTS

                                 ______


                                  IRAN

 Mr. D'AMATO. Mr. President, I rise today to discuss a topic of 
great concern to this country, as well as the world: Iran.
  In January, I introduced a bill, entitled ``The Comprehensive Iran 
Sanctions Act of 1995.'' The recent press regarding the aborted Conoco 
deal with the national Iranian oil company, has further brought the 
problem of the purchase of Iranian oil by overseas subsidiaries of 
American companies to light. These purchases help Iran fund their 
terrorism and keep their economy afloat. We can no longer subsidize 
Iran's violence and terrorism.
  For this reason, it is of paramount important that this bill becomes 
law. In regard to this, I ask that the following answers to a series of 
questions on Iran's economic status that I posed to Manouchehr Ganji, 
Secretary General of the Organization for Human Rights and Fundamental 
Freedoms for Iran, who is based in Paris, be printed in the Record. His 
answers are enlightening and provide the view of someone who knows with 
intimate detail, the threat that Iran poses to the world.
  The material follows:

         Organization for Human Rights and Fundamental Freedoms 
           for Iran,
                                    Paris, France, March 14, 1995.
     Senator Alfonse D'Amato,
     Chairman, U.S. Senate, Committee on Banking, Housing and 
         Urban Affairs.
       Dear Senator D'Amato, In response to your letter of March 
     9, 1995, I herewith enclose my reflections to the questions 
     posed. As you will note I have added a sixth question and 
     provided my responses to it as well. I will be available for 
     any further questions or clarifications.
       Please accept Sir, the assurances of my highest 
     considerations.
           Sincerely,
                                                 Manouchehr Ganji,
     Secretary-General.
                                                                    ____



                              introduction

       Under today's deteriorating economic, social and political 
     conditions in Iran, a total U.S. trade embargo on Iran is the 
     single most important policy initiative that needs to be 
     taken if the overwhelming majority of Iranians, inside and 
     outside the country, are to be given the incentive to play 
     their full part in bringing about a change of government--to 
     allow power to be transferred to civilized, progressive and 
     democratic forces; an outcome which would, among other 
     things, remove the threat to the region and the world that 
     the present regime in Iran represents. It is my considered 
     opinion that a total U.S. trade embargo will ultimately be 
     effective, if (a) it is part of a coordinated strategy which 
     enjoys the actual as well as the declared support of other 
     governments and their agencies; and if (b) U.S. and other 
     policy-makers and their agencies are fully coordinated with 
     those civilized, progressive and democratic Iranian forces on 
     the ground, inside and outside Iran, which will take the lead 
     in bringing about a change of power. However, if such a 
     policy is not coordinated and well organized, it will not 
     necessarily bring about the desired results, and could even 
     be counter-productive. It is also my view that your list of 
     five questions should be extended to include one more. I am 
     therefore responding hereunder to six questions.
       Question 1. We are aware of the severe problems that the 
     Iranian economy is facing. The government cannot serve all of 
     its short and long term debts, and basically is teetering on 
     total collapse. What benefits does Iran derive from its trade 
     with the United States, and how much importance does Iran 
     place on this trade?
       Answer. The deterioration of the economic and financial 
     situation of Iran has been accelerating during the past 
     several months at an unprecedented rate. The situation can be 
     summarized as follows:
       (1) The incapability of the country to service its short 
     and long term debts. This is in spite of the regime's efforts 
     to reschedule its debts of around $37 billion dollars, which 
     does not even include the debts to former communist 
     countries.
      Presently, the debt service and foreign exchange policies 
     are out of control and the regime is incapable of taking 
     concrete steps to redress the situation.\1\
     Footnotes at end of report.
---------------------------------------------------------------------------
       (2) From 1979 to 1995, the value of the Rial to the Dollar 
     had lost 30 times its value in the free market, whereas 
     during the last two months the value of the Rial has fallen 
     by an additional 50%,\2\ and no end is seen to the collapse 
     of the Rial. Most banks in the world are presently refusing 
     letters of credit from Iran.
       (3) The shortage of foreign exchange has limited the import 
     of even essential goods such as pharmaceutical products, raw 
     materials, and spare parts. Domestic production is falling 
     rapidly--industrial production is running at 17%-20% of its 
     capacity.\3\ Agricultural production is also in trouble due 
     to the shortage of seeds, fertilizers and pesticides.
       (4) To a large extent, Iran has also become ``a Dollar 
     economy'', in the sense that local prices are related to the 
     Dollar exchange rate. Consequently, the fall in the value of 
     the Rial, and the decreasing supply of goods (due to 
     shrinking imports and falling production) have been causing 
     price increases during the last two months of between 50% and 
     100%. This inflation is taking place in a country that is not 
     used to--contrary to some other countries--the psychology of 
     inflation, and lacks the experience and the mechanisms to 
     adapt to daily price increases.
       It is in such exceptional context that we have to evaluate 
     the importance of trade between the United States and Iran. 
     Since the 1979 revolution, more than anytime before, oil 
     revenues play the central role in Iran's economy. In 1994 
     Iran's oil revenues amounted to $11.9 billion.\4\ In 1994, 
     oil purchases of U.S. oil companies from Iran amounted to 
     $2.567 billion, or 25% of total oil revenues.\5\ The direct 
     U.S. exports to Iran were around $800 million in 1994. Not 
     only are these imports essential and substantial for the 
     regime, but, in addition, they allow it to cover certain 
     technological needs as well as other goods that Iran must 
     purchase from the U.S. due to its close economic and 
     industrial ties prior to the 1979 revolution.
       Consequently, an embargo by the U.S. under the present 
     circumstances would substantially affect a crucial factor for 
     the regime which is its foreign exchange earnings from oil. 
     Even if one argues that the regime will find other buyers and 
     suppliers, this substitution shall take some time, whereas 
     the various effects of the embargo would be felt much 
     quicker. More importantly, the psychological impact of such 
     an embargo by the U.S. would be greater than the effect on 
     the actual flow of revenues and goods.
       Question 2. Owing to its severe economic condition, what 
     effect (socially, politically and perhaps even 
     psychologically) would a total U.S. trade embargo have on 
     Iran?
       Answer. Generally speaking, the ruling mullahs have been 
     talking about the U.S. trade embargo on Iran since the 
     seizure of the U.S. Embassy in 1979, and they have told so 
     many lies and boasted on their ability to survive the embargo 
     that the term ``embargo'' does not carry much weight unless 
     the U.S. clearly indicates that it means business and that 
     the ``embargo'' is much more than mere political rhetoric. 
     Thus, the embargo must be effective and must be seen as 
     effective; which means it must affect the regime's finances, 
     deprive the regime from buying the goods it needs-- including 
     instruments needed for its security forces--and finally, 
     financially pressure the regime to scale down its budget, 
     especially the allocation to its radical constituency and 
     forces of repression.
       The most important effect of a total U.S. trade embargo 
     would actually be the psychological one--from two quite 
     different points of view. In so far as the present regime can 
     be said to have any confidence in its ability to survive, 
     that confidence is based on its ability to demonstrate that 
     it is continuing to enjoy at least a measure of U.S. support. 
     A critical factor in this light is the fact that U.S. 
     companies, oil companies in particular, are being allowed to 
     continue to purchase large amounts of oil from Iran. The 
     present regime is thus able to say to itself ``Powerful U.S. 
     vested interests need us as much as we need them. We're okay. 
     We can ride this storm out.'' In effect, the U.S. oil 
     companies, in order to protect their own short-term vested 
     interests as they see them, are sending the signal that gives 
     the present regime its hope for survival. A total U.S. trade 
     embargo would therefore undermine and probably destroy 
     whatever remaining confidence the present regime has of its 
     survival chance.
       On the other hand, the psychological impact on the 
     overwhelming majority of the Iranian people--who will pay any 
     price necessary to rid themselves of the present regime, 
     provided only they believe that further hardship, suffering 
     and sacrifice will lead to the removal of the present 
     regime--will be in my opinion enormous and positive. For most 
     of the past sixteen years the main cause of despair in the 
     hearts of the largely silent, frightened and anti-regime 
     majority in Iran has been the perception that, to one degree 
     or another, the U.S. and other major powers were supportive 
     of the regime. The peoples of nations are no fools? They have 
     learned that when the U.S. in particular, and other major 
     powers in general, are supporting repressive regimes, there 
     is little or no point in those being repressed risking 
     everything in an effort to remove the source of repression.
       Orinary Iranians do not believe that the ruling mullahs 
     have stayed in power simply on the strength of their own 
     resources and wits. They truly believe that the mullahs have 
     the hidden support of the big powers, including the oil 
     companies and international
      financial institutions, and that is why they have survived 
     despite their obvious inefficiency and ignorance of the 
     ways of the modern world.
       The psychology of the Iranian society, which for historical 
     reasons at times overestimates the role and influence of 
     foreign powers, particularly the United States, would view a 
     total U.S. trade embargo as a clear signal that the United 
     States has finally taken a definitive position against the 
     ruling mullahs. At the same time, the regime's supporters 
     will also lose confidence and morale for the same reason. 
     Furthermore taking into account the general state 
     [[Page S4117]] of dissatisfaction and opposition to the 
     regime which prevails in Iran today\6\, the positive 
     interpretation of a total U.S. trade embargo would be 
     manifold greater than the immediate adverse financial effects 
     of it. It can be assumed that large economic interests mainly 
     in the bazaar and close to the regime would then be more 
     inclined to distance themselves from the regime, and 
     establish contacts with the dissatisfied middle classes and 
     lower income classes whose living standard have been 
     completely disrupted by inflation and unemployment.
       A total U.S. trade embargo would therefore be the signal 
     for which the overwhelming majority of Iranians have been 
     waiting for. Meaning that the U.S. does no longer support, in 
     any shape or form, the present regime and that the commitment 
     to the final struggle to remove it is for Iranians to make. 
     In effect, the positive psychological impact on the 
     overwhelming majority of Iranians will lead, by definition, 
     to a positive political impact. One may ask, what of the 
     social impact? It can be said that the hardship and suffering 
     of most Iranians could hardly be worse than it already is. 
     But as indicated above, most Iranians are willing to make the 
     further sacrifices required of them provided they feel that 
     it could result in the collapse of the present regime and the 
     opening of the door to a worthwhile and democratic future. 
     This indirect support of the opposition forces at this 
     crucial stage when a power struggle within the regime is also 
     taking new dimensions would be well received inside and 
     outside of Iran.
       Therefore, an embargo in the case of the Islamic Republic 
     is not only a trade issue and should not be looked upon only 
     as a balance sheet of what U.S. companies will be losing and 
     what will be the financial loss to the regime. Such a policy 
     will be suffocating to the ruling mullahs and will be taken 
     as a signal of support for those struggling for the freedom 
     of Iran. It will also act as a very strong signal to other 
     countries that the time for ``the party to which terrorists 
     are invited'' is over!
       However, the sine qua non for the success of the 
     administration's policy to isolate the Islamic Republic of 
     Iran internationally is for the U.S. to do as it preaches and 
     to effectively take the lead in this regard thus making 
     itself a model by strictly adhering to such a policy. How can 
     the U.S. persuade other countries to restrain from relations 
     with the Islamic Republic when the U.S. is in fact itself a 
     major trading partner of that renegade regime? There is no 
     doubt that a total U.S. trade embargo would strengthen the 
     U.S. position in its efforts to isolate the Tehran regime. 
     Terrorism and extremism are like drugs, they have to be 
     fought internationally. Oil money in the hand of the Tehran 
     mullahs--the symbol of state terrorism and dark ages in 
     today's world--is like cleaned drug money in the hands of 
     drug smugglers. It is oil money combined with foreign aid and 
     assistance that has prolonged the life of the extremist 
     regime in Iran, enabling it to continue to disregard all 
     rights and freedoms of the Iranian people to carry out acts 
     of terrorism abroad, and to destabilize the moderate pro-
     western Moslem countries.
       Question 3. In its present form, does the Clinton 
     Administration's policy of ``dual containment'' of Iran and 
     Iraq work?
       Answer. An evaluation of this policy has to be made 
     separately with regard to each country.
       Iraq: After Iraq's invasion of Kuwait a radical change of 
     U.S. policy towards Iraq took place. The former policy of 
     support for Iraq against the regime in Tehran turned into a 
     policy of isolation. Destruction of Iraq's war power and of 
     its chemical and nuclear facilities became paramount. Since 
     the war between Iran and Iraq had ended, there was no longer 
     the need for military support of Iraq against the Islamic 
     Republic of Iran. Although Saddam Hussein is still in power 
     in Baghdad and continues his repressive policies. Iraq's 
     aggressive designs have been checked and neutralized. The 
     integrity of Iraq has been preserved, which is most 
     important, taking into account the possibility of a 
     fundamentalist Shiite state in the south and the possibility 
     of the Kurdish secession in the north. Although some volume 
     of trade has been going on between Iran and Iraq, taking into 
     account the historical issues and quarrels between the two 
     countries, no united front against the U.S. has been formed. 
     One can safely say that on the whole the policy of 
     containment has been successful concerning Iraq.
       Iran: Taking into account the nature of the Islamic 
     Republic, the implication of this policy must be viewed 
     separately. Today, the Islamic Republic is the center of 
     support for the extremist fundamentalist movements such as 
     the Hamas, Jihad and Hizballah in their efforts to fight and 
     derail the Middle East peace process. The ruling mullahs in 
     Iran believe that if these extremist movements success in 
     destroying the peace process, they would also succeed in 
     destabilizing the moderate pro-western countries in the 
     region with Tehran's help and leadership. In spite of the 
     dual containment policy declaration and the U.S. government's 
     efforts to isolate the Islamic Republic, trade relations 
     between the two countries have remained the same or have even 
     risen. Oil purchases by U.S. oil companies and direct or 
     indirect trade between the two countries have continued at 
     even a higher level than before. The Tehran regime still 
     continues to pursue arms and weapons of mass destruction, 
     support international terrorism, subvert the Arab-Israeli 
     peace process, abuse human rights at home, assassinate 
     political opponents abroad and promote militant Islamic 
     fundamentalist movements in other Muslim countries in the 
     Middle East and in North Africa.
       Under these circumstances, the regime in Tehran has 
     concluded that the United States is not serious and has no 
     real policy against it. In fact, they may be right as they 
     compare the U.S. policy towards themselves with the U.S. 
     policy toward Iraq, both of
      which are within the context of the dual containment policy. 
     Therefore, the dual containment policy would be more 
     successful if tougher criteria would also be applied vis-
     a-vis the regime in Tehran. The embargo is certainly a 
     first and a right step in that direction. It is imperative 
     however, that the stated target and aim of the sanctions 
     be the regime and not the people of Iran.
       Question 4. What response would you have to the charge by 
     U.S. companies (oil companies in particular) that an embargo 
     only hurts U.S. companies and will not hurt Iran?
       Answer. By definition a total U.S. embargo will result in 
     short term losses for U.S. companies, oil companies in 
     particular. In their position I would insist that my 
     government does everything in its power to see that the 
     embargo is global. In their position I would also have good 
     cause for grievance if other governments allowed their 
     companies to make short term gains at my expense. In other 
     words, there is a case for saying that a total U.S. trade 
     embargo could hurt U.S. companies more than it would hurt the 
     regime in Iran if the U.S. was unable to persuade all other 
     major powers to make common cause with it.
       But there is another more important argument which U.S. 
     companies (oil companies in particular) would be well advised 
     to consider even if other governments did allow their 
     companies to go on trading with the Islamic Republic of the 
     Iran. If U.S. companies continue to be seen by a growing 
     number of Iranians as the agencies which are doing most to 
     prop up the present discredited and despised regime in Iran, 
     there will come a time when the present regime is replaced, 
     when U.S. companies will have much and perhaps everything to 
     lose. What U.S. companies would be well advised to weigh 
     carefully is what they might gain in the short term against 
     what they could lose in the longer term. If they give the 
     matter the consideration it deserves, U.S. companies should 
     not have that much difficulty in concluding that it is in 
     their best longer term interest to support a total embargo, 
     particularly under the current intense economic and political 
     conditions in Iran.
       If other governments did then allow their companies to make 
     short term gains at the expense of their American 
     counterparts, U.S. companies would end up being the longer 
     term beneficiaries--because they would be seen by the 
     overwhelming majority of Iranians in a new Iran to have 
     played a part in bringing an end to the present discredited 
     and despised regime.
       Question 5. If the United States were to impose an embargo 
     cited in Senator D'Amato's bill, in your opinion, would the 
     industrialized countries follow?
       Answer. Since the Iranian regime is a real threat to 
     international peace and stability, and in view of the fact 
     that its declared policy is to harm U.S. interests, it seems 
     that the United States has a perfect moral and legal case in 
     seeking to internationalize its embargo in the same way it 
     mobilized the international community against the Iraqi 
     regime.
       The argument that isolating the Iranian regime would only 
     make it more intransigent is wrong. So is the argument that 
     by bringing the mullahs into the international fold one can 
     tame them. Today, this argument is presumably put forward by 
     the Germans and the Japanese more than others. The fact is 
     that the Iranian mullahs, being extremely cynical, receive 
     the wrong signal from appeasement and accommodation. They 
     interpret such overtures as a sign of weakness which 
     indicates that the West is not serious about their unruly 
     behavior and lacks resolve and political will to confront 
     them. However, experience has shown that the ruling mullahs, 
     being bullies, lose their morale quickly as soon as they are 
     convinced that their adversary is strong, determined and 
     means business.
       My guess is that some major powers would be mightily 
     tempted to seek to make short term gain at America's 
     expense--it least until it is clear that the present regime 
     in Iran is close to being toppled. Then they would try to 
     change horses. I am therefore of the opinion that U.S. 
     policy-makers would be well advised to every effort to bring 
     other major power on board. Much could depend on the extent 
     to which other major powers are consulted by the U.S. before 
     any announcement, (if there is to be one) of a total trade 
     embargo. If the British, French, Germans and others are able 
     to say, ``we were not consulted'', they consider that they 
     have enough scope to play games. If the United States clearly 
     indicates that it means business and that the embargo is more 
     than more political rhetoric, other industrialized nations 
     will think twice about doing business with the present regime 
     in Iran under the prevailing economic and political 
     conditions.
       Question 6. If the United States were to impose an embargo 
     cited in Senator D'Amato's bill, what in your opinion would 
     be the likelihood of the present regime in Iran, or elements 
     within it, deciding to mount a terror campaign against U.S. 
     interests for the purpose of weakening American resolve and, 
     by 
     [[Page S4118]] intimidation, driving a wedge between the U.S. 
     and other major powers, the Europeans especially? And if you 
     think the present regime in Iran (or elements within it) 
     might consider such a strategy, how do you assess the ability 
     to perform?
       Answer. The clerical regime has been in power in Iran for 
     sixteen years and it still claims it does not condone, much 
     less support, terrorism. By now, however, so much evidence to 
     the contrary has accumulated in so many countries that Tehran 
     clerics professions of innocence are seen as little more than 
     self-serving lies. There are no signs that the clerical 
     regime has any intention to mending its way. Reports from 
     throughout the Middle East and North Africa reflect the 
     Tehran regime's determination to use terrorist violence to 
     achieve its expansionist aims. One of the regime's latest 
     weapons in its war on the world is Hamas, a radical 
     fundamentalist Palestinian group on which the Islamic 
     Republic has lavished millions of Dollars as well as weapons 
     and guerrilla training.
       As I know to my cost, the present regime has the ability to 
     carry out single-hit assassinations in virtually any place of 
     its choice. But the evidence of Lockerbie would seem to 
     suggest that for more complex terror operations the Tehran 
     regime requires (or prefers) the organizational assistance of 
     international extremist forces such as the
      Hizballah, Jihad and Hamas. If the need to contain the 
     possibility of terror strikes by the present regime in 
     Iran arises due to the imposition of trade sanctions, 
     history dictates that the proper course of action is the 
     policy of combating terrorism at its source, and making it 
     clear to the proponents of terrorism that they have much 
     to lose as a consequence of their actions.


                               conclusion

       A relatively effective trade embargo on Iran will place 
     noticeable constraints on the regime's finances. This will 
     deprive the regime from access to funds which it can use to 
     finance oppressive operations at home and mischievous 
     activities abroad. However, in order to maximize the effects 
     of a total trade embargo, there must be a coordinated and 
     well organized political action to further isolate the Tehran 
     regime at home and abroad. Such a political action should 
     embody measures to deny the regime the prestige and 
     respectability associated with a government in charge of a 
     State on the one hand, while it strengthens popular 
     opposition to the regime both at home and abroad on the other 
     hand. Most importantly, it is imperative that the stated 
     target and aim of the sanctions be the regime in Tehran as 
     opposed to the Iranian people. This distinction is extremely 
     crucial.
       Action by the United States alone in imposing a total trade 
     embargo on the Islamic Republic will be effective 
     economically, politically and psychologically. However, there 
     is no reason why the U.S. should not seek to enlarge the 
     embargo by trying to internationalize it, particularly since 
     a coordinated strategy which enjoys the declared support of 
     other governments would unquestionably yield a much greater 
     success in isolating the Tehran regime. The policies of the 
     present regime in Iran are no less repulsive than those of 
     the apartheid regime in South Africa. It would be worth 
     reviewing the type of actions which were undertaken against 
     the apartheid regime of South Africa in the 1970's and 1980's 
     which were ultimately successful in promoting freedom and 
     democracy.
       The United States Senate can initiate a campaign of moral 
     opposition to the regime in Iran by giving international 
     dimensions to its opposition to the clerical regime's 
     renegade behavior and inhuman policies. Unlike the ambiguous 
     policies of the past, a total U.S. trade embargo as proposed 
     by Senator D'Amato would not only send the right signal to 
     the ruling mullahs, but it would also solidify the leadership 
     position of the U.S. and enable it to successfully convince 
     its allies to comply and adhere to such a policy, and thereby 
     enhance the probability of success.


                               Footnotes

     \1\In the Fiscal Year April 1994-1995, 56 billion have been 
     rescheduled up to now and will ultimately need to be repaid. 
     this amount would represent about 60% of expected oil 
     revenues for that Fiscal Year.
     \2\In 1979, 1 Dollar was equivalent to 78 Rials; in January 
     1995, 1 Dollar was equivalent to 2000-2200 Rials, and in 
     March 1995, 1 Dollar was equivalent to 4000-4500 Rials.
     \3\Imports of $2.5 billion are required if the industry works 
     at 25% of its capacity. Another $4.5 billion are needed for 
     projected subsidies.
     \4\An additional $800 million non-oil exports revenues sold 
     to the Central Bank (out of total non-oil exports of $3.8 
     billion) has to be added to this figure.
     \5\To show the importance of this figure, it should be noted 
     that in Fiscal Year 1995-1996 the Islamic Republic has 
     allocated $3 billion (arms purchases excluded) in foreign 
     exchange as current expenditures for military and security 
     matters.
     \6\See interview with the late Prime Minister Mehdi Bazargan 
     in Frankfurter Rundschau of 12 December 1994. Mr. Bazargan 
     was the first prime minister of the Islamic Republic in 
     1979.
     

                          ____________________