Persian Gulf War

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The Persian Gulf is one of the few regions whose importance to the United States is obvious. The flow of Gulf oil will continue to be crucial to the economic well-being of the industrialized world for the foreseeable future; developments in the Gulf will have a critical impact on issues ranging from Arab-Israeli relations and religious extremism to terrorism and nuclear nonproliferation. Every president since Richard Nixon has recognized that ensuring Persian Gulf security and stability is a vital U.S. interest.

The Clinton administration's strategy for achieving this goal during the president's first term was its attempted "dual containment" of Iraq and Iran. This is more a slogan than a strategy, however, and the policy may not be sustainable for much longer. In trying to isolate both of the Gulf's regional powers, the policy lacks strategic viability and carries a high financial and diplomatic cost. Saddam Hussein is still in power six years after his defeat at the hands of a multinational coalition, and the international consensus on continuing the containment of Iraq is fraying.

The strident U.S. campaign to isolate Iran, in turn, drives Iran and Russia together and the United States and its Group of Seven allies apart. Finally, the imposing U.S. military presence that helps protect the members of the Gulf Cooperation Council (GCC) from external threats is being exploited by hostile elements to take advantage of internal social, political, and economic problems. The advent of the Clinton administration's second term, together with the imminent inauguration of a new administration in Iran following this May's elections, provides an opportunity to review U.S. policies toward the Gulf and consider whether midcourse corrections could improve the situation.

The first step in such a reevaluation is to view the problems in the Gulf clearly and objectively. In Iraq, the United States confronts a police state led by an erratic tyrant who's limited but potentially serious capacity for regional action is currently subject to constraint. In Iran, the United States confronts a country with potentially considerable military and economic capabilities and an imperial tradition, which occupies a crucial position both for the Gulf and for future relations between the West and Central Asia. If Iraq poses a clear and relatively simple immediate threat, Iran represents a geopolitical challenge of far greater magnitude and complexity.

Consultation with leaders of some Persian Gulf countries has made it plain to us that they do not share an identical view of the threat posed by Iraq and Iran. Hence no U.S. Gulf policy will satisfy everyone in every respect. That makes it all the more essential that any adjustment in U.S. policy toward Iraq and Iran be preceded by extensive consultations with friendly Gulf leaders. Inadequate dialogue and unilateral action have caused some insecurity in the region and weakened trust in U.S. steadfastness.

When the British withdrew from the Persian Gulf in 1971, the United States became the principal foreign power in the region. For almost three decades it has pursued the goal of preserving regional stability, using a variety of means to that end, particularly regarding the northern Gulf powers of Iraq and Iran.

At first the United States relied on Iran as its chief regional proxy, supporting the shah's regime in the hope that it would be a source of stability. This policy collapsed in 1979 with the Iranian Revolution, when Iran switched from staunch ally to implacable foe. During the 1980s, the United States strove to maintain a de facto balance of power between Iraq and Iran so that neither would be able to achieve a regional hegemony that might threaten American interests. The United States provided some help to Iraq during the Iran-Iraq War of 1980-88, moved in other ways to counter the spread of Iranian-backed Islamic militancy, and provided--with Israeli encouragement--some help to Iran, chiefly in the context of seeking the release of American hostages. This era ended with Iraq invading Kuwait in 1990 and the United States leading an international coalition to war to restore Kuwaiti sovereignty and defeat Iraq's bid for dominance.

The Clinton administration came into office in 1993 facing the challenge of ensuring Gulf stability in a new international and regional environment. The disappearance of the Soviet Union gave the United States unprecedented freedom of action, while the Madrid Conference, sponsored by the Bush administration, inaugurated a fundamentally new phase of the Middle East peace process, offering hope that the Arab-Israeli conflict might eventually prove solvable. The Clinton team's initial Middle East policy had two aspects: continued support for the peace process and dual containment of Iraq and Iran. These strands were seen as reinforcing each other: keeping both Iraq and Iran on the sidelines of regional politics, the administration argued, would protect Saudi Arabia and the smaller Gulf monarchies and enable Israel and the moderate Arab states to move toward peace, while the burgeoning Arab-Israeli detente would demonstrate that the attitudes of the "rejections front" were costly and obsolete.

Dual containment was implemented not as a long-term solution to the problems of Gulf stability but as a way of temporarily isolating the two chief opponents of the American-sponsored regional order. Regarding Iraq, the policy involved maintaining the full-scale international economic sanctions and military containment the administration had inherited, including a no-fly zone in southern Iraq and a protected Kurdish enclave in the north. The Clinton administration stated that it merely sought Iraqi compliance with the post-Gulf War U.N. Security Council resolutions, particularly those mandating the termination of Iraq's weapons of mass destruction programs. In practice, the administration made it clear that it had no intention of dealing with Saddam Hussein's regime, and seemed content, for lack of a better alternative, to let Iraq stew indefinitely. The administration responded to Iraqi provocations, but saw little opportunity to oust Saddam except at great cost in blood and treasure.

The dual containment policy initially involved mobilizing international political opposition against Iran, together with limited unilateral economic sanctions. The Clinton administration asserted that it was not trying to change the Iranian regime per se but rather its behavior, particularly its quest for nuclear weapons, its support for terrorism and subversion in the region, and its opposition to the peace process. By early 1995, however, the U.S. attitude toward Iran began to harden. The Iranian behavior at issue had continued. But the real impetus for a shift seems to have come out of American domestic politics, in particular the administration's desire to head off a challenge on Iran policy mounted by an increasingly bellicose Republican Congress.

Congressional initiatives were designed to increase pressure on so-called rogue states such as Iran and Libya, to the point of erecting secondary boycotts against all parties doing business with them, including American allies. Hoping to deflate support for such action, in spring 1995 President Clinton announced (with an eye on domestic politics at the World Jewish Congress) that he was instituting a complete economic embargo against Iran. The move achieved its intended domestic effects in the United States, but only temporarily. Late in 1995 pressure from Congressional Republicans, led by House Speaker Newt Gingrich (R-Ga.), called for covert action against the Iranian regime, and last year Congress passed the Iran and Libya Sanctions Act, which the president signed. This legislation mandates U.S. sanctions against any foreign firm that invests more than $40 million in a given year in the development of energy resources in Iran or Libya. Not surprisingly, America's allies have strenuously opposed it as an unjustifiable attempt to coerce them into following a hard-line policy.

At the start of President Clinton's second term, therefore, U.S. Persian Gulf policy is at an impasse. Saddam Hussein remains in power in Iraq and has even regained some control over the Kurdish areas of the north, while the Gulf War coalition that defeated him is eroding. Toughened U.S. sanctions against Iran, although doing some damage to the Iranian economy, have produced no major achievements and increasingly isolate America rather than their target. The continued willingness and ability of some members of the GCC and others to help implement these policies is open to question. What, then, is to be done?

The continued rule of Saddam Hussein poses a danger to the stability and security of the region. He has threatened his neighbors while doing everything possible to acquire weapons of mass destruction in direct violation of international law, even during the last several years, when subject to the most restrictive supervision in the history of international arms control. Although there are real costs involved in maintaining Iraq's pariah status, it is difficult to see how any policy in the military sphere other than continued containment can be adopted so long as Saddam remains in power. The United States should be prepared to maintain Iraq's military containment unilaterally should the will of others falter. Similarly, while there are costs to keeping Iraq's oil off the world market, retaining the economic embargo in general is necessary, because with unrestricted access to large profits Saddam would likely embark on further military development.

The United States may, however, need to consider a revised approach to the political and economic aspects of Iraq's containment, because not all of them can be implemented unilaterally. Furthermore, they have unfortunate consequences on the humanitarian situation in Iraq, which especially concerns some members of the GCC. While America's basic goal should continue to be keeping Saddam's Iraq in a straitjacket, the United States may need to adjust the fit to ensure the straitjacket holds. There should thus be five corollaries to the basic containment policy, not all of which the Clinton administration has adequately stressed.

"First, the international community must credibly demonstrate its concern for the Iraqi people even if their own ruler does not. Sanctions against Iraq continue to be necessary, but the United States and others should try to mitigate the sanctions' effects on ordinary Iraqis. The offer to permit Iraq to sell some oil and use the proceeds to alleviate its humanitarian problems has been on the table since the end of the Gulf War and remains a good idea. Saddam's recent willingness to accept stringent conditions on the disbursement of the funds from such oil sales has led to the deal enshrined in U.N. Security Council Resolution 986, which was designed to address this problem. If it becomes necessary or appropriate to ease Iraq's economic containment, the sanctions should be suspended rather than lifted completely, so that the international community can continuously them should unacceptable Iraqi behavior resume."

"Second, the United States should reassure Iraqis and their neighbors that while America continues to seek political relief for the Iraqi people, it is committed to the integrity of the Iraqi state. The ultimate goal of U.S. policy should be an Iraq that retains its existing borders and that at some point after Saddam has left the scene can take its rightful place as a legitimate member of the international community. Any doubts about this should be dispelled."

"Third, the United States should consult more closely with Turkey on areas of common interest. Turkey's continued support for U.S. policy in northern Iraq is crucial, and to secure it Washington should confer on how best to stabilize the situation in Iraqi Kurdistan. If the Turks are not comfortable with the status quo, including the arrangements for Operation Northern Watch, the United States should discuss with them what might be done to address their concerns."

"Fourth, the United States should send a clear signal that it is prepared to work with a post-Saddam Iraqi regime. That such a regime be benign and democratic is desirable but unlikely, so these factors should not be prerequisites for Iraq's reintegration into regional politics. American officials should state that they would be prepared to deal with any Iraqi regime--including one that emerged from within the military or the Baath Party--that is ready to fulfill Iraq's basic international obligations. To start relations from as clean a slate as possible, the United States should consult with interested parties about whether a post-Saddam regime should be offered relief from Iraq's enormous debts or Gulf War reparations. Such a gesture would be a sensible way to deal with the problems of Iraqi reconstruction, and it might even help induce aspiring successors to step forward."

"Fifth, if and when Saddam's regime crosses clearly drawn lines of appropriate behavior, particularly with regard to its weapons of mass destruction programs and its threats to other countries, the United States should punish it severely and effectively. For several years the United States has responded to Iraqi provocations with more bluster than action; the precedent of Operation Desert Storm shows the reverse is a better strategy. With his behavior incurring militarily insignificant penalties, Saddam may have concluded that he can continue to maneuver with relative impunity to heighten the contradictions in the allied coalition. This cat-and-mouse game should stop. There must be no doubt in anyone's mind that should Saddam try to break his containment through force, he will be punished. Accompanying such resolve must be a serious diplomatic effort to nurse the Gulf War coalition of European and Arab countries and Japan back to robust health. Forceful American action can and should build on multilateral consultation and a sense of purpose and necessity; it should not be conditioned on allied approval, but neither should the United States be perceived as ignoring allies' concerns or taking their support for granted."

The United States continues to be the world's largest trading nation in exports and imports of goods and services. Over the past decade, trade has become increasingly important for the U.S. economy with the ratio of trade to GDP in 1995 reaching 23.6 per cent, up from 17.2 per cent in 1985 and 20.6 per cent in 1990. A new WTO Secretariat report on the trade policies and practices of the United States notes that the U.S. invests less as a share of GDP than its industrial counterparts but with very efficient resource allocation, capital productivity is high, a factor that underpins U.S. prosperity.

The United States maintains energy sanctions against several countries, including Iran, Iraq, and Libya (an oil embargo against Serbia was lifted by President Clinton on October 12, 2000). Iraq remains under comprehensive sanctions imposed after its invasion of Kuwait in August 1990. Iran and Libya are affected by the Iran-Libya Sanctions Act (ILSA), passed unanimously by the U.S. Congress and signed into law by President Clinton in August 1996. ILSA imposes mandatory and discretionary sanctions on non-U.S. companies, which invest more than $20 million annually (lowered in August 1997 from $40 million) in the Iranian oil and gas sectors. The passage of ILSA was not the first U.S. sanction against Iran. In early 1995, President Clinton signed two Executive Orders, which prohibited U.S. companies and their foreign subsidiaries from conducting business with Iran. The Orders also banned any "contract for the financing of the development of petroleum resources located in Iran."

As a result of the Executive Orders (but prior to the enactment of ILSA), U.S.-based Sonoco was obligated to abrogate a $550-million contract to develop Iran's offshore Sirri A and E oil and gas fields. On August 19, 1997, President Clinton signed Executive Order 13059 reaffirming that virtually all trade and investment activities by U.S. citizens in Iran was prohibited. The threat of secondary U.S. sanctions has also deterred some multinationals from investing in Iran.

A consortium led by Total (France), Gazprom (Russia), and Petronas (Malaysia) to develop Iran's South Pars gas field was granted a waiver under Section 9(c) of ILSA by the United States in May 1998. U.S. Secretary of State Madeleine K. Albright noted that the United States had concluded that sanctions would not prevent this project from proceeding, and stated that the waiver was also granted because of the cooperation achieved between the United States, the EU, and Russia in accomplishing ILSA's primary objective of inhibiting Iran's ability to develop weapons of mass destruction and support of terrorism.

The United States modified its sanctions on April 28, 1999 to allow shipments of donated clothing, food and medicine for humanitarian reasons (trade in informational materials such as books and movies is also allowed). On the same day that the humanitarian exceptions were made, the U.S. denied Mobil's request to swap crude oil from Kazakhstan with Iran. Recently, on March 17, 2000, Secretary of State Madeleine K. Albright announced that the United States would ease sanctions on Iran, would seek to expand contacts between American and Iranian scholars, professionals, artists, athletes, and nongovernmental organizations, and would increase efforts with Iran aimed at eventually concluding a global settlement of outstanding legal claims between the countries.

Attempts by the United States to implement ILSA have run into opposition from a number of foreign governments. The European Union (EU) opposes the enforcement of ILSA sanctions on its members, and on November 22, 1996 passed resolution 2271 directing EU members to not comply with ILSA. On May 18, 1998, the EU and the U.S. reached an agreement on a package of measures to resolve the ILSA dispute at the EU/U.S. Summit in London, but the Summit deal is contingent upon acceptance by the U.S. Congress before full implementation may take place.

On April 5, 1999, following the Libyan handover of two suspects in the 1988 bombing of Pan Am flight 103 to stand trial before a Scottish Court in the Netherlands, the United States modified its Libya sanctions on April 28, 1999 to allow shipments of donated clothing, food and medicine for humanitarian reasons (trade in informational materials such as books and movies is also allowed). However, all other U.S. sanctions against Libya remain in force.

Relations between the United States and Libya have been extremely rocky for a long time. Beginning with arms embargos in the 1970s and ending recently with adoption of the Iran and Libya Sanctions Act of 1996, American policy toward Libya has been increasingly hostile. Libya has been referred to as the" geopolitical outlaw of the Mediterranean" and has been blasted by American bombers in 1986. When Libya tried to extend its territorial claims to 100 miles across the Gulf of Sidra, the United States conducted exercises within Libya's"Line of Death"and two American F-14's shot down two Libyan fighter planes who flew out to challenge the exercise.

The leader of Libya, Colonel Muarmmar Qadhafi has served as a lightning rod for American anger. Qadhafi's Libya has been accused of supporting terrorist organizations responsible for several attacks against American citizens, including the bombing of Pan Am 103 over Lockerbie, Scotland. Libya has also been under intense scrutiny for the production of chemical weapons. In the mid-1980s Libya attacked neighboring Chad and Sudan, and was accused of subverting nearly a dozen other African regimes.

As discussed in the previous section concerning Iran, the ILSA of 1996 imposes secondary boycotts against companies who do more than $20 million in business in Libya. Senator Ted Kennedy added Libya to the Iran Sanctions Bill at the behest of the families of the victims of the Pan Am 103 bombing.

In some ways, sanctions, as a part of the overall containment strategy, have moderated Libyan behavior. Threats and imposition of sanctions are credited with Libya's pull out from Chad, closure of the Rabta chemical facility, and withdrawal of an assassination team alleged to have entered the U.S. with the purpose of killing the American President. Recently the U.N. Security Council decided to extend the six-year old sanctions on Libya for their failure to extradite those accused of the Lockerbie bombing.

On the other hand, unilateral sanctions have no economic effect on Libya because items can be purchased from others or sold to others, and indeed American sanctions have caused more European investment to enter Libya. That sets the stage for the American dilemma regarding enforcement of ILSA.

Economic sanctions are the cornerstone of current U.S. policy toward Iran. The American government hopes that the economic cost to Iran is sufficient to induce a change in behavior. Our first task is to evaluate this policy to determine if it can be effective and, anticipating the answer to this question, to explain why it cannot.

The performance of the US economy is uninspiring in the early part of 2001. While industrial production recorded its fifth consecutive monthly decline in February 2001, retail sales fell again in February after the rebound in the previous two months. The IMF has recently revised its US growth forecast for 2001 from 3.2% to 1.7%. Despite signs of economic weaknesses, the US employment condition remains sound and inflation is well contained.

Major Economic Indicators

1999 2000 2001 Forecast

Population (million) 273 275 278

GDP (US$ billion) 9,255 9,963 n.a.

GDP per capita (US$) 33,900 36,200 n.a.

Real GDP growth (%) 4.2 5.0 1.7

Inflation (%) 2.7 3.4 2.2

Unemployment rate (%) 4.2 4.0 4.2

Exports (goods, US$ billion) 683 773 n.a.

Imports (goods, US$ billion) 1,030 1,222 n.a.