January 1999 Vol. 220 No. 1  Production

Perry A. Fischer,  Engineering Editor

Trading sanctions: Are they the only way?

Should you do business with countries accused of misconduct? Many of these nations are simply not democracies, such as Cuba. Others are accused of extreme acts, such as violent repression of dissent, torture, perpetuating slavery and trafficking in drugs, to name a few.

What should be done? Refusing to do business with these nations may offer psychological rewards, but also isolates them so that they will likely remain unchanged. Engage them in trade and you may have a chance at influencing their future behavior. It’s an old dilemma without a perfect solution.

From the USA Engage website. In recent years, the U.S. government has increased its use of unilateral trade sanctions, which now extend to 56 countries, with sanctions pending in another 21 countries, plus sanctions from 22 state and local governments. A recent federal court ruling found state- and local-government sanctions unconstitutional, and the case seems headed for the Supreme Court.

The Massachusetts Burma Law, which punishes companies that trade with Myanmar and want to do business with the state, infringes on the federal government’s power to regulate foreign affairs. "State interests, no matter how noble, do not trump the federal government’s exclusive foreign affairs power," Chief Judge Tauro wrote. The National Foreign Trade Council (NFTC) filed the Massachusetts case on behalf of its 580 members.

Unilateral federal sanctions cost the U.S. tens of billions of dollars in lost exports. The U.S. Department of Agriculture analyzed six selected countries and reported that sanctions cost $500 million in lost agricultural trade in 1996 alone.

At a recent NFTC forum, Chevron chairman Ken Derr, quoting the Institute for International Economics, said that federal sanctions cost the U.S. $15 to $20 billion in 1995, and urged that the Hamilton-Crane-Lugar Sanctions Reform Act be passed in 1999. NFTC President Frank Kittredge said that the business community does not disagree with the objectives of federal sanctions, the concern is that "Unilateral sanctions have a dramatically unsuccessful record of achieving their own objectives."

Cuban investment. Canada-based Sherritt International, the largest foreign investor in Cuba’s fledgling oil and gas sector, has increased its oil production in Cuba to more than 15,000 bpd, an increase of 9,000 bpd from early 1997 levels. In addition to oil and gas, Sherritt’s operations include nickel plus cobalt mining, power generation, communications, tourism, food processing and agriculture.

Sherritt’s President, Ian Delaney, has apparently chosen to ignore U.S. sanctions, most notably the Helms-Burton Act, and invest in the communist Caribbean island. His acts have made the Canadian company solid profits and powerful enemies.

PESA view. The following is a column from Petroleum Equipment Suppliers Association Chairman Doug Rock, reprinted from the PESA News with permission:

At last — some good news to report on sanctions.

Many times PESA chairmen have warned of pending trade sanctions legislation that threatens not only our industry, but American business in general. My predecessors have frequently urged our members to get involved in the debate on economic sanctions and let their legislators know the damage that sanctions do to American competitiveness and suspicions they cast on our reliability. For the past six years, PESA members have made their case to the Foreign Service Officers participating in our Energy Industry Training Session. However, it appeared that the U.S. government would never be able to kick the sanctions habit.

The formation of USA Engage provided American business with a focal point and a channel to magnify our voices to Congress. Where many individual efforts have failed to stop the flurry of sanctions in the past, a united front today may be succeeding in turning the ship in time to avoid the iceberg. Recent news articles indicate that the White House and Congress are realizing that, in many cases, sanctions are just not an effective way to make foreign policy. USA Engage reports that in recent months the U.S. has backed off imposing sanctions on Asian countries so they would be free to buy wheat, on Cuba to avoid a court fight with Canadian and European allies, and on China so American business could compete in that huge market.

Now that some headway is being made, USA Engage and the National Foreign Trade Council are responding to requests from members to evaluate members of Congress to determine where work remains to be done. They have released the 1998 Final Congressional Report Card for the current members of the House of Representatives.

The report grades legislators based on five key votes involving expanded trade and investment, as well as engagement with other countries. The five votes were: Religious Persecution Sanctions, China NTR, Vietnam Waiver, State and Local Sanctions and African Trade.

One point was given for each positive vote and an extra credit was earned by members who co-sponsored the Hamilton-Crane-Lugar Sanctions Reform Act. The point totals were then applied to the following grade scale: A55 or 6 points; B54 points; C52 or 3 points; D51 point; F50 points. The complete list can be obtained from the PESA office or by accessing the USA Engage website at: www.usaengage.org.

This is the final scorecard for 1998, and the results may surprise you. The value of this information is wasted if we do not let the legislators with poor grades know that American business can’t afford to let them fail.

It gives me great pleasure to finally report positive progress in this arena. At long last and thanks to the efforts of companies like yours, the U.S. government may finally be getting the message –Doug Rock

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company