Envoy Warns U.S. of Trade War With Europe Over Iran, Libya Sanctions

The European Union is ready to launch a trade war against the United States if Congress enacts legislation, already passed by the Senate, to impose trade sanctions on foreign companies doing business with the Iranian or Libyan oil and gas industries, a French diplomat warned Wednesday.

“We have made it clear that we would not accept this situation without going to retaliatory action against American companies,” the diplomat told a small group of reporters. “There is a full range of retaliatory measures.”

The French diplomat, who declined to be identified, said the 15-nation European Union might also bring charges against the United States in the World Trade Organization.

A British diplomat agreed that Europe would have little choice but to retaliate if Washington imposed sanctions against European firms.

The bill, sponsored by Sen. Alfonse M. D’Amato (R-N.Y.), passed the Senate in December.

A similar measure was approved last month by the House International Relations Committee and is awaiting action on the House floor.

D’Amato said the legislation is intended to dry up sources of hard currency that Iran and Libya use to bankroll terrorists and, in Iran’s case, to pay for a clandestine nuclear weapons program.

He said it is time to give foreign companies an ultimatum: “You can trade with us or trade with them.”

President Clinton issued an executive order last May banning all trade with Iran. Trade with Libya has been outlawed for years.

However, D’Amato said the U.S. policy has been undercut by foreign firms that hurried to pick up the business American companies were required to drop.

“We must put real teeth in our policy of economically isolating and undermining a regime which has embarked on policies of terrorism and aggression that impose a clear and present danger to the vital security interests of our own nation,” D’Amato said.

Although the Clinton administration is unenthusiastic about the bill, it has not threatened a veto.

The French diplomat said Europeans object to the bill because it would impose a secondary boycott against companies doing business with Iran even if they are based in countries, such as France, which maintain normal diplomatic relations with Tehran.

“The principle of secondary boycott is not acceptable,” the diplomat said.

He pointedly added that the United States regularly scolds nations for acquiescing in the Arab boycott of Israel, which is also a secondary boycott.

The diplomat added that the European Union also objects to the Helms-Burton Act--signed into law by Clinton last month--imposing U.S. sanctions against companies doing business with Cuba.

But he said the Europeans are unlikely to risk a trade war over Cuba, an impoverished island nation that does not afford the same sort of lucrative trade as Iran and Libya.