U.S. Losing Support in ‘Containing’ Iraq and Iran

After a tough week for American diplomacy, the United States faces a forbidding challenge in holding off an international onslaught that threatens its efforts to contain Iran and Iraq--one driven largely by money and a quest to depose the U.S. as the dominant influence in the oil-rich Persian Gulf.

Trying to shore up their “dual containment” policy of isolating both Iraq and Iran, U.S. officials set out to twist allies’ arms last week. In a strong cable to Moscow and two frank phone calls to Paris, Secretary of State Madeleine Albright pressured her Russian and French counterparts to back tougher sanctions against Iraq. Baghdad, she warned, cooperates on dismantling its germ warfare program, missiles and nuclear weapons only when the world stands firm--and together.

At the same time, senior White House, CIA, State Department and Treasury officials scrambled to respond to a baldly defiant deal that a French-led consortium has made with Iran, another U.S. nemesis in the Persian Gulf. Ignoring U.S. pressure, the French, Russian and Malaysian firms have agreed to join in a $2-billion gas field development project, the largest foreign investment in Iran since its 1979 revolution.

But the U.S. efforts failed, and worse: The setbacks raise the prospect of more ominous failures to come. Critics say America’s long-standing Gulf strategy is in tatters.

“The U.S. hard-line position on Iraq is no longer acceptable to the international community,” said Judith Kipper of the Center for Strategic and International Studies, a Washington think tank. “And reassessment of Iran policy is long overdue, because the U.S. stands alone. Sanctions now hurt the United States as well as Iran.”

But isolating Iraq and Iran, U.S. officials argue, clearly symbolizes the American approach to central issues of the post-Cold War world: terrorism, regional aggressors and weapons of mass destruction. Washington has opted for the moral high ground--whatever the cost.

“There’s no question that sustaining over this many years the most comprehensive economic sanctions in history gets harder and harder,” said State Department spokesman James P. Rubin. “Memories of the Gulf War begin to fade. Yet we’re still successfully restraining a dictator in Iraq who developed dangerous weapons and invaded a neighbor.”

But in a world where economic strength is shouldering aside military might as the barometer of power, Washington sometimes seems out of step.

“The United States wants to stand for what is right, which is admirable,” said a leading European envoy. “But in today’s world, that is not always what is either most effective or realistic.”

On Friday, as the U.S. government began making a list of Iraqi officials obstructing U.N. disarmament efforts--for the purpose of seeking individual U.N. sanctions against them next April--France, Russia and a host of other allies probed the potential for commercial deals with Baghdad and Tehran.

Last week, Iraq disclosed negotiations on joint oil or gas production with 40 foreign companies from 20 countries, including Australia, Canada, Italy and Spain. Baghdad signed deals earlier this year with Russian and Chinese companies to develop two oil fields. Two other deals are near with France’s Total and Elf Aquitaine oil companies.

The talks represent the first major opportunities for outside investment in Iraqi oil fields since Baghdad nationalized its industry in 1972. Over the next 10 years, about $30 billion will be needed to develop new fields that could triple Iraq’s production to 6 million barrels a day, Iraqi officials say. Other investors are being sought to exploit nearly 4 billion cubic yards of natural gas.

No deal can legally start until U.N. sanctions are lifted, which first requires--at a minimum--that the United Nations certify that Iraq has dismantled all weapons of mass destruction. But by the time that step is taken, American businesses interested in Iraq could be out in the cold, and the price could be steep. Between the restoration of U.S.-Iraq relations in 1983 and Iraq’s invasion of Kuwait in 1990, Iraq spent several billion dollars in the American marketplace.

With Iran, Washington faces a dilemma on the gas deal signed this month. A law passed by Congress in 1996 mandates sanctions on any foreign company that invests $40 million or more in the energy industries of Iran or Libya.

While the U.S. has not made a decision on sanctions, any punishment could in turn hurt Russia’s fragile economy, which the West has an interest in stabilizing. Gazprom, a partner in the deal with France’s Total and Malaysia’s Petronas oil company, is Russia’s most powerful corporation and was once run by Prime Minister Viktor S. Chernomyrdin--so there could be political spillover as well.

As Stuart E. Eizenstat, undersecretary of state for economic affairs, conceded Friday, sanctions are often fraught with such difficulties.

“Other countries will from time to time have interests and priorities that conflict with ours, which can create great complexities in implementing an appropriate sanctions policy,” he said.

But Eizenstat and others indicated that Washington will not back down. “There’s no country whose behavior is more threatening to us and Western security interests than Iran. It’s critical to put the dangers of Iran’s efforts to acquire weapons of mass destruction at the very top of our agenda,” Eizenstat said.

Yet increasingly, the U.S. is standing alone, and the long-eroding Gulf strategy is in danger of eventual collapse.

“In order to get unanimity, the lowest common denominator wins,” James A. Placke, a former U.S. diplomat in Iraq, said of the United States’ U.N. efforts. “What has happened over the past two years is that the lowest common denominator has dropped significantly.”

Is the cost worth the price?

Neither the White House nor Congress is seriously bothered that the government’s decision two years ago barring Conoco from developing Iranian oil fields ultimately cost thousands of potential jobs and tens of millions of dollars in business.

Yet in the face of the eroding policy, a debate is growing among American foreign policy experts.

“We have let our position get frozen,” said Richard Murphy, former assistant secretary of State for Near East affairs. “We haven’t had support on Iran internationally, and what we had on Iraq has dissipated.

“We should be big enough people to come up with some means of dealing with both countries--for example, to loosen the ties to allow more humanitarian goods into Iraq while still constraining the military,” he said. “It’s time to be creative in developing new approaches to these old problems.”

Times staff writer Craig Turner at the United Nations contributed to this report.