Global Policy Forum

By Peter Behr and Alan Sipress

An influential energy task force headed by Vice President Cheney has broached the possibility of lifting some economic sanctions against Iran, Libya and Iraq as part of a plan to increase America's oil supply. According to a draft of the task force report, the United States should review the sanctions against the three countries because of the importance of their oil production to meeting domestic and global energy needs.

The April 10 draft acknowledges that sanctions can "advance" important national security and diplomatic goals. But it adds that United Nations sanctions on Iraq and U.S. restrictions on energy investments in Libya and Iran "affect some of the most important existing and prospective petroleum producing countries in the world." "The administration will initiate a comprehensive sanctions review and seek to engage the Congress in a partnership for sanctions reform," the draft said. The nation's energy security should be one of the priorities of U.S. domestic and foreign policy, according to a portion of the draft read to The Washington Post and confirmed by the White House.

With the administration already weighing how to restructure sanctions on Iraq, Iran and Libya, those recommendations provide the latest evidence of skepticism among some Bush officials about the effectiveness of this long-standing foreign policy tool. The task force text also offers a rare glimpse inside the workings of one of the administration's most significant deliberations.

White House officials, who have sought to keep the task force's work quiet, cautioned that the recommendations are not final. "There have been many drafts of the energy proposals and many changes made," said Juleanna Glover Weiss, a spokeswoman for Cheney. "We're still quite a while out from a final product to be presented to the president. Until the president makes final decisions on that product, everything is subject to change."

The energy report, due in the next few weeks, will be about 100 pages and divided into 10 chapters, administration officials say. The report will be heavily focused on increased energy production but will also deal with environmental concerns and promote energy efficiency and renewable fuels.

The task force's draft recommendations come amid a brewing battle over whether Congress should reauthorize the Iran-Libya Sanctions Act for five more years when it expires in August. The oil industry is pressing for the investment restrictions to be eased, and the leading pro-Israel lobby and its allies are pushing to keep them in place. The administration has not said whether it will support the reauthorization of ILSA but has signaled that it has some reservations about the existing restrictions. The measure, enacted in 1996, is designed to punish Iran and Libya for sponsoring terrorism by penalizing foreign companies that invest in their energy industries. American companies were already banned from involvement.

But confronting stiff opposition from European countries, whose energy firms faced U.S. penalties, the Clinton administration later issued a waiver allowing some investment in the Iranian energy industry to proceed.

In recent weeks, Sens. Gordon Smith (R-Ore.) and Charles E. Schumer (D-N.Y.) have sought to build support for renewing ILSA for five more years with only minor modifications. Capitol Hill staffers said the measure would continue to ban foreign firms from investing more than $20 million in the Iranian energy industry while possibly lowering the existing ceiling on investments in Libya from the current level of $40 million down to $20 million.

A cross-section of the energy industry, including oil companies such as Exxon Mobil Corp. and production services companies such as Halliburton, have been pressing Congress and administration policy-makers under Bush and former president Bill Clinton to give them access to Libya, Iran and Iraq. Cheney was chief executive of Halliburton before Bush tapped him to be his running mate last year.

Iran, Iraq and Libya exported 6 million barrels a day last year, about 8 percent of world total oil demand. Iraq probably has about 10 percent of world oil reserves, second only to Saudi Arabia's 25 percent share, energy analysts estimate, and Iran's reserves are close in size to Iraq's. Libya has about 4 percent of world reserves.

A proposal to increase energy exploration and production in Libya, Iraq and Iran would seem to run counter to the administration's concerns about foreign dependence. But a key conclusion of the energy task force will be the need to diversify the nation's sources of energy supplies as widely as possible, administration officials have said. "Growing levels of conventional and heavy oil production and exports from the western hemisphere, the Caspian and Africa are important factors that can lessen the impact of a supply disruption on the U.S. and world economies," the task force draft said. Secretary of State Colin L. Powell has taken the lead in promoting a plan to ease the economic embargo on Iraq while tightening restrictions on imports and oil revenue that can be used to develop its military.

Under the U.N. Security Council's oil-for-food program, Iraq is allowed to export petroleum -- much of which ultimately is sold in the United States. But the profits must be placed in a U.N. account, which can be used to pay for food, medicine and other humanitarian goods. Administration officials plan to craft a new program of sanctions on Iraq by June, when the restrictions come up before the Security Council for a review.