Terms of ‘Engagement’: Lugar Anti-Sanctions Measure Could Preclude Important U.S. Security Policy Options

(Washington, D.C.): Just when it seemed that nothing further could be done to undermine
the use
made by the United States of economic sanctions — the Clinton Administration having already
dumbed down, circumvented, suspended or “fudged” the facts concerning the application of
legally mandated sanctions — along comes Senator Richard Lugar (R-IN) to
add the coup de
grâce: The Chairman of the Senate Agriculture Committee is seeking early Senate
action —
perhaps as an amendment to the Fiscal Year 1999 Defense Authorization bill currently under
consideration — on legislation which threatens to emasculate this necessary tool of
American
foreign policy.

The Lugar bill is S. 1413, entitled “The Enhancement of Trade, Security and Human
Rights
Through Sanctions Reform Act.” S. 1413 which enjoys the strong support of the Clinton
Administration and a number of U.S. businesses (volubly represented by a consortium known as
“USA Engage”) — would encumber the imposition of unilateral economic sanctions,
significantly impinging upon Congress’ present authority under the Constitution to
utilize
such measures in response to foreign policy crises or national security threats.

A Bill of Particulars

The Lugar legislation declares that its purpose would be to “revise the procedures in the
executive
branch and in Congress for considering economic sanctions and for reviewing those sanctions
already in place.” In fact, this substantially understates the impact S. 1413 would have. For the
following reasons, Sen. Lugar’s legislation would radically change the latitude that
currently
exists with regard to the imposition and implementation of unilateral economic
sanctions:

Item: The Lugar bill would require all future
sanctions to include presidential waiver
authority. This provision is particularly troubling given the Clinton Administration’s
propensity
for exercising waivers whenever they are provided so as to defeat the intent of Congress. For
instance, President Clinton recently waived economic sanctions against an energy consortium that
had contracted to invest some $2 billion in Iran’s energy sector — in direct violation of the
Iran-Libya Sanctions Act.⁽¹⁾ Other
examples include:

• The Administration’s efforts to exempt the European Union from the Helms-Burton
  (a.k.a.
  Libertad) Act, which seeks to protect American property in Cuba;

• Its reading of the requirements of the Iran-Iraq Non-Proliferation (or
  Gore-McCain) Act
  so narrowly as to avoid the imposition of sanctions on countries transferring missile technology
  (e.g., largely ignoring the transfer of Chinese C-802 cruise missiles to Iran href=”#N_2_”>⁽²⁾);

• Its refusal to sanction China after the U.S. intelligence community had concluded that the
  PRC
  transferred complete M-11 ballistic missiles to Pakistan in 1995 — in violation of Beijing’s
  pledge to abide by the guidelines of the Missile Technology Control Regime. href=”#N_3_”>⁽³⁾

Item: The Lugar bill requires a 60-day waiting period after an
executive branch
decision to impose sanctions is made. While Sen. Lugar argues that the 60-day waiting
period
gives the parties a “cooling off” period, there can be little doubt that the practical — and
intended
— effect of this requirement will be to create a nearly insurmountable obstacle to the imposition of
any sanctions the President believes should be imposed, unilaterally if necessary. After all,
prohibition on the immediate imposition of such sanctions by the United States further reduces the
likelihood that other nations will follow suit. That predictable response, in turn, only makes it
easier for opponents of sanctions in the American business community to argue against their
imposition by the United States.

Item: The Lugar bill imposes unwarranted red tape, primarily in the
form of myriad
reporting requirements, that would subject any sanctions initiative to the equivalent of
the death
of a 1,000 bureaucratic cuts. These include:

• A White House report detailing the justifications for sanctions together with an assessment
  of
  the likelihood of the action achieving its objective, as well as one on the “the impact of the
  proposed unilateral economic sanction on U.S. foreign policy, national security and
  humanitarian activities”;

• A report from the Secretary of Agriculture on the impact of such sanctions on American
  agricultural exports; and

• A report from the U.S. International Trade Commission (if an Executive action) or the
  Congressional Budget Office (if a legislative action) assessing the likely effects of the
  sanctions, including:

“the likely short-term and long-term costs of the proposed sanction to the United States
economy, including the potential impact on United States trade performance, employment, and
growth, the international reputation of the United States as a reliable supplier of products,
agricultural commodities, technology, and services, and the economic well-being and
international competitive position of United States industries, firms, workers, farmers, and
communities.” (Emphasis added.)

It is a safe bet that some, if not all, of these often speculative and unquantifiable assessments
will
take considerable time to prepare and evaluate. The time thus expended will not only have the
effect of further postponing the imposition of U.S. sanctions; it will — as noted above — reduce
their chances of being complemented by a multilateral sanctions regime and/or having a
therapeutic effect on the target state. Naturally, the time provided between the announcement
triggering a report and the imposition of any sanctions allows companies a window to create or
finalize contracts with the targeted nation or its companies. href=”#N_4_”>⁽⁴⁾

Item: The Lugar bill protects all contracts negotiated prior to the
imposition of sanctions.
The aforementioned opportunity is all the more problematic as the Lugar bill creates
an incentive
for companies to negotiate contracts before sanctions come into force. Everyone will wind up
having some sort of “contract” they will cite as grounds for exempting their trade transaction or
other undertaking from the effects of sanctions. As a result, perhaps more than any other this
provision, would likely pull any remaining teeth from unilateral U.S. economic sanctions.

Item: The Lugar bill requires the “sunsetting” of U.S. economic
sanctions. By limiting the
duration of U.S. sanctions and essentially requiring affirmative action to reimpose them every two
years, S. 1413 would make the maintenance of the sanctions needed to deny economic
life-support to well-entrenched, hostile regimes exceedingly difficult, if not impossible.

In short, were this bill to become law, targeted foreign governments and companies would
have
ample opportunity to implement counter-measures. These would be designed to insulate
themselves from the punitive effects of U.S. economic sanctions, increasing the chances that they
will be rendered impotent before they are implemented. Specifically, a foreign entity might divest
— or relocate — its U.S.-based assets in anticipation of well-telegraphed attempts to freeze those
assets. The targeted nations can be expected to use the time thus afforded to divide and conquer
— to block multilateral sanctions, negotiating new contracts and stockpiling commodities so as to
counteract whatever punitive effect American sanctions might have had.

What Debate?

In a letter to his colleagues dated 4 June, Sen. Lugar declared: “I believe it is time to engage
in a
serious debate on the merits of using unilateral economic sanctions to achieve foreign policy
goals.” In fact, serious debate seems to be just what the Senator from Indiana is trying
to
avoid by offering this bill as a floor amendment. S. 1413 has yet to go through markup
by
either the full Foreign Relations Committee or its Subcommittee on International Economic
Policy, Export and Trade Promotion. Its sponsor, however, seems intent on circumventing such
deliberations in favor of hasty action and minimal debate on the Senate floor — the
sort of
process antithetical to the Senate’s essential deliberative process, but conducive to the pressure
tactics of well-heeled special interests lobbies like “USA Engage.”

It is also worth noting the lengths to which Sen. Lugar has sought to assure his colleagues
that
this bill will not have an impact on existing sanctions. For example, in his 4 June letter, the
Senator states: “It does not preclude the use of sanctions nor would it affect existing
sanctions
already in force. Rather, it lays out a careful and deliberative process in both branches
for
considering new U.S. sanctions.” (Emphasis added.) The Senator goes on to
say, “The
amendment is prospective and would not affect existing sanctions.” (Emphasis in original.)

Yet, if S. 1413 will not directly affect existing sanctions, it will have a tremendous
impact on
the implementation of existing sanctions law. Section 7(a) reads: “IN
GENERAL- The
President may implement a unilateral economic sanction under any provision of
law not less than
60 days after announcing his intention to do so.” (Emphasis added.) The bill further provides in
Sec. 7(j) for the “INAPPLICABILITY OF OTHER PROVISIONS- This section
applies
notwithstanding any other provisions of law.” (Emphasis added.) In effect,
every sanctions
law on the books to date will have to conform to the implementation process provided for
in
S. 1413.

The Lugar Bill is Out of Step With the Will of Congress, U.S. Policy
Requirements

In recent days, both the Senate and the House of Representatives have affirmed the
importance they attach to the use of sanctions as a tool of U.S. foreign policy.
Legislators
clearly and properly recoiled from the Clinton Administration’s feckless response to the ongoing
transfer of missile-related technology from Russia to Iran. This overwhelming, bipartisan reaction
was expressed in the Iran Missile Proliferation Sanctions Act, which will
require the imposition
of sanctions if Russia continues to send such technology to Iran. Within the past few weeks, the
Senate adopted this legislation by a vote of 90-4. The House followed suit on 9 June by a vote of
392-22.

The William J. Casey Institute of the Center for Security Policy believes that economic
sanctions
— including unilateral ones — continue to be a vital instrument of U.S. foreign policy. In the
course of the special interests’ campaign to prevent the further use of such sanctions, the benefits
of the appropriate use of this instrument are being seriously understated and the costs greatly
exaggerated. In the latter regard, the testimony by Jan Paul Acton, Assistant Director of
the
Congressional Budget Office’s Natural Resources and Commerce Division, before the
House International Relations Committee on 3 June 1998 is instructive:

“To date, the cost of existing sanctions to the overall economy has been quite
modest. CBO’s review of research indicates that the net cost may be less than $1
billion annually of lost national income. That compares with $6.6 trillion of total
national income in 1997 …. The main reason that sanctions have had such a small effect
on the overall U.S. economy is that the principal targets of sanctions have been
countries with which the United States conducts relatively little trade.”

The Bottom Line

The argument for retaining sanctions as a foreign policy tool does not ignore the fact that,
where
possible other, more precisely targetable measures should be utilized. For example, the Center
has long argued that the removal from power of Saddam Hussein and Slobodan Milosevic and
their respective ruling cliques would be far preferable to the use of sanctions against Iraq and
Serbia.⁽⁵⁾ In addition, more emphasis should be given to the
use of carefully crafted financial
sanctions — including limiting access of offending foreign government-controlled entities to the
U.S. debt and equities markets. Such measures would affect an area of economic activity where
the United States enjoys a clearly dominant position. In addition, restrictions on the issuance of
bonds in the U.S. market, for example, would not jeopardize underlying American exports, jobs
or people-to-people contacts.

Were the United States to be denied the ability to use unilateral economic sanctions — the
practical effect of the Lugar bill, it would be left with just two, generally unsavory, options in
response to a host of foreign policy crises or national security threats: Take military action or
issue often ineffectual diplomatic warnings. The Senate should preserve the Congress’
ability
to exercise the third option of economic sanctions, by rejecting the Lugar legislation, while
working in less counterproductive ways to ensure that those sanctions that are imposed are
as effective as possible with as few unintended and undesirable impacts on American
businesses, farmers and other interests.

– 30 –

1. For a further discussion of this decision and economic sanctions as
a policy tool more
generally, see the Casey Institute’s Perspective entitled By
Eviscerating Economic Sanctions,
Clinton Leaves No Policy Choice Between Inaction and Military Strikes ( href=”index.jsp?section=papers&code=98-C_87″>No. 98-C 87, 19
May 1998).

2. It is interesting to note, that, according to Dr. Gary Milhollin,
director of the Wisconsin
Project on Nuclear Arms Control, “the C-802s were transferred by the…China Precision
Machinery Import-Export Corporation …. The parent of that company is China Aerospace.
[China Aerospace Corp. is the primary provider of space launch services in the PRC.] So, if
sanctions had been applied for the C-802s, then China Aerospace would have been denied the
right to launch U.S. satellites.”

3. In the course of a recent congressional hearing, Gordon Oehler,
former director of the CIA’s
Non-proliferation Center, was asked: Did “a preponderance of evidence indicate that M-11
missiles had been transferred by China?” He responded: “There is no question in my mind
whatsoever about this.” Had the U.S. government — as opposed to the intelligence community —
formally reached such a conclusion, however, it would have been barred, pursuant to the
Arms
Export Control Act, from selling satellites to China.

4. It should be noted that these requirements can be waived “in the
event that the President
determines that there exists a national emergency that requires the exercise of the waiver.”

5. See the Center’s Decision Briefs entitled
Clinton Legacy Watch # 26: The ‘Feckless-izing’ Of
U.S. Security Policy (No. 98-D 112, 16 June
1998) and Glaspie Redux In The Balkans: As
With Saddam, Appeasing — Rather Than Resisting — Milosevic Is A Formula For Wider War
(No. 98-D 45, 11 March 1998).