NEWS RELEASES
CANADA OBJECTS TO IRAN/LIBYA SANCTIONS LEGISLATION
August 6, 1996 No. 137
CANADA OBJECTS TO IRAN/LIBYA SANCTIONS LEGISLATION
Foreign Affairs Minister Lloyd Axworthy and Minister for International Trade Art
Eggleton have expressed their strong objection to the U.S. Iran/Libya sanctions
legislation signed yesterday by President Clinton. Canada is concerned that the
Act allows the United States to take unilateral trade measures against third
parties trading or investing in Iran or Libya, including, potentially, Canadian
companies.
"While we share the concerns of the United States and other countries on
international terrorism and place a high priority on finding ways to combat it,
this is not the way to proceed," said Mr. Axworthy. "As with the Helms-Burton
law, Canada continues to object to unilateral measures that have extraterritorial
effects; this legislation is an inappropriate response to U.S. concerns."
"The extraterritorial effects of this latest act represent once again an attempt
by the United States to dictate trade policy to its allies," said Mr. Eggleton.
"Canada will continue to defend its interests against the extraterritorial
application of such legislation."
The Ministers indicated that Canada would be consulting on this matter with the
European Union and other allies to determine how best to address the
extraterritorial impact of the Act.
Canada takes strict measures through export controls to ensure that its trade will
not contribute to the military capabilities, including any possible nuclear,
biological or chemical weapons capabilities, of Iran or Libya.
Canada fully supports United Nations sanctions against Libya. "Trade sanctions
are most effective when carried out through a multilateral forum," said Mr.
Axworthy.
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A backgrounder is attached.
For further information, media representatives may contact:
Catherine Lappe Nicole Bourget
Director of Communications Director of Communications
Office of the Minister of Office of the Minister for
Foreign Affairs International Trade
(613) 995-1851 (613) 996-6271
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
This document is also available on the Department's Internet site:
http://www.dfait-maeci.gc.ca
Backgrounder
U.S. IRAN AND LIBYA SANCTIONS ACT OF 1996
Background
On July 23, the U.S. Congress unanimously adopted the "Iran and Libya Sanctions
Act of 1996." The Act is an amended version of a bill first introduced in May
1995 by Senator Alfonse D'Amato (Republican-N.Y.). Senator Edward Kennedy
(Democrat-Mass.) introduced an amendment that toughened the sanctions against
Libya -- in effect making mandatory some of the proposed sanctions that were
previously optional. The President signed the bill into law on August 5.
Intention of Legislation
The intention of the legislation is to dissuade companies from making significant
investments in the Iranian and Libyan oil and gas sectors. U.S. companies are
already prohibited from trading with, and investing in, Iran by an Executive Order
passed in May 1995. Libya is currently the subject of UN sanctions. The oil and
gas sectors have been targeted because they are the economic "lifeblood" of those
countries. The stated policy of the Act is:
For Iran: to "deny the ability to support acts of international terrorism and to
fund the development and acquisition of weapons of mass destruction and the means
to deliver them."
For Libya: to "seek full compliance by Libya with its obligations under
Resolutions 731, 748, and 883 of the Security Council of the United Nations,
including ending all support for acts of international terrorism and efforts to
develop or acquire weapons of mass destruction."
(The above resolutions deal with Libya's failure to co-operate with a UN
investigation of the destruction of Pan Am flight 103 and with related sanctions
placed on Libya.)
Activities that Will Trigger Sanctions
The following activities will trigger sanctions under the Act:
For Iran: New investments in any 12-month period totalling more than
US$40 million (or any combination of investments of at least US$10 million each
that equals or exceeds US$40 million) that directly and significantly contribute
to Iran's ability to develop its oil and gas resources.
For Libya: New investments in any 12-month period totalling more than
US$40 million (or any combination of investments of at least US$10 million each
that equals or exceeds US$40 million) that contribute to Libya's ability to
develop its oil and gas resources.
Exports of goods and technology that are prohibited by UN resolutions and would
(a) contribute to Libya's ability to acquire nuclear, chemical or biological
weapons, (b) contribute to Libya's ability to develop its oil and gas resources or
(c) contribute to Libya's aviation capabilities.
Type of Sanctions to be Imposed
If the President determines that a company or person has knowingly violated the
Act on or after the date of enactment, he must impose at least two of the
following sanctions:
denial of Export-Import Bank assistance for exports;
denial of U.S. export licences;
prohibitions on U.S. financial institutions providing major loans or credits to a
sanctioned person or company;
for financial institutions, the denial of the right to serve as an agent of the
U.S. government, repository of its funds, or as a primary dealer of its debt
instruments;
denial of access to U.S. government procurement contracts where this is not
inconsistent with World Trade Organization (WTO) obligations;
for companies, restriction of their exports to the U.S.
Companies (including parents, subsidiaries or successor entities) with knowledge
of prohibited activities would also be subject to sanctions. The legislation does
not apply to contracts entered into before the date of enactment. The definition
of investment does not include loans or financing through debt instruments.
Presidential Discretion
The President has considerable discretion in administering the Act:
The President makes the initial determination that a company has knowingly
violated the Act.
The President can waive sanctions if he determines it is in the national interest
of the United States. He could use this waiver to avoid violating international
trade obligations.
The Act urges the President to conduct multilateral negotiations for sanctions
against Iran; after a year the President will determine whether negotiations have
been successful in achieving the objectives of the Act and will report back to
Congress.
The President may remove the nationals of any country or countries from the Act's
provisions if the country "has agreed to undertake substantial measures, including
economic sanctions, that will inhibit Iran's efforts" to acquire weapons of mass
destruction and support international terrorism. If the company violating the Act
is non-American, the President may consult with that company's government before
imposing sanctions.
The President can also terminate sanctions upon a determination that the
triggering activities have ceased and will not be resumed.
Other Factors to be Considered in the Administration of the Act
Sanctions are not always automatic; for example, there are exceptions for goods
and services that are essential to U.S. national security.
Companies can ask the U.S. Secretary of State to indicate whether their proposed
activities would result in sanctions. Approved activities would not then be
subject to sanctions.
For Iran, the size of the investment that would trigger sanctions drops to
US$20 million a year for companies whose home countries the United States has
deemed have not made enough progress in implementing sanctions against Iran.
Duration of Sanctions
Sanctions remain in effect for up to two years, or until the President determines
and certifies to Congress that the person or company is no longer violating the
Act. Sanctions cannot be applied for less than one year.
The Act expires after five years.
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