One of the most logical, inexpensive and commercially viable export routes for Caspian region energy resources is a pipeline through Iran. However, the United States does not support building an Iranian pipeline. In fact, the United States’ policies and unilateral economic sanctions against Iran are the biggest constraints in the development of the Caspian’s vast energy resources.

While the region is one of the most commercially important areas of the Newly Independent States because of its oil and natural gas reserves, American companies have not been able to fully participate in the development of this region because of the United States’ sanctions against Iran.

Most governments, including the U.S. government, support building an East-West, Baku-Ceyhan pipeline. This route, however, is not commercially viable. It is one of the longest and most expensive routes, and with today’s low oil prices, revenues would not justify expenses. Until Caspian region oil exports grow significantly, this project (although it has already been approved) will not move forward. The private sector will not risk investment in Caspian oil and gas development unless there are commercially viable transportation routes for getting these resources to world markets.

Among the other pipeline options, the Iranian pipeline option makes the most sense. The Iranian route would be the cheapest and fastest to build, and because it avoids the Black Sea and the Bosphorous Straits, it presents far less environmental risk.

The United States’ sanctions prohibit American producers from engaging in any business activity with Iran. The sanctions were imposed because the United States views Iran as a sponsor of international terrorism and fears that Iran is trying to acquire nuclear weapons. In fact, however, U.S. companies have been hurt most by the sanctions because they have been denied the opportunity to invest in Iran and engage in other profitable arrangements, including swapping arrangements and contracts to use Iranian equipment. The U.S. sanctions have only given foreign firms the opportunity to profit where U.S. firms cannot. European companies in particular are investing in multibillion-dollar projects offered by the Iranian government and thereby undermining U.S. companies’ competitiveness, as well as the effectiveness of the sanctions.

Indeed, European firms have already claimed most of the Iranian market. Recently the French oil company Total announced a $2 billion contract to develop Iran's offshore gas fields. The Asian firm Petrona has also signed a multimillion dollar project. And a consortium of French, Italian and Iranian oil companies have signed a $998 million, 10-year contract to redevelop a giant oil field in Iran. Elf Petroleum Iran, a subsidiary of the French Oil Company Elf Aquitaine will be the lead partner.

Because Iran is a major player in the Caspian region, U.S. policy on Iran contradicts its interests. Iran has close cultural and religious links to the Caspian states, and it will play an important and unique role in the development of Caspian resources. U.S. policy won’t change this reality. And it will be impossible for the United States to participate in Caspian region development in any meaningful way unless it changes its relationship with Iran.

Congressional Testimony

Statement of Bill Slick, Chairman of U.S. Oil Company
& President of the Coalition for Caspian Energy Development

Testimony before the House Subcommittee on
International Relations and Trade

Good afternoon. Thank you Mr. Chairman and members of the Subcommittee for giving me this opportunity to speak before you today. I am Bill Slick, Chairman of U.S. Oil Company and President of the Coalition for Caspian Energy Development or CCED. I am here today on behalf of U.S. Oil Company and CCED to address our concerns over U.S. policy towards Iran and to ask for support of legislation that will reform current sanctions against Iran.

Currently, U.S. companies are prohibited from engaging in any business activities with Iran due to the United States’ unilateral economic sanctions against this country. While the U.S. Administration supports free trade, it has banned all U.S. trade with Iran, an action which has cut U.S. oil companies out of several deals in the Caspian Sea oil fields and continues to prohibit them from participating in profitable projects. While Iran is opening up to foreign investments, American companies are left sitting on the sidelines.

More importantly, the Iranian sanctions have compromised U.S. companies' ability to compete in the strategically important and resource-rich Caspian region. Because Iran is an important player in Caspian resource development and controls a large amount of the oil extraction and refinery equipment in the region, foreign companies that are not restricted from doing business with that country have numerous options available to them whereas U.S. companies are severely limited.

We cannot ignore Iran. If the United States wants to participate in developing Caspian region economies, it must recognize that Iran is an important player in the region. The isolation of Iran cannot and should not continue. The United States would benefit greatly from building a more open and constructive relationship with Iran.

U.S. Oil is very interested in engaging in Caspian region pipeline development. The best pipeline option, however, is the Iranian pipeline option. Advantages of the Iranian pipeline include:

• It is commercially viable.
• It requires less investment in comparison to other pipeline options.
• It can be constructed faster than other pipeline options.
• It offers the best solution for near-term oil export.
• It avoids unstable political regions.
• It avoids the Black Sea and Bosphorus Straits where the risk of a disastrous oil spill is greatest.

The democratic election of President Khatami should be considered a positive development in Iran. The United States should respond by supporting the Iranian pipeline and granting American companies permission to invest in the Iranian oil and gas sector. Such a step would serve to open up the possibility of renewed U.S.-Iran relations. In fact, companies like U.S. Oil can act as a vehicle for changing the hostile relations between the two countries.

While U.S. Oil agrees with the United States’ policy goals, unilateral sanctions are not the right tool for advancing these goals. Sanctions don't work; they don't change the behavior of a country, its policies or leaders. They do, however, punish ordinary citizens and prohibit companies from being part of great investment opportunities. Only the United States continues to refuse to do business with Iran. So the sanctions are only creating barriers for U.S. companies.

The United States’ policy toward Iran contradicts other U.S. policy goals. While the United State government wants to help the Central Asian republics grow and prosper, especially in the development of the area’s large oil and gas resources, U.S. sanctions against Iran are creating roadblocks to U.S. companies involvement of such development.

As we near the end of the 20^th century, barriers to trade and investment are falling, and countries, which have long been closed to foreign trade and investment, are now opening again. This is a great opportunity for the United States to rethink its current policy and open the door to Iran.

We urge the Subcommittee to pass a resolution in support of the Coalition for Caspian Energy Development’s campaign to lift the U.S. economic sanctions against Iran.

On behalf of the Coalition for Caspian Energy Development, I thank you for your attention.

After my colleagues have testified, we welcome questions from the Subcommittee.

Thank you.

Dear potential coalition member (a major U.S. oil company):

As the president of a corporation that is already involved in efforts to develop Caspian region energy resources, you are fully aware that there is still no good route for transporting these resources to world markets. I’m sure you agree that one of the most commercially viable and logical routes is the Iranian route. However, due to the U.S. economic sanctions against Iran, U.S. companies are prohibited from participating in developing and using this route. While countries of the Caspian region and our European allies are fully supportive of this route, and in fact are already setting up deals with Iran to move the project forward, U.S. oil producers are forced to sit and watch from the sidelines.

U.S. Oil is aware of the reasons behind the United States’ policies toward Iran. However, we think that economic sanctions are the wrong tool for addressing issues of terrorism and the development of weapons of mass destruction. The United States’ sanctions are not achieving these goals and, at the same time, the sanctions are causing U.S. companies to lose business, which means American workers are losing jobs too. Constructive engagement that allows bilateral trade and shared business investments would be a much more effective way to influence the Iranian government. Trade generates economic benefits to both countries.

U.S. Oil is forming both a Coalition for Caspian Energy Development in the United States and an International Coalition for Caspian Region Economic Development that will be established in Kazakhstan. The primary objective of CCED is to put pressure on the U.S. Government to consider allowing U.S. business participation in building the pipeline through Iran. CCED’s long-term objective is to convince the U.S. government to pass legislation that recognize the need to lift the unilateral sanctions.

U.S. Oil would like your company to joint the coalition and, by doing so, support our objectives and actions towards achieving those objectives.

I look forward to your response and will contact you in a few days to answer any questions you may have.

Sincerely,

Bill Slick
Chairman, Chief Executive Officer

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