Senators Warn Against Sale of Libyan Oilfields to German Company

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Jesse Helms and Joe Biden don't agree on much, but the Republican chairman and the ranking Democrat of the Senate Foreign Relations Committee had similar messages for the German foreign minister this week. TIME has learned that in separate, private meetings in Washington with Joschka Fischer, Germany's top diplomat, both Helms and Biden warned that a major German oil company is negotiating to acquire huge oil deposits in Libya controlled by U.S. companies. Such a purchase, the senators cautioned, could harm U.S.-German relations by triggering sanctions under the Iran-Libya Sanctions Act.

The law, passed by Congress in 1996, threatens foreign companies with sanctions if they invest more than $20 million in a single year in oil and gas projects barred to U.S. firms through unilateral U.S. sanctions. The bipartisan warning from Helms and Biden is likely to raise the profile of the Libya issue at a time when the Bush administration is increasingly concerned with the high cost of oil and energy.

TIME has learned that both Helms and Biden cited reports that Wintershall, an oil subsidiary of the giant German chemical conglomerate BASF, is currently in talks with the Libyan government about properties of the Oasis Partners, a U.S. consortium involving Marathon, Conoco and Amerada Hess. The holdings, which could be worth hundreds of millions of dollars, have not been operated by the Americans since 1986, when President Ronald Reagan imposed an executive order banning U.S. firms from doing business in the country.

Both senators apparently feel strongly about the Wintershall matter and informed Fischer that while a deal with Libya might not be illegal under German law, it could lead to sanctions under ILSA. German government sources in Washington confirmed the conversation, but pointed out that the European Union, of which Germany is the largest member, has no sanctions against Libya and does not recognize ILSA. They said it was likely the German government would inform Wintershall or its parent, BASF, of U.S. objections, but could do little more.

Representatives of BASF and Wintershall had no comment.

It's not clear which sanctions would be invoked under ILSA if the State Department determined that Wintershall had violated U.S. law. And President Bush can exercise his discretion on whether to impose penalties, which can include restrictions on imports and on U.S. government procurement from violators. Wintershall has a limited U.S. presence, but BASF has said it has more than $1.6 billion in North American revenues. Any penalties could also provoke retaliation by Germany, and a German challenge to the U.S. action before the World Trade Organization.

The possibility of a commercial dustup with Germany comes just as some in the Bush administration would like to weaken sanctions against Libya, Iran and other rogue states as a way of increasing American access to oil.

A leaked draft report late last month from President Bush's energy task force called for a full review of U.S. economic sanctions against Iran, Iraq and Libya — countries with some of the largest oil deposits in the world. An easing of sanctions could allow U.S. companies to operate in those countries at a time when the White House is trying to forge a new energy policy and increase tight supplies.

The leak immediately put President Bush on the defensive, and he quickly issued a statement denying that sanctions would be dropped any time soon. "I think it's important for the country to review all sanction policies to make sure they are effective," the President said. "But I have no intention as of this moment [of] taking sanctions off countries like Iran and Libya."

ILSA expires in August, and the oil industry, including members of the Oasis consortium involved in Libya, has been lobbying hard to persuade Congress and the administration that it should not be renewed. But renewal has been gaining political support in recent months, and a number of experts following the legislation expect Congress to move in that direction later this year. That, together with Bush's demands on Libya, makes it unlikely that American companies will be allowed to exploit Libyan oil any time soon. As a result, even if Wintershall fails to strike a deal, rights to exploit the rich Oasis oil concession could go to other non-U.S. competitors thought to be interested in the properties, including Royal Dutch Shell, British Petroleum, Total of France and other major companies.