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Europe Threatens Retaliation Over U.S. Sanctions on Libya, Iran

Prague, August 6 (RFE/RL) -- European nations today are threatening retaliation against a controversial new U.S. law that aims to tighten sanctions against Iran and Libya.

The law, signed yesterday by President Clinton, requires U.S. penalties be imposed against foreign firms that invest more than $40 million in the Iranian or Libyan energy sectors. U.S. firms already are banned from doing business in the countries, but none of America's allies have joined the embargo.

Clinton yesterday described Iran and Libya as "two of the most dangerous supporters of terrorism in the world." He said the new law asks America's allies to join in the embargo in order to deny finances that he says ultimately result in the funding of terrorist activities.

"You cannot do business with countries that practice commerce with you by day while funding or protecting the terrorists who kill you and your innocent civilians by night," Clinton told his European allies.

But criticism of the law from European Union countries, which receive 20 percent of their oil from Libya and Iran, was harsh and immediate. EU Trade Commissioner Sir Leon Brittan said that the law "establishes the unwelcome principle that one country can dictate the foreign policy of others."

Guenter Rexrodt, German economics minister, said the United States was taking the "wrong path." France said the EU would retaliate if Washington carries out the sanctions. Britain's Foreign Office said it could not accept U.S. pressure of this kind against its own allies.

Today, French and Irish officials said that the 15 EU nations are discussing possible countermeasures. The EU is expected to challenge the law at the World Trade Organization.

The European Commission, which serves as the EU's executive arm, already has drawn up retaliatory action against a recently passed U.S. law that tightens sanctions on Cuba's communist government.

European Commission members say that legislation could be approved by the national governments as soon as next month. If passed, the bill would allow European companies to sue for damages incurred because of U.S. sanctions against Cuba, Libya or Iran.

France is among the more aggressive European investors in Iran. The law signed by Clinton yesterday was first proposed last year after a French oil company, Total SA, signed a deal to develop oil fields in Iran. That deal had been arranged in the vacuum that was created when Clinton forced an American oil firm, Conoco Inc., to give up its plans to develop Iranian oil fields.

The new law requires Clinton to impose at least two sanctions from a list of seven options against foreign companies that violate the U.S. embargo. Among the relatively minor options are the denial of export financing from the U.S. Export-Import Bank, and the refusal to grant licenses for the export of U.S. goods.

More severe sanctions include banning U.S. bank loans of more than $10 million to companies that violate the embargo. Clinton could prevent European financial institutions from becoming primary dealers in U.S. government funds. He also could ban companies from selling goods to the U.S. government or bar all imports by those companies.

Notably, the law applies only to new investments--not those existing already, such as France's Total SA. Market analysts say Italy's state-owned Agip could be the first European firm confronted by Washington. Agip reportedly is exploring possible oil deals with Libya and Iran.

Jacques-David Spicer, an expert on European-Middle East relations at Paris University, says French authorities and other European officials have a "healthy fear" of Iran's potential for creating trouble within their countries.

Spicer says most European officials don't want to get involved in the U.S. embargo because they think it would result in more terrorist attacks within Europe.

More than four million Algerian and other North African Muslims live in France. They form the largest religious community in the country after the Catholics.

Last summer, Paris and other French cities were struck by a series of bombings which French officials said were instigated by the Muslim fundamentalist movement in Algeria. That movement blames France for its support of the Algerian military regime.

In the mid-1980s, assasinations and other terrorist attacks on Iranian exiles in France led to a temporary cut in diplomatic relations between Paris and Tehran. Iranian-backed groups were held responsible for many of those attacks.

Germany has been in the forefront of those resisting U.S. pressure to join sanctions against Iran and Libya. Chancellor Helmut Kohl's government insists that "isolating the nations would merely exacerbate the danger."

But Clinton, who is in the midst of a re-election campaign, is under pressure to appear strong in the face of a series of apparent terrorist attacks.

Incidents in recent weeks include the pipe bombing at Olympic Park in Atlanta, the unexplained explosion of TWA Flight 800 off the coast of New York, and a truck bomb explosion in Saudi Arabia that killed 19 U.S. military personnel.

Other attacks in the past two years that have pushed the terrorism issue to the forefront of this year's U.S. presidential campaign include the attack on the World Trade Center in New York City and the Oklahoma City federal building explosion that killed 168 people.

In a national security speech at George Washington University yesterday, Clinton compared the battle against terrorism to the fight against communism. He called terrorism "the enemy of our generation," saying that nobody is immune from attacks--whether riding a subway in Tokyo or a bus in Tel Aviv, whether window shopping in London or walking the streets in Moscow, whether serving with the military in Saudi Arabia or going to work in Oklahoma City.

Iranian deputy foreign minister Javad Zarif yesterday denied that Iran finances or shelters terrorists. Zarif said Tehran "categorically rejects the use of terrorism against innocent civilians, the use of terrorism as an instrument of policy or as an instrument of political pressure."