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Iran: U.S. Fails To Prevent World Bank Loans

For the first time in more than six years, the World Bank has approved a package of loans for Iran. The loans -- to improve sewage systems and improve health care for the poor -- are classic World Bank programs. But the U.S. opposed the loans, and worked hard to get its allies to vote against it. And yet, only two months ago, Washington announced an easing of trade restrictions with Iran. RFE/RL's Andrew F. Tully explores this contradictory U.S. policy.

Washington, 19 May 2000 (RFE/RF) -- Executive directors of the World Bank disregarded vehement U.S. opposition when they approved on Thursday two loans for Iran totaling $231 million.

The loans are emblematic of the World Bank's mission: alleviation of poverty. One loan -- for $145 million -- would improve sewage treatment in a poor neighborhood of the Iranian capital, Tehran. The other -- for $86.1 million -- would increase health-care resources for the poor in both urban and rural areas of Iran.

But the U.S. opposed the transaction, and worked diligently to get executive directors representing others to vote "no." For at least the past week, Secretary of State Madeleine Albright has been trying to persuade U.S. allies to vote against the loans. Canada and France quickly joined Washington's opposition to the transactions, but Britain support the loans because their focus is on fighting poverty.

The vote of the bank's 24 executive directors was 21 to 1, with Canada and France abstaining.

The U.S. had no choice but to vote against the loan. By law, it may not vote in favor of any World Bank loan to any country designated by the U.S. State Department as sponsoring terrorism. Iran is on that list, as are Iraq, Cuba, Libya, North Korea, Sudan, and Syria.

Washington also opposes the loans because of what it calls Iran's unfair, closed trial of 13 Iranian Jews on espionage charges. One of the defendants recently was shown on Iranian television making a public confession -- without his lawyer being present. Americans consider this an egregious abuse of the rights of the accused. U.S. officials say it would be inadvisable to support such loans to Iran while the trial is in progress.

The vote came two months after Albright announced a major trade overture to Iran. The U.S. allowed the import of some Iranian goods, including carpets and certain dried foods such as fruits and nuts. At the time, Albright said the administration wanted to recognize the growing number of moderates in the Majlis, Iran's parliament, and to show the Iranian people that the U.S. bears them no ill will.

James Phillips is a specialist in Middle Eastern affairs at the Heritage Foundation, a Washington-based think-tank. He acknowledges that the U.S. is sending contradictory messages to the leadership of Iran. But Phillips says the anomalous signal is the announcement in March that Washington was easing trade restrictions with that country.

"I think it's -- it was a mistake for the Clinton administration to ease trade restrictions on Iran before, because the Iranians continued to support terrorism. And I think the administration would be correct to oppose the World Bank loans to Iran now because that signal suggests to Iranian hard-liners that they can continue their terrorism with very few consequences."

He said a more useful tactic would be to maintain economic as well as political pressure on the government in Tehran.

"Paradoxically, the U.S. strengthens the moderates by maintaining the most rigid sanctions, because that strengthens the arguments of the moderates that Iran has to change its foreign policy, has to change its support of terrorism."

Now, Phillips says, the contradictory messages of the U.S. government are likely to confuse both the conservatives and the moderates in Iran.

Shahriar Afshar, president of the California-based Iranian Trade Association, disagrees. He says the World Bank loans are examples of humanitarianism, and that politics has no place in deciding whether the loans were to be made. In fact, he sees no difference between these transactions and the United Nations' "oil for food" program. This allows the government in Baghdad, Iraq, to sell oil on the open markets as long as it directs all profits to feed Iraq's poor.

"You can politicize it all you want. This is strictly about improving the sewage infrastructure of a major megalopolis, which is Tehran, and the second loan is about helping -- almost planned parenthood and health-care development for children in Iran. I mean, if we have an oil-for-food program in Iraq, what possible reason could we have to oppose loans to help Iran deal with those issues domestically?"

After the vote of the World Bank's Executive Board, Bank President James Wolfensohn issued a mixed message of his own. He said the members recognized that "economic and human needs underpin the approval of these loans," as he put it. But Wolfensohn also injected a bit of politics into his statement: He also said the board supports the reform policies of Iranian President Mohammad Khatami.