Iran: Halliburton Involvement May Be Part Of Larger Diplomatic Effort

By Andrew Tully

The involvement of the U.S. company Halliburton in a project to develop oil fields in Iran could be part of the larger effort to convince Iran to abandon any nuclear-weapons program it might have. That's the opinion of analysts looking at a new and controversial deal involving Halliburton and Iranian companies. U.S. law generally prohibits U.S. companies from operating in Iran, but exceptions are written into the law to allow such deals if they serve greater diplomatic ends. RFE/RL spoke to analysts to see what may be going on behind the scenes.

Washington, 11 January 2005 (RFE/RL) -- Details of the agreement are sketchy, but it likely involves a Halliburton subsidiary based outside of the United States and the Iranian companies Oriental Kish and Pars Oil and Gas.

Halliburton spokeswoman Wendy Hall yesterday appeared to distance the company from the deal. She was quoted as saying Oriental, not Halliburton, signed the main contract. Halliburton, in turn, would likely provide subcontracting services.

Such an arrangement would not necessarily contradict U.S. law. The United States has tough rules against companies doing business in Iran, which it accuses of sponsoring terrorism. But companies are permitted to deal through their subsidiaries as long as the work is kept separate from the parent company.

Analysts say the agreement may be more than just business and part of a larger diplomatic effort to convince Iran to abandon plans it may have to develop nuclear weapons.

Sean Murphy, a law professor at George Washington University, told RFE/RL that U.S. laws that prohibit firms from working in certain countries usually allow for exceptions to serve diplomatic ends. He said the United States may be using the Halliburton deal to send a positive signal to the Iranians.

"The way these sanctions regimes are set up, you ban a scope of activity, but then you give the executive branch the ability to carve out exceptions as needed -- typically on national security grounds. That makes sense, if you're talking about certain types of aid that might be provided or if you're trying to do 'carrots and sticks.' That is the way that statute is structured," Murphy said.

The criticism has been especially keen because of Halliburton's links to the administration of President George W. Bush.

While there has been no official confirmation of this, Murphy said Halliburton or its subsidiary could serve as a conduit for back-channel contacts between Washington and Tehran.

"There's probably some kind of 'dance' going on here relating to the nuclear issue. The Europeans, as you know, have been at the forefront of negotiating that with Iran. The U.S. has been pretty hostile generally and has been more interested in wielding the stick rather than the carrot. But there's all kinds of discussions, I am sure, going on behind closed doors -- you know, the Europeans, the U.S., and Iranians," Murphy said.

Halliburton's reluctance to be identified with the project is understandable. The company has been criticized in the past for doing business in Iran. In addition, it is under investigation for allegedly paying bribes in Nigeria and overcharging the U.S. military in Iraq.

The criticism has been especially keen because of the company's links to the administration of President George W. Bush. Bush's vice president, Dick Cheney, served as Halliburton's chief executive until 1999, when he became Bush's running mate.

Some say those links make the company an especially bad choice to serve as any kind of informal conduit of U.S. policy.

Judith Kipper, the director of the Middle East Forum and Energy Security Group at the U.S. Council on Foreign Relations, points to Halliburton's history of wrongdoing. She said Cheney's former affiliation with Halliburton makes matters worse because it raises the question of who ultimately will benefit. Kipper recalled that more than 30 years ago, the United States and China made their first diplomatic overtures by permitting their table-tennis teams to compete against each other. This famously became known as "ping-pong" diplomacy.

"I don't like the idea that it would be Halliburton. If [the Bush administration] wants to do something like ping-pong diplomacy, I'm all for it because I think we need to engage with Iran. But I have -- would have -- a lot of questions if the company that is going to profit from this be used somehow as a diplomatic liaison. This is probably not going to help the United States. It's going to hurt, because it will be criticized," Kipper said.

Voices within Iran are already using the agreement as a way of criticizing U.S. policy. The Tehran-based daily "Hamshahri" wrote that the deal proves U.S. companies don't respect their own laws and that U.S. sanctions are not effective.