US and Israel hold back from blocking Iran's WTO application

Iran's longstanding bid to join the World Trade Organization inched forward. In a politically significant move, the United States and Israel held back from blocking a five-year application by Tehran, senior diplomats said. "It's a very big step by the US," said a senior trade diplomat, familiar with the details of the behind-the-scenes diplomacy.
The US and Israel allowed Iran's application to be put on the agenda of WTO's ruling council. The Clinton administration, which considered Iran a sponsor of worldwide terrorism, blocked the same request from even reaching the WTO's General Council in September 1996 and in March 1999.
But Keith Rockwell, WTO spokesman, told this pattern was "shattered by events. Iran has made it to the agenda." In what diplomats here consider a symbolically important step linked to exploratory efforts by the Bush administration to try to formulate a new foreign and security policy toward Iran, Rita Hayes, the US trade representative, told delegates from 140 countries, "The US is currently internally reviewing this matter and is not in a position to discuss Iran's accession request at this time."

The move could strengthen prospects for Iranian reformers and the incumbent moderate Iranian leader Mohammed Khatami in the coming presidential election scheduled for June 8. A strong anti-Iran stance by the US in the WTO would have played right into the hands of the hard-line conservatives, analysts said.
"This (US) administration wants to differentiate itself from the past," said Shahram Chubin, director of research at the Geneva Centre for Security Policy. A number of ambassadors from countries friendly to the US said Hayes' statement was a holding operation as Washington was "not ready" to make a decision, for or against the Iranian request.
This US review of Iran is spearheaded by the US National Security Council in close consultation with other key agencies and is expected to take a few months to conclude, say informed sources. US Secretary of State Colin Powell, speaking on May 3 to the Senate Appropriations subcommittee, said: "I think that Iran is a nation that has enormous treasure, an educated population, has all the potential to enter the international marketplace, the international world and be successful."
But he also said, "...we will have to watch Iran, be willing to engage when they show that engagement makes some sense..." Powell also made it clear that the administration will contain and deter Iran from developing nuclear weapons and weapons of mass destruction.

Malaysia's ambassador to the global agency, Supperamaniam, speaking on behalf of the informal group of developing countries, an umbrella grouping of about 70 WTO members, said: "We agree the (Iran) item continues to be on the agenda and hope an appropriate response will be forthcoming by the next meeting so that normal procedures will be followed."
The European Union's WTO ambassador, Carlo Trojan, said: "We could have contemplated the establishment of a working party but we also recognize that the consensus rule is an important feature of the organization and we are ready to come back at the next occasion." Senior Western and developing country diplomats close to Washington say it was a "wise move by the Americans" not to block.
The same sources noted that for the time being the Iran-WTO issue is "heading in the right direction" and are hopeful that if a rapprochement in US-Iranian relations begins to emerge, entry talks on Iran could begin before the WTO trade summit take place in Doha, in November.
How the Iranian application evolves in the coming months, a WTO ambassador told United Press International will be largely determined how the 1996 Iran and Libya sanctions Act (ILSA) plays out in Congress, when it comes up for review in August, and how the political situation develops in Iran after the Presidential poll.
One diplomat close to developments said he expects the strongly pro Bush energy industry and agriculture lobbies to win the battle over the influential pro-Israel lobbies on the Iran issue, this time round, and the administration likely to opt for a policy of gradual scrapping of the restrictive economic sanctions but keep in place the proliferation technology transfer deterrents. But the same sources said all bets are-off if the hard-liners get the upper hand in Tehran.

Chubin, author of a recent study on Iran's strategic predicament, believes, Khatami who is favoured to win, to be more open and transparent on the terrorism issue, but just as nationalistic on the pursuit of weapons of mass destruction, and support for the Palestinians on the Arab-Israeli question. But experts highlight the struggle for power in Iran between the reformers and the hard-liners led by Iran's supreme leader Ayatollah Ali Khamenei, to be prolonged and hard.
With European, Japanese and Canadian companies lining up multi-billion investments in Iran's energy sector, US industry has intensified its calls for them to be removed. Iran is also a major importer of wheat and other primary commodities.
But trade diplomats are quick to point out that even if Iran is given the green light to begin WTO entry talks sometime in the second half of this year "it will be years" before these negotiations would be completed. The Hong Kong chairman of the general council, Stuart Harbinson, said members would revert to the Iran matter at their next meeting scheduled for July 18.
Chubin said membership in the WTO would change the country and enhance transparency of the economy. In particular the estimated 20-30 % of the economy controlled by foundations or "bonyades" that are financially controlled by the conservatives, lack financial accountability and are a major source of patronage and power.

These foundations consist of companies taken over after the 1979 revolution that were doing well at the time but which their owners fled with the demise of the Shah. With a highly volatile and oil and gas dependent economy and at least 65 % of Iran's 65.6 mm population under 25, the country needs to grow annually by 6 % to be able to provide jobs for 600,000 to 800,000 newcomers each year., Chubin said.
The latest UN Economic and Social survey for Asia and the Pacific projects the Iranian economy to grow in real terms by 5.5 % in 2001 and the inflation rate to remain in double digits at 17.4 %. According to WTO estimates, in 1999 Iran was ranked the world's 31st largest exporter with shipments valued $ 16.2 bn and 34th largest importer with $ 13.2 bn in merchandise goods.