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Iraq proposes to buy electricity from Iran, Syria

Effects of US sanctions on transactions unclear

WASHINGTON -- The US-appointed Iraqi interim government said late last month in a little-noticed statement that it would buy electricity from Syria and Iran, a deal that would probably enrich with US funds two countries that top the White House list of states that support terrorism.

The move reveals the limits of President Bush's war on terrorism, of which the invasion of Iraq was a key part, and of trade sanctions generally. With many details of the Iraqi reconstruction effort unclear, it's not certain whether the United States or its contractors in Iraq would be violating an embargo -- in place since the 1979 seizure of America's embassy in Tehran -- against doing business with Iran.

"There is a formal process" for doing business with Iran, said Edward Chow, an oil consultant who has had to navigate the complex US rules prohibiting companies from doing business with Iran. "If there's a dollar transaction that exceeds a certain threshold you have to get permission. It is not easy to evade those sanctions."

Spokesmen for the Bechtel Group, the San Francisco engineering giant that is restoring Iraq's energy grid as part of its $1 billion contract to rebuild the country, said it knows nothing of the proposed energy sale. An official at the Department of Treasury, which monitors countries under US embargo, said he was unaware of Iraqi efforts to buy electricity from its neighbors, but doubted the United States would veto such a transaction. "It could be we regard Iraq as a sovereign state that can purchase electricity from any country it likes," the treasury official said.

A spokesman for the Pentagon, which has authority over the US occupation of Iraq, referred questions to a counterpart in Baghdad, who could not be reached.

The United States imposed sanctions on Iran in 1979, and tightened them as part of the Iran-Libya Sanctions Act in 2001. A bill that would apply a similar embargo on Syria is working its way through Congress, largely because Syria continues to support the radical Lebanese group Hezbollah.

Removing Saddam Hussein, said Bush officials, would intimidate rogue regimes like Iran and Syria into obedience. Some administration hard-liners had even suggested Iran or Syria, or perhaps both, were next on the Pentagon's target list.

But with postwar Iraq in disarray, starting with an acute energy shortage that has destabilized the country, the White House has had to lower its sights. Rather than subduing Syria and Iran, the United States appears to be relying on them to help alleviate Iraq's crippling power failures.

"There is the hubris of the administration and there is the reality on the ground," said Peter Galbraith, a former US ambassador and senior advisor to the Senate Foreign Relations Committee. "And the reality is Iraq needs to have good relations with its neighbors."

Muwaffak Al Rubai, a member of Iraq's interim governing council, said on Aug. 27 that Iraq was negotiating with Syria, Iran, and Turkey for electricity to augment energy supplies rationed by the US occupation. Rubai said negotiations between Iraq and Turkey were well underway and were moving ahead with Syria. On Aug. 31, Tehran's state media announced Iran would supply electricity to the southern Iraqi cities of Mehran and Dehloran.

The moves come as US occupation officials are struggling to restore Iraq's energy output from 3,200 megawatts to its prewar level of 4,000 megawatts. The country has a maximum production capacity of 6,000 megawatts.

Iraq is technically bankrupt and is surviving on a drip feed of US funds and limited oil revenue. Analysts said the purchase of Iranian electricity, though an important step toward rapprochement between two countries that fought a devastating war in the 1980s, reflects inconsistent US policy. For instance, just last month Japan said it would buy Iranian oil after resisting weeks of pressure from the United States to respect its embargo on Tehran.

"What the heck are we doing jawboning the Japanese from signing an Iranian oil deal when Iraq is buying Iranian electricity?" said Chow.

Stephen J. Glain can be reached at glain@globe.com.

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