Conoco calls off oil-development deal with Iran


WASHINGTON -- A big U.S. oil company said yesterday that it would not proceed with its agreement to develop two large offshore oil fields for Iran after the White House announced that President Clinton would issue a directive barring all such transactions.

The step by Conoco Inc. ended an energy deal that would have been the first involving Iran and the United States since Washington severed relations with Tehran in 1980.

It came after eight days of debate within the administration about how and whether to block an agreement that top deputies to Clinton acknowledged was legal but said could undermine U.S. efforts to isolate Iran.

In announcing Mr. Clinton's decision yesterday morning to block such oil-development agreements, the White House said the president was trying to set an example for U.S. allies and also was trying to prevent Iran from accumulating wealth that could make it more dangerous to its neighbors.

"We need to send a clear and unequivocal message," said Michael D. McCurry, the White House spokesman. "There cannot be normal relations until Iran's unacceptable behavior changes."

One reason, perhaps, that Conoco misjudged the suitability of its Iranian deal was that the administration had been sending U.S. business a clear message: Join the age of "economic engagement," by helping the United States win over the souls of authoritarian regimes through greater access to U.S. capital and investment.

That was the case in China, North Korea and Vietnam. But in pursuing a policy of economic containment in Iran, one administration official said, "We draw the line in countries with policies that are beyond the pale."

The administration was surprised by the deal between Conoco and Iran, which some analysts valued at $1 billion, and its initial complaints were dismissed by the company, a Houston-based subsidiary of E.I. du Pont de Nemours & Co. Conoco emphasized that it was operating within the law.

But after senior administration officials objected strongly in meetings with top Conoco executives, the company's chief executive, Constantine Nicandros, indicated that he would end the controversial deal if the president made clear that it violated U.S. policy, aides to Mr. Clinton said yesterday.

At the same time, three powerful members of the Du Pont board, members of the Bronfman family, had been expected to vote against the accord, and a statement issued by Conoco yesterday suggested that their opposition played an important role in the company's decision.

Edgar M. Bronfman, Charles R. Bronfman and Edgar Bronfman Jr. are top officers of Seagram Co., which owns 24.2 percent of Du Pont. They also are active in Jewish organizations that support the administration's policy on Iran.

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