The Caspian region is important to the United States because it is perhaps the last great untapped oil reserve in the world and it offers the U.S. a rare opportunity to diversify world oil supply. Therefore, the Caspian Sea region could be one of the most  important areas of U.S. foreign policy. However, In Washington DC, and especially in the U.S. Congress, foreign policy tends to be an elitist sport. Few Members of Congress focus on foreign policy and most Americans do not either — except in rare cases.

As a result, few Members of Congress view foreign policy, and the Caspian region, in strategic terms. There are of course exceptions to this including Senators Lugar and Byrd and Congressman Hamilton. Nevertheless, most Members of Congress tend to view the region through one or more of  the following perspectives:

· the Azerbaijan-Armenia issue;

· US policy toward Iran;

· US policy toward Russia;

· partisan and domestic politics.

Exploring these perspectives will help in understanding how and why congressional attitudes are formed and can help in determining the outlook for next year.

I. The Azerbaijan-Armenia Issue

On the Azerbaijan-Armenia issue, Congress tends to favor Armenia and uses foreign aid legislation as a means of exerting pressure on Armenia’s neighbors, particularly Azerbaijan and Turkey. The most obvious example of this is Section 907 of the Freedom Support Act which prohibits US government aid to the government of Azerbaijan.

Groups such as the Armenian National Committee of America critique congressional performance on this issue and wield significant political power (in terms of both money and votes) especially in the key electoral states of New Jersey, New York, California, and Illinois. These four states comprise nearly half of the total electoral votes needed to be elected President. The primary objective of these pro-Armenian groups, who are well-organized, well-funded and active on Capitol Hill, is to retain Section 907.

Concern over the plight of Azeri refugees and the increasing importance of US investment in the Azeri oil sector, have led Congress to adjust Section 907 incrementally each year since it took effect in January 1993. Nevertheless, congressional attitudes toward the region began to change more significantly in 1997. These changes occurred for several reasons:

1) Last year’s presidential elections in Armenia appeared to be less than free and fair. This damaged Armenia’s image on Capitol Hill and embarrassed lawmakers who had touted Armenia as the democratic ideal for the region;

2) Some Members of Congress thought the Armenia lobby had gone too far and was out of step with the realities on the ground. The Armenian lobby was pushing for what some Members of Congress thought was excessive legislation;

3) As the deadline for a decision on the main export pipeline route approaches (OCT ‘98), Congressional interest has continued to rise. Last year saw a huge increase in the number of congressional delegations traveling to the region. At least 5 delegations visited the region in 1997, including one led by Senator McConnell. McConnell had been a critic of Azerbaijan subsequent to traveling to the region. However, since his trip he has taken a more balanced approach to the region. This is noteworthy because McConnell is the Chairman of the Senate Appropriations Subcommittee on Foreign Operations, the Subcommittee which has jurisdiction over Section 907.

4) There is an increasing sense of urgency in Congress that the states of the former Soviet Union need to make progress toward reform and democracy sooner rather than later and Azerbaijan, in the eyes of Congress, needs substantial improvements in both areas;

5) Senator Dole, who had been the champion of the Armenian caused, retired from the Senate in 1996.

These factors all contributed to Congress making its first significant dent in Section 907. In 1997, Congress loosened the restrictions on U.S. assistance for the Overseas Private Investment Corporation (OPIC) allowing OPIC to provide U.S. companies with risk insurance. Congress also approved aid for feasibility studies and democracy building programs in Azerbaijan. The House of Representatives, however, continued to rejected attempts to weaken Section 907.

Congress tends to be an incremental body and this year’s gains demonstrate that there is momentum toward making further revisions to Section 907. As a result of this increasing momentum,  I believe the U.S. Senate is now positioned to make substantial changes in 907 — perhaps even a full repeal if enough pressure can be brought to bear. Senate headway will be critical because progress will have to be made in a House-Senate conference committee and the House of Representatives continues to be solidly on the side of Armenia and is unlikely to support a significant softening or repeal of 907.

A major problem, especially in the House, is that Section 907 is not on the radar screen for most representatives. Since 907 is usually inserted into the foreign operations appropriations legislation at the subcommittee level, only 13 House Members — LESS THEN 3% — have an opportunity to vote up or down on 907 each year. Given that the Armenian lobby has for the past five years been organized at the grass roots level and has focused its effort on these few Members, it is understandable why progress has been slow.

II. Congressional Attitudes Toward Iran

Since Iran is probably the most stable country politically and economically bordering the Caspian, and offers the most attractive pipeline routes, it is important to understand congressional attitudes toward that country. It should come as no surprise that Congress is opposed to Iran, and limits the Clinton Administration’s flexibility in dealing with it. In this respect, Congress plays a significant role in the process.

A leading Member of Congress recently told me that no country undermines American interests more than Iran. This underscores the fact that America has some very real disagreements with Iran and that U.S. policy is not simply driven by domestic lobbies.

Since the Iranian revolution, the US has sought to isolate Iran diplomatically and politically, and more recently economically. Last year, Congress passed the Iran-Libya Sanctions Act (ILSA). This Act sanctions foreign companies that invest in the petroleum sector of Iran.

Congress passed ILSA without a single Member of Congress voting against the sanctions. Rarely has Congress unanimously adopted such a controversial piece of legislation with such wide ranging implications.

This law  is causing problems for the companies trying to move Caspian oil to market. For example:

· US companies are prohibited from partnering with Iranian firms in the Caspian.

· If the center of the Caspian Sea is ultimately considered to be an area of shared resources, American companies may face difficulties in moving oil across the Caspian because Iran might be part owner of that territory.

· ILSA is also limiting the pipeline routes for Caspian oil. Although Iran may be the most stable country politically that borders the Caspian Sea, Congress has labeled it off limits to U.S. and foreign companies.

One illustration of the problems ILSA has caused is the flap over the proposed Turkey - Iran (now Turkmenistan) gas deal. On July 23, a State Department official announced before the House International Relations Committee that the U.S. had found the deal, as structured, was not sanctionable. The reason the Administration gave for the non-sanctionable designation was that Turkey had agreed to buy gas from Turkmenistan, superseding  the agreement with Iran, and that Iran would earn only transit fees.

Members of Congress interpreted the Administration announcement as a gesture of conciliation toward Iran as Khatemi was coming to power. Since the July announcement, Congress has sent strong signals to the Administration that it is premature to alter US policy toward Iran significantly. I believe that congressional reaction to this announcement demonstrates that from the point of view of Congress, the Iran option is not viable as a pipeline route and is not likely to become viable in the near term.

U.S. Policy Toward Russia

Another regional issue clouding Congress’ view of the region is U.S. policy toward Russia. Congress is skeptical of Russia, and its relations with Iran.  Many Members of Congress came of age politically during the 1980’s and opposing the Soviet Union was a major pillar in their political philosophy. Today, there are still residual effects of this cold war attitude, especially in the Republican party. In 1997 dozens of bills were introduced seeking to impose sanctions on Russia. Congress has consistently opposed Russian efforts of nuclear cooperation with Iran.

U.S. domestic politics

A fourth element influencing Congress, and perhaps the most important, is the phenomenon of domestic politics. Members of Congress tend to be overly responsive to their domestic constituents and some even support certain ethnic groups as a way to raise campaign contributions. This leads to a phenomenon  I   term, “ethnic politics.” Critics argue that ethnic politics have driven U.S. policy toward both Azerbaijan and Iran.

They say the strong pro-Israeli and Armenian lobbies have formulated U.S. policy. While these groups wield significant influence in Congress,  is overly simplistic and inaccurate to say that they determine U.S. policy. The U.S. favors Armenia over Azerbaijan for several reasons, including the fact that Armenia is generally seen as being more democratic than Azerbaijan. The U.S. opposes Iran for some legitimate reasons as Iran often seeks to undermine U.S. policies. So while the domestic lobbies have significant influence, they still need to have substance behind their arguments.

The most interesting aspect of these lobbies is the convergence of the pro-Israeli lobby and those advocating a more balanced approach to Azerbaijan. Both Azerbaijan and the pro-Israeli lobby want to see an alternate source of non- Middle Eastern oil. How the pro-Israeli lobby positions itself in 1998, an election year, will have an enormous impact in shaping congressional attitudes toward the region. This is also true, but to a lesser extent, with the pro-Armenian lobby. One reason these groups will have so much influence is because Members of Congress tend to get their information on the region from these two groups.

Congressional View Impacts Attitudes Toward Pipeline Routes

It has been argued that the U.S. should allow Caspian oil to travel through Iran. This may ultimately be possible. However, in the short term it is difficult to predict that the U.S. will  suddenly change its position. In fact, Congress, which has maintained the U.S. embargo against Cuba despite the opposition of American allies, might actively work to prevent Caspian oil from moving out of the Caspian at all if the only option is to move it through Iran.

How does Congress view the possible pipeline alternatives? Of the main possible options (northern route through Russia, southern route through Iran, eastern route through Afghanistan, and the western routes through Georgia and Turkey) congressional views of the pipeline can be summed up in three ways: Congress is opposed to pipeline routes through Iran, is skeptical of routes through Russia, and is dubious of a route through Afghanistan. That leaves Turkey and Georgia as the only options in the eyes of Congress.

Therefore, it is obvious why Congress has expressed support for pipelines along an East-West axis. This also helps to explain why the U.S. government (Congress and the Administration) are increasingly calling the Baku-Ceyhan route “the preferred route” since it bolsters a NATO ally, and avoids Iran and Russia.

The Outlook for 1998

Congress is likely to continue to advocate isolation of Iran and to continue the incremental progress in U.S. relations with Azerbaijan.

This will make new initiatives by the Clinton Administration more difficult. On Iran, a significant shift in U.S. policy is unlikely even if the U.S. fails to persuade the Europeans to adopt a tougher line towards Iran. As in the case of Cuba, the U.S. may be content to “go it alone.”

Even if the government in Tehran makes significant overtures to the U.S., a thaw in relations is likely to be an incremental process and could take years. Therefore, Iran is not likely to be open for American companies in 1998.

While major changes in policy are unlikely in 1998, there is a chance to make substantial progress on repealing Section 907 and possibly on policy on Iran, depending on what happens in the South Pars - ILSA decision. I contend that 1998 will be a year when momentum (the precondition for policy changes), of both U.S. policies towards Azerbaijan and Iran will change significantly.

With increasing interest in Congress, there is an opportunity, especially in the Senate, to repeal section 907, based on the argument that repealing 907 will help advance U.S. security objectives. Also, the entire House of Representatives (not merely the 3 percent who usually control the issue) could, for the first time, have a chance to vote on Section 907 if a bill by Congressman King (R-NY) can make it to the House floor. Congressional attitudes toward Iran may also soften (they can hardly move in any other direction), depending on the policies of the new political leadership in Iran.

As I noted earlier, Congress tends to be an incremental institution and obtaining and maintaining momentum is a critical factor in defining congressional policy. I believe that as the decision on a main export pipeline route from the Caspian nears in October 1998, congressional interest will increase. This offers those of us who favor a more balanced approach to the region an opportunity to urge Members of Congress to view the region in its entirety rather than from a narrow  perspective. Thus, I remain optimistic that we could see significant changes in U.S. congressional attitudes in 1998, paving the way for even greater policy changes in 1999.