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Bush Administration Bars Chemical Plant Sale to Iran

By R. Jeffrey Smith
and Peter Behr

The Washington Post

WASHINGTON

The Bush administration has decided not to authorize the sale to Iran of a large chemical plant that had aroused controversy within the government, White House spokesman Marlin Fitzwater said Tuesday.

Fitzwater's statement appeared to lay the matter to rest at least for the next two weeks, but left unclear whether the plant's manufacturer, BP Chemical, would be permitted to renew its application under the Clinton administration.

A spokesman for BP Chemical Tuesday defended the proposed sale and said the company had not been informed by any government agency that its application for an export license had been officially denied. The export had aroused criticism because the plant's manufacturing process would produce hydrogen cyanide, a gas that has been used as a chemical weapon.

Although several Bush administration officials predicted on Monday that the proposed sale would be discussed Tuesday at a White House meeting on export licensing cases, the matter was not raised there, according to several sources.

The sources said the meeting did not resolve two other export license controversies: the proposed sale to Iran of American-made crop-dusting planes and the export to China of U.S.-made jet engine technology.

Some administration officials oppose these exports on grounds that the planes could be used by Iran to spray chemical weapons and the engines could be used by China in cruise missiles and attack aircraft that China wants to sell to Pakistan. Advocates of the exports within the administration argue that military use of the crop-dusting planes by Iran or diversion of the engines by China would be highly unlikely and readily detectable.

Fitzwater said the administration decided "a month ago" not to approve the chemical plant export but he did not elaborate. Another White House official said the decision was made after the Commerce Department included the proposed export in a list of licenses it suggested the administration approve before President Bush's term ends on Jan. 20.

Larry W. Evans, director of patent and licensing for BP America, said the firm's principal contact at the State Department had told him Tuesday that he did not know what decision Fitzwater's statement referred to. BP America, like BP Chemical, is a subsidiary of British Petroleum and would provide support for the chemical plant.

Evans said that in April last year, the Defense Department approved the proposed deal, provided BP made certain modifications in the plant's design and observed certain requirements for monitoring hydrogen cyanide produced by the plant.

Since then, Evans said, BP officials have met a half-dozen times with State Department officials and had many telephone conversations with them, most recently in December. He said that to his knowledge, the last government decision on the matter occurred last summer. "It was not a decision to kill it ... . They decided not to approve it at that time," Evans said.

Evans said hydrogen cyanide was not considered a chemical weapon because it disperses so quickly. "Never were we inclined to do anything to contribute to anyone's chemical warfare capability," he said. Several experts said, however, that a global chemical weapons treaty to be signed in Paris next week will impose restrictions on the sale of hydrogen cyanide, which acts through the bloodstream to asphyxiate those exposed to it.

Evans said that BP had agreed to modify its plant design to prevent diversion of the chemical. BP would have authority to monitor the plant's production.

The company's "ace in the hole," Evans added, is a contractual agreement stipulating that if any attempt to divert the chemical were detected, BP would shut the plant down by cutting off supplies of a catalyst available only from BP and its licensees.

Construction of the plant would cost an estimated $250 million. American firms, including BP Chemical, would receive about $100 million of that. BP's undisclosed share would be less than $50 million, Evans said, explaining that the firm would be paid only for the technology and the catalyst.

He said BP and its allies at the State Department regarded the proposed sale as a model technology transfer agreement with Iran because of the safeguards. "We still have our supporters in the State Department ... (but) we don't know where (the proposal) stands," Evans said.

Officials said the State Department itself has been divided over the proposed sale. Advocates have included the department's Bureau of Economic and Business Affairs and the Bureau of Near East and South Asian Affairs, which is responsible for following Iranian matters. Opposition came from the Bureau of Politico-Military Affairs and, in the end, the department's senior management.