12 Europe Nations OK Sanctions : Persian Gulf: Purchases of Iraqi oil are banned by community. Arms sales are halted.

By DANIEL WILLIAMS

Aug. 5, 1990 12 AM PT

TIMES STAFF WRITER

ROME — The European Community, responding to the first major international crisis of the post-Cold War era, imposed a series of sanctions on Iraq, including a ban on purchase of Iraqi oil, as punishment for what the group called the brutal invasion of Kuwait.

The 12-nation body also stopped arms sales to Iraq and ordered an embargo on purchases of Kuwaiti oil to ensure that Iraq does not benefit from the takeover. European Community foreign ministry officials met in Rome for 5 1/2 hours and adopted the measures unanimously “in order to safeguard the interests of the legitimate government of Kuwait.”

Their decision dovetails with the policy of the Bush Administration, which is spearheading efforts at the United Nations to block oil exports and other trade in order to force Iraq to retreat from its small but oil-rich neighbor.

A statement issued by the EC officials expressed “unreserved condemnation for the brutal invasion.” It said that the community will “refrain from any act which may be considered as implicit recognition of authorities imposed in Kuwait by the invaders.”

“We will not be satisfied until there is not a single Iraqi soldier in Kuwait and until there is a legitimate and sovereign government in Kuwait,” said Giovani Castellaneta, a spokesman for the Italian Foreign Ministry. Italy, as part of a rotation, heads the EC for the next six months.

In making its move, the community apparently had an eye on discouraging Iraqi leader Saddam Hussein from making further conquests, especially in Saudi Arabia. “Already they are talking of massing troops on the Saudi frontier,” said Italian Foreign Minister Gianni De Michelis.

Some European countries had already taken steps to pressure Iraq. Both France and Britain have sent warships to the Persian Gulf, and Italy announced an end to arms sales. Several European Community members put a freeze on Kuwaiti property in Europe to keep it out of Iraqi hands. Controls on Kuwait’s assets were affirmed Saturday by the entire EC.

Just how long-lasting and effective community pressure will be is open to question. Individual European countries depend on Iraq for oil for part of their import mix, and several are owed large debts by Iraq. EC members bought $4.4 billion worth of oil from Iraq last year, a figure that amounts to 10% of the group’s oil purchases. Exports to Iraq, weapons sales conspicuous among them, totaled $3.8 billion.

Skepticism was plentiful, with predictions that leaks would soon appear in the oil and arms embargo. “The Western countries have too many concrete interests in Iraq--if only the sale of arms and the debts which result from them--to envisage any brutal action,” wrote Thierry de Montbrial, director of the French Institute for International Relations in Paris.

Western European nations regularly sold arms to Iraq both during its long war with Iran and also after a cease-fire took hold in 1987. Not a few observers expressed dismay that the customer, through its invasion of Kuwait, is in a position to drive up oil prices, to the detriment of European economies.

“Unfortunately, Saddam Hussein is not a paper tiger,” commented Livio Caputo in Corriere della Sera, an Italian newspaper. “For 10 years, East and West have competed in (giving) aid to him, in part in the illusion that Iraq could function as a buffer against the expansionist policies of the ayatollah of Iran and in part because he represented the best client in the weapons industry, where everyone is in the hunt for deals.”

Italy recently delivered a dozen warships to Iraq that had been on order since 1981.

The idea for a ban by the EC on oil purchases came from French President Francois Mitterrand, reports in Rome said. France was a major arms supplier to Iraq during Baghdad’s war with Iran and provided Iraq with jet warplanes equipped with Exocet missiles to be used against Iranian oil tankers. In recent months, relations between France and Iraq deteriorated as Iraq fell behind on its large debt.

The oil ban is expected to be the EC’s strongest weapon, since oil is Iraq’s sole source of earnings from abroad. “This will strike at the heart of Iraq,” Italian spokesman Castellaneta said.

Kuwait spread its oil wealth around Europe through numerous investments. About 2,000 Kuwaiti-owned service stations under the trade name Q-8 were the most visible example, but Kuwait also holds shares of important European banks, insurance companies and industries, including Fiat in Italy and Daimler Benz, the maker of Mercedes-Benz cars, in Germany.

Rising oil prices resulting from the invasion of Kuwait created an immediate economic scare in Europe. Italy and Spain, which were just getting inflation under control, are now faced with sharp price rises across the board as the increases in oil costs trickle throughout the economy. Economists are predicting slower growth across the Continent.

An exception to the grim prospect may be Britain, where higher oil prices will increase earnings from its own North Sea field.

There was concern that development in the new democracies of Eastern Europe will be crippled by higher oil prices. The former Soviet Bloc countries are weaning themselves away from subsidized Soviet oil and now will have to pay for supplies at going world rates. Within a matter of weeks, oil prices in Europe have soared from $16 a barrel to $23.

Ghosts from Europe’s modern past are haunting the debate over what to do about Iraq. In urging a stiffening resolve, newspapers are warning European leaders to be on guard against “appeasement,” a reference to attitudes toward Adolf Hitler in the period before World War II.

Sometimes, the analogies are more direct. Corriere della Sera headlined a commentary with the words “Hitler in the Middle East.”