DOWN GOES THE DEAL

Was this any way to strike a billion-dollar trade deal? For four years the Conoco company had been negotiating to develop two huge offshore oil fields in Iran, but the deal's managers kept only low-level State Department officials informed of the broad nature of the talks. As a result, just after Conoco and the Iranians reached their agreement this month--but before the Houston-based company had sought approval from senior U.S. officials or board members of DuPont, its corporate parent--the contract flared into a political and diplomatic incident as unwelcome to Conoco as a fire in an oil well. It was left to President Clinton to put out the flames by issuing an order that barred all U.S. companies from helping Iran develop its energy resources. Yet even as the President acted last week, his move raised questions about how the Conoco talks had progressed even as far as they did.

The answers may lie in part within an Administration whose passion for brokering trade deals clashes with its hostility toward Iran. On the one hand, the Commerce Department under Clinton has helped U.S. companies sign billions of dollars' worth of contracts with foreign countries. On the other hand, the U.S. government remains deeply suspicious of Iran, which is one of the countries--along with Cuba, North Korea and Iraq--with whom the U.S. restricts trade.

But Conoco may have been guilty of a little soft-pedaling of its own, hoping to slip a deal through first and worry about government approval later. When pressed by TIME to name which State Department members the company had consulted, Conoco officials refused to name them. According to two people in the room, Conoco president Constantine Nicandros told State Department officials at their meeting last week: "We always knew the Administration would be opposed to the deal. But everyone acknowledged that it would not violate the law."

Secretary of State Warren Christopher became the first senior official to attack the Conoco deal in public after Iran abruptly disclosed it on March 6. He immediately denounced any transaction that put money into "the evil hand of Iran," but recused himself from involvement as soon as he learned his former law firm took the case. No one was more put out by the Administration's sudden get-tough attitude than Conoco's Nicandros. Rushing to Washington on March 10, he found his $1 billion contract with Iran under attack from all sides. Not only was Christopher loudly opposing the deal, but Alfonse D'Amato, who chairs the Senate Banking Committee, was using it to escalate his two-month-old crusade for a virtual halt to all American commerce with Iran. While U.S. oil firms have long been barred from buying Iranian crude oil, their foreign subsidiaries are free to purchase it and sell it abroad.

There was broad agreement in the Administration to kill the Conoco contract as an example to Russian Foreign Minister Andrei Kozyrev, whom the Secretary is to meet in Geneva this week. There, Christopher will urge Kozyrev to stop Russia from delivering two nuclear reactors to Iran, which the U.S. fears could be used to help develop nuclear weapons.