America's West European allies are going ahead with an export embargo against Iran but have softened the blow in two significant ways: 1. They have decided to exclude from the embargo all contracts with Iran that were concluded prior to the taking of the American hostages on Nov. 4, 1979. That would leave in place the bulk of West European projects in Iran, projects amounting to billions of dollars.
2. They are agreed that they would suspend the embargo, should now-revived United Nations efforts to secure the release of the American hostages make sufficient progress.
The Carter administration reaction to the action taken against Iran by the foreign ministers of the Common Market nations meeting in Naples May 17 and 17 is likely to be one of restrained official welcome. At the same time there will be disappointment that it did not go further.
The White House is also likely to be disappointed that the European foreign ministers, meeting informally at a villa overlooking the Bay of Naples, decided to continue planning for a West European initiative to help resolve the Arab-Israeli conflict. Such an initiative would combine new guarantees for Israel's security with recognition of the Palestinians' right to self-determination.
US Secretary of State Edmund S. Muskie has warned repeatedly that any new initiative might undercut the US-sponsored negotiations being conducted between Egypt and Israel.
But the British and the French, among others, fear that a number of "moderate" Arab nations, including Saudi Arabia in particular, are growing impatient over the lack of progress on the Palestinian question. They are convinced that President Carter is not going to press Israel to make what they consider to be necessary concessions on that question in this election year, given the influence of the Jewish community in the United States.
The Europeans do not share the American view on economic actions against Iran. The US has been arguing that the Iranians must be convinced through ever-increasing international pressure that they have much to lose from continuing to hold the 53 American hostages. The European experience with economic sanctions has convinced them that sanctions are ineffective. They fear that such action may merely serve to strengthen the hand of extremists in Iran.
The Europeans have some hope that the Iranian parliament, which is to begin meeting toward the end of this month, will move to end the hostage crisis. And they admit that they have sizable economic interests in Iran. Cutting exports and other links with Iran will hurt them more than it does the United States.
A long-awaited economic recession has begun in a number of European countries. Thus economic and financial links with Iran assume greater importance. Iran has large financial deposits in both France and West Germany.
The Italians assert that a total boycott would mean the closing down a total of some $5.5 billion worth of Italian contracts with Iran -- concluded before Nov. 4, 1979 -- and would have a devastating impact. Some 1,700 technicians, contractors, and others from Italy are involved in projects in Iran.
Some Europeans have indicated that they are willing to move at a pace separate from the Americans on Iran sanctions. This is because they feel the Americans themselves have not always fully consulted with them. At one point earlier this year the US suddenly decided to hold off on further sanctions in the interest of a possible settlement with Iran. One European foreign minister said he first learned about the decision from his morning newspaper.
The Europeans did support a United Nations resolution on sanctions as far back as January, but it was vetoed by the Soviet Union. They reluctantly made a further decision on their own outside the United Nations context: on April 22 in the hope that if they agreed to sanctions the United States would refrain from taking any military action against Iran.
It came as a shock then to the Europeans when the United States only a short time thereafter undertook its abortive raid.