The Reagan administration is preparing to let the nation of Kuwait explore for minerals on U.S. public lands, a decision that some think could further open up public lands to exploitation by foreign governments generally.
Interior Secretary James G. Watt, in a decision expected to be announced as early as next week, will declare Kuwait a "reciprocal" nation under the Mineral Lands Leasing Act, even though mineral resources in Kuwait are nationalized. The 1920 leasing law prevents foreign investors from holding U.S. mineral exploration leases unless their country grants American citizens similar rights.
Interior Department spokesmen declined to comment on reports of Watt's decision, but administration and congressional sources confirmed yesterday that Kuwait will become the fourth foreign nation this year to be granted reciprocal status.
In February, Watt declared Canada a reciprocal nation, despite that country's stiff new restrictions on foreign investment in energy resources. Similar decisions followed for Cyprus and Sweden, both of which also have laws restricting foreign investment.
The decision on Kuwait, however, is potentially even more far-reaching, both because the oil-rich Mideast nation has significant amounts of money to invest and because it frequently sets the pace for other Mideast countries.
"The Kuwaitis are the most sophisticated of Middle Eastern investors," said a congressional aide. "You can expect they will increase their holdings and lead others, like the Saudis, to do the same."
The decision, while in line with the administration's free-market philosophy and Watt's desire to increase energy and mineral production from federally owned lands, runs counter to some strong feelings on Capitol Hill, where some members worry about the national security implications of turning essential resources over to foreign control.
In the case of Canada, some members of Congress urged the administration to fight protectionism with protectionism, by enforcing provisions of the mineral leasing act and cutting off leases to development companies owned in whole or in part by Canadians.
It was the subject of mineral reciprocity for Canada that led to a hostile confrontation between Watt and Congress earlier this year. The White House averted a potential contempt of Congress citation against Watt by agreeing to let members of a House subcommittee review a series of documents Watt had refused to supply on the grounds that they involved "sensitive materials bearing on foreign policy."
Among the documents eventually obtained by the subcommittee was an exchange of State Department cables on Kuwait's request for permission to buy energy and mineral leases. The cables indicated Watt was "very sympathetic" both to Kuwait's position and to "the general idea of promoting investment in firms developing U.S. mineral resources."
Shortly after receiving that word, Kuwait initiated talks that eventually led to its controversial purchase of Santa Fe International Corp., headquartered in Alhambra, Calif. Santa Fe is an energy exploration firm that holds $10 million worth of energy exploration leases on federal lands in Oklahoma, Louisiana and Colorado, and has applications pending for more leases in North Carolina.
The $2.5 billion acquisition of Santa Fe was completed last December, after the federal Committee on Foreign Investment in the United States said it had no objections, the Justice Department terminated an antitrust inquiry, and the Defense and Energy departments satisfactorily resolved their questions over the nuclear engineering activities of a Santa Fe subsidiary.
The decision to open leases to Kuwait was greeted benignly yesterday by some frequent Watt critics. "You can argue that we can shoot ourselves in the foot if we enforce the law too literally," said a congressional aide. "Nobody wants to keep foreign capital out of the United States."
But others responded more skeptically. "We could be helping develop a foreign nation that is economically hostile to the United States," said a representative of a national environmental group. "It's a flaw of all our mining laws that they were developed on a 19th century philosophy that it's good to develop land and it ought to be encouraged."