Iran Sanctions Expanding

Iran Sanctions Expanding

Derek Sands
SOURCEUnited Press International
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A groundswell of opposition to Iran is pushing U.S. states to divest their pension funds from companies that do business in Iran, and behind-the-scenes political efforts by the administration are paying off with increased European support of government sanctions.

Last week California became the most recent state to pass measures that would divest its retirement funds from any companies that do business with Iran. Gov. Arnold Schwarzenegger said he will sign the legislation, which involves shifting billions of dollars away from those companies.

The Center for Security Policy, a think tank that pushes divestment from countries that are said to sponsor terrorism, released a report in 2004 outlining how much individual states invest in these companies. The report found that California’s CalSTRS, the state teachers’ retirement fund, invested in 195 companies that did business in Iran. The public employees’ retirement fund, CalPERS, was found to have invested in 144 companies doing business in Iran.

Earlier this year Florida divested its pension funds from similar companies, and many other states, including Michigan, Massachusetts and Texas, are looking into similar initiatives.

But these measures are not a new concept.

“States often have sought to impose their own sanctions; South Africa in the 1980s being the major case. This reflects NGOs and other sanctions supporters seeing opportunities for leverage with states and their pension funds and procurement accounts, as well as state political leaders with interests in the issue — California was out front on South Africa as well as now on Iran,” according to Bruce Jentleson, an expert on coercive diplomacy and the director of the Terry Sanford Institute of Public Policy at Duke University.

State-run sanctions have run into problems in the past, when federal courts decided it was the federal government that should organize diplomatic efforts. But the new Iran efforts have taken a different tack, arguing that it is a fiscal decision, not a political one.

“The states have done something interesting. They are making the argument now that because of the growing divestment movement, it is their fiscal responsibility to divest, as opposed to a political one. You can’t argue with it. As more and more pension funds and companies pull out of Iran, it makes sense to get out of companies still working in Iran,” because eventually they will lose value as well, according to Jonathan Schanzer, the director of policy at the Jewish Policy Center in Washington and a former counter-terrorism analyst for the U.S. Treasury Department.

The states will also have cover once the Iran Sanctions Enabling Act is passed by Congress, a piece of legislation with influential backers including presidential candidate Sen. Barack Obama, D-Ill. The act will force the federal government to list any company that does more than $20 million in business with Iran, as well as allow states to sanction Iran. The Iran Sanctions Act, passed in 1996, already calls for sanctions against foreign companies that invest more than $20 million in Iran but leaves its enforcement up to the administration. Up until now the administration has not acted against foreign companies that violate U.S. rules.

Whether or not this will make much difference is still up in the air.

“How much of a difference that will make has yet to be seen, but it is a strong statement to the European companies and to the extent that it helps the leaders in those countries to go along with the other sanctions of Iran. I think that is a fine thing,” according to Roger Stern, a research associate at Princeton University who has written extensively on the future of Iran’s oil industry and the effect of sanctions on it.

But what could prove more fruitful is action on the part of European governments, according to Stern.

“It is much more important that the European states decide to urge or command companies headquartered in their countries to divest,” Stern said.

In September French President Nicolas Sarkozy called for tougher U.N. sanctions on Iran and told French energy giant Total, which has been pursuing deals to help develop Iran’s huge South Pars natural gas field, that it should not invest in the country. France has also urged the European Union to consider its own sanctions if further U.N. sanctions do not succeed. Germany, which has been reluctant to push its companies hard to get out of Iran, has recently begun calling for stricter U.N. sanctions.

U.S. pressure behind the scenes may have caused some of the European turnaround.

“What the Treasury Department has done is a very different approach. Stuart Levey has gone around to banks and large corporations around the world and lobbied them one-on-one. I think there has been a realization at Treasury that maybe not every country is going to do what we have done, because frankly, there is a lot of money to be made,” said Schanzer, a former analyst with the U.S. Treasury Department.

Undersecretary of the Treasury Stuart Levey is in charge of terrorism financing and has been running Iran sanctions since 2004.

“By going to these companies individually, it has been a very effective quiet lobbying campaign,” according to Schanzer.

Iran has repeated said it has the right to enrich uranium for civilian nuclear fuel, but the United States and its allies are concerned Iran will use the technology and know-how to make fuel for nuclear weapons, a charge Tehran denies. Iran’s jousting with the International Atomic Energy Agency over inspections of its nuclear facilities has led the U.N. Security Council to impose two rounds of sanctions over the past year, with the United States in talks urging a third.

Companies themselves are beginning to feel the heat from Iran’s souring reputation. The German foreign minister accused U.S. companies of doing business with Iran through front companies in the United Arab Emirates, according to the German news magazine Der Spiegel, a practice that is unsubstantiated but that some European companies may pursue under increased scrutiny.

The U.S. Securities and Exchange Commission Web site posted a list of publicly traded companies that do business with Iran, Schanzer said. The list, which can now be found on the Jewish Policy Center’s Web site, mostly contained European and Asian companies. But large American concerns, such as Houston-based oil giant ConocoPhillips, were also listed.

“They initially listed all the companies out there that openly admitted to working with Iran through subsidiaries in Europe and elsewhere. Since that time, the list has been taken down. And I think there may be a sense among these companies, many of them European, but all of them listed publicly, traded publicly, that maybe it is not a good idea to let people know we are doing this. As divestment picks up speed it would be very natural if companies — obviously it would be very dishonest — but if companies decided they didn’t want to openly admit to working with Iran, so this is how they go around it.” Schanzer said.

Nations and states are not the only ones getting in on the divestment game. Jimmy Delshad, the mayor of Beverly Hills, Calif., announced a campaign in July to rid the city’s pension investments of companies that do business in Iran. The Los Angeles area has a large and vocal population of Iranian-Americans opposed to the Tehran government.

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