Home inSight Let States Divest From Iran

Let States Divest From Iran

Howard Slugh and Jonathan Schanzer
SOURCEBaltimore Sun

Last month, Florida Gov. Charlie Crist signed a bill ordering his state to divest its pension fund from businesses that work with Iran’s energy sector. The legislation, led by Adam Hasner, Republican majority leader of Florida’s House of Representatives, passed unanimously in both chambers of the Legislature.

Unfortunately, the state legislation is unconstitutional. Only new federal legislation can legally allow states to divest from Iran.

In 1996, Massachusetts restricted state businesses from working with companies that dealt with Myanmar, formerly called Burma. Massachusetts sought to press Myanmar’s military junta to take steps toward democracy and provide better treatment for dissidents. In 2000, the Supreme Court unanimously struck down the Massachusetts law in Crosby v. National Foreign Trade Council.

The problem was that the state legislation conflicted with a federal statute that enabled the president to impose sanctions on Myanmar. The court argued that the president “has less to offer and less economic and diplomatic leverage as a consequence” of the Massachusetts law. According to the Constitution’s supremacy clause, federal sanctions must trump state law.

Florida’s sanctions against Iran could face a similar fate. Under federal law, only Congress and the president can implement federal tools – such as the Iran Freedom Support Act – to deter Iran from nuclear proliferation and terrorism. As in the Myanmar case, the Florida divestment plan conflicts with federal sanctions.

Florida has attempted to distinguish its statute from Massachusetts’ by adding wording claiming that the law aims to lower fiduciary risk, not create an alternate foreign policy. But just because a state claims its law doesn’t conflict with federal law doesn’t make it so. The Florida law could be struck down if challenged – unless Congress does the right thing.

The House and Senate are considering the Iran Sanctions Enabling Act to authorize states to pass divestment laws aimed at Iran’s energy sector. The bill would cure any constitutional conflict. It would integrate the state sanctions as an element of congressional sanctions, rather than leaving them outside the congressional framework.

Broad bipartisan support of this bill is a sign that Congress sees sanctions – on both the state and federal levels – as an important tool to weaken Iran. It also shows that Congress understands that divestment is a tool that Americans broadly support. Indeed, the growing “terror-free investing” movement is gaining traction nationwide. It echoes grass-roots efforts to divest from South Africa in the 1980s, which eventually brought the apartheid regime to its knees.

Despite the bill’s wide popularity, some in Washington oppose it. William Reinsch, former commerce undersecretary in the Clinton administration and current president of the National Foreign Trade Council, claims that “a unified U.S. foreign policy – not multiple state sanctions or divestment laws – is best suited to address” the Iran challenge. Those who join Mr. Reinsch in opposing the bill claim that divestment would create economic tensions with our allies, making it more difficult to act multilaterally.

Opponents of the bill fail to understand that the lack of enforcement of federal sanctions in the past is exactly why the American people have taken matters into their own hands. They have lobbied their state legislatures because they want to punish Iran. They do not care whether their states offend our allies who continue to do business with Iran.

A handful of states are considering their own divestment bills, including Maryland, where Del. Ron George, an Anne Arundel County Republican, has proposed legislation that would bar the state pension fund from investing in companies tied to Iran. Other states are weighing different divestment options. In Ohio, state Rep. Josh Mandel reports that he and his colleagues led an effort for “state pension funds to divest the retirement dollars of policemen, firefighters and teachers from an Iranian regime that is calling for the destruction of America and Israel.”

The House and Senate have deliberated over the Iran Sanctions Enabling Act since May. It is imperative that Congress pass the bill quickly, to ensure that these state efforts are constitutional.

This is an effective way to push Iran to cease developing nuclear weapons and to encumber its efforts to support terrorism.

Jonathan Schanzer, a former intelligence analyst at the Treasury Department, is director of policy at the Jewish Policy Center. His e-mail is jschanzer@jewishpolicycenter.org. Howard Slugh is a law student at Hofstra University law school and a research assistant at the Jewish Policy Center. His e-mail is hslugh1@pride.hofstra.edu.