Washington, DC -- Congressman Brad Sherman, who chairs the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade, announced the introduction of the Stop Iran's Nuclear Weapons Program Act, H.R. 6296, to increase economic and diplomatic pressure on Iran and its remaining business partners.
On July 1, President Obama signed into law significant economic sanctions against Iran. In the wake of the new American statute and a new round of U.N. sanctions, the European Union, Japan and other U.S. allies enacted tough trade sanctions against Iran, effectively barring their firms from developing Iran's energy sector and reducing Iran's access to the international financial system.
"Existing Iran Sanctions have had a significant impact on Iran's economy, but have not achieved the ultimate goal of ending Iran's nuclear weapons program. We must continue to enact tougher sanctions to isolate Iran economically and diplomatically, and we must act now," said Congressman Brad Sherman. "With the enactment of the Comprehensive Iran Sanctions Accountability and Divestment Act in July, Congress provided firm authorization for U.S. states to enact their own measures to divest from firms that do business in Iran. My legislation would provide similar authorization for states to refuse to contract for goods and services from such firms."
Among other provisions, the Stop Iran's Nuclear Weapons Program Act would definitively end the practice of American corporations conducting business with Iran through their foreign subsidiaries, sanction entities that provide loans to the government of Iran, sanction firms that prepay for future Iranian oil and gas deliveries, and reduce U.S. contributions to international institutions that provide loans or other assistance to Iran.
A longer summary of the Stop Iran's Nuclear Weapons Program Act is below.
Stop Iran's Nuclear Program Act
Subsidiaries of U.S. Firms Conducting Business in Iran. Currently, the Iran sanctions regulations allow the foreign subsidiaries of American firms to conduct business in Iran that would be prohibited if conducted by the American firm, so long as no U.S. person and no one working at the American firm is involved. A number of U.S firms, most notably the Halliburton Corporation, have conducted business in Iran through their overseas subsidiaries. This provision would punish the U.S. parent entity for the activities of a foreign subsidiary that would violate current U.S. sanctions if they were conducted by a U.S. person -- it would effectively end the Halliburton loophole.
Fighting the Iran Revolutionary Guard Corp. Provisions in the recently enacted Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) target the IRGC and other designated entities through a financial sanction -- any financial institution that conducts business with them will have their business in the United States severely curtailed. This provision does not target commercial transactions with the IRGC and its affiliates; also, Treasury has designated only about 40 IRGC related entities, while we know that the IRGC operates its business and procurement operations through hundreds of fronts. The bill contains a provision that would require an expedited campaign at the Treasury Department to designate the hundreds of front companies and agents that operate on behalf of the Iran Revolutionary Guards Corp, and provides for secondary sanctions against any firms that continue to do business with them or the main IRGC. Treasury would only need to determine that there is credible evidence that an entity is a front, alias, affiliate or agent of the IRGC in order to designate it. Also, if a foreign company assists or conducts any transactions with an IRGC entity it would face harsh sanctions, including loss of access to the U.S. market. These provisions are based on the Iran Revolutionary Guard Designation Implementation Act (HR 2375).
Sanction Entities that Subscribe to Iranian Sovereign Debt. There are indications that Iran may seek to float bonds sometime within the near future. The bill includes a provision that would make buying or facilitating the issuance of Iranian sovereign debt, including government bonds, an activity sanctionable under the Iran Sanctions Act (ISA).
Sanction Entities that Pay in Advance for Oil Deliveries or Sign Long-Term Contracts to Purchase Oil and Gas from Iran. In 2003, Japan reportedly paid several billions in cash for future oil deliveries over the course of several years. The Swiss firm EGL reportedly signed a contract worth nearly $20 billion for future purchases of Iranian gas. When the world buys Iranian oil and gas, they should do so on a cash basis without long term commitment, lest they provide the Iranian government with, in effect, a bailout.
The bill will make these agreements and transactions sanctionable under the ISA.
Mining and Milling Equipment. Current law provides for sanctions against a firm if it provides nuclear or other WMD technology or advanced conventional arms to Iran, North Korea or Syria. Known as the Iran, North Korea and Syria Nonproliferation Act, or INKSNA, this statute is a key weapon in our nonproliferation arsenal. Iran's supply of uranium is limited, and Iran has sought to obtain uranium from a number of foreign sources and through domestic mining. Supplying mining and milling equipment to Iran for its uranium mines is not currently sanctionable. The legislation will incorporate the operative provisions of HR 2290, which would add such activity to the list of activities sanctionable under the INKSNA.
Deny Tax Benefits to Companies that Violate the Iran Sanctions Act. This provision would deny favorable amortization rules for exploration expenditures for any corporate family of companies that has violated the Iran Sanctions Act's prohibition on investment in the energy sector of Iran.
Prevent Aircraft Parts and Services Transfers. Current law provides for special licensing of aircraft repair and servicing of U.S. origin aircraft owned by Iran. In July, Iran Air was denied access to EU airspace because its old Boeing and some Airbus aircraft are unsafe for air travel. Those planes should remain grounded until the nuclear crisis is resolved.
Comprehensive Denial of U.S. Government Benefits to those Who Conduct Sanctionable Activity in Iran. The bill will include provisions that bar companies who conduct activities sanctionable under the Iran Sanctions Act from receiving any taxpayer funds or other governmental assistance through OPIC, Ex-Im, TDA, foreign aid and other programs. The bill will also require that the TSP divest of firms that run afoul of the Iran Sanctions Act.
Authorize States to Adopt Similar Restrictive Procurement Policies. The bill will include a provision authorizing states to prohibit procurement from firms that conduct activities sanctionable under the Iran Sanctions Act.
Provide for Sanctions Against Firms that Enter into Joint Ventures or Other Investment Arrangements with National Iranian Oil Company or Other Iranian Firms. Currently, Iran's national oil company has invested in a number of joint ventures to develop oil and natural gas projects outside of Iran, including one with BP off the coast of Scotland. This provides Iran's state oil firm with access to technology and capital. Entering into these types of arrangements should be sanctionable to the same extent as an energy investment in Iran would be under the Iran Sanctions Act.
Reduce Contributions to the World Bank or other International Financial Institutions that Provide Loans or Other Assistance to Iran. From 2000-2005, as the United States sought to stop Iran's nuclear program, the World Bank approved some $1.4 billion in loans to Iran. Likewise, last year the IMF approved a distribution of so-called "Special Drawing Rights" -- SDRs -- worth $250 billion to IMF member states to increase liquidity during the financial crisis. Iran benefited by receiving in its IMF account more than $1 billion in SDRs tradable for hard currency. We must stop these respected financial institutions from approving any further assistance to Iran and work to prevent the distribution of the benefits already approved. The legislation will include provisions that would require the Administration to work at the World Bank, IMF and other institutions to stop disbursements to Iran and to prevent approval of further assistance. It would also provide for the reduction or elimination of U.S. contributions to an institution if it approves new assistance to Iran.
Divestment Tax Benefits. The bill will contain a series of provisions that allow taxpayers to defer the recognition of capital gains on the sale of companies conducting sensitive business in Iran or Sudan, so long as the taxpayer purchases replacement investments without such connections to Sudan or Iran. The taxpayer would pay taxes on the gain when they sold the replacement property, of course. American investors are beginning to seek investments without ties to terrorism or the genocidal war in Sudan. This measure could provide modest encouragement for such beneficial financial decisions. These provisions are based on H.R.3516.