Iran Sanctions Enabling Act of 20907

Floor Speech

IRAN SANCTIONS ENABLING ACT OF 2007 -- (House of Representatives - July 30, 2007)

Mr. SHERMAN. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2347) to authorize State and local governments to direct divestiture from, and prevent investment in, companies with investments of $20,000,000 or more in Iran's energy sector, and for other purposes, as amended.

The Clerk read the title of the bill.

The text of the bill is as follows

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Mr. SHERMAN. Mr. Speaker, I yield myself so much time as I may consume.

Mr. Speaker, at Natans, the centrifuges are turning. Iran is perhaps half a decade away from a nuclear weapon. Iran, however, is not without its Achilles heels. The mullahs have mismanaged the economy to the point where they are rationing gasoline in Tehran. Iran has a vibrant political culture in which the behavior of the elites and the behavior of the people can indeed be influenced by outside information. The key is to be able to broadcast into Iran on RadioFarda a message. That message is that Iran will be diplomatically and economically isolated around the world, and especially from the United States, unless it drops its nuclear weapons program. The problem is, I can't lie that well in Farsi. The fact is we have not yet begun to use the economic and diplomatic levers available to the United States. And it is not yet true that Iran's nuclear program subjects it to the possibility of economic and diplomatic isolation.

The bad news, Mr. Speaker, is that we have not had the political will to reach into our economic and diplomatic tool box. The good news is we've still got a lot of tools lying there in the tool box. One of the best is divestiture. Divestiture needs to be part of a bigger economic and diplomatic strategy to isolate the government in Tehran. If we can dry up, however, Iran's access to foreign investment, if we can sever the ties between the multinational corporations and the government of Iran, we may be able to increase the cost of Iran's behavior and put enough pressure on that regime so either it decides, or its people insist, that it abandon its nuclear program.

Now, the key is to change the behavior of these multinational corporations, and the best way to do that is with American policies that make them choose between the benefits of doing business with the American people, American investors on the one hand, and the so-called benefits they might get from doing business with Tehran on the other.

So what does this bill do to begin and continue the divestment process? The bill mandates nothing except for the creation of a list by the administration, which I will get to in just a second. It provides a clear authorization from Congress for States to divest from companies conducting the certain identified activities in Iran, and it would shield both private pension plan managers, mutual funds and public sector pension plan managers from harassing lawsuits should they decide on their own initiative to divest from those companies carrying out certain activities in Iran. In doing so, this bill sweeps away an excuse from those investment managers who, up until now, haven't wanted to be bothered to divest, even though their beneficiaries are demanding it.

This bill also provides some standards. I mentioned this in the discussion of the Sudan bill. First, people want to know what activities should cause them to divest. Now, I have more than sympathy with those who say one penny of activity, sell one candy bar in Tehran and I don't want my money invested in your company. That's a purist approach. That's an approach some may choose to take. I think the better harnessing of America's economic power and the power of individual investors, individual decisionmakers, pension plans, mutual funds, et cetera, is to focus on three activities, and that is what this bill does.

It requires that 6 months after enactment, the U.S. Government, the administration, probably the Treasury Department but whichever department is identified by the President, produce a list of those international corporations that engage in any one of these three activities. The first is to invest $20 million in the energy sector of Iran. That is a standard we have adhered to for a long time since the adoption of what was then called the Iran and Libya Sanctions Act, now the Iran Sanctions Act.

The second are those firms selling munitions to the government in Tehran. And the third are those who extend credit of $20 million or more to the Iranian Government.

And at this point, let me pause, because the question arises, what is it to extend credit to the Iranian Government when the Iranian Government issues a long-term bond?

Is it just the company that buys the bond or the financial institution that buys the bond, or is it directly from the Iranian Government, or is it those that provide a secondary market by buying those bonds from the original purchaser?

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. SHERMAN. I yield to the gentleman from Massachusetts.

Mr. FRANK of Massachusetts. I thank the gentleman for making this point. The gentleman from California is a very careful student of the intertwined legal and economic issues, and the point he is making now is very important. We expect this to be subjected to a sensible economic analysis; that is, if you are providing real value to that government, then you are covered. Clearly, if you have a secondary market for bonds, you've enhanced the value of the initial instrument. So people who support a secondary market for a particular instrument are clearly investing in the underlying issuer. They know that. It is a conscious act. No one is going to be trapped.

So the gentleman is making a very important point, and we want to be very clear. We will be expecting the administration, in preparing this list, to use the same kind of economic analysis we would use in any other case. If an activity, a purchase, an investment, a loan, any financial activity is contributing to the financial enhancement of the Iranian Government, then it triggers, we would believe, this bill.

Mr. SHERMAN. I thank the gentleman and agree with him completely. This bill is designed to cause the list prepared by the administration to include those who invest in bonds issued by the Government of Iran.

I should point out that in identifying the three activities that are going to cause multinational corporations to be listed, that we are paralleling what we did just last week when this Congress passed the bill dealing with the Overseas Private Investment Corporation, which also focused on pretty much the same standards and said those multinational corporations engaged in those activities with the Government of Iran would not be able to be partners of OPIC in its activities around the world.

Now, the bill also provides that any State statute enacted prior to the publication of the first list of firms by the administration would be grandfathered. States do not have to wait and should not wait for the publication of this list by the administration.

States such as Florida, Ohio and California, which are proceeding with divestment measures, and any other States which might consider a divestment program need not wait for the Federal list, and whatever they choose to do will be grandfathered in this legislation.

Now, this bill states explicitly what I think was clearly true of both the Sudan bill we just discussed and this bill, and that is it provides a safe harbor but does not imply that that which lies outside the safe harbor is somehow forbidden. Section 7 of this bill would make it clear that the authorization that's been provided by this bill is just that, a safe harbor, that this bill in no way implicitly restricts or takes away whatever authorities the States, the pension managers and mutual funds already have.

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. SHERMAN. I yield to the gentleman from Massachusetts (Mr. Frank).

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Mr. SHERMAN. I thank the gentleman and agree with him completely.

I believe that divestment is already clearly authorized in the terms of the fiduciary trying to meet their fiduciary obligation. Investing in terror is bad business for States. I don't think they have an obligation to, in making their own investment policy, to conform to some Federal foreign policy. But if they do, Federal foreign policy for a long time has been very clear: don't invest in Iran. That's why we've had the Iran-Libya Sanctions Act, now the Iran Sanctions Act for quite some time.

So this bill will eliminate an excuse for those who do not want to, that have not yet, divested. It will provide a safe harbor, and it will provide guidance for those who want to use their investments to get multinational corporations to take the actions that will be most effective.

It provides a list of companies not to invest in, and it provides a standard to define what particularly it is we want the business community worldwide to desist from doing.

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