Congressman Brad Sherman, the Ranking Member of the House Foreign Affairs Subcommittee on Terrorism, Nonproliferation and Trade, reintroduced the Stop Iran's Nuclear Weapons Program Act late last week.
Sherman's new bill would tighten economic and diplomatic pressure on Iran and its remaining business partners. Congressman Ed Royce is the lead Republican cosponsor of the bill. Sherman first introduced the bill in the previous Congress in September 2010. Senator Robert Casey and Senator Scott Brown introduced similar legislation under the same name in the Senate in December 2010.
President Obama signed into law the last round of economic sanctions against Iran on July 1, 2010. 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 tougher trade sanctions against Iran, effectively barring their firms from developing Iran's energy sector and reducing Iran's access to the international financial system. Sherman's bill seeks to follow on with even more measures designed to isolate Iran.
"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 Sherman.
Among the provisions of the bill, 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 target the IRGC and its business partners for greater sanctions.
A longer summary of the provisions of the Stop Iran's Nuclear Weapons Program Act is below.
Summary of the Stop Iran's Nuclear Weapons Program Act, H.R. 1655
Sanction Entities that Pay in Advance for Oil Deliveries or Sign Long-Term Contracts to Purchase Oil and Gas from Iran. In 2003, Japanese purchasers reportedly paid several billion in cash for future oil deliveries over the course of several years. In 2008, 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 Iran Sanctions Act (ISA).
Sanction Entities that Subscribe to Iranian Sovereign Debt. Iran recently announced that a subsidiary of its national oil company has issued $4.2 billion in bonds to help finance the development of the South Pars gas field. The bill includes a provision that would make buying or facilitating the issuance of Iranian sovereign debt, including government bonds or bonds issued by a state-controlled firm, an activity sanctionable under the ISA.
Provide for Sanctions Against Firms that Enter into Joint Ventures or Other Investment Arrangements with Iran's National Oil Company or Other Iranian Firms. Late last year, BP announced it was suspending a project involving Iran's national oil company off the coast of Scotland due to concerns about EU sanctions. We need to encourage other companies with similar arrangements to follow suit. Currently, Iran's national oil company has invested in a number of joint ventures to develop oil and natural gas projects outside of Iran. These type of deals provide 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.
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 -- effectively ending the Halliburton loophole. This provision is based on legislation from previous Congresses, including an amendment to H.R. 282 from the 109th Congress, a bill authored by Chairman Ileana Ros-Lehtinen.
Fighting the IRGC. Provisions in the new Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) target the Iran Revolutionary Guard Corps 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 60 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 Corps, especially in sensitive industries such as the energy sector. The bill also provides for secondary sanctions against any firms that continue to do business with them or the main IRGC. This language is based on stand-alone legislation developed with Chairman Ileana Ros-Lehtinen during the 111th Congress (H.R. 2375).
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. This is similar to provisions included in H.R. 1400, authored by the late Rep. Tom Lantos, from the 110th Congress.
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. If they are unable to fly due to needed repairs, those planes should remain grounded until the nuclear crisis is resolved. Unfortunately, the State Department recently noticed its intent to license the inspection and repair of 15 U.S. origin aircraft, including four planes operated by Mahan Air, a suspected IRGC front company.
Comprehensive Denial of U.S. and State Government Business 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. Expanding the provisions of CISADA, the bill would also allow U.S. states and local jurisdictions to enact laws to deny licenses -- for example, permission to sell insurance -- to firms that conduct activities 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. This language is similar to legislation developed with Chairman Ros-Lehtinen and current Terrorism, Nonproliferation and Trade Subcommittee Chairman Ed Royce in the last Congress (H.R. 2290).
Reduce Contributions to the World Bank if it Resumes Lending 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. We must stop this respected financial institution from approving any further assistance to Iran and work to prevent the distribution of the benefits already approved. The bill would require that the U.S. work to stop disbursements and prevent future assistance. It would reduce funding for the Work Bank should it resume lending 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, so long as the taxpayer purchases replacement investments without such connections to 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. This measure could provide modest encouragement for such beneficial financial decisions (similar to H.R. 3516, from the 111th Congress).
Bar Entry for Those that Engage in, or Serve as Senior Executives in Companies that Engage in, Sanctionable Activities. This provision would bar from the United States senior executives at corporations that conduct activities sanctionable under the Iran Sanctions Act and other statutes targeting Iran. This provides additional, powerful disincentive for corporate decision-makers (new provision, not in 111th version of this legislation).