WASHINGTON -(Dow Jones)- A key House panel Tuesday voted overwhelmingly to pass a wide-ranging bill that would toughen U.S. sanctions on Iran and on companies that invest in the country.
The Foreign Affairs Committee voted 37-1 to pass the Iran Counter- Proliferation Act of 2007. The bill is part of a concerted congressional effort to tighten an economic stranglehold on Iran to deter it from a nuclear fuel enrichment program which the U.S. and other countries believe is for nuclear weapons.
"Our goal must be zero foreign investment – let me repeat this, zero foreign investment – in Iran’s energy sector," Chairman Tom Lantos, D-Calif., said. " That is the only formula that can prevent Iran’s acquisition of nuclear weapons."
The chairman said the bill already had more than 300 co-sponsors before heading to the floor. In May, the House Financial Services Committee passed a " name-and-shame" bill that would require the federal government to publish the names of companies investing in Iran and allow public and private pension funds with hundreds of billions of dollars in assets to divest from companies on the list. The Senate is considering legislation similar to these two House bills.
Although the bill, if passed into law, would sanction any investment in Iran, it particularly targets oil company investments and banking transactions. It requires the president’s administration to enforce the Iran Sanctions Act, ending the State Department’s ability to waive its enforcement. Under the Iran Sanctions Act, foreign companies that invest more than $20 million in Iran’s energy sector can be penalized by the U.S.
An approved amendment to the bill also allows the federal government to seize the assets of corporate officers of companies investing in Iran.
"Corporate barons running giant oil companies – who have cravenly turned a blind eye to Iran’s development of nuclear weapons – have come to assume that the Iran Sanctions Act will never be implemented," Lantos said. "This charade now comes to a long overdue end this morning."
Several companies with multi-billion dollar operations in the U.S., or that are listed with the Securities and Exchange Commission, including Royal Dutch Shell PLC (RDSA), Norsk Hydro ASA (NHY.OS), Total SA (TOT) and China’s National Offshore Oil Corp. (CEO), are in negotiations for major oil and gas deals with Iran and could be hit by the bill if passed.
"My legislation will increase exponentially the economic pressure on Iran, and empower our diplomatic efforts by strengthening the Iran Sanctions Act," Lantos said.
Ranking member Ileana Ros-Lehtinen, R-Fla., said the bill would also affect petroleum products and liquefied natural gas exports from Iran. Iran is in the process of contracting some of the biggest LNG projects in the world.
The lone dissenter on the bill, Jeff Flake, R-Ariz., argued a position the administration has repeatedly stated: Unilateral sanctions would undermine multilateral sanctions.
The U.S. State Department has balked at being forced to implement the Iran Sanctions Act, saying enforcement could jeopardize an international coalition that is seeking to persuade Tehran to abandon its nuclear program. Instead, Undersecretary of State Nicholas Burns has said he’s been trying to persuade heads of state and companies not to invest in Iran. Burns told Congress he couldn’t support the act.
"Abusing its waiver authority and other flexibility in the law, the executive branch has never sanctioned any foreign oil company that invested in Iran," Lantos said. "Those halcyon days for the oil industry are over."
By law, the administration has to declare companies that are in violation, even if it is going to use its waiver authority. Though many companies have invested hundreds of millions of dollars in Iran, the government has yet to declare any company in violation of the Iran Sanctions Act.
The administration has also relied on U.N. Security Council sanctions – now in their third round of tightening – and financial transactions. The Treasury Department recently created the terrorism financial intelligence team, which has been able to persuade major banks such as Credit Suisse Group (CS), HSBC Holdings PLC (HBC) and Commerzbank AG (CBK.XE) to stop dealing with Iranian banks. The Treasury also has prohibited U.S. dollar transactions with two Iranian banks it linked to terrorism and support of the regime’s alleged efforts to build a nuclear bomb.
The Foreign Affairs Committee’s bill seeks greater exclusion of the Iranian banking sector. The bill authorizes an additional $60 million in funding for the terrorism team for next year, and the same amount until 2010.
Lantos’ Iran Counter-Proliferation Act also would eliminate some U.S. tax incentives for oil companies investing in Iran and close a loophole that allows foreign subsidiaries of U.S. companies to invest more than $20 million in Iran.
Victor Comras, a retired diplomat and a consultant on terrorist financing, told the Senate Commerce Committee in late April that around 35 subsidiaries of U.S. companies were known to be operating in Iran, including oil services company Smith International Inc. (SII), General Electric Co.’s (GE) Canadian, Italian and French subsidiaries, and a Swiss-owned Caterpillar dealership in Tehran. According to its Web site, Schlumberger Ltd. (SLB) also has a well services unit in Tehran.
The bill could affect economic production in Iran by prohibiting business deals with or funding for the Islamic Revolutionary Guards Corps, or the IRGC. The legislation, if passed, would designate the IRGC as a "foreign terrorist organization."
"The Revolutionary Guard, which is a major base of support for (President Mahmoud) Ahmadinejad, owns huge economic enterprises in Iran," Lantos said. " Foreign banks will think twice about dealing with these enterprises once the Revolutionary Guard is declared a terrorist organization."
The IRGC’s engineering arm, Khatam-al-Anbiya Construction Headquarters, or Ghorb, last year won a $2.3 billion contract to develop two phases of Iran’s giant South Pars gas field in the Persian Gulf. Ghorb also is building a $1.3 billion pipeline that will carry gas from southwestern Iran to the Pakistan border.
