States Defy D.C. by Keeping Iran Sanctions
While the United States and other world powers have lifted oil and financial sanctions on Iran, several states continue to adhere to their own bans on investing or doing business with companies with ties to the country.
Although international inspectors determined in January that Iran has curtailed its nuclear program, it appears unlikely there will be any significant move toward backing away from those state-imposed sanctions. Rhetoric surrounding the issue in fact suggests the opposite - that more states may consider enacting new sanctions as a show of objection to the international agreement.
More than 20 states have laws preventing state pension funds from investing in companies that do business with at least some part of the Iranian economy. A few others have institutional policies in place that also prevent such investments, according to the advocacy group United Against Nuclear Iran (UANI), which pushes for the divestment laws, and the National Foreign Trade Council (NFTC), which opposes them. And more than 10 states either prohibit state government agencies, local government agencies or both from contracting with companies that trade with Iran.
Congress has sanctioned those laws since passage of the 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act. U.S. law had imposed some sanctions on Iran since the 1980s, including prohibitions against American oil companies working there, and limiting loans to Iranian companies by U.S. banks. The 2010 law additionally prohibited large investments in Iran’s petroleum industry, and other international sanctions banned the purchasing of Iranian oil, which would normally be the nation’s biggest export.
The lifting of sanctions in January re-opens the global market to Iranian oil, and frees up billions of dollars in Iranian money that had been frozen in international accounts. The agreement also lifts restrictions on Iranian shipping, and allows international banks to renew ties with Iranian banks.
The deal further discourages state and local governments from measures that are inconsistent with the new U.S. policy toward Iran, though as U.S. Secretary of State John Kerry (D)told a congressional committee last July it doesn’t prevent the states from keeping or imposing their own sanctions.
“But we would urge those states, if Iran is fully complying with this agreement, we will take steps to urge them not to interfere with that,” Kerry told the House Foreign Affairs Committee.
In at least two states, the federal government may get its wish. There had been bills filed in Wisconsin and Tennessee, two states currently without sanction measures in place, seeking to require pension fund divestment. But the Wisconsin bill appears unlikely to pass while the Tennessee measure is being withdrawn.
In contrast, at least one state that doesn’t already have such sanctions, Virginia, currently has legislation under consideration that would prohibit the Virginia Retirement System from investing in companies with “current substantial business operations in Iran,” and requiring the system to divest from any current holdings in such companies.
None of the 20-plus states with laws on the books currently has a measure to repeal the prohibitions. Sanctions opponents at the National Foreign Trade Council say it is unlikely any states will vote to repeal them.
“The politics of this issue run strongly in the opposite direction,” said council vice president J. Dan O’Flaherty.
Resolutions were passed in both the U.S. Senate and House in December expressing support for any states that continue to sanction companies that work in or trade with Iran. And at least one presidential candidate, Sen. Ted Cruz (R-Texas), has encouraged states to keep or impose new sanctions. And just last week, U.S. Rep. Ron DeSantis (R-Florida) introduced the “State Sanctions Against Iranian Terrorism Act,” spelling out that the state laws aren’t pre-empted by the agreement, or “any federal law.”
Much of the support for the state laws is rooted in opposition to the nuclear deal.
“Most state legislatures are Republican and seem to oppose the Iran deal and the president’s move,” noted Matan Shamir, executive director of United Against Nuclear Iran, which was behind model legislation to prohibit state dealings with companies with Iranian ties.
Wisconsin Rep. Dale Kooyenga (R) said Iran backed the terrorists that tried to kill him and other American soldiers when he was serving in Iraq.
“I don’t think their intent has changed,” Kooyenga said. “It’s to sew chaos in the region and around the world. “This bill is also about sending a clear message that Wisconsin believes (the Iran nuclear agreement) is a grave mistake.”
He added that he’s working to make his bill applicable only to companies that might help Iran develop nuclear or other weapons.
“It’s not our intention to block Coca-Cola,” he said, noting, “they sell Coke in Iran.” But Kooyenga also acknowledged that with time running out on Wisconsin’s session, the measure may not have enough interest to pass.
In Tennessee, Rep. Judd Matheny (R), who filed legislation last year to require divestment there, said through a spokeswoman that he was pulling the bill from consideration, but didn’t offer a reason.
Florida was one of the pioneering states in sanctions against Iran, passing its law in 2007. Florida prohibits pension fund investments, but also has a ban on state contracting with companies, most of them large multinationals, that do business in Iran.
Florida shouldn’t back off, says Jeff Atwater the state’s elected state Chief Financial Officer and one of four trustees of the state pension fund.
“A state can invest funds — or not invest funds — where it chooses,” Atwater wrote in a statement late last year after the nuclear deal was reached. “Absent a treaty, which the ... federal Iran deal is not, the federal government cannot force states to do business, either directly or indirectly, with regimes that fund terrorism and systematically abuse human rights.”
Atwater, a former Florida Senate president, supported Florida’s divestment bill when it passed, and points out it has a provision allowing Congress or the President of the United States to void the state’s divestment law.
“At the time of enactment, this seemed prudent,” Atwater wrote. “But at that time, we could not have dreamed that our country’s leadership would enter into an agreement at odds with the sentiments of most Americans and engage with a state that openly sponsors terror, holds American hostages, threatens the stability of an entire region, seeks to eradicate Israel from the face of the earth, and whose leaders presently call for ‘Death to America.’”
California, where the nation’s two largest pension funds, the state’s employee and teachers’ funds, have been prohibited since 2007 from investing in companies that do business with Iran, also appears poised to remain divested.
Sen. Joel Anderson (R), who sponsored the bill that required divestment, said late last year that nothing was changing.
“I am happy to report that both CalPERS and CalSTRS confirmed that no change to the current ban and investment strategy put in place by AB 221 is contemplated or justified in light of recent events,” Anderson, who represents parts of the San Diego area, said in a statement. “California will continue to refuse to invest in Iran.”
There isn’t a comprehensive accounting of how much pension funds have divested from companies doing business with Iran - though Florida, which is thought to have divested the most, reported at the end of last year that its law resulted in the divestment of more than $1.3 billion from companies affected by its law. Most of those companies are on Florida’s list for doing business in Iran, though some are on the list because they do business in Sudan, which, like Iran, is considered by the United States as a state sponsor of terrorism.
In 2011, the nation’s largest public pension fund, the California Public Employees’ Retirement System, or CalPERS, announced it was selling about $160 million in stock in companies doing business either in Iran or Sudan.
At least one major multinational has ended business in Iran because of one of the laws. Swiss engineering firm ABB stopped working in the Iranian oil and gas business, at least in part because of California’s refusal to contract with the company because of its law.
UANI’s Shamir said that regardless of the new nuclear deal, Iran should still be sanctioned. “They are still a state sponsor of terrorism,” he said.
That is legally part of the consideration in some states. The Florida and California laws, for example, are both based on Iran’s presence on a U.S. State Department list of “State Sponsors of Terrorism.” Iran has been on the list since 1984.
The NFTC’s O’Flaherty said that, as much as anything, may keep the measures in place.
“A lot of these bills are contingent on Iran being removed from the state-sponsored terrorism list, and that ain’t gonna happen,” O’Flaherty said.
The NFTC has opposed both divestment and contracting laws. The council argues to states that contracting bans, in particular, were determined to be unconstitutional by the U.S. Supreme Court ruling in Crosby v. National Foreign Trade Council, which challenged Massachusetts’ prohibition on contracting with companies doing business with Myanmar.
When states take up procurement or contracting bills, “We write them and we say, ‘Hey, this bill is unconstitutional,” said O’Flaherty. “They don’t give a damn.”
With no Supreme Court case on the divestment laws, it’s more ambiguous. And complicating matters is the 2010 federal sanctions law, which says specifically that states may enact contracting and divestment laws.
Shamir said it doesn’t seem likely that the federal government would go beyond the “urging” that Kerry mentioned, and actually move to pre-empt any of the state laws.
“That would be a political hot potato,” Shamir said. “It would create such a big fight, there’d be so much push back from the states, and from Congress as well.”
-- By SNCJ Correspondent David Royse
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