Bipartisan sanctions and economic war, again

16Jul08

Now it seems Senators Christopher Dodd (d) and Richard Shelby (r) have announced (July 15) yet another new “bipartisan” agreement on a new Iran sanctions package.  According to Dodd, they have reached a bipartisan agreement on legislation that will expand U.S. sanctions on Iran with respect to weapons proliferation, support for terrorism, and the destabilization of its neighbors in the Middle East.  The Banking Committee will consider the legislation on Thursday.  Two cheers for bipartisanship. (raspberry noise)

Senator Dodd’s website states:

“Iran’s missile tests last week underscore its serious threat to our allies and interests in the region,” said Dodd.  “This bipartisan bill strengthens economic sanctions against Iran, and authorizes divestment from companies that do business with Iran’s key oil sector to increase pressure on its government to meet the demands of the international community.  It also helps to prevent the illegal diversion of sensitive U.S. technologies to Iran.  This legislation is a critical component to efforts to advance peace and stability to this vital region.”

 “I am pleased to join Chairman Dodd in supporting this important legislation,” said Shelby.  “Iran is a growing and serious threat, and it is imperative that the United States avail itself of every possible measure to ensure that Iran changes its behavior in a manner that promotes peace and stability.  This legislation is a step in that direction, and I look forward to helping Chairman Dodd advance it.”  

Note the reference to Iran’s missile tests, which as blogged earlier, were not that dramatic and did not involve any unique or new weapons systems.  But they worked as an attention-getter.

Dodd’s office sumarizes the proposed legislation.  Here are selected highlights.

Expansion of Definitions in Iran Sanctions Act (ISA): This provision expands the definition of persons subject to sanctions to include financial institutions, underwriters, insurers, export credit agencies and others, and expands the definition of “petroleum resources” in ISA to include oil and liquid natural gas pipelines, oil and liquid natural gas tankers, and products used to construct or maintain them.     

Codification and expansion of export and import bans on goods to and from Iran:  In accordance with the International Emergency Economic Powers Act (50 U.S.C. 1701-1707), certain executive orders currently prohibit, with some exceptions, the direct or indirect exportation of U.S.-origin goods to Iran, and the direct or indirect importation of Iranian-origin goods into the United States.  The Chairman’s mark codifies the direct and indirect export ban on U.S. goods destined for Iran, exempting food, medicine, medical devices, and other humanitarian assistance; informational materials other than those subject to control under the Export Administration Act; and goods or services necessary for safe commercial aircraft operation that are approved by the Secretary of the Treasury and licensed appropriately.  The measure provides an exception from the import ban for informational materials.  

Freezing of assets of certain Iranian persons:  Under current law, the President has frozen the U.S. assets of several Iranian governmental, military, and quasi-governmental entities, as well as those of Iranian individuals designated as proliferators of weapons of mass destruction or terrorists, and the U.S. assets of their supporters. The proposal effectively removes the President’s discretion to freeze or not freeze such assets, and instead requires the President to freeze the funds and assets under U.S. jurisdiction of Iranian diplomats and representatives of other government and military or quasi-governmental institutions of Iran, and their family members or associates to whom they have transferred assets on or after January 1, 2008, if such persons are found to have been involved in proliferation-related or terrorist activities. The provision also requires financial institutions to report to the Office of Foreign Assets Control on any assets of a person so ed. The President must report on such asset freezes to Congress within 14 days. 

Ban on U.S. Government Contracts for Entities Subject to Sanctions: This ban would prohibit U.S. or foreign firms from entering into procurement contracts with the federal government for goods or services if the entity meets the criteria for sanctions under the Iran Sanctions Act.

Each of these sanctions provisions would be subject to a waiver by the President if he determines that such a waiver would be in the national interest of the United States, and if he reports to Congress describing the reasons for the waiver. 

U.S. Parent Company Liability for Violations of Sanctions by Foreign Subsidiaries: Under current law, foreign subsidiaries of U.S. companies may invest in Iran if the foreign subsidiary is completely independent of the U.S. parent company.  The proposal subjects U.S. parent companies to sanctions if the parent company establishes or maintains a subsidiary to circumvent U.S. sanctions law, and if the subsidiary engages in activity which, if committed in the U.S. or by a U.S. person, would violate sanctions law. The provision does not apply to those firms which terminate business with such an entity or which divest themselves of the subsidiary within 90 days of the legislation’s effective date. The President may waive this requirement if he determines that such a waiver would be in the national interest of the United States, and reports to Congress on the reasons for the waiver.

Authorization of Divestment: Patterned after legislation enacted last year to enable divestment from firms investing in certain sectors in Sudan, the Chairman’s mark gives authority to State and local governments to divest from any company that invests $20 million or more in the energy sector in Iran, or extends $20 million or more in credit to be used for investment in the energy sector in Iran.While not mandating divestment, this authorization is designed to recognize that investors may have moral, prudential or reputational reasons to divest from companies that accept the substantial business risk of operating in countries subject to international economic sanctions. 

Identification of Countries of Diversion Concern:  If the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of the Treasury, determines that a country is a destination of diversion concern,  either because a country is determined by the Secretary of Commerce to be directly involved in trans-shipment or illegal diversion, or one year after being listed a country as a Destination of Possible Diversion Concern has failed to cooperate in efforts to improve its export control system, it shall be subject to additional U.S. licensing requirements for sensitive technologies. The President may waive imposition of these licensing requirements if he determines that such a waiver is in the U.S. national interest, and submits a report to Congress describing the reasons for the determination. 

According to Iran Nuclear Watch, the above is the “least of all sanctions evils” since it drops the controversial provision that would bar nuclear cooperation between the United States and Russia until Russia halts missile and nuclear energy aid to Iran. This provision has pr oven to be the most significant roadblock to both the Iran Counterproliferation Act of 2007 (S.970) and the Iran Sanctions Act of 2008 (S.3227).  Instead, countries like India and Russia are merely to identified as “countries of possible diversion concern.”   US contributions to the World Bank are also implicated if the funds are used to go to Iran.

I agree with INW that sanctions are a poor substitute for talking.  Congress – and the majority of Democrats – appears to be signing on to the Administration’s uniformly punitive approach to Iran.  It is difficult to see how such measures assist the EU or Russia in their diplmatic efforts, or will do anything other than strengthen the hand of conservatives in Iran.

Nor are sanctions a “substitute” for war.  Often they are a prelude to war – as with Japan in 1940 and 1941, and with Iraq before 1991.  These measures condition the American public to accept a bellicose and aggressive position that disfavors diplomacy and only heightens international tensions.

Filed under: American politics, Sanctions   |  1 Comment