Congress Moves to Impose Iran Sanctions

C. I. Bosley

The House of Representatives July 31 passed two pieces of legislation tightening sanctions on Iran, in response to the international row over its nuclear ambitions. Both bills garnered broad bipartisan support. Further measures focused on Iran are also on the congressional agenda.

By a vote of 408 to 6, the House approved the Iran Sanctions Enabling Act. To prevent lawsuits on the grounds of fiduciary irresponsibility, the bill extends a legal shield to companies and financial institutions that undertake disinvestment from firms with holdings of more than $20 million in Iran’s energy sector, firms selling armaments to Iran, and firms extending loans in excess of $20 million to the Iranian government. State and local governments are also allowed to prohibit investment in such firms, and the Department of the Treasury must publish a list of all entities holding more than $20 million in Iran’s energy sector.

A second bill, authored by Rep. Ileana Ros-Lehtinen (R-Fla.), would amend current sanctions on Tehran to close a loophole that has permitted foreign subsidiaries of U.S. parent companies to sidestep prohibitions on investment and trade with Iran. The current sanctions were imposed by President Bill Clinton in 1995. The House approved the bill by a vote of 415 to 11.

In the Senate, Sen. Gordon Smith (R-Ore.) incorporated similar provisions concerning foreign subsidiaries into the broader Iran Counter Proliferation Act. This bill would freeze almost all trade between the United States and Iran. Save for food and medicine, all U.S. exports to Iran would be banned, as would all imports from Iran to the United States. Currently, imports of pistachios, caviar, and carpets from Iran are permitted, owing to a policy shift undertaken by the Clinton administration to improve relations with reformist president Mohammed Khatami.

In addition, the bill bars the executive branch from facilitating Iran’s accession to the World Trade Organization (WTO). As of yet, Iran has not sought membership in that organization. This provision stands in contrast to the June 2006 proposal made by the United States, in concert with China, France, Germany, Russia, and the United Kingdom, which would have supported Iran’s application to the WTO had Tehran agreed to give up its enrichment and reprocessing technology, which could produce material for nuclear weapons.

To discourage countries from building facilities to enrich and reprocess fissile material—activities at the core of the current controversy over Iran—the bill also designates $50 million in appropriations toward establishing an international bank of nuclear fuel, under the authority of a multilateral institution such as the International Atomic Energy Agency (IAEA). Another Senate bill, the fiscal year 2008 energy and water appropriations act, allots a supplementary $50 million for the same purpose. In June, the House and the Senate Foreign Relations Committee approved similar legislation for establishing an assured nuclear supply. (See ACT, July/August 2007. )

Moreover, the Senate’s Iran Counter Proliferation Act singles Russia out for the nuclear reactor it is currently constructing in the Iranian port of Bushehr and for which Iran’s government has concluded a 10-year agreement for purchasing enriched uranium from Moscow. (See ACT, November 2006. )

In an attempt to entice Russia to halt nuclear cooperation with Tehran and to take a more tenacious stance in the UN Security Council, the Senate bill would deny Russia Washington’s cooperation on any nuclear projects unless the Kremlin halts “all nuclear assistance” and all transfers of “advanced conventional weapons” to Iran, or unless Tehran “completely, verifiably, and irreversibly” gives up its enrichment and reprocessing capabilities. The United States has long sought to stop Russian sales of advanced weaponry to Iran, most recently in January, when Washington opposed Moscow’s sale of Tor-M1 anti-aircraft missile systems.

This Russia-focused stipulation has proved controversial, as the sanctions on Russia it envisions cannot be overridden by presidential waiver. Opponents inside and outside the Bush administration believe the provision unnecessarily antagonizes Russia, thereby reducing the likelihood of achieving a diplomatic solution under the auspices of the UN Security Council, where Russia and the United States are two of the five veto-holding members. Because Iran has agreed to purchase low-enriched uranium for its reactor, critics contend, the Bushehr project poses little risk of proliferation. (See ACT, July/August 1996 and September 2002. ) In addition, this clause of the Smith bill would directly affect the pending nuclear cooperation agreement between Russia and the United States, initialed by Presidents George W. Bush and Vladimir Putin July 3 (see page 29).

The Bush administration has stated that it generally “opposes mandatory sanctions and other comparable constraints on the President’s flexibility.” In 2006 the Department of State successfully lobbied against passage of legislation sponsored by Sen. Rick Santorum (R-Pa.) that would have ratcheted up sanctions on Iran, contending it would have undermined international diplomacy. (See ACT, July/August 2006. )

Diplomats furthermore maintain that the Kremlin has provided more back-channel cooperation than its public pronouncements indicate. Moscow, they contend, used the excuse of a dispute over Iran’s failure to make scheduled payments to delay finishing work at Bushehr in order to increase pressure on Tehran. As State Department spokesperson Tom Casey noted May 11 of negotiations on sanctions, “There was good private consultation with the Russians, the Russian leadership.”

The House version of the Iran Counter Proliferation Act, authored by House Foreign Affairs Committee Chairman Tom Lantos (D-Calif.), would impose further punitive measures on firms maintaining business ties to Iran. The legislation may be voted on after the congressional summer recess. Currently, it has 323 co-sponsors, enough to override a presidential veto, should such a vote become necessary.

“Our goal must be zero foreign investment in Iran’s energy sector,” Lantos stated June 27 at a committee session. “That is the only formula that can prevent Iran’s acquisition of nuclear weapons,” he argued.

Pursuant to the Lantos bill, entities found to have violated the ban on financial and business transactions with Iran may be denied U.S. bank loans exceeding $10 million, forbidden from concluding procurement contracts with the U.S. government, and may face a ban on imports to the United States. Under current U.S. law enacted in 1996, the White House is instructed to impose sanctions on foreign entities engaging in significant energy-sector investments in Iran, although the president may waive this stipulation. Both Bush and Clinton have chosen not to sanction any companies under this provision in order to avoid disputes with allies in Europe and Asia. (See ACT, June 2002. ) However, the Lantos bill would remove the president’s ability to waive this requirement.

In addition, the bill encourages the State Department to designate Iran’s Revolutionary Guards Corps as a terrorist organization. In August, press reports indicated that the White House was taking steps in this direction.

Several Western governments whose companies do business with Iran are reportedly lobbying Capitol Hill for removal of the clause requiring the president to impose sanctions. There has even been talk of claims against the United States before the WTO.

Yet, Congress seems not to be easily swayed. When Arms Control Today asked on Aug. 8 whether the various sanctions bills before Congress risked undermining multilateral Security Council initiatives, Rep. Brad Sherman (D-Calif.), a member of the House Foreign Affairs Committee and one of the bill’s co-sponsors, responded, “Isn’t it really the EU’s continued refusal to adopt measures that prevent their own companies from doing business with Iran that is undermining our common diplomatic efforts?”