Iran Bill May Hinder Efforts on Nukes

By Marc Perelman

Published March 24, 2006, issue of March 24, 2006.
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Congressional efforts to enact stringent sanctions against Tehran could hamper the administration’s drive to cobble a broad international coalition to curb the Iranian nuclear program.

Last week, the House International Relations Committee passed 37-3 the Iran Freedom Support Act, which would authorize the president to promote democracy in Iran and slap sanctions on foreign companies investing in Iran’s oil sector.

The administration supports the portion of the bill on promoting democracy. But it opposes the sanctions provisions, on the grounds that such measures would create tensions with European and Asian allies and, more broadly, encroach on the executive branch’s foreign policy prerogatives.

The White House and its House allies were forced to relent in the face of overwhelming support for the legislation.

The State Department said Monday that the mandatory sanctions would “create tensions with countries whose help we need in dealing with Iran, and shift the focus away from Iran’s actions and spotlight differences between us and our allies.”

Rep. Henry Hyde, an Illinois Republican and the chairman of the House International Relations Committee, also raised concerns in comments to reporters.

“By threatening tough sanctions, not against Iran but against third parties who invest in Iran’s petroleum industry, [the bill] targets our allies,” he said. “The approach is divisive and, understandably, our allies have resisted.”

Also complicating the administration’s approach is its interest in securing Iran’s cooperation in Iraq. This week, both President Bush and Iranian Supreme Leader Ali Khamenei publicly endorsed official bilateral talks between the two countries on Iraq.

In New York, meanwhile, diplomats at the United Nations were negotiating over future steps to address the issue of Iran’s nuclear program.

The House bill is slated to replace the expiring Iran-Libya Sanctions Act, which targeted foreign companies investing more than $20 million in those two countries’ oil sector. The new measure would maintain only the Iran-related sanctions.

The legislation enables the president to waive any sanctions for national-security reasons, but requires the administration to complete investigations of reported violations within 180 days.

Passage in the House seems likely, given that two-thirds of its members are sponsors of the bill. However, sources on Capitol Hill said that the Senate was likely to balk at imposing such stringent sanctions on foreign companies doing business with Tehran, despite the fact that about 40 senators have signed on to a similar bill.

The proposed House bill also includes a provision introduced by Rep. Brad Sherman, a California Democrat, aimed at prohibiting American companies from doing business with Iran through foreign subsidiaries.

The issue became salient after revelations in the summer of 2004 that major companies such as Halliburton, Conoco-Phillips and General Electric were using wholly owned foreign subsidiaries to conduct business with Iran, thus skirting American sanctions.

Senator Frank Lautenberg, a New Jersey Democrat, has proposed provisions similar to Sherman’s on several occasions. Lautenberg attached an amendment to the Defense Appropriations bill in 2004 and 2005 and to the Intelligence Reform bill last year. He was defeated each time in party line votes.

After each party line Senate vote, Democrats accused the administration of protecting Halliburton, noting that Vice President Dick Cheney served as CEO of the oil services giant in the late 1990s. So far, six American companies — Halliburton, G.E. and Conoco-Phillips, as well as Aon, Cooper Cameron and Foster Wheeler — pledged to cease any activities in Iran. The pledges follow a series of shareholder resolutions initiated by the New York City comptroller, Democrat William Thompson, who has oversight over major state pension funds, forcing the companies to sever their links to Iran.

The Sherman provision was inserted into the House measure after consultations with the State Department and with such leading Republicans as Hyde, according to Sherman. He said that the State Department had accepted the language, which specifies that American companies are prevented from doing business through foreign subsidiaries if the deals were expressly used to circumvent American law. As such, it excludes foreign subsidiaries over which American corporations have no effective control.

“The measure is something that our allies will be able to accept,” Sherman said in an interview. “The language has been modified to ensure State [Department] acquiescence.”

Sherman is working on a more comprehensive bill on Iran that would ban all imports from the country, reversing a Clinton administration decision to allow the imports of pistachio, caviar and Persian rugs. The bill also seeks to bar firms that violate the law from accessing American capital markets, and it requires the Bush administration to oppose World Trade Organization membership for Iran until it abandons its nuclear program.

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