As the Obama administration imposes new economic sanctions against Iran in an effort to get it to abandon its nuclear program, some state legislatures are ramping up sanctions of their own.
Following the lead of California and Florida, New York state is now considering a ban on contracts with all companies doing business with Iran. The new legislation enjoys bipartisan support and is expected to pass. But so far, only these three states have responded to the call issued by some advocacy groups for states to contribute to the escalating American sanctions regime.
“It has a very marginal effect,” said Kenneth Katzman, a specialist in Middle East Affairs with the Congressional Research Service, referring to state sanctions. Katzman, who has done extensive work on the impact of sanctions against Iran, believes that to make a dent in Iran’s nuclear program, the United States would have to get Russia and China to stop working with Iran’s oil industry. That is a goal currently beyond the reach of American diplomacy.
Mark Dubowitz, executive director of the Foundations for Defense of Democracies, acknowledged that all sanction measures taken together “will not amount to a silver bullet.” But they might, he said, be “silver shrapnel that will injure the Iranian regime.” Dubowitz stressed that no measure, big or small, should be discounted in the push to stop Iran. “State sanctions and divestments are important elements that mutually reinforce federal sanctions,” said Dubowitz, who recently testified on Iran sanctions at a hearing held by the House Committee on Oversight and Government Reform.
On November 21, the administration announced a new round of sanctions against Iran that included tightening measures against its oil and petrochemical industries, and applying more scrutiny to financial institutions dealing with Iran to prevent money laundering. These measures were viewed as closing loopholes in existing sanctions rather than as a new phase in the sanctions regime.
Experts point to two measures that could deal a definitive blow to Iran’s economy: blocking international use of Iran’s refined oil, or targeting the nation’s central bank, a move that has already gained support in Congress. But either move would inflict pain on the United States and the global economy, as both could lead to a spike in oil prices worldwide.
State-level boycotts offer local lawmakers a way to join the global effort against Iran’s alleged attempt to develop nuclear weapons and to amplify a message to the business community about the price companies working or investing in Iran will pay.
Iran, which has vowed to continue its nuclear development drive despite sanctions, asserts that its program is for peaceful purposes.
International, federal and local sanctions against companies doing business with Iran have cost the Islamic Republic an estimated $60 billion in lost investments over the past two years. They have also significantly damaged its oil industry and effectively crippled the country’s natural gas sector.
The proposed New York State bill, introduced on October 27 by Assembly Speaker Sheldon Silver, a Democrat, will require the state to create a list of foreign companies and individuals that invest more than $20 million in Iran’s energy sector. (American entities are already banned from investing there.) Firms on the list will be banned from bidding for New York State contracts and will be cut out of any state funding. Iran is determined to acquire nuclear weapons, Silver said in a statement following the bill’s introduction, and therefore, “for the safety of our nation, as well as our allies throughout the world, including Israel, we cannot allow that to happen.”
The proposal won quick bipartisan support. Republican New York Senate majority leader Dean Skelos endorsed the bill and praised Silver, a political opponent, for “taking the lead on this important legislation.”
The vote on Silver and Skelos’s proposal in New York will probably take place next year.
Barring foreign companies doing business with Iran from receiving state contracts is viewed as a relatively easy step, since it does not involve any loss of American jobs and does not impact negatively on local businesses. Still, the list is expected to include several large industrial international conglomerates, such as China National Petroleum Corporation, the Korean company, Hyundai, and Russia’s LUKOIL oil company.
New York’s bill builds on the success of the law passed last September in California, the first state to bar contractors invested in Iran. The California law, and the publication of a blacklist of companies invested in Iran’s energy sector, proved to be effective in pressing international firms to take action and make clear they had severed their business ties with Iran. In one case, ABB, a Swiss-based engineering company, wrote California’s Department of General Services that it had “decided to complete its exit from all business in the oil and gas sector in Iran by the end of September 2011.” Three other international companies reached out and stated that they no longer do business with Iran.
Behind the drive to dissuade international companies from dealing with Iran stands an organization called United Against Nuclear Iran, which has developed model legislation for states to use.
“We are focusing on the state front,” said Nathan Carleton, UANI’s communications director. “That seems the most effective. This is a very simple thing: If you do business with Iran, you have to make a choice.”
UANI was founded in 2008 as a bipartisan effort. Its founding leaders were Richard Holbrooke, a top American diplomat in Democratic administrations who passed away last year, and R. James Woolsey, former head of the CIA, known for his conservative views. While UANI works in coalition with many Jewish groups active on the Iran issue, it is not itself a Jewish or pro-Israel organization. Its founding members include Dennis Ross, a veteran Middle East peace negotiator under both Republican and Democratic presidents who recently resigned as President Obama’s top Middle East adviser. Mark Wallace, a former GOP political operative who served under President George W. Bush as an envoy to the United Nations, now leads the group.
On July 14, UANI sent letters to governors and legislative leaders in all 50 states, urging them to adopt state certification legislation to ensure that their respective states are not dealing with companies active in Iran.
The legislation, said Carleton, “has proven a highly popular cause among politicians of all stripes, and typically passes quickly and unanimously after being introduced.”
Contact Nathan Guttman at firstname.lastname@example.org