Sherman Statement on Iran Sanctions
Washington, D.C. - For thirteen years in Congress, I’ve been focused on Iran. When Madeleine Albright opened our markets to Iranian goods in 2000 --- not to oil, but only the stuff that we don’t need and they couldn’t sell anywhere else --- I went down to the House floor and said “there’s blood in the caviar.”
Well, my fellow panelist pointed out those Iranian goods still have access to the American markets. If the nation wants to protect its national security, it must prioritize. The number one priority in American foreign policy should be to prevent Iran from developing a nuclear weapon. An Iranian nuclear bomb means the end of the worldwide nonproliferation regime. Iran is the number one state sponsor of terror; now imagine Iranian worldwide terror with impunity.
A nuclear Iran can interfere with the straits of Hormuz or engage any other provocative action and that provocation will involve us going eyeball-to-eyeball with a hostile nuclear state, not one led by Khrushchev, but led by someone far less sane. And finally, if the Tehran regime thinks its going to be overthrown, inshallah, they could use their nuclear weapons against Israel in an effort to regain popularity, or against the United States, figuring they might as well go out with a bang.
And do not let your neighbors tell you not to worry and feel safe behind a missile-defense shield in the United States, because it is easier to smuggle a nuclear weapon than it is to smuggle a person across our border, and you do not have to be a rocket scientist to smuggle a nuclear weapon inside a bale of marijuana.
Let me speak briefly about the military option. We are all aware that Israel acted militarily to stop the nuclear program of Saddam Hussein and then Syria. The nuclear sites in Iran are harder and better hidden. Now, I have strongly opposed any declaration by the US Congress – and we’ve fought these off on the floor, successfully – that the US would not use military force against Iran to stop its nuclear program. I regard such a declaration as Ambien for Ahmadinejad – it would just help him sleep better.
There are two other reasons why we should at least leave the military option on the table. One is to strengthen the argument of those Iranian forces that are saying “maybe we ought to give up our nuclear program, in return for the very generous terms offered by the West; it may get blown up before it yields any fruit, anyway.” Second, we need to convince Europe that we are serious, that they should go along with tough economic measures against Iran. If they block economic pressure on Iran, the Europeans are simply increasing the likelihood of more lethal pressure.
Israel could take military action. It would be highly problematic, however, and it could take either of two forms. One is the most talked about, which is a one to two week air campaign against Iran’s nuclear sites. The second version would then add Israeli action or the threat of Israeli action against the strategic and energy sites in Iran. Israel could threaten such action if Iran did not verifiably and permanently renounce nuclear programs and nuclear research. But, as I said, this military approach is extremely problematic and we ought to focus instead on how we can force the Iranian regime to give up its nuclear program. We owe a special debt of gratitude to the mullahs in Tehran because their mismanagement, corruption and oppression have made Iran vulnerable to economic pressure. Vulnerable to what I call economic diplomacy. Let us look at that economic vulnerability. Iran has a large and growing population with twenty percent unemployment. Their budget is based on a minimum price of seventy-five dollars a barrel but they are only getting fifty. They are dependent on a large quantity of imports which they are having a difficult time financing – they especially need parts for systems that they already own. For example, they’ve got a lot of Boeing jets that they bought prior to the imposition of the U.S. embargo. Those aging jets were going to be grounded in 2005 except for the fact that the Bush Administration allowed our companies to sell replacement parts to the Iranians, thus demonstrating that our aircraft manufactures are reliable suppliers, even to a country that is creating nuclear weapons in order to annihilate Israel. I’m not sure it was the right decision. Europe has far more opportunities to say “we won’t provide this or that or replacement part or technologies that Iran needs.” Iran is in no way self sufficient; the sophisticated electric generation facilities, the sophisticated computer facilities, sophisticated aircraft systems, telephone systems, these are all coming in from abroad. Iran’s oil fields need technology and capital because the infrastructure is getting old and production is petering out. Iran has to import thirty percent of its refined petroleum, the gasoline needed for its cars and diesel for trucks. The Iranians need capital, especially in a fifty dollar a barrel world. So, they have significant vulnerability.
We’ve got broadcasting resources, and nothing would please me more than to go on Radio Farda to tell the Iranian people and the Iranian elites they will face economic and diplomatic strangulation unless they abandon this nuclear program. The problem is that I can’t lie this well in Farsi. Iran does not yet face economic and diplomatic isolation. The good news is that we have a lot of tools in the toolbox, tools that would be sufficient for the job. The bad news is that all of those tools are still in the toolbox, and after thirteen years of this I’m getting a little frustrated. Let’s review some of those tools.
First, we need to implement existing law. We should enforce the Iran Sanctions Act, formerly known as the Iran-Libya Sanctions Act. We used the sanctions effectively against Libya, Qaddafi changed his behavior, and we dropped Libya from the statute. The law says that if an oil company invests $20 million in oil production facilities in Iran, the State Department must name and shame this company, and then the President must either impose sanctions or waive them and explain to the American people why its in our national interest to do so.
What has the State Department done? They’ve cancelled their subscription to the Wall Street Journal so they can plausibly say they’re not aware of all the stories in the Wall Street Journal about international companies making investments of $20 million or more in the Iranian oil fields. This approach was adopted in 1998 in the Clinton Administration, continued for eight years by the Bush Administration, and I have not seen a change in the Obama Administration, but it’s only been a hundred days.
So we start by enforcing the Iran Sanctions Act. But what about the new legislation? First, the Iran Sanctions Enabling Act. This bill is designed to further the efforts of states such as Florida and California that have enacted divestment measures against Iran. The argument that you run into with state governments and local governments, pension plans, municipal governments and with mutual fund managers is they say “Oh, if I don’t invest for the best possible return, I’ll get sued.” Now some are genuinely afraid of lawsuits, some are just making an excuse. Either way, this bill says they can’t be sued. We’ve passed legislation saying the same thing for divestment efforts aimed at Sudan for the Darfur Genocide. We’ve passed this same Iran bill through the House in 2007 and again in 2008, we could not pass this through the Senate even though Senator Obama was the Senate sponsor of the legislation. We’ve got to pass it now.
Next, the Iran Diplomatic Enhancement Act says that the Iran Sanctions Act, which focuses on investments in the oil and gas fields of Iran, should also apply to selling gasoline to Iran or selling refining equipment to Iran. Next, the Enable Divestment from Sudan and Iran Act. You’ve got some individual investors who want to divest, but a few of them realize that if they sell the stock at a profit, they are going to owe the cap gains tax. So what do we do? We say if you sell stock in a bad company and invest in a good company, you do not owe any taxes until you sell the stock in the good company some future time down the road. You’ll pay the full tax at that time. We hope to have the support of the Darfur divestment community and I hope you’ll mention this to those Members of Congress that are particularly interested in Darfur.
Next, the Iran Revolutionary Guard Corps Designation Implementation Act. The IRGC has already been designated a terrorist organization. We need to designate all its front groups as terrorist organizations, but we can go beyond that. It’s called secondary sanctions. Here’s where Europeans come in. It’s one thing to say we need to prevent Americans from doing business with the IRGC. Now, if the IRGC want to buy trucks, they buy from Mercedes through one of their front businesses. The question on secondary sanctions is, if Mercedes is selling trucks to a terrorist organization, can they still sell them to you? This bill would say no. Needless to say, this bill will be hard to pass, and we need your help.
Next is the International Uranium Extraction Control Act, which says: do not sell anything of relevance to uranium mining and milling to Iran, North Korea or Syria.
Next, the Overseas Private Investment Corporation Reauthorization Act, which is a longtime agency of the federal government which supports U.S. exports and business activities overseas that assist with development projects. Its charter expires this year. Its jurisdiction is in my subcommittee. This bill will say to OPIC that you cannot help a corporation that is doing bad things in Iran. Under this bill, OPIC will look at your entire enterprise, so don’t play games with your subsidiaries and other affiliates. If one of the entities in a corporate family is doing bad things, your entire corporate family is disqualified from receiving OPIC assistance.
Finally, the Iran Counter-Proliferation Act. This was Tom Lantos’ bill, alav ha-shalom, and I will reintroduce it in the coming weeks. It bans all Iranian imports into the U.S., prohibits U.S. companies from doing business with Iran through their foreign-incorporated subsidiaries, and bans the sale of spare aircraft parts to Iran.
In addition what can we do without actually passing legislation? Sometimes we’re able to push on administrative agencies. Two partial successes. First, Vitol, a major Swiss oil trading company, sells gasoline to Iran. It also has a major contract with the Department of Energy. We got a decision out of the Department of Energy recently which says, in effect, no more contracts with Vitol. This company pled guilty to paying Saddam kickbacks in the Oil-for-Food scandal. Next is Reliance, the energy giant in India. This firm was getting help from the Export-Import bank. In response to Congressional pressure, they suspended gasoline shipments to Iran for several months; unfortunately, now it looks like they’re resuming those shipments.
Next, multilateral organizations. The World Bank approved $1.4 billion in concessionary loans to Iran from 2000-2005. We, in effect, acquiesced to this; we could have stopped it, but that would have made the Europeans upset, so we did not. $500 million from these loans still has not been disbursed. We could stop the final disbursement. That would make the Europeans upset, so we have no plans to do that. AIPAC at its very core advocates US foreign aid, so please don’t tell anybody back home that one of the major recipients of foreign aid is also aiding terror. Just don’t tell anyone.
Now, the much bigger issue is the International Monetary Fund, the IMF, it’s going to get roughly $100 billion from the United States, similar amounts from Europe, a big check from Japan. Why? To allow it to bail out countries during this worldwide economic crisis, to make the IMF more bailout ready. My view is we should not make the IMF bailout ready as long as Iran is bailout eligible. Even if the IMF never provides loans to Iran, it enhances Iran’s international credit; the world would know that if everything melts down, Iran may get an IMF bailout. We’ve got to make the IMF choose between the United States and our $100 billion and the potential relationship with Iran.
More important than the IMF and the World Bank is the United Nations, where we have to deal with Russia and China. Nothing could be more powerful in this effort than strong UN sanctions against Iran. Real sanctions, not the joke of a regime we have now. We could be successful in this effort, obviously, if we could get Putin to sound like Sherman. Unfortunately, we have never offered Russia or China anything in return for them cooperating with us on Iran at the U.N. In fact, we’ve told Russia that their votes on Iran will not affect our policies towards Chechnya, South Ossetia, Abkhazia, Moldova or anything else Russia cares about. Likewise, we’ve never pointed out to China how we pressured Taiwan to drop plans to develop nuclear weapons, and that our policy may be affected by whether or not they help block Iran from developing nuclear weapons. And, by the way, we have never suggested that the next shipment of tennis shoes will be stopped at the port if China continues to be unhelpful on Iran at the United Nations.
If we made it clear to Russia or China that things they care about are dependent on their support of our efforts against Iran at the United Nations, I think you would see improved cooperation from those two countries.
And if we have the Russians and Chinese --- not even their support but just their acquiescence at the UN --- we could get a worldwide binding resolution prohibiting the export to Iran of refined oil products that would put Iran in big trouble within a few weeks. We have that opportunity. We have to overcome the political power of the oil companies, the intransigence of the State Department bureaucracy, the ideological power in the argument that corporations should be allowed to do whatever they want without governmental interference, and we have to remember that the centrifuges are turning right now.
Preventing Iran from developing nuclear weapons should be the number one foreign policy objective of the United States. We have the powerful economic and diplomatic tools, and we better start using them right away.
Legislative Efforts to Increase Economic Pressure on Iran
The Iran Sanctions Enabling Act, HR 1327 (Frank, Berman, Sherman and Meeks) – This bill will provide federal authorization for states and municipalities to enact Iran divestment legislation. States and municipalities may face lawsuits when they enact divestment measures under various legal theories. The bill would provide similar protection to private asset managers, such as mutual fund managers, from suits brought under the theory of breach of fiduciary duty should they choose to divest from certain firms. These firms include those that invest $20 million in the energy sector of Iran, those that provide credit to facilitate such investment, firms that provide shipping for Iran’s energy sector, as well as companies that provide products or services related to pipeline construction. This bill passed the House Financial Services Committee on April 27 and awaits action in the full House.
Iran Diplomatic Enhancement Act of 2009, HR 1985 (Kirk and Sherman) – It would add sales of refined petroleum and related services and the provision of refining equipment or technology services to actions sanctionable under the Iran Sanctions Act.
A similar bill, the Iran Refined Petroleum Sanctions Act of 2009, HR 2194 (Berman and six others, including Sherman) was introduced on April 30. The bill has 294 cosponsors. The Senate counterpart was introduced by Senators Evan Bayh, Joe Lieberman and Jon Kyl and is designated S. 908. Iran, despite being an oil rich country, must import as much as 40 percent of its gasoline and other refined petroleum needs.
The Enable Divestment from Sudan and Iran Act, H.R. 3516 (Sherman, Ros-Lehtinen and 17 others) – This bill would allow taxpayers that divest from firms doing business in Iran or Sudan to reinvest in firms or mutual funds that have no such business with Iran and Sudan. Such taxpayers would not be taxed, but would “carry-over” their basis in the new investment. This bill will be reintroduced very soon.
Iran Revolutionary Guard Designation Implementation Act, H.R. 2375 (Sherman, Ros-Lehtinen, Kirk, Klein and Royce) – The Iran Revolutionary Guard Corps (IRGC) was designated a terrorist organization and proliferation concern by the U.S. Treasury in late 2007. Relatively few of the front companies that the IRGC operates have also been designated. A strong effort by the Administration to designate all known IRGC fronts, aliases and agents could have a significant effect on Iran’s economy. The bill calls on the President to designate all known entities within 90 days of passage of this bill and provides for strong sanctions against those that continue to do business with the IRGC and its various fronts. This bill was introduced on May 12, 2009.
International Uranium Extraction Control Act of 2009, H.R. 2290 (Sherman, Royce and Ros-Lehtinen) – This bill would impose U.S. sanctions on companies providing mining and milling equipment to Iran, North Korea or Syria.
Reduce Iranian Cyber-Suppression Act, H.R. 3284 (Sherman, Royce and Klein) – This legislation would prohibit federal contracting with firms that supply Iran with technology that allows the government to spy on its own citizens or suppress their ability to express their opinions via electronic media. Sherman and his colleagues introduced this legislation in July, 2009; it is identical to legislation introduced in the Senate, authored by senators Charles Schumer (D-NY) and Lindsey Graham (R-SC).
Overseas Private Investment Corporation Reauthorization Act (Sherman) – This legislation includes a novel provision authored by Brad Sherman that would require that any company receiving assistance from this U.S. government agency to certify that it has no prohibited investments or business in any state sponsor of terrorism. These include: an investment of $20 million or more in the energy sector; a loan or extension of credit to the government of $5 million or more for more than 45 days; or a transfer of arms to any state sponsor in the previous three years. The initial version of this bill was passed by the House in 2007 (H.R. 2798, Sherman). It is must-pass legislation for 2009, since OPIC’s charter expires later this year.