New Sanctions Bill to be Marked up in Finance Committee

On June 16, Senator Max Baucus (D-MT) introduced a new sanctions bill entitled the “Iran Sanctions Act of 2008” and it is scheduled to be marked up in the Senate Finance Committee on June 18, 2008. The bill is based on S.970, introduced by Senator Gordon Smith (R-OR). The bill is not yet accessible in Thomas, but a summary is posted on the Senate Finance Committee website.

As stated in a National Journal article, the new bill preserves the core of the measures in S.970, including a ban on “direct or indirect trade of most products between the United States and Iran;” prohibiting “the extension of trade preferences to Iran or that country's accession to the World Trade Organization;” freezing “assets of certain Iranian diplomats and representatives deemed to be involved in nuclear proliferation;” and subjecting “U.S. parent companies to sanctions if they knowingly participate in violations of sanctions law by a foreign subsidiary.”

The biggest difference between the new bill and S.970 is the inclusion of presidential waivers for nearly all of the provisions in the bill, “if the President determines that such a waiver is in the national interest of the United States.” The new bill does not appear to contain a requirement that the Director of National Intelligence submit to Congress an updated, comprehensive National Intelligence Estimate on Iran. It also does not contain the provision in Section 9 of S.970 that would have eliminated certain tax incentives for oil companies investing in Iran.

The new bill tightens an export ban “so that only agricultural commodities, medicine and medical devices, humanitarian assistance provided to relieve human suffering, and information materials are specifically excepted. The proposal defines agricultural commodities as any agricultural commodity, food, feed, fiber, or livestock.” According to the description of the bill, “The proposal also codifies the direct and indirect import ban on Iranian goods destined for the United States. The proposal does not provide any specific exceptions for the import ban. Under the proposal, the President may waive the export and import prohibitions if he determines that such a waiver is in the national interest of the United States.”

The bill removed a provision in S.970 that would have penalized trade preferences or World Trade Organization (WTO) accession for third countries determined to be aiding Iran's nuclear program. However, the bill still “prohibits the United States Trade Representative or any other Federal official from taking action that would extend trade preferences or lead to the WTO accession of Iran,” but “the President may waive this prohibition if he determines that such a waiver would be in the national interest of the United States.”

The bill would require 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 if such persons are subject to sanctions under the International Emergency Economic Powers Act, but “the President may waive this requirement if he determines that such a waiver would be in the national interest of the United States.”

The bill would subject U.S. parent companies to sanctions if the parent company knowingly participates in violations of U.S. sanctions laws by its foreign subsidiaries, but “the President may waive this requirement if he determines that such a waiver would be in the national interest of the United States.”

The bill would prohibit the U.S. from entering into a 123 Agreement with Russia and provides that the U.S. “may not issue licenses for the export of any nuclear material, facilities, components, or other goods, services, or technology that fall within the scope of the 123 Agreement.” It further states that the U.S. “may not approve the direct or indirect transfer or retransfer to Russia of any nuclear material, facilities, components, or other goods, services, or technology that fall within the scope of the 123 Agreement.” Under the bill, these prohibitions would remain in place “unless the President certifies to Congress that (1) Russia has suspended all nuclear assistance to Iran and all transfers of conventional weapons and missiles to Iran; or (2) Iran has completely, verifiably, and irreversibly dismantled all nuclear enrichment-related and reprocessing-related programs.” Given this impossible certification, it is likely that several key senators will become motivated to either remove the provision or oppose the bill.

The new bill also expresses the sense of Congress that the United States should support the creation of an international nuclear fuel bank by the International Atomic Energy Agency and “that the President should ensure that the fuel bank has multilateral support, is under IAEA control, and has necessary safeguards in place prior to making a contribution on behalf of the United States.”

The bill maintains the provision in S.970 that the United States must cut its contributions to the World Bank by an amount that is proportional to the total amount of loans the World Bank provided to Iran after 2008. Like S.970, it also authorizes the money made available as a result of the United States’ reduction in contributions to the World Bank to be appropriated to the U.S. Agency for International Development for its Child Survival and Health Programs.” However, this section also now includes a presidential waiver if determined to be in the national interest in the United States.

The section on “Exchange Programs with the People of Iran” has been changed from S.970. The new bill would authorize the President to carry out exchange programs with the people of Iran, with a focus on exchange programs with Iranian youth and it authorizes $15,000,000 to carry out these exchange programs for fiscal year 2009. S.970 would have authorized $10,000,000 for this program. Like S. 970, the new bill states that the Broadcasting Board of Governors should devote a greater proportion of Radio Farda’s programming to news and analysis.

The bill would increase the amount of money to be appropriated to the Department of Treasury’s Office of Terrorism and Financial Intelligence (TFI), of which the Office of Foreign Asset Controls is part, to $61,712,000 for Fiscal Year 2009. It would also increase the Department of Treasury’s Financial Crimes Enforcement Center (FinCEN) to $91,335,000 for Fiscal Year 2009.

The reporting requirements that were in S.970 have been changed and now include a requirement to report “to the Senate Finance, Banking, and Foreign Relations Committees and House Ways and Means, Financial Services, and Foreign Affairs Committees 180 days after enactment of this Act, and every 180 days thereafter, any foreign investments made in Iran’s energy sector since January 1, 2008 and the determination of the President on whether such investments qualify as sanctionable offenses under the” Iran Sanctions Act. This reporting requirement was added because the President has never imposed sanctions on foreign companies that have invested more than $20,000,000 a year in Iran’s petroleum and natural gas sectors.

The bill would require “Secretary of Treasury to report to the Senate Finance, Banking, and Foreign Relations Committees and House Ways and Means, Financial Services, and Foreign Affairs Committees not later than 90 days after the date of enactment of this Act, and every 90 days thereafter, on export credits issued by foreign banks to persons investing in Iran’s energy sector, and any fines, restrictions, or other actions taken by the President to discourage such export credit guarantees.” Currently there is no requirement for such a report.

The bill would require the President to provide Congress with a report not later than 180 days after enactment of the bill, and annually thereafter, on the names of persons that have or conduct business in the United States and also invest in Iran. The report will also be required to include the amount of each investment in Iran. Currently, there is no requirement for such a report.

Like S.970, the bill maintains a “Sense of Congress” that “the Executive Director of the Thrift Savings Board should report to the Senate Finance, Banking, and Foreign Relations Committees and House of Representatives Ways and Means, Financial Services, and Foreign Affairs Committees any investments from the Thrift Savings Plan that are in entities that invest in Iran.”

The bill adds a termination clause “if the President determines and certifies to the Senate Finance, Banking, and Foreign Relations Committees and House of Representatives Ways and Means, Financial Services, and Foreign Affairs Committees that Iran has completely, verifiably, and irreversibly dismantled all nuclear enrichment and reprocessing-related programs.” It also adds a sunset provision in that it will “cease to have force and effect five years after the date of enactment.”

It is unclear whether the new bill will be subject to the jurisdiction of other Senate committees, particularly the Banking and the Foreign Relations Committees.