Obama, McCain, Americans and Diplomacy

On June 4, Barack Obama told the audience at the American Israel Public Affairs Committee Annual Policy Conference that as President of the United States, “We will also use all elements of American power to pressure Iran. I will do everything in my power to prevent Iran from obtaining a nuclear weapon. That starts with aggressive, principled diplomacy without self-defeating preconditions, but with a clear-eyed understanding of our interests.” He also said that he “will always keep the threat of military action on the table.”

John McCain told the audience at the AIPAC annual policy conference that diplomacy with Iran would only produce a “spectacle” and said, “Even so we hear talk of a meeting with the Iranian leadership offered up as if it were some sudden inspiration, a bold new idea that somehow nobody has ever thought of before. [Laughs].” Instead of pursuing diplomacy without preconditions, McCain called for tougher sanctions and divestment instead.

However, a new CNN/Gallup poll conducted May 19-21 and released on June 2 found that majority of Americans favor diplomacy.

According to the poll’s findings, “Large majorities of Democrats and independents, and even about half of Republicans, believe the president of the United States should meet with the leaders of countries that are considered enemies of the United States. Overall, 67% of Americans say this kind of diplomacy is a good idea. Although separate Gallup polling shows that few Americans view Iran favorably, and that Iran leads Americans' list of top U.S. enemies in the world, the new Gallup survey also finds high public support for presidential-level meetings between the United States and Iran, specifically. About 6 in 10 Americans (59%) think it would be a good idea for the president of the United States to meet with the president of Iran. This includes about half of Republicans, a majority of independents, and most Democrats.”

The Divestment Trap

John Tirman, executive director and principal research scientist at the MIT Center for International Studies and head of the Persian Gulf Initiative, has a new Op-Ed in the Boston Globe on "The Divestment Trap." Tirman writes of a pending bill in the Massachusetts Legislature on divestment: "Because of the broad, longstanding, and punitive sanctions on Iran, the divestment bill will have virtually no practical effect. The likelihood that any possible investment in Iran's energy industry would not already be prohibited by US law is low. In the globalized economy nowadays, such strategies are less effective anyway, because tracking the flow of money and goods is increasingly difficult." Read the full editorial here.

Georgia Passes Divestment Legislation

This passed under the radar as far as any mainstream media is concerned, but on April 2, 2008, the Georgia House of Representatives overwhelmingly passed the “Protecting Georgia’s Investment Act” introduced by state senator Don Balfour (R-Snellville). The bill must now be signed by Georgia governor Sonny Perdue before it becomes law.

The legislation, SB 451, requires boards administering public retirement funds in Georgia to identify all companies making investments in Iran. The bill also defines “scrutinized companies” that have, with actual knowledge, invested $20 million or more in Iran's petroleum sector since 1996.

Senator Balfour touted the bill, “U.S. soldiers are being killed and maimed in Iraq and Afghanistan with IEDs and weapons provided by Iran to terrorists. In my mind, the state of Georgia shouldn't be doing business with companies that are doing business in Iran. It is an unstable, pro-terrorist nation, and we shouldn't be risking our retirement funds there.”

Currently, Georgia has $565,261,350 invested in companies, such as Royal Dutch Shell and Enersis SA, that are actively doing business in Iran. Senator Balfour argues that neighboring state Florida has “successfully enacted similar divestment legislation” and hasn’t “suffered any negative financial consequences.” He added, “I am confident that we won't see any drop in our investments, while at the same time we are sending a clear message, ‘We will not willfully invest in anti-American countries that support terrorist activities.'"

I wonder if Senator Balfour knows that one of the two most consistently present companies in Iran that has manufactured and sold its product there, even during and following the Islamic Revolution, is Coca Cola (the other is Pepsi). While SB 451 won’t really affect Coca Cola’s business in Iran, it’s still worth pointing out that despite this new legislation, Georgia will still continue to have profitable investments in Iran through one of its most reknown companies.

MA Divestment Bill Passes Committee

On April 10, 2008, the Committee on State Administration and Regulatory Oversight in the Massachusetts State Legislature held a hearing for H. 4270, which would require the Pension Reserves Investment Management (PRIM) Board to divest from roughly 20 companies that are involved in Iran’s oil and gas initiatives. Supporters of the bill accuse Iran of being a sponsor of terrorism and a threat to the U.S. because of its pursuit of a nuclear program.

According to PRIM officials, the total value of Iran-related investments is $452 million in securities. In written testimony, Stanley Mavromates, CIO of the pension fund, said it would cost $10,000 to $40,000 a year to hire a consultant to maintain an Iran divestment list and $5 million in Iran-related securities sale transaction costs. According to Mavromates, those costs could pay the annual pension benefit for nearly 200 state employees and teachers.

Rep. Denise Provost (D-Somerville) said: “We need constructive engagement. We need to talk to them.”

Jim Walsh said the Legislature was better off passing a non-binding resolution. He said in his testimony, “My own conclusion is that this legislation, while well intended, is unlikely to be effective and will instead create unintended consequences that actually make it more difficult to achieve a successful resolution of the nuclear issue and other issues in the US-Iranian relationship.”

The Committe, which is co-chaired by the bill’s main sponsor, Rep. Antonio Cabral (D-New Bedford) endorsed the bill, with ten members voting for the bill and no one registering opposition. Six U.S. representatives from the Massachusetts delegation have written a letter of support for the bill to House Speaker Salvatore DiMasi.

New Jersey Passes Iran Divestment Legislation, Joining the '50 Foreign Policies' Movement

On Monday, December 17, the New Jersey state Senate voted 34-0 to pass divestment legislation that prohibits state pension money from being invested in companies doing business in Iran. The Assembly voted 78-1 in June to approve the measure. The bill now goes to Democratic Gov. Jon S. Corzine for his signature. Both Florida and California passed similar legislation earlier this year and New Jersey is now the third state to pass such legislation.

New Jersey's state pension fund is the ninth largest in the U.S. and is thought to be worth about $80 billion, though it is unclear how much is invested in companies doing business in Iran. The legislation requires the state to hire an independent research firm specializing in global securities to identify such investments.

I like to call this the “50 Foreign Policies Movement.” Several other states are being pressed by lobbies to take up similar legislation. I’ve been told by folks who work closely with State legislators that even the Human Rights Campaign is on board with Iran state divestment now and their reasoning is that Iranian President Mahmoud Ahmadinejad is homophobic.

Texas Gov. Rick Perry asked the state's pension funds to divest, though they didn't meet his deadline and legislation involving divestment from Iran died in the Legislature. Meanwhile, Michigan's House has approved divestiture legislation and the Senate announced separate measures, though none have advanced to the governor's desk.

On July 31, 2007, the House of Representatives passed H.R. 2347, The Iran Sanctions Enabling Act, by a vote of 408-6, despite opposition from the Secretaries of State and Treasury. The bill will establish a federal list of companies that have direct investments in Iran’s energy sector and remove specific legal barriers to enable mutual fund and corporate pension fund managers to cut ties with these listed companies if they choose to do so. The bill also provides federal authority for state and local governments that choose to divest their public pension funds and calls on the U.S. government to list companies with more than $20 million invested in Iran's energy sector. Senator Barack Obama introduced the bill in the Senate where it is awaiting approval.

Even the Bush administration opposes State divestment. Click here for arguments against divestment and quotes from Bush administration officials.

California State Assembly Passes Iran Divestment Bill

On Thursday, September 6, the California State Senate passed a divestment bill on Iran. The bill was passed by the State Assembly on June 5. The bill requires the $247.7 billion California Public Employees’ Retirement System and the $169 billion California State Teachers’ Retirement System, both in Sacramento, to divest stocks totaling about $2 billion and $1.4 billion, respectively. California Governor Arnold Schwarzenegger has until Oct. 14 to sign the bill.

SSP Warning: Debate on CNBC

Sorry for the shameless self-promotion, but here is the video clip of my appearance on CNBC's "On the Money" last night, debating former CIA Director James Woolsey on Iran divestment movement.

Statement of Bush Administration Policy on H.R. 2347

After the House passed H.R. 2347, it was sent to the Senate, where it is currently sitting on hold in the Banking Committee.

Here is the Bush administration's Statement of Policy on H.R. 2347. It argues that the bill would undermine US efforts to maintain international unity on intensifying pressure on the Iranian regime.

According to the Statement, "Increasing American unilateral sanctions targeted at United States allies and diplomatic partners would shift focus away from Iran's unacceptable behavior and onto differences between the US and its partners, and would impair the Adminsitration's ability to employ effective multilateral approaches, including multilateral sanctions. This is essential because we believe US unilateral sanctions alone will not suffice and will harm the coalition."

House Passes HR 2347

On July 31, 2007, the House of Representatives passed H.R. 2347, The Iran Sanctions Enabling Act, by a vote of 408-6, despite opposition from the Secretaries of State and Treasury.

The bill will establish a federal list of companies that have direct investments in Iran’s energy sector and remove specific legal barriers to enable mutual fund and corporate pension fund managers to cut ties with these listed companies if they choose to do so. The bill also provides federal authority for state and local governments that choose to divest their public pension funds and calls on the U.S. government to list companies with more than $20 million invested in Iran's energy sector.

Linking the Sudan and Iran divestment bills, Rep. Barney Frank (D-MA), H.R. 2347’s sponsor, said, “I am disappointed by the Bush administration's opposition to both of these bills, and I am pleased that the House has passed them with well above the number of votes that would be necessary to override any vetoes.”

Under the bill, private sector and state and local government money managers who decide to divest from companies on the list would be protected from lawsuits. The bill could affect large public pension funds and several states, including California, Florida and Ohio have already introduced divestment legislation.

The Congressional Research Service recently found more than $100 billion in energy investments in Iran since 1999 by foreign firms like France's Total, Royal Dutch Shell Plc, Italy's ENI and Japan's Inpex Holdings Inc.

Double Whammy on House Suspension Calendar

I have been posting for the last two weeks that we should be expecting these bills to come up any time and now they are set on the House Suspension Calendar for Monday, July 30.

H.R. 957 - To amend the Iran Sanctions Act of 1996 to expand and clarify the entities against which sanctions may be imposed (Rep. Ros-Lehtinen – Foreign Affairs)

H.R. 2347 – Iran Sanctions Enabling Act of 2007 (Rep. Frank – Financial Services)

It seems highly unlikely that either of these bills will fail to pass in the House. Most Members of Congress seem to think that rhetorically beating up on Iran scores them political points. Most have failed to grasp that concept that ramping up rhetoric and sanctions threats against Tehran only undermines US diplomatic efforts and strengthens the case being made by the hardliners inside of Iran.

Rather than ramping up threats, Congress should press for more sustained direct talks with Iran. Iranian expert Professor William Beeman published an excellent article about how the US should negotiate with Iran entitled "How to Talk the Talk with Iran." It can be read here, below the first article.

Congress Could Consider Iran Divestment Bill Next Week

On July 26, H.R. 2347, which would enable state divestment from companies doing business in Iran, passed out of the House Financial Services Committee and could be placed on the Suspension Calendar as early as next Monday, a.k.a, the full House could vote on the bill as early as next week.

H.R. 2347 was introduced in May by Rep. Barney Frank (D-MA) and currently has 43 co-sponsors. Also called the Iran Sanctions Enabling Act of 2007, the bill includes the following provisions:

Directs the Secretary of the Treasury to: (1) publish biannually in the Federal Register a list of each person, whether within or outside of the United States, that has an investment of more than $20 million in the energy sector in Iran; and (2) maintain on the website of the Department of the Treasury the names of the persons on such list.

States it is the policy of the United States to support the decision of state and local governments and educational institutions to divest from, and to prohibit the investment of assets they control in, persons that have investments of more than $20 million in Iran's energy sector.

Authorizes a state or local government to adopt and enforce measures to divest its assets from, or prohibit investment of assets in, persons included on the most recent list.

Amends the Investment Company Act of 1940 to shield any registered investment company from civil, criminal, or administrative action based upon its divesting from, or avoiding investing in, securities issued by companies included on such most recent list.

Amends the Employee Retirement Income Security Act of 1974 to shield from treatment as breaching a fiduciary duty any person divesting plan assets from, or avoiding investing plan assets in, persons included on such most recent list.

Expresses the sense of Congress that the Federal Retirement Thrift Investment Board should initiate efforts to provide a terror-free international investment option among the funds of the Thrift Savings Fund.

According to the National Foreign Trade Council, H.R. 2347 poses potentially serious consequences for the conduct of U.S. foreign policy and will set a precedent of injecting social or political criteria into investment decisions that could lead to more attempts by State legislatures to divest from future hot-button social issues of the day. NFTC also argues that H.R. 2347 threatens to create a complex web of restrictions and regulations that interfere with the Constitutional right given to the President to conduct foreign policy.

Ironically, a measure in H.R. 180, the “Darfur Accountability and Divestment Act,” which also passed out of Financial Services and could be considered as early as next week, undercuts arguments in favor of H.R. 2347. According to H.R. 180: “Congress acknowledges that divestment should be used sparingly and under extraordinary circumstances,” and H.R. 180 “is based on unique circumstances, specifically, the reprehensible and abhorrent genocide occurring in Sudan.”

Federal Retirement Thrift Investment Board Rejects Divestment Plans

The Washington Post is reporting today that the Federal Retirement Thrift Investment Board has approved in a 4 to 0 vote a resolution objecting to any efforts that would "introduce political or social considerations into TSP [Thrift Savings Plan] investment policy."

According to the Washington Post article:

"The TSP, a program that functions like a 401(k) for the civil service, postal and military personnel, has practiced neutrality on political and social issues since its start 20 years ago.

However, bills pending in Congress would pressure the TSP to stop investing in companies that do business with Iran or support, directly or indirectly, the conflict in the Darfur region of Sudan, which the United States has called a genocide.

While the legislation would 'address various meritorious causes,' the board objected to any effort to tamper with the TSP, which uses funds that mirror the ups and downs of stock and bond markets rather than a particular industry or individual companies."