Global Policy Forum

By Jim Lobe

Neo-conservative hawks who championed the invasion of Iraq are leading a new campaign to persuade state and local governments, as well as other institutional investors, to "divest" their holdings in foreign companies and U.S. overseas subsidiaries doing business in Iran.

While stressing that U.S. military action against Iran's nuclear program should not be taken off the table, they call their divestment strategy the "non-violent tool for countering the Iranian threat". And, like the run-up to the Iraq war, the campaign has attracted bipartisan support. Democrats, including those who strongly oppose the George W. Bush administration's Iraq policy, see divestment, as well as other proposed economic sanctions against Tehran, as a way to look "tough on Iran" short of going to war. "I'm not yet ready to suggest the use of military force. but one has to stay on alert that that time could come sooner rather than later," James Woolsey, who served briefly as former President Bill Clinton's CIA director, told an Ohio legislative committee this week in support of a bill that would ban investments by the state's pension funds in companies operating in Iran or in any other country the State Department lists as a state sponsor of terrorism.

"Terror-free investing will not solve the problems. but I think it's an important part of the comprehensive package," added Woolsey, a prominent neo-conservative associated with the like-minded Foundation for the Defense of Democracies (FDD).

The new campaign, the brainchild of the far-right Center for Security Policy (CSP), is designed to put pressure on the Islamic Republic to abandon its nuclear program, end its support of anti-Israel groups like Palestinian Hamas and Lebanon's Hezbollah, and "perhaps even to push (it) toward collapse," according to FDD president Clifford May, by depriving it of foreign investment and commercial ties with other countries. According to a report released here Wednesday by the neo-conservative American Enterprise Institute, which is collaborating with the CSP, Iran has signed more than 150 billion dollars worth of investment and commercial contracts with foreign companies based in more than 30 countries since 2000, including more than four billion dollars with U.S. overseas subsidiaries.

The initiative, which is modeled after the anti-apartheid divestment campaign against South Africa of the 1980s, is also backed by major pro-Israel and Jewish groups, including the American Israel Public Affairs Committee, the American Jewish Committee, the Anti-Defamation League, and local Jewish Community Relations Councils whose membership is worried that Israel will be threatened by a nuclear-armed Iran.

Potentially at stake are billions of dollars controlled by state pension funds and other institutional investors that have invested money in companies - based mostly in Europe and Asia - operating in Iran. According to CSP, New York pension funds alone own nearly one billion dollars of stock in three Fortune 500 companies tied to Iran. "Iran's ability to fund its nuclear program and sponsor terrorism would come to a grinding halt without revenue gained from foreign investors," according to CSP, which, along with the American Enterprise Institute and FDD, was a leading advocate for the 2003 invasion of Iraq. Last year, Missouri became the first state to order one of its pension funds to divest its shares of all companies that do business with Iran and other countries on the State Department's terror list. Last month, both houses of the Florida legislature unanimously approved a bill banning the investment of state funds in companies with commercial ties to Sudan and Iran's energy sector. Iran-related divestment bills are expected to be approved over the next month by legislatures in Ohio, Louisiana, Pennsylvania, and California, according to Christopher Holton, the head of CSP's "Terror-Free Investing" program. Similar bills are also being considered in the legislatures of Texas, Georgia, Maryland, and New Jersey and will soon be introduced in Michigan and Illinois, he told IPS. The sudden proliferation of state divestment measures comes amid renewed efforts in Congress to tighten and expand the scope of existing legislation against Iran.

Under the 1996 Iran Sanctions Act (ISA), which, among other provisions, bans U.S. companies from doing business in Iran, the president is required to impose a range of economic sanctions against foreign companies that invested more than 20 million dollars a year in Iran's energy sector, which accounts for about 80 percent of its foreign-exchange earnings. The same law, however, permits the president to waive such penalties if he deems it in the national interest. Worried that imposing sanctions would anger key U.S. allies, President Bush has consistently exercised his waiver authority, as his predecessor, Bill Clinton, did before him. But, as tensions with Iran have increased since the election of President Mahmoud Ahmadinejad nearly two years ago, pressure, especially from neo-conservative groups and the hawkish leadership of the so-called "Israel Lobby," which includes the Christian Right, to take stronger action has grown. Congress is currently considering several bills that, if passed, would reduce or eliminate the president's waiver authority and include language encouraging divestment drives at the state level. The administration, which is at least rhetorically committed to working through the U.N. Security Council to impose multilateral sanctions against Iran to rein in its nuclear program, appears ambivalent on both expanding ISA and on the divestment campaign.

On the one hand, State and Treasury Department officials, using the threat of tougher Congressional action, have informally - and with some success - pressed foreign banks, companies, and governments, to forgo or freeze new investments in Iran's energy sector over the past year. On the other hand, the administration has opposed the pending legislation both because it would reduce the president's flexibility in conducting foreign policy and because imposing sanctions will almost certainly produce a backlash in foreign capitals that would undermine Washington's ability to sustain a united front with its allies and other powers against Iran at the U.N. and in other forums. "We could not support modifications to (ISA) now being circulated in Congress that would turn the full weight of sanctions not against Iran but against our allies that are instrumental in our coalition against Iran," Undersecretary of State Nicholas Burns told a Senate Committee in late March. In this position, the administration has been strongly supported by the National Foreign Trade Council (NFTC), a business lobby created by many of the nation's biggest corporations, which has long opposed both unilateral U.S. trade sanctions and state divestment initiatives. "On one hand, we're asking Europe, Russia, China and Japan to work together with us on this, and, on the other hand, we're beating their companies over the head with a stick," NFTC President William Reinsch told IPS.

In a letter to Ohio lawmakers considering divestment legislation, Reinsch made much the same argument, noting also that, in a case brought by the NFTC, a federal court judge recently struck down as unconstitutional a Sudan divestment law in Illinois on the grounds that it interfered with the federal government's ability to conduct foreign policy and regulate foreign trade. In his weekly column in the Washington Times published shortly after Reinsch sent his letter, CSP's president, Frank Gaffney, denounced Reinsch as "Terror's lobbyist", charging that the NFTC "favors doing business with America's enemies and runs interference for those determined to do so."

"Iran is already in difficult economic straits; if fully brought to bear, the power of America's capital markets could mightily affect corporate behavior, undermining - hopefully, helping to bring down - the mullahocracy in Iran," wrote Gaffney.