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House lets states get rid of Iran-linked funds

JIM ABRAMS | 10/14/09 03:35 PM | AP

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WASHINGTON — The House on Wednesday sent a message to Iran that pursuit of nuclear capability will not go unpunished, approving legislation that allows state and local governments to curtail investments in international corporations doing business in Iran's energy sector.

The legislation also protects from shareholder lawsuits those investment managers who divest funds from companies that are involved in Iran's energy sector or have provided equipment for the transport of oil or liquefied natural gas from Iran.

The bill passed the House 414-6 and now goes to the Senate.

The bill does not impose new sanctions, said its author, Financial Services Committee Chairman Barney Frank, D-Mass.

"What it does is to make it very clear that Americans who are deeply concerned about the prospect of Iranian nuclear power, and other aspects of Iranian governance, that they are able to act on those (concerns)," he said.

"Several international firms continue to subsidize Iran's nuclear ambitions by investing billions of dollars in the regime's energy sector," said Rep. Mark Kirk, R-Ill., a co-sponsor. "This legislation gives a strong 'go signal' to state and local leaders around America to get out of Iran."

Lawmakers in both the House and Senate have clamored for the imposition of tougher sanctions on Iran since it was revealed that the Tehran government was operating a previously undisclosed uranium enrichment facility near the holy city of Qom.

Iranian officials have pledged to the United States and five other world powers that the plant would be opened to U.N. inspectors and that Iran would ship low enriched uranium out of the country to show it is not seeking to develop nuclear weapons.

But lawmakers question whether Iran can be trusted, and the Obama administration says it is hoping to craft an international consensus on new multilateral sanctions if Iran acts in bad faith.

The difficulty of coming up with a common approach on new sanctions was highlighted Wednesday when Russian Prime Minister Vladimir Putin, speaking to reporters in Beijing, said talking about sanctions against Iran could disrupt negotiations with Tehran regarding its nuclear program.

The House bill, which passed in similar form twice in the past two years ago, makes clear that the federal government will not interfere – citing its sole authority to determine foreign policy – when states or local governments decide to divest themselves of investments in an organization that has spent $20 million in Iran's energy sector. Frank said about 20 states have enacted legislation to cut investment ties to corporations associated with Iran.

The second part of the bill provides safe harbor from lawsuits to investment companies or asset managers who divest from or avoid investing in Iran's energy sector.

Sen. Sam Brownback, R-Kan., has a similar bill pending in the Senate.

The National Foreign Trade Council and its affiliate, USA Engage, issued a statement expressing disappointment that the House had acted in the middle of diplomatic efforts to encourage Iran to be more forthcoming about its nuclear ambitions.

"While we understand that the legislation is a reflection of policymakers' desire to 'do something' with respect to Iran, it undermines the federal goverment's ability to conduct foreign policy by granting all 50 states and countless municipalities the right to levy what amount to economic sanctions agains Iran," said USA Engage director Richard Sawaya.

The Frank bill is one of numerous measures to beef up penalties against Iran waiting congressional action. Senate Banking Committee Chairman Chris Dodd, D-Conn., is backing a comprehensive bill that would extend the range of sanctions on financial transactions, restrict the export of refined petroleum products to Iran, strengthen the ability of the administration to freeze the assets of Iranians involved in weapons programs and, like the Frank bill, allow divestiture of investments.

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The bill is H.R. 1327.

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