UPDATE: US Senate Banking Panel Passes Iran Sanctions Bill
October 29 2009 - 5:36PM
Dow Jones News
The U.S. Senate banking committee Thursday passed legislation
authorizing stringent new sanctions against Iran and the firms that
conduct business with the nation, particularly targeting the energy
sector.
The bipartisan bill - which sailed through the panel on a 23-0
vote - is part of a larger effort to try to halt Tehran's nuclear
enrichment program.
Committee chairman Sen. Chris Dodd (D, Conn.), said lawmakers
hope to "send an overwhelmingly clear signal of our resolve here in
Congress that Iran must finally come clean on its nuclear program
and rejoin the community of responsible nations."
"The President has rightly adopted a two-track policy of
engagement backed by the prospect of further sanctions, and I
support his approach," Dodd said. "Our legislation strengthens what
has come to be known as the "pressure track."
Like a similar bill that passed in the House of Representatives'
Foreign Affairs Committee Wednesday, it gives the Obama
administration stronger powers to sanction companies that provide
Iran with gasoline, diesel and other refined petroleum fuels. It
expands current U.S. sanctions for firms--and their foreign
subsidiaries--investing more than $20 million a year in Iran's
energy sector, including financial institutions, tankers, insurers,
and export credit agencies.
It requires the President to sanction companies exporting
petroleum products to Iran by restricting their foreign exchange
transactions, access to U.S. banks and handling of property in the
U.S.
But it also has broader provisions that strengthen the U.S.
Treasury Dept.'s authority to freeze assets of Iranian officials,
prohibits government contracting from companies that export
communications jamming or monitoring technology, and encourages
divestment out of firms that do business with Iran.
The U.S. and other countries fear Iran is pursuing a nuclear
weapons program. International sanctions through the United Nations
have so far failed to make major progress in negotiations with
Tehran, spurring Congressional lawmakers to legislate more
stringent unilateral sanctions.
Despite being one of the largest exporters of crude in the
world, Iran imports a major portion of its gasoline due to a dearth
of refining capacity.
The measure also follows the President Wednesday signing an
appropriations bill into law that prohibits the Department of
Energy from purchasing fuel for the Strategic Petroleum Reserve
from companies that do business with Iran.
The Foundation for the Defense of Democracies, which tracks
companies doing energy business with Iran, said from August through
October the main suppliers include Vitol Holding (VTL.YY),
Trafigura Group (TFG.YY), Total SA (TOT, FP.FR), Royal Dutch Shell
(RDSA, RDSA.LN), Reliance Industries (500325.BY), Independent
Petroleum Group (IPG.KW) and Malaysia's Petronas (5681.KU).
FDD Executive Director Mark Dubowitz says the National Iranian
Oil Company (NIOC) also shows up as a supplier "which probably
means it is acting as a front for other suppliers."
Vitol Holdings, one of the world's largest energy traders, is
responsible for importing 42 million gallons of gasoline into the
U.S. a day, and is a major supplier to the U.S. emergency
stockpile.
FDD's Dubowitz said the legislation "provides real teeth to a
comprehensive economic warfare strategy against the Iranian
regime."
But Cliff Kupchan, a senior analyst at Eurasia Group, said
unilateral action wouldn't likely ratchet up the type of pressure
lawmakers are seeking, with other countries able--and willing--to
fill the supply gap.
"Lack of refining capacity in Iran is an Achilles heel, but a
measure that lacks multilateral enforcement can easily be
circumvented," Kupchan said. "They will at best have a limited
affect," he said.
Firms from China, Malaysia, Gulf countries, Indonesia and South
Africa are likely to backfill any lost western supplies.
Iranian transactions costs are likely to increase, putting some
pressure on the Iranian economy, but Kupchan said Tehran is deeply
committed to its nuclear program and the broader economy isn't
performing badly.
Under the legislation, the U.S. administration would have to
report back to Congress every six months on which individuals and
companies had potentially violated the act.
Currently, the administration hasn't applied the Iran Sanctions
Act to any company for nearly a decade, though a raft of companies
have invested more than the threshold amount. State Department
officials have said applying sanctions against companies based in
other countries raised sovereignty issues and complicates
negotiations for multilateral sanctions.
State Department officials have said they're reviewing nearly
two-dozen companies to see if there have been violations of the
Iran Sanctions Act.
By Ian Talley, Dow Jones Newswires; 202-862-9285;
ian.talley@dowjones.com;