Washington DC - If one goes by the number of co-sponsors in the House and the Senate, a key sanctions bill is well on its way to passage. The Iran Counter-Proliferation Act (HR 1400, S.970) is intended to patch designated “loop-holes” in existing sanctions and trade regulations. The legislation includes several critical measures, outlined here, which could have significant implications for US policy toward Iran and the US relationship with its allies.
In what would arguably be the most drastic change to current sanctions law, a provision in HR 1400 would remove the President's waiver authority. Under current law, the President may waive the application of sanctions to nationals of a country if that county has agreed to impose independent economic sanctions on Iran or if the President finds that doing so would serve the 'national interest.'
The Presidential waiver authority is a key provision in existing sanctions law - the Iran Sanctions Act - and was critical to its initial passage in 1996. In an apparent bow to Administration pressure and acknowledgement of the President's Constitutionally mandated power over foreign policy, Congress fashioned the Iran Libya Sanctions Act, now the Iran Sanctions Act (ISA), with a trap door built in: the ISA places the burden of enforcing its provisions squarely on the shoulders of the President. In carefully crafted language, the ISA directs the President to 'investigate' cases of foreign investment in Iran's petroleum infrastructure. It is left to the President's discretion when, or if, such investigation is concluded, thus allowing the investigative stage to be carried on indefinitely.
All amendments and revisions since the ISA's inception have upheld this built in flexibility, and the Presidential waiver authority has been exercised by both the Clinton and Bush administrations. As a result, according to the Congressional Research Service, no firms have been sanctioned under the ISA since its inception.
The proposed legislation would also restrict US nuclear cooperation with countries that assist Iran's nuclear and weapons program - specifically Russia. In the past, Congress has relied on foreign aid appropriations to penalize Russia for assisting Iran. For FY2006, Congress withheld 60% of US foreign aid assistance to Russia when it failed to terminate technical assistance to Iran's nuclear and ballistic missiles programs. The foreign aid appropriation for FY2007 contained similar measures. The current bill would carry on in this tradition, restricting nuclear cooperation with Russia if it continues to assist Iran's nuclear or advanced conventional weapons capabilities.
On July 3, President Bush and Russian President Vladimir announced that they had initialed a formal bilateral nuclear cooperation agreement that would capitalize on the growing demand for nuclear energy. Following a two day meeting at the Bush compound in Kennebunkport, Maine, the two leaders pledged to expand nuclear energy cooperation, make nuclear power available to other states, and reduce their own strategic nuclear weapons to the lowest possible levels. While the two nations have yet to sign the document, the move signifies a major step for Russia in its effort to secure a civilian cooperation accord with the US, commonly known as the 123 agreement, in reference to Section 123 of the Atomic Energy Act.
Over the years, Russia has indicated a desire to serve as a repository for US-origin spent nuclear fuel from countries such as South Korea, Switzerland, and Taiwan, estimating that it could earn as much as $20 billion from the enterprise, Arms Control Today reports. The Bush Administration, like its predecessor, has attempted to use the prospect of such an arrangement as leverage in its effort to force Russia to abandon its nuclear and weapons dealings with Tehran. The current legislation would cement this conditional framework into law by prohibiting all nuclear cooperation, under the auspices of Section 123, until Russia ceases its nuclear and weapons dealing with Iran.
Russia's Foreign Affairs Committee Chairman Konstantin Kosachyov expressed concern about the bill and said he hoped the President would veto it if it is passed by Congress. 'Otherwise, the signing and further implementation of a Russian-US agreement on cooperation in the atomic energy sector will be put in danger,' said Kosachyov, as reported by InterFax. Critics argue that the bill would damage one of the few remaining areas of strong US-Russian collaboration, while the bill's supporters say it would advance US policy objectives by forcing Russia's hand in terms of its relationship with Iran.
If passed, HR 1400 would also have sweeping implications on foreign corporations with subsidiaries in the US. The bill would sanction to foreign parent companies of US subsidiaries if those subsidiaries are directed or formed to trade with Iran. An amendment to the bill would provide an exception to parent companies that acquire a subsidiary without knowledge of its business dealings with Iran. Simon Weber of the Organization for International Investment, which represents over 160 US subsidiaries of companies headquartered abroad, many of which do business in Iran, says that the provision may reduce the attractiveness of doing business in the US. He describes the companies targeted by this bill as 'trapped between reciprocal statues,' with their home countries prohibiting them from doing what is being mandated by the US. 'If this bill passed,' said Weber, 'we would see a major outcry from our European allies.'
The legislation would also expand current sanctions law to target corporate officers of companies investing in Iran. An amendment to the bill would give the President the authority to freeze the assets of any corporate officer whose company invested more than $40 million in Iran's oil and natural gas industry. It would allow the President to block the property of those officers or prohibit transactions in that property 'to the same extent as the property of a foreign person determined to have committed acts of terrorism for purposes of Executive Order 13224 of September 23, 2001.'
Moreover, a provision of the bill would reduce the US contribution to the World Bank for reconstruction and development each year by a percentage equal to the amount that the World Bank loaned out to Iran in the previous fiscal year. The withdrawn funds would be tranfered to the government's reconstruction and development program. A similar measure in the FY1994-FY1996 budget contributed to the temporary halt to new World Bank lending to Iran.
The bill would also expand on current trade restrictions, effectively eliminating all imports and ending critical exports. Last year, US imports from Iran totaled $85 million. Since the easing of trade restrictions in December 2004, a handful of goods have been eligible for importation (with tariffs) including nuts, dried fruits, carpets, and caviar. Effective 120 days after the bill's enactment, all importation of Iranian goods would be eliminated.
Under current trade regulations, some goods related to the safe operation of civilian