Sanction Multipliers: New Laws Would Get Tough on Companies that Affiliate with Mullahs

In the wake of enactment of major sanctions against Iran, some in Congress are looking for new ways to tighten the noose further. While Iranian government officials have mused publicly that new sanctions — not just from Washington but also from Europe and the United Nations — will slow their pursuit of nuclear weapons, much more pressure can be applied.

Preparing for increased sanctions over the past several years, the Iranian mullahs have developed myriad business relationships with Western and Asian companies as an economic buffer. Taking aim at that buffer, two new bills are being designed to use the disinfectant of sunlight to help apply public pressure and, in many cases, give overworked government officials information they can use to shut down activities that run afoul of the law.

The Iran Transparency and Accountability Act (ITA), which was introduced in the House last week, would force publicly traded companies to list in their regular filings all business dealings — including the revenues and profits — that their subsidiaries and affiliates have in Iran that could be covered by various sanctions. Already on board as co-sponsors are several top Republicans and Democrats from the Foreign Affairs Committee, but the author is someone in office just three months, Rep. Ted Deutch, Florida Democrat.

Given the complexity of far-flung multinational conglomerates, sometimes the only people who can document various investments are the corporate attorneys who submit Securities and Exchange Commission (SEC) filings. Even then, the paper trail can be murky. But that is why such legislation would greatly advance the ability of government investigators to piece together who owns what and where.

Not all the business dealings from subsidiaries and affiliates covered by the ITA would necessarily be impermissible under the new sanctions legislation, but all listed activities certainly would draw scrutiny from a very important audience: investors.

The SEC would be required to establish a website with a searchable database of listed activities, which is a powerful tool for activists and investors alike. “Simply being on that list will encourage companies to behave responsibly and enhance national security,” Mr. Deutch explains.

Despite barely having broken in his office furniture, Mr. Deutch has wasted no time inside the Beltway continuing the work he started in the Florida Senate. Working together, he and Adam Hasner, the Republican House majority leader and one of the most prominent conservatives in the Sunshine State, successfully passed bipartisan legislation to divest state pension funds from companies that do business with Iran and Sudan. More than $1 billion has been divested, including more than $200 million from Royal Dutch Shell alone.

The other key bill aiming to apply pressure on the Iranian mullahs would force oil companies seeking drilling permits in U.S. federal waters to certify that they are not investing inside Iran and disclose any joint ventures they have with Iranian-controlled businesses.

Joint ventures, whether in Europe or Asia or elsewhere, have been central to the Iranian mullahs’ efforts to blunt the impact of sanctions they’ve known for some time eventually would be enacted. Among the ways in which the Iranian regime gets access to western technical expertise are through joint ventures its firms have with BP, including a massive natural gas project in Britain’s North Sea.

The recently passed Iran sanctions legislation didn’t fully deal with joint ventures (beyond banning the transfer of technology and expertise and requiring reports which can be used to “name and shame”), in large part because not enough is known about the scope and extent of the various projects already in place.

Mark Dubowitz, executive director of the Foundation for the Defense of Democracies (where this journalist is an adjunct fellow) has identified joint ventures and other partnerships Iranian government-controlled entities have with foreign companies in energy projects off the coast of Scotland, in Croatia, Azerbaijan, Uzbekistan and India.

Even that, he notes, “probably barely scratches the surface of Iran’s foreign partnerships and investments.”

Rep. Ron Klein, Florida Democrat, who plans to introduce the joint-venture legislation this week, thinks his bill will help steer companies through a simple cost-benefit analysis. “Our provision says that companies must make a choice,” Mr. Klein explains: “Either do business with the U.S. government or do business with Iran, not both.”

With the momentum building against Iran, companies truly might be having to make that choice sooner rather than later.