While today’s state laws target narrow investment in oil and gas, federal sanctions — for the moment — apply to Iran’s financial, energy, metals, mining, minerals, manufacturing, and automotive sectors — all of which have been linked to the Islamic Revolutionary Guard Corps (IRGC). Governors and state legislatures should amend their pension-divestment statutes to align with this counter–IRGC framework — ordering their pension systems to divest from any company that engages in or facilitates a transaction with any entity connected to those sectors.
State divestment laws on Iran would grow teeth overnight. Banks and companies around the world would quickly find themselves on pension blacklists for taking advantage of Biden’s temporary sanctions relief.
And, yes, multinational companies — private and public — do pay attention to these lists. In 2015, Illinois became the first state in America to use pension divestment to target companies engaged in boycotts of Israel. Florida, New Jersey, Texas, and eight other states followed. Airbnb found itself in the crosshairs of these laws after announcing it would stop listing homes in disputed Jewish communities of the West Bank. Facing financial, legal, and reputational costs in multiple U.S. states — while pursuing an initial public offering — the company quickly reversed course.
The BDS laws exist in only a dozen states — and those state pension funds alone hold more than $170 billion in international equities. Imagine the impact of even more states wielding even more leverage uniting to stop Iran-sponsored terrorism that threatens America and Israel.
Governors could get even more creative. Willie Sutton infamously said he robbed banks because “that’s where the money is.” The same is true for effective sanctions policy — target the banks and financial transactions.
The State of Florida passed an Iran banking law in 2012 that required all chartered banks to certify that they did not engage in transactions with the Central Bank of Iran or other dirty Iranian banks. The hiccup: The list of those companies would be based on the U.S. Treasury Department’s sanctions list, which isn’t much help as the Biden administration prepares to lift most Iran sanctions.
There may be an easy fix for Florida and other interested governors. As it happens, foreign banks must apply to state regulators to open offices and establish representation. States could add a simple certification requirement for existing and future applicants: With an exception for trade in food and medicine, the bank must pledge it will not facilitate transactions with or for any entity in the Islamic Republic of Iran.
Governors and state legislatures hold many levers to influence decision-making in C-suites around the world. The question is whether they will pull those levers to protect the security of the United States and Israel.
Richard Goldberg is a senior adviser at the Foundation for Defense of Democracies. He served on Capitol Hill, on the U.S. National Security Council, as the governor of Illinois’s chief of staff, and as a U.S. Navy Reserve intelligence officer. Follow him on Twitter @rich_goldberg. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.