With little in the way of tangible progress from Tuesday’s nuclear negotiations with Iran, Congress is moving ahead with yet more legislation to close off Iran’s economy from the rest of the world.
House Foreign Affairs Chairman Ed Royce, R-Calif., and ranking Democrat Eliot L. Engel of New York introduced a bill Wednesday that would bar a range of international commerce with Iran, beyond the energy and financial transactions U.S. sanctions laws have targeted thus far. And a Senate bill, which is expected to be even more expansive, is in the works. A bipartisan group of senators is also introducing a joint resolution Thursday afternoon calling for the United States to stand with Israel if it is forced to “take military action in self-defense,” presumably against Iran.
Royce and Engel’s Nuclear Iran Prevention Act authorizes the president to sanction foreign entities who engage in “significant” commercial trade with Iran, similar to language Sens. Robert Menendez, D-N.J., and Mark S. Kirk, R-Ill., had considered including in sanctions provisions attached to the final fiscal 2013 defense authorization bill (PL 112-239) that was passed in December. Menendez and Kirk ultimately dropped that provision under pressure from colleagues and the White House.
Under the Royce-Engel bill, countries that reduce their trade with Iran to a significant degree would be exempt from the sanctions, much in the same way that existing U.S. laws exempt countries from oil sanctions if they significantly reduce their Iranian oil purchases.
The goal is to create a sort of de facto commercial embargo the same way that the West has created a partial oil embargo on Iran.
Royce and Engel’s bill also would press the administration to enforce one of the sanctions provisions that was included in the most recent defense authorization bill. That provision goes after any entities owned and controlled by the government in Tehran or acting as a government agent or affiliate.
The new bill also requires the Treasury Department to provide a list of all those entities within 60 days of the bill’s passage, then gives the department 30 more days to sanction any financial institutions doing business with those groups.
In a memo, Royce and Engel explain that this is aimed at curbing one of Iran’s tactics for evading sanctions against state-owned companies — “privatizing” them, but retaining a controlling stake.
The bill requires the president to report every 60 days on Iran’s latest nuclear capabilities, including an estimated timeline for when it could develop a nuclear explosive device and build a nuclear weapon, also known as “breakout capacity.”
“What that gives you is a very firm red line,” says Mark Dubowitz, a sanctions expert and executive director of the pro-sanctions think tank Foundation for Defense of Democracies.
It also requires the secretary of State to make a determination as to whether Tehran’s paramilitary force, the Iranian Revolutionary Guard Corps, is a foreign terrorist organization.
The bill includes a section targeting human rights abusers, including those involved in the regime’s program of censorship, and would apply financial-sector sanctions in existing law to transactions conducted by designated human rights violators.
The House legislation does not go as far as some sanctions hawks would like; a Senate bill that Kirk is working on is likely to pursue some of the legislation’s targets more vigorously, Dubowitz says.
One key focus is barring Iran’s access to euros.
Iran “has billions of euros’ worth of foreign exchange reserves sitting in foreign financial institutions,” which are the “principal weapon to forestall economic collapse,” Dubowitz explains. With access to dollars restricted because of sanctions, those reserves are increasingly being converted to euros.
To access that money, however, Tehran needs the banks holding the funds to move them around, transfers that have to be settled and cleared through a European Central Bank payment and settlement system called Target 2.