Congress tries to tighten the screws on Tehran

The Bush administration will need to engage in a full-scale lobbying campaign if it hopes to prevent Congress from approving a tougher Iran sanctions regimen this year, according to business sources.

Prompted by the administration’s own view that Iran is trying to acquire nuclear weapons and is tied to terrorist groups, as well as statements by Iran’s president denying the Holocaust, anti-Iran sentiment is rising. In particular, Congress is considering sanctions that would penalize foreign companies investing in Iran. Supporters see this as a way of further isolating the regime and cutting off funds that could help Iran’s pursuit of nuclear technology.

House legislation sponsored by Rep. Tom Lantos (D-Calif.) gained more than 50 additional cosponsors this week, including House GOP Whip Roy Blunt (R-Mo.), and Democratic Chief Deputy Whip Debbie Wasserman Schultz (Fla.). Lantos, who chairs the House Foreign Affairs Committee, is also lobbying other House members for support, a committee spokeswoman said. The bill could be marked up after the April recess.

Meanwhile, in the Senate, Banking Committee Chairman Chris Dodd (D-Conn.) this week said he is considering legislation to “close up” problems with existing sanctions law, although he did not endorse the Lantos bill. He also criticized the lack of sanctions against foreign companies invested in Iran, noting that $126 billion in foreign investment in Iran was potentially subject to sanctions.

The Lantos bill would make U.S. companies subject to existing sanctions if they invest in foreign subsidiaries that are used to side-step those sanctions. The bill says a U.S. company must have more than a 50 percent stake in such investments to qualify, although business sources said this provision is still too vague. As such, it could penalize U.S. companies that have only loose affiliations with foreign firms.   

U.S. Chamber of Commerce President Tom Donohue said the sanctions effort is misguided. “I’m not sure when totally separate subsidiaries around the world who have little or nothing to do with the United States … that Congress can wave a magic wand and prohibit it,” Donohue told The Hill.

He said the U.S. is better served by letting natural market forces work while sending strong signals about the issue of nuclear weapons.

Last year, the administration successfully lobbied against similar measures in the Senate through meetings and calls with individual senators. “It’s going to take that kind of effort again, at an even more critical time,” one lobbyist said.

“You don’t win this particular battle in the hearings, you win the battle in the backroom, where you can explain the consequences of the legislation,” said Bill Reinsch, president of the National Foreign Trade Council.

So far, business sources said, they are unaware of any behind-the-scenes meetings on Iran sanctions. But this week officials launched the administration’s public argument: The U.S. needs allies in pressuring Iran, and penalizing foreign companies would be counterproductive.

 “We want the sanctions to be on Iran itself and not so much on our allies, because that could disrupt or even disassemble our coalitions,” Undersecretary of State Nicholas Burns told Dodd’s committee this week. “If we turn around and sanction France, Germany, Italy and Russia but not the Iranians, they might be less willing to support us.”

Business sources said European and Asian countries would also be likely to adopt “blocking statutes” forbidding their companies from complying with the new U.S. sanctions.

The debate comes as the U.S. is pushing for a tougher United Nations sanctions resolution on Iran in cooperation with France, Germany, Russia, China and the United Kingdom. Dodd said he’d like to see the UN support tougher Iranian sanctions, and suggested this could cool the mood in Congress on unilateral sanctions. “If that were the case … that would certainly reduce the temperature on moving on a unilateral sanctions regime, and I would much prefer that case,” he told reporters this week.

Burns also emphasized that U.S. officials are already putting pressure on foreign companies not to invest in Iran. “We’ve gone to CEOs and major financial officers of those corporations just in the last few weeks and months to say this is a bad idea, you shouldn’t do it, and if Congress does pass tougher sanctions legislation we will be subject to our law and we won’t be able to protect those companies,” Burns said.

He specifically mentioned “jawboning” sessions with representatives of Shell Oil, the China National Oil Company and SKS Ventures in Malaysia, which has a proposed $20 billion investment in the Iran oil sector.

Several members of Dodd’s committee, including ranking member Sen. Richard Shelby (R-Ala.). Jack Reed (D-R.I.), Evan Bayh (D-Ind.), Jon Tester (D-Mont.), Robert Menendez (D-N.J.) and Wayne Allard (R-Colo.), signaled they could support tougher sanctions by either criticizing foreign investment in Iran or calling the existing U.S. sanctions regimen too weak.

Dodd said he would be discussing the issue with fellow committee members, and that he plans to call Burns back to his committee for a report on U.S. lobbying of foreign companies. “If jawboning doesn’t produce results here, then you’re going to have to question whether or not this law is having the desired effect,” he said.