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As time goes on, the threat of Iran acquiring nuclear weapons capability increases.  Many observers believe that 2010 will be a crucial year in the effort to prevent this development.  In 2009-2010, the IAI dramatically expanded its efforts to mobilize communities on the issue of Iran's nuclear weapons program.

Why Iran Divestment Matters

by Israel Advocacy Initiative, Iran


Why Iran Divestment Matters

Supporting the 2009 Iran Sanctions Enabling Act

Iran is a Threat to the International Community

Iran has been repeatedly identified by the U.S. State Department as the chief state sponsor of international terrorism.  Iran continues to defy the international community by pushing ahead with its nuclear program in defiance of its nonproliferation obligations, and since December 2006, the UN Security Council has unanimously passed three Resolutions (No. 1737, 1747, and 1803) imposing sanctions on Iran for its failure to suspend uranium-enrichment activities. The risks of doing business with Iranian banks and other institutions have also been highlighted by the U.S., the European Union, and the Financial Action Task Force of the Organization for Economic Cooperation and Development.


The Iran Sanctions Enabling Act of 2009

The bill (H.R. 1327) authorizes state and local governments to divest the assets of their pension funds or other investment funds under their control from companies known to be assisting Iran’s energy sector, and protects these fund managers from lawsuits by investors unhappy with the results. From a Constitutional perspective, the legislation is entirely consistent with U.S. law, including the Iran Sanctions Act and the Iran Freedom Support Act. Currently, a total of 15 U.S. states have either enacted Iran divestment legislation, or adopted policies to the same effect, and this legislation can encourage more such efforts.

Investments in Iran are Questionable and Risky

Iran’s economy is in a vulnerable state.  International isolation, inadequate foreign investment, declining oil production, rising domestic energy consumption, high inflation, and political unease all have contributed to Iran’s economic condition.  In 2001, the U.S. SEC determined that companies with business operations in terrorist-sponsoring states (such as Iran) are exposed to a special category of risk known as Global Security Risk, a combination of risk to both share value and corporate reputation that stems from a publicly traded company’s international activities and the security-related concerns generated by connections to terrorism and weapons proliferation. Under U.S. law, pursuant to the Iran Sanctions Act of 1996, all U.S. and foreign companies that have invested more than $20 million in Iran’s energy sector since August 5, 1996, are liable to be sanctioned.  The number of sanctionable companies is less than twenty, and all are foreign.


Investments in Iran Pose a Financial Risk for Our State

Economic sanctions, risk warnings, credit restrictions, and other measures announced by the U.S., European nations, and the UN, business in Iran’s energy sector poses a fiduciary risk that individual state’s cannot ignore. These actions and similar future actions affecting investments in publicly traded companies involved in Iran’s energy sector pose a financial risk to teachers, civil servants, and retirees. To protect public assets, it makes sense to enact statutory prohibition on public investment in companies doing business in Iran’s energy sector. Citizen stakeholders must have a say in the broad outlines of where their retirement funds are invested, especially when looking at a rogue state such as Iran.


How Does Divestment Work?

Legislation in a number of other states has required state pension funds to review their investment portfolios to determine their direct holdings in companies investing in Iran’s energy sector, and then to contact such companies in writing. If the companies do not commit to stop business in Iran, they will be divested from within a limited span of time. These laws are focused on Iran’s energy sector because the revenue from Iran’s oil and gas industry directly funds its nuclear program as well as its support for international terrorism.  Additionally, the number of companies from which these states are asked to divest from is quite limited.


The states with divestment laws are Arizona, California, Florida, Georgia, Illinois, Louisiana, Missouri, Maryland, Michigan, and New Jersey. The states with divestment policies are Colorado, New York, Ohio, Texas, and Washington.


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