Senate Targets Iran’s Oil Suppliers

Peter Crail

The Senate approved a bill Jan. 28 that would increase pressure on Iran by levying sanctions on firms that export gasoline and refinery equipment to that country.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act, sponsored by Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd (D-Conn.), amends the 1996 Iran Sanctions Act, which targeted firms investing in Iran’s energy sector. The House of Representatives passed an Iran sanctions bill in December. (See ACT, January/February 2010.)

Iran imports about 30 to 40 percent of its gasoline from abroad; proponents of the legislation have cited this as a key economic vulnerability. (See ACT, June 2009.) Iran has recently taken steps to reduce its gasoline consumption, however. The Iranian parliament adopted legislation last October to phase out long-standing public energy subsidies, which artificially lowered the cost of gasoline and other energy-related goods.

The Senate measure was approved unanimously by voice vote and came a day after a bipartisan group of nine senators sent a letter to President Barack Obama urging him to pursue additional U.S. sanctions against Iran.

A House-Senate conference committee will have to reconcile the two versions of the bill, and the two chambers will then have to approve the committee compromise before final legislation can be signed into law.

The Senate bill is far more expansive than the House version, which was primarily aimed at Iran’s gasoline imports. Among other steps, it extends the Iran Sanctions Act restrictions to U.S. firms whose subsidiaries violate that law; codifies Department of the Treasury asset freezes and trade bans against Iran; authorizes states, local governments, and mutual funds to divest, without the risk of legal action, from firms that contribute to Iran’s energy sector; and prohibits U.S. government contracts with firms that export sensitive communications monitoring and jamming equipment to Iran.

It also establishes criteria to determine whether states may be found to be “destinations of possible diversion concern” and “destinations of diversion concern,” enumerating actions to be taken in response to each designation. The legislation would require the United States to provide assistance to strengthen the export controls in countries found to have lax export control systems or not to be cooperating with U.S. efforts to halt illicit trafficking in sensitive goods and technologies. Countries that continue their noncooperation would be subject to tightened Department of Commerce export licensing requirements.

The Obama administration has expressed concern that the sanctions legislation may hinder multilateral cooperation addressing Iran’s nuclear program. In a Jan. 27 floor statement, Dodd said that the administration was seeking an exemption from sanctions for firms in countries that are cooperating on efforts to address Iran’s nuclear program. The administration wants to have “a mechanism which could provide an additional incentive for certain countries to work with us on imposing tougher sanctions,” Dodd said.

He added that discussions with the administration have begun on adding such an exemption. The talks are focused on determining the criteria that would constitute “close cooperation,” he said. House Foreign Affairs Committee Chairman Howard Berman (D-Calif.), who sponsored the House bill, said in December that he would be willing to work with the administration to address its concerns in a final bill.

In addition to being broader in scope, the Senate version includes less-stringent waiver provisions than the House bill for the president to exempt firms from sanctions. Although the Senate and House bills require the president to notify Congress of the rationale for any exemption, the Senate bill requires that such an exemption be “in the national interest” rather than “in the vital national interest,” as the House version requires.

Due to concerns that such penalties on foreign firms may hinder international cooperation to address Iranian proliferation, previous presidents have often not made the official determination that a firm is violating the law, skirting the need to issue a waiver or impose sanctions.

The United States has been holding discussions with UN Security Council members over the past month on a fourth round of sanctions on Iran. U.S. officials have indicated that Russia, which has not been willing to go as far as Western countries on Iran sanctions in the past, has joined the West in seeking new penalties.

U.S. officials have expressed hope that China would do so as well. On NBC’s Meet the Press Feb. 14, Vice President Joe Biden said, “[W]e have the support of everyone from Russia to Europe, and I believe we’ll get support of China to continue to impose sanctions on Iran.”

However, Beijing, one of the five veto-holding permanent members of the council, has continued to object to sanctions, calling for further negotiations instead. “We hope relevant parties can show flexibility to create conditions for completely and properly solving the Iran nuclear problem through diplomatic efforts,” Chinese Foreign Ministry spokesman Qin Gang told reporters Feb. 23.

Some key nonpermanent council members, including Brazil and Turkey, have echoed China’s call for continued negotiations rather than seeking sanctions, but current negotiation efforts on an IAEA proposal to fuel an Iranian nuclear reactor and reduce tensions appear to have failed to make progress.

A resolution requires nine of 15 votes to pass, but sponsors generally want their resolutions to be as broadly supported as possible.