Wednesday 14 October 2009

Israel Matzav: US state and local governments to be empowered to divest from Iran

US state and local governments to be empowered to divest from Iran

On Tuesday, the US House of Representatives debated legislation that would make it easier for state and local governments to divest from Iran. The legislation is part of the Iran Sanctions Enabling Act that is currently making its way through Congress.

Under the bill, U.S. state and local governments would acquire new legal authorities that would make it easier to divest from companies investing more than $20 million in Iran's energy sector.

Like other Iran-related legislation, the Iran Sanctions Enabling Act has broad support from Democrats and Republicans who favor maintaining pressure even as the Obama administration and other nations continue talks with Iran over its nuclear program.

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While the legislation itself does not impose sanctions, it extends legal protections to shield state and local governments, and investment fund managers, from civil or criminal lawsuits in response to divestment decisions.

In particular, the measure states a sense of Congress supporting decisions by employee pension plans to divest from or avoid investing assets in persons or companies with more than $20 million in Iran's energy sector.

Erik Paulsen, a Minnesota Republican, referred to the revelation in September of Iran's second uranium enrichment site, and asserted that the legislation would help persuade Iran that it must respond to international concerns about its nuclear program. "The Iranian government will be more responsive if the U.S. can isolate the regime and apply some distinct pressure that will help force Tehran to deliver on its commitments and not merely to do what it has done in the past, and that is [to] use negotiations to merely run out the clock," he said.

Similar legislation sponsored by Republican Senator Sam Brownback and Democrat Bob Casey is pending in the U.S. Senate where it has 34 co-sponsors.

Too little, too late.

For those wondering why this legislation is necessary at all, an argument could be made that trustees and investment managers who shun Iran investments are doing so out of political motivations and are therefore not acting in the best interests of the state and local governments and particularly, their pension funds.

Senators Brownback and Casey have written an article in support of the legislation here.


Israel Matzav: US state and local governments to be empowered to divest from Iran

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