Iran Divestment Legislation
Jill Marie Parillo
October 22, 2008
Let's say that legislation promoting divestment in companies that have a 20 million or higher investment in Iran's energy sector, as offered by Senator Obama, gets through Congress next year.(1) This will provide a list of about 50 such companies (updated every six months) to US state run organizations which are set up to generate income for the pensions of public employees (like CalSTRS in California).(2) The legislation will protect these state organizations from lawsuits which could result if they decide to divest their pension funds from the identified companies.
If such legislation is passed and state organizations divest in companies doing big business in Iran, US allies in negotiations over Iran's nuclear program will be hurt, and public retirement funds run by US states could lose value. Iran may not suffer much from such legislation directly, since companies will likely keep their business in Iran, even if US stocks are withdrawn. However, as a result, Iran will feel more threatened by the West, which could increase its protective policies aimed at harming US interests in the region and provoke a need to develop its own security assurance through a nuclear deterrent.
Hurting our Allies
Divesting from these companies could displease European and Asian states needed as partners in Iran nuclear negotiations. Companies which could be targeted by the divestment legislation would likely include big name European Union state companies like:
- Siemens, based in Germany,
- Daimler-Chrysler, based in Germany,
- Volkswagen, based in Germany,
- Renault, based in France,
- Peugeot Citroen, based in France,
- Ericsson and Volvo based in Sweden, and
- Austrian Energy Company OMV, based in Austria.(3)
The National Foreign Trade Council (NFTC) which lobbies on behalf of many of the US's largest corporation's is against initiatives promoting divestment because it will hurt our allies and their willingness to negotiate a solution to the Iran challenge. "On one hand, we're asking Europe, Russia, China and Japan to work together with us on this [challenge Iran's nuclear program poses], and on the other hand we're beating their companies over the head with a stick," said NFTC President William Reinsch.(4)
Losses in US Retirement Fund Values
People could lose money if States pull investment out of these listed companies. When California was considering legislation similar to the proposed divestment legislation in Congress, CalPERS, which provides retirement, health, and related financial programs and benefits to 1.5 million public employees in California, published a study of potential loss in fund value if they divested from the listed companies. The CalPERS report said that if "all 50 of the companies potentially meeting the criteria for divestment" were excluded from their fund over the past five years, "a $66 million loss in fund value" would result.(5) These types of loses would be made up by employer contributions, but how can employers contribute more with the state of today's economy?
D.C. Councilman David Catania said that D.C. should not invest in companies doing big business with Iran due to its corruption and economic hardship. However, Attorney Ian Lanhoff, working for the City's counsel set up to oversee DC's retirement portfolio, disagrees that any investments in companies doing business with Iran is risky, since so many large public investment plans are invested in the same stocks.(6) Approximately $370 million of D.C. pension assets (totaling $3.7 billion) are in companies invested in Iran's oil industry.(7)
Divestment will not Push Businesses out of Iran
Even if US State run organizations divest from companies doing big business with Iran, who is to say that those companies will withdraw their own investment in Iran's energy sector? China makes $7.5 billion through exports to Iran and imports $13 billion from Iran, mostly in petroleum.(8) Doubtful that China will stop importing needed petroleum from Iran if the US divests from its companies investing there. Germany makes a profit of over $5 billion dollars annually from exports. It could be too big of a loss for German car companies to pull their business out of Iran, especially in the state of the global economy today.
Isolation Pushes Iran Towards Nukes
Supporters in Congress of this legislation seem to think that divestment from companies invested in Iran will have a strong impact on Iran's nuclear program goals. Congressman Brad Sherman (D-CA) said that "divestment is a key element in our strategy to use economic pressure until Iran gives up its pursuit of nuclear weapons."(9) However, it is unlikely companies are going to pull out of Iran if the US divests from them. It is more likely that Iran will feel more isolated and less secure vis-à-vis the West.
The arms control community in DC and the media are buried in the minute details of Iran's nuclear program, while Congress pushes hard for more and more muscle in a US policy which they believe will force Iran to end all work on its nuclear program, stop supporting terrorism and end its support of anti-US militias in Iraq. What these groups are missing is that the harder the US pushes Iran, the more the nation will strategically push back through nuclear achievements, terrorism and influence in Iraq.
Policies which help to decrease tension in Iran's relations with the West by incorporating Iran into the International community will reduce Iran's reliance on self made security assurances and offer an opportunity for a radically different US-Iranian relationship. Flynt Leverett and Hillary Mann Leverett both worked at the National Security Council under the Bush Administration. After years of experience and access to high level intelligence on the Middle East, they have laid out a comprehensive policy of rapprochement with Iran through a "US-Iranian Grand Bargain." The Grand Bargain would engage the United States and Iran in a dialogue to alleviate all major concerns, as was done with China by the Nixon Administration. Today, with US assets deeply imbedded in China and vice-versa, China is more of a needed partner to the United States than an isolated enemy. It is time to turn our relations with Iran around and engage the nation for peace.
1 As sighted on Obama's website July 17, 2008 clarifying Obama's additions to Iran legislation, "The Obama provisions clarify that state and local governments can divest from companies that invest $20 million or more in Iran's energy sector and provide safe harbor for private fund managers who divest from such companies."
2 CalSTRS is the second-largest public pension fund in the United States, with a market value of $170 billion as of May 2007. It provides retirement, disability and survivor benefits to California's public school educators from kindergarten through community college, serving more than 776,000 members and their families.
3 Time published an article on a related divestment initiative in 2007: "Campaign Pushes for Iran Divestment" TIME, May 17, 2007. Available at [http://www.time.com/time/world/article/0,8599,1622322,00.html]
4 "Politics-US: Neo-Cons Driving Iran Divestment Campaign," IPS-Inter Press Service, May 10, 2007. Available at [http://ipsnews.net/news.asp?idnews=37687]
5 "Assemblyman Argues for Pension Fund Divestment," The Sacramento Bee, October 15, 2008. Available at
6 "D.C. councilman proposes Iran divestment," Associated Press for the Washington
Examiner, October 14, 2008. Available at
8 "The World Factbook-Iran," Central Intelligence Agency. Available at [https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html]
9 California Representative Brad Sherman, Press Release-Sherman Bill Provides Tax Deferral for Those Divesting from Iran and Sudan," August 2008. Available at [http://www.house.gov/list/press/ca27_sherman/morenews/Divesting.html]
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