U.S. Adds Its Own Sanctions on Iran
President Barack Obama signed into law new sanctions on Iran that, for the first time, will bar from the American market foreign companies that work with Iranian businesses charged with aiding Tehran's nuclear program and the suppression of democracy.
The law requires the Treasury Department to cut off from the U.S. financial system any foreign bank conducting transactions with Iranian entities blacklisted by the United Nations or the American government.
Those blacklists include some Iranian banks, Tehran's energy sector, and the businesses of Iran's Revolutionary Guards.
Treasury said it has already started dispatching senior officials to Europe and Asia to outline to governments and executives how the new U.S. law could potentially freeze out companies.
The legislation also significantly limits the White House's ability to grant waivers to allow certain foreign firms to continue to pursue investments of more than $20 million in Iran's energy sector, the financial lifeline of the Islamic Republic.
Such exemptions significantly weakened past legislation against Iran, said U.S. lawmakers who helped to draft the new bill. "Foreign companies are going to have to make a choice: Do they want to do business with us or with the Iranians?" said Rep. Ron Klein (D., Fla.).
The law adds to sanctions recently enacted at the United Nations against Iran for its nuclear program, which critics say is for military purposes and Tehran says is peaceful in nature.
"With these sanctions-along with others-we are striking at the heart of the Iranian government's ability to fund and develop its nuclear programs," Mr. Obama said at a White House ceremony.
Mr. Obama said his administration will continue to work with allied nations to increase pressure on Tehran so it will return to the negotiating table.
U.S. lawmakers and financial analysts say dozens of European, Japanese and Middle East banks continue to do business with sanctioned Iranian banks.
Among those that could face legal challenges and fines are Japan's Big Three banks-Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group and Mizuho Financial Group Inc.-as well as European firms such as Commerzbank Bank AG and Deutsche Bank AG, all of whom have businesses inside Iran.
Representatives from all three Japanese banks declined to comment on their Iran businesses or the impact of the new U.S. law.
A spokesman for Commerzbank declined to comment on the effect of the law, saying the bank wasn't familiar with its details. He said Commerzbank has been reducing its exposure to Iran since 2007.
A Deutsche Bank spokesman said most of its existing contracts in Iran have durations of more than 10 years and the bank is legally obligated to fulfill them.
A number of Japanese, South Korean and German firms that do business with Iran said they had already begun scrutinizing the U.S. law to gauge its potential impact on their businesses.
Enforcement of the law will involve significant negotiations between the U.S. and foreign governments. U.S. officials said that when they find a foreign firm in violation they will seek mechanisms to allow the firm to unwind their Iran business before taking punitive action.
Other provisions in the law require the U.S. to sanction Iranian entities or individuals accused of suppressing democracy activists in Iran who challenged President Mahmoud Ahmadinejad's re-election last year. Washington is also required to target foreign firms believed to be providing technologies to Iran's government that can be used to repress political dissent.
The new law expands on the 1996 Iran Sanctions Act, which also targeted international firms investing more than $20 million in Iran's oil-and-gas sector. But because of presidential waivers incorporated into the old bill and a number of legal loopholes, successive U.S. presidents never sanctioned any foreign energy firm under the law, despite what American lawmakers said were numerous past violations.
The new U.S. law still provides the White House with waiver powers for firms operating in Iran's energy sector, according to lawmakers who drafted the bill. But it incorporates a number of new measures that significantly raise the political pressure on the White House not to offer blanket waivers to companies or countries.
The White House, for example, now is required to report to Congress the names of any companies in violation of the investment restrictions on the energy sector.
It is also required to report to lawmakers on what national-security interests are served by granting waivers. The legal exemptions are now only good for 12-month periods.
"This waiver has the name-and-shame effect and a political cost for the White House," said Howard Berman (D., Calif.), chairman of the House Foreign Affairs Committee.
One statute in the new sanctions requires that all foreign firms to certify that they aren't not doing business with any suspect Iranian companies or entities before being eligible for winning U.S. government contracts.
Japan's Inpex Corp. is among the major international firms that said it was closely studying the new legislation.
The oil-and-gas producer holds a 10% stake in the Azadegan oil field in southwestern Iran, but has no other business there, the company said.
Inpex President Toshiaki Kitamura said his company has no plans to divest itself from its Iranian investment and had legal obligations to protect its shareholders. He declined to discuss the amount of Inpex's investment or its potential impact on the company's bottom line.
"We are aware that President Obama is expected to sign the bill. We will keep an eye on the impact," Mr. Kitamura said in Tokyo before the signing Thursday. "We are responsible on our shareholders' behalf for recovering money we had invested."
Current and former Treasury officials said they have been scrutinizing international financial data to locate what they said were dozens of international financial institutions that continue to do business with the 16 Iranian banks sanctioned by the U.N. or the Treasury Department. The data were mined from U.S. intelligence networks as well as from public information from the Bankers Almanac and global banking regulators.
A recent report by Avi Jorisch, a former Treasury Department intelligence official, details how the Big Three Japanese banks, Deutsche Bank and Commerzbank continue to maintain bank accounts for Bank Sepah, Iran's oldest financial institution.
Bank Sepah has been blacklisted by both the U.N. and the U.S. in recent years for its alleged role in assisting Tehran's development of weapons of mass destruction.
Spokesman Reiner Rossman declined to comment on any relationship Commerzbank had or has with Bank Sepah.
Ronald Weichert, the spokesman for Deutsche Bank, said the bank is or has been "engaged in a limited amount of business with counterparties, including government-owned or controlled counterparties, in certain countries which the U.S. State Department has designated as state sponsors of terrorism, including Iran."
He said the bank's "existing business with Iranian counterparties consists mostly" of participation "as lender and/or agent in a few large trade finance facilities arranged some years ago to finance the export contracts of exporters in Europe and Asia."
U.S. officials said Stuart Levey, the Treasury Department's point man on Iran sanctions, will visit Germany, France and Belgium next week to outline to financial regulators and companies there the impact of the new U.S. and U.N. sanctions. A second Treasury official, Assistant Secretary David Cohen, will visit Pakistan, Malaysia and Japan.
Source: Wall Street Journal