Reuters logo
Senate panel backs tough pressure on Iran
February 2, 2012 / 4:42 PM / 6 years ago

Senate panel backs tough pressure on Iran

WASHINGTON (Reuters) - Banking transactions with Iran and financing for its oil shipments could come under tougher scrutiny after a bipartisan sanctions bill easily passed a key Senate Committee on Thursday.

The Senate Banking Committee passed a bill that lawmakers hope will further eat into revenues they say Tehran is using to develop nuclear weapons. Iran denies seeking nuclear arms.

The impact of new sanctions will depend on how aggressively the administration chooses to implement them. President Barack Obama on December 31 signed sanctions aimed at Iran’s central bank, and his administration is grappling with how quickly to put them into action.

The White House said on Thursday that enforcement of the sanctions should not harm U.S. allies or oil markets.

The new Senate package seeks to target foreign banks that handle transactions for Iran’s national oil and tanker companies, and for the first time, extends the reach of Iran-related sanctions to foreign subsidiaries of U.S. companies.

The bill is part of an “evolution” in U.S. sanctions law, widening the net cast by U.S. sanctions to companies beyond the U.S. border, said Jeanne Archibald, partner with Hogan Lovells law firm in Washington.

“It’s just a tightening of the screw, if you will,” said Archibald, who was general counsel for the Treasury Department during the George H.W. Bush administration, and now advises international clients on sanctions compliance.

CUTTING IRAN OUT OF SWIFT

The bill, if it becomes law, would direct the White House to press the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, to shut out Iran’s central bank and its other financial institutions from the system used to move money between banks around the world.

“It is inconsistent and troubling that financial communications services providers continue to service those financial institutions” in Iran that are otherwise subject to sanctions, said the provision, proposed by Democratic Senator Robert Menendez.

The measure would authorize but not compel the Treasury Department to sanction Belgium-based SWIFT and the banks that own it, should it not drop Iran banks. The final decision on sanctions would be left to the White House.

In a response posted on its website, SWIFT said it is transparent, complies with all sanctions laws and “will continue to do so.”

Cutting Iranian banks out of SWIFT would have a “very disruptive impact” on the banks’ ability to do business, said Hogan Lovells’ Archibald.

“SWIFT messages are kind of the glue for the worldwide banking system,” she said in an interview.

One section of the bill attempts to make it easier for families of U.S. citizens killed in bomb attacks in 1983 in Beirut and in Saudi Arabia in 1996 to be able to tap into frozen Iranian assets. U.S. courts found Iran to be legally responsible for the deaths.

Families of the victims cried and embraced when the bill passed. “We are one step farther down the road to justice,” said Lynn Smith Derbyshire, whose brother Vincent, a U.S. Marine Corps captain, was killed at the age 30 in the Beirut bombing.

“They destroyed our family,” she told Reuters. “Honestly, I just don’t want (the money) to go back to Iran.”

FOREIGN SUBSIDIARIES AFFECTED

Under current sanctions laws, U.S. companies cannot do business with Iran, but foreign subsidiaries of U.S. companies can and do.

One provision in the new law would close that gap, making U.S. parent companies liable for business done by their foreign subsidiaries that is prohibited for U.S. nationals.

The prohibition in the bill could have a significant impact on trade of innocuous goods, because many foreign affiliates of U.S. companies lawfully sell consumer products to Iran, said Corinne Goldstein, a partner with Covington & Burling LLP.

Before the measures could take effect, the new bill would need to be passed by the full Senate, squared with existing legislation from the House of Representatives, and signed by Obama.

IRAN‘S OIL COMPANY SINGLED OUT

Iran’s currency has fallen sharply in recent weeks because of sanctions from the United States and other Western nations, many of which target its ability to sell oil.

Traditionally, Iran’s central bank cleared oil sales. Now, more payments are being made directly to the National Iranian Oil Company and National Iranian Tanker Company as “workarounds” for the new sanctions, Menendez said.

He introduced a measure that would direct the Treasury Department to quickly investigate the relationship the oil and tanker companies have with Iran’s Islamic Revolutionary Guard Corps, or IRGC.

If there are ties, the administration could sanction foreign banks that deal directly with the oil and tanker companies.

Foreign energy companies involved in joint ventures with Iran could also find themselves facing sanctions under the bill, which could affect projects planned by companies in Venezuela, elsewhere in South America and Asia, said Ed Krauland, partner with law firm Steptoe & Johnson.

“This reflects a significant expansion of sanctions and will put much more pressure on non-Iranian, non-U.S. companies to stay away from Iranian energy projects inside and outstide Iran,” Krauland said.

But like the companion legislation passed by the House, the bill would not cover BP’s Shah Deniz natural gas project in Azerbaijan in which a subsidiary of the National Iranian Oil Company owns a stake.

The bill would also force shippers, insurance companies and reinsurers of marine cargo to pay closer attention to the cargo being carried by ships, lest they face sanctions.

Not included in the package was a Menendez proposal that would see ships that have recently visited Iran blocked from U.S. ports, a measure that the House included in its legislation.

Editing by Russell Blinch and Mohammad Zargham

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below