Divest Iran

By Kenneth R. Timmerman
FrontPageMagazine.com | April 27, 2007

"Economic sanctions,” former Sen. Jesse Helms was fond of remarking, “are the only policy option between appeasement and war.”

In his paraphrase of Thomas Jefferson, Sen. Helms was addressing the concerns expressed by the business lobby to U.S. sanctions on the regime of Saddam Hussein. The sanctions Sen. Helms was advocating came in response to the gassing of thousands of Iraqi Kurds by Saddam’s troops in Halabja, nearly twenty years ago.

So too, today, the business lobby is fighting vigorously to prevent state legislatures around the country from passing new laws to divest state pension funds from companies doing business with the terrorist regime in Iran.

But not only do such laws make good sense. They will act as “force multipliers” for other measures now being taken by the federal government to increase the pressure on the Tehran regime, such as banning Iranian state-owned banks from the international financial system.

I travel the country speaking about Iran. People are always asking: what can we do?

Divest Iran bills answer that question. Here is something clear-cut, effective, and just plain right that individual Americans and state legislatures can do to help increase the pressure on the Iranian government.

What kind of policies will be effective in compelling a regime such as the one in power in Tehran to change its behavior? Certainly not continuing to invest and do business with them as usual.

But by telling foreign companies that their support for the Tehran regime will affect the investment decisions Americans make will complicate Iran’s quest for the investment capital and technology it needs to keep its oil industry afloat.

This is Iran’s key vulnerability. Just last week, Iran’s oil minister told a conference in Tehran that Iran needed $20 billion annually in fresh foreign investment funds to keep the oil flowing. We can help to staunch that flow by shunning companies that do business in Iran.

But in a letter sent to Ohio state representative Chris Widener, chairman of a key economic panel hearing a divest terror bill on Wednesday, the president of the National Foreign Trade Council, Bill Reinsch, dragged out every shop-worn argument the business lobbyists have used for decades to oppose any limits on trade with terrorists.

Divestment would “broadly and indiscriminately harm U.S. and foreign companies,” he claimed, and was “extremely unlikely to affect the behavior of the Iranian government or help the Iranian people.”

On the contrary: divestment is one thing the Iranian regime truly fears, because it knows that businesses will follow the money. And without the support of Western business, Iran’s oil industry – and possibly its radical Islamist regime – will collapse.

Reinsch also claimed that divesting in companies that are propping up the Iranian regime would hurt individual pensioners – apparently under the assumption that Wall Street fund managers are too dumb to tailor specialized “Iran-free” funds that would perform at or above the market. (We’ve got sector funds, index funds, emerging market funds, “green” funds – why not Iran-free or terror-free funds?)

But what was most astonishing about Reinsch’s argument was what he didn’t say. Why are he and his organization lobbying so vigorously against this bill? What interests or behavior are they seeking to protect? Why do responsible business executives want to invest in Iran in the first place, given the unwillingness of the Tehran regime to protect foreign investment and its imposition of onerous buy-back arrangements that rational executives in the oil industry shun?

My friend and colleague Frank Gaffney calls Reinsch “terror’s lobbyist,” because of his systematic willingness to go to bat for the right of business to prop up the world’s worst regimes. Gaffney notes that Reinsch told a reporter, “You don’t win this particular battle in the hearings; you win the battle in the backroom, where you can explain the consequences of the legislation.”

Appropriately, Reinsch shunned yesterday’s hearing in the storied statehouse of Columbus, Ohio, preferring to send a letter filled with specious legal gobbledygook instead. His goal was to intimidate legislators into believing that their actions would be struck down by the courts as a violation of the foreign commerce clause of the Constitution.

That argument was taken apart by Arizona state university law professor Orde F. Kittrie, who actually pulled the full legal opinion Reinsch had selectively cited and showed that the court did NOT address the right of state governments to pass divestment laws, but a separate and unrelated issue.

That’s why Reinsch works in the backrooms. As Frank Gaffney noted, “his clients’ case cannot stand the light of day. Their only chance lies in spooking legislators in settings where their constituents [and in this case, law professors] cannot monitor the misinformation and intimidation.”

But even more astonishing was Reinsch’s assertion that government should not set guidelines for business.

Government regulates business for two primary reasons: to prevent rapacious acts that harm consumers, workers, and/or investors, but also to protect business from non-stop lawsuits.

Reinsch’s insistence that state governments should step back from passing divest terror legislation could open his member companies to massive lawsuits from victims of the products he insists they should be allowed to sell to Iran.

A case in point. After the 1991 Gulf war, thousands of U.S. military veterans came down with a broad array of debilitating diseases that became known as Gulf War syndrome.

A few years after the war, U.S. Army and outside medical studies began to find that a high percentage of the soldiers affected by Gulf War syndrome also had been exposed to Saddam Hussein’s chemical weapons. This prompted a class-action lawsuit against the companies that had provided the dual-use technology and expertise to Saddam enabling him to build those weapons.

Many of the companies argued at the time that they could not be held responsible for what Saddam did with their products because the government had never warned them away from the trade.

(This was only partly true, of course. Starting in 1984, the Reagan administration began imposing a series of increasingly severe foreign trade restrictions on the sale of precursor chemicals and chemical weapons manufacturing goods to Saddam’s regime, because of his documented use of CW on the battlefield against Iran. They later expanded these to include missile, nuclear, and biological technology.

Mr. Reinsch’s arguments could expose his members, or the foreign parents or subsidiaries of his members, to a flurry of future lawsuits from victims of the Iranian regime who will claim they were harmed by his clients’ actions.

Members of the Financial Institutions committee of the Ohio House of Representatives heard from a recently retired state teacher, Mary Lou Bennett, who told them that she was outraged to think that her retirement money was going to prop up the Tehran regime.

They heard from a Cleveland area fireman, Marine Gunnery Sergeant Mark DePhillips, who told them that while serving in Iraq his men had been targeted by Iranian-supplied weapons.

Indeed, U.S. military spokesmen in Iraq have said recently that over the past 18 months, more than 170 American soldiers have been murdered in Iraq by insurgents equipped with Iranian-made “Explosively-Formed Penetrators” used in roadside bombs.

Sgt. DePhillips expects to be redeployed to Iraq at some point over the next year. Asked by a committee member if he would accept, say, a 10% lower yield if the firemen’s pension fund were required to divest from companies doing business in Iran, he didn’t miss a beat.

Divestment was “just the right thing to do,” he said. “They want to destroy us.”

Sgt. DePhillips is right. What is more fundamental than the right of individual Americans and groups of Americans to decide where they will invest their money? It’s like choosing who you invite for dinner.

After all, investment is a voluntary decision, not a compulsion. Nobody can force you to invest in Daimler-Chrysler, LG Group, Siemens, Shell, Sinopec, Petronas, Gazprom, Statoil, Mazda, Bayer or Total, just as nobody can force any of those companies to invest in Iran.

But Bill Reinsch and the National Foreign Trade Council would like to compel you to invest in companies doing business in Iran, or at the very least, to make sure you never know when you are investing in them. And they want to accomplish this through back-room arm-twisting and disinformation.

In my own testimony to the committee, I recalled an anecdote told about George Shultz.

When Shultz was Secretary of State, he traveled to Hong Kong and delivered a speech that included a sharp rebuke of the Communist Chinese regime. The President of the U.S. Chamber of Commerce in Hong Kong was livid. You’re going to ruin our trade with China, he said.

Shultz reportedly turned to the man and said icily, “Security trumps trade.”

And so it does here.

America’s national security, the security of our troops in Iraq who are being killed by Iranian intelligence officers, and the security of our friends in the region trumps profits.

Terror-free investing is an idea whose time has come. Already last summer, the Securities and Exchange Commission wrote officially to Ford Motor Company, warning them that they had failed to mention business operations in Iran, Sudan and Syria by their subsidiary, Mazda.

The SEC letter asked Ford to address “qualitative factors that a reasonable investor would deem important in making an investment decision, and the potential impact of corporate activities [in Iran and other terrorist states] upon a corporation’s reputation and share value.”

The SEC pointed out that “Arizona and Louisiana have adopted legislation requiring their state retirement systems to prepare reports regarding state pension fund assets invested in,…companies that conduct business with countries identified as state sponsors of terrorism.” Pennsylvania had followed suit, while Illinois, Maine, New Jersey, and Oregon had all adopted similar measures regarding Sudan.

In Ohio, state legislators Rep. Josh Mandel, a 29-year old Marine sergeant who served in Iraq with DePhillips, and his co-sponsor Rep. Shannon Jones, deserve special praise for introducing this legislation and braving the irresponsibility lobby.

Shareholders expect corporate leaders to make them as much money as possible. But it is up to legislators to frame the guidelines, to write the rules of the game.

If American states had taken this kind of initiative in 1938, and made Henry Ford, and IBM, and others pay a price for investing in Hitler’s Germany, the horrific war that my father and his generation had to fight might never have occurred.

If America had acted then in a timely fashion, we might have prevented the Holocaust.

So let us learn from history, not merely repeat it out of ignorance – or through mistaken arguments that put today’s profit before tomorrow’s security.

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