WASHINGTON – Congress is expected to pass legislation on Monday that will make it easier for state pension funds to divest from companies doing business in Iran, despite the efforts of fund managers and pro-regime lobbyists to block their efforts.

Rep. Brad Sherman, D-Calif., who will run the floor debate next week, told an audience at the American Enterprise Institute on Thursday that the new bill was designed to moot the arguments of fund-managers who have opposed disinvestment legislation now pending in some 15 states on the grounds that it would open them up to shareholder lawsuits.

"I know of nobody who was sued for divesting from South Africa," Sherman said. "I can't imagine a judge saying it is good business to invest in Iran."

While details of the measure were still being worked out, Sherman indicated that it would provide protection from lawsuits to state pension funds, grandfather pending state laws, and change tax basis rules so that individuals or fund managers shedding stock in companies investing in Iran would not get stuck with capital gains on their profits.

"I think we should be encouraging disinvestment, not taxing it," Sherman said.

Known as the Iran Sanctions Enabling Act (H.R. 2347), the bill targets companies with investments of $20 million or more in Iran's energy sector. It was introduced in May by Rep. Barney Frank, D-Mass., chairman of the House Financial Services committee, after a joint hearing with Sherman's foreign affairs subcommittee on April 18.

Support for harsher sanctions against Iran is building in both parties.

The Frank bill has 43 co-cosponsors, including key Republicans such as Ileana Ros-Lehtinen of Florida, the ranking member of the foreign affairs committee, Dan Burton of Indiana, Eric Cantor of Virginia, Joe Knollenberg of Michigan, and Trent Franks of Arizona.

Last week, the House cut off access to U.S. government export credits offered by the Overseas Private Investment Corp. to any company selling goods or services to Iran.

And a separate bill that passed recently, known as the Iran Counter-Proliferation Act of 2007 (H.R. 1400), would make secondary sanctions mandatory against foreign oil companies doing business in Iran.

Until now, those sanctions – initially passed in 1996 – could be waived by the president and have never been imposed by Presidents Clinton or Bush.

"We have a lot of tools in the toolbox we could use against Iran," Sherman said. "The bad news is, we haven't had the political will to take them out of the toolbox."

Over the past year, Treasury Secretary Henry Paulson has pursued a behind-the-scenes effort, jawboning his foreign counterparts to convince them to scale back their exposure in Iran.

This has led the German export credit agency, Hermes, to reduce its export credits for new business in Iran by 30 percent this year, said Danielle Pletka, AEI's vice president for foreign affairs and defense programs.

"The Treasury sanctions have made the cost of money to the Iranians almost double," she added.

As a result of these efforts, Iranian banks are having a hard time clearing international transactions, and major foreign banks have announced they are pulling out of Iran.

While the Congressional Research Service has compiled an impressive table showing more than $100 billion in recent energy contract by foreign companies with Iran, many if not most of those deals exist only on paper, according to economist Patrick Clawson of the Washington Institute for Near East Policy.

"New foreign projects have not moved forward," Clawson said. Without massive injections of foreign oil field technology, Iran could cease exporting oil by 2015, Clawson added.

The economic pain the United States and its allies have begun to inflict appears not to faze President Mahmoud Ahmadinejad, who revels in sticking his finger in America's eye.

"Ahmadinejad's supporters come from the hinterland, not from the middle classes or the elites," said the Kenneth Katzman of the Congressional Research Service.

"There is no pressure from his [lower class] constituents to cave in to international demands" to stop Iran's nuclear program, Katzman added. "The pressure comes from bazaaris," Iran's business and trading class.

Iran's business community has long sought to get U.S. sanctions on Iran lifted, and has panicked over the disinvestment campaign now under way in 15 states because it directly impacts their ability to profit from foreign trade.

 The National Iranian American Council, a recently created group that lobbies Congress against sanctions, held a separate conference on Thursday to oppose the disinvestment campaign as well as State Department funding for pro-democracy groups inside Iran.

 "We're tracking disinvestment," NIAC legislative director Babak Talebi told NewsMax. "But there are so many bills."

At least a dozen Iranian-Americans who accused NIAC of supporting the goals of the Tehran regime were denied entry to the NIAC event, which was hosted at the Rayburn House Office Building by Rep. Christopher Van Hollen, D-Md., and Rep. James Moran, D-Va.

"This has all the trappings of a regime-sponsored event," a U.S. government official told NewsMax.

Moran, an outspoken opponent of the Bush administration and the Iraq war, derided sanctions and dismissed the State Department efforts to provide funding for pro-democracy groups inside Iran.

"I think it's stupid to put money into democracy assistance," he said. "That $75 million is interpreted [by the Iranian government] as money to overthrow the regime. That's not an intelligent or productive thing to do."

However, Moran said he would vote for the disinvestment bill because it also called for disinvestment from companies doing business in Sudan, a popular cause with the left.

Out in the hallway after the NIAC event, Iranian-Americans handed out papers calling NIAC founder Trita Parsi "a consistent advocate of a policy of appeasement" toward the Tehran regime.

"Trita Parsi and NIAC do not represent the Iranian-American community," said women's rights activist Mandana Zand-Erwin, who was denied entry to the NIAC event.

"They represent the Islamic regime," she told NewsMax.

© NewsMax 2007. All rights reserved.

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