roux - 24 September 2008 09:13 AM
“...allowing states and private companies to divest from companies doing business in Iran”
You mean that states and private companies are forced to do business with companies doing business in Iran? I never knew.
Obama is an idiot.
Apparently it is a problem, because it is not easy for the investment managers to take out the portions of funds connected with Iran. A retirement system might lose a good investment over 1% of its activity, how much better to get the fund to drop the Iran portion. There is no flip-flop on the part of Obama. In addition, there is the potential conflict with the Executive branch power which must be resolved. This was from a year ago, and focuses more on the stick than the carrot:
In 2000 the Supreme Court struck down a Massachusetts law boycotting companies investing in Myanmar, saying it weakened the president’s ability to make foreign policy. But states have continued to try to influence foreign policy in other ways. The latest is a boomlet in state laws requiring divestment from Iran.
Federal law has long prohibited Americans from doing direct business with Iran. But many mutual funds and pension funds hold shares in foreign companies, mostly European, that do business there. A campaign called Divest Terror names companies doing business in Iran, and tries to get American funds to pull their investments out of those firms. Many are energy companies, such as Total (French), Statoil (Norway) and PetroChina. Others, like Alcatel, a French telecoms firm, build Iranian infrastructure that has military uses, according to Chris Holton of Divest Terror.
The movement was given a big boost on October 10th when Arnold Schwarzenegger, California’s governor, signed a law terminating investment by the state’s pension funds in companies doing business with Iran. California was not the first: Missouri’s treasury secretary had put her state’s money into a “terror-free” fund. But California’s size matters—CalPERS, one of its pension funds, is the biggest in the country—and it is inspiring others. Pennsylvania, Michigan, Massachusetts and Georgia are all considering similar bills. Pennsylvania’s would divest state funds from all countries listed by the State Department as sponsors of terrorism, including North Korea, Cuba, Syria and Sudan.
The bills have, unsurprisingly, broad bipartisan support. The only sign of resistance comes from fund managers, many of whom say their duty is simply to achieve the best returns. But “terror-free” funds have met or beaten the returns from traditional funds, say their advocates. And the sums pulled out from Iran and others could be large. Pennsylvania’s bill alone would pull $10 billion from companies investing in the State Department’s list of terror-sponsors.
Despite the political appeal of divestment, it is unlikely to change Iran’s behaviour. Daniel Drezner of Tufts University notes that any economic pain caused to Iran will be mitigated by Chinese and Russian companies filling the gap. Besides, if Iran is expecting to fight America one day anyway, economic pressures such as sanctions and divestment offer it little incentive to change its behaviour.
At the federal level, several bills would bolster the states’ efforts. One, for example, sponsored by Barack Obama and Sam Brownback (Democratic and Republican candidates for president, respectively), would produce a list of companies doing business with Iran. This would not only have a strong “name and shame” effect on the firms, but would also concentrate the states’ efforts. John McCain, a Republican senator and another candidate for president, supports the idea, which he calls the “privatisation” of sanctions. However, the bill has had a “hold” placed on it, an archaic Senate procedure that any senator can use to freeze a bill anonymously.
The hold may be encouraged by the Bush administration, which disapproves of bills like that of Messrs Brownback and Obama. The administration reckons that embarrassing and irritating those companies, and therefore their host countries, undermines its efforts to get those countries onside with broad international sanctions—including, it is hoped, universally binding sanctions from the UN. Unfortunately, there is not much sign of such sanctions being imposed.
http://www.economist.com/PrinterFriendly.cfm?story_id=9989861
