Legislative conferences are somewhat like the children’s game of telephone. It is never an easy task to divine what the Members or staff may be up to. The information is usually held close. The media, attorneys, lobbyists, company officials, interest groups and at times foreign governments seek out nuggets. While some good information gets out every now and then, sometimes by design, most of it is usually unreliable by the time it is passed around a few times.
The energy industry has many issues at play right now in DC. While some companies focus on the Gulf of Mexico cleanup and its potential political backlash, others are are attempting to figure out what is taking place with the ongoing Iran sanctions conference meetings on Capitol Hill. House and Senate conferees, along with Obama Administration officials, are working on a final legislative proposal that would implement a series of new economic sanctions on Iran’s oil and gas industry. And while conferrees and staff meet, Iran sanctions oversight continues on several other fronts.
For example, during a Senate Committee hearing yesterday, Senators discussed a recent U.S. government report detailing how seven companies that did business in Iran between 2005-2009 had been awarded $1 billion in U.S. government contracts. “The GAO report exposes evidence of potentially serious violations of our current sanctions regime. In light of this alarming information, we not only need to pursue rigorous enforcement of our current laws but also to strengthen our sanctions against Iran. My hope is that this GAO report will prompt the Administration to enforce current law and that it will provide a sense of urgency to completing the conference negotiations on the Iran Sanctions Act,” Sen. Susan Collins (R-Ma.) said in a prepared statement.
One of the more contentious issues that House and Senate conferees have likely been discussing is how to close the Iran sanctions foreign subsidiary loophole. Under current law, so long as there has been no U.S. persons involved in the business transactions, companies based in the United States can arguably do business in Iran through foreign subsidiaries. Even if the conferees agree to new language in this area, it will only work if they can limit the discretionary power of the President to enforce the measure. This latter point is likely to become the conference sticky widget. If the conferees authorize too much discretion, the sanctions become akin to a paper tiger with the exception that it would be clear that such behavior could be sanctioned in the future.
Regardless of the conference outcome, investing in Iran is becoming a high stakes legal and public relations challenge for U.S. and foreign companies. Efforts such as United Against Nuclear Iran and the Divest Terror & Terror Free Investing initiatives are raising public awareness of companies doing business in terrorist nations such as Iran, Cuba, and Sudan. Increasingly, the Securities and Exchange Commission (SEC) is using information letters to extract information from companies about alleged business activities in state sponsors of terrorism. Just one bad story in the media can lead to costly government investigations and other headaches. These and other “shame on you” tactics work. During the past few weeks companies such as Caterpillar, KPMG, and Ingersoll Rand have pulled out of Iran.
Congressional conferees are expected to wrap up work on Iran energy sanctions by the end of May or early June. Until then the “telephone game” continues. While it is tough to predict the final outcome, it seems that new Iran sanctions will be on books this summer (that is IF they can fend off opposition from pockets in the Administration and the energy sector).