Economic warfare against Iran

Michael Barone:

Iran is the leading state sponsor of terrorism. The mullah regime is providing weapons to kill our soldiers in Iraq. It is working furiously to develop nuclear weapons. We certainly do not want to go to war against Iran -- though perhaps we could do a more aggressive job of keeping the mullahs' minions out of Iraq. But we have other weapons that are being deployed now -- not by the military, the federal government or officials in Washington, but by state government officials and legislatures in state capitals, who are working to divest their pension funds of stocks in companies that do business in Iran.

The divestment movement has been gaining speed during the past year. In 2006, Missouri State Treasurer Sarah Steelman ordered the Missouri Investment Trust to divest stock in companies that do business in Iran. The California Assembly has passed a divestment bill, and it is now before the state Senate; Gov. Arnold Schwarzenegger has promised a major signing ceremony if it passes. A bill limited to Iran's energy sector has been passed into law in Florida. A divestment bill has been passed in committee in the Pennsylvania House, and a divestment resolution was passed by the Georgia Senate. In Louisiana, a bill to set up a "terror-free international index" has been passed into law. Divestment bills have been filed in Ohio, New Jersey, Michigan, New York, Massachusetts, Maryland and Texas.

Many of these bills have met with opposition. Pension fund administrators, such as those at California's giant CalPERS, have opposed them. They argue that divesting would cost them money. But the fact is that U.S.-based companies already are prohibited from doing business in Iran. Firms that do the most business in Iran are French (Alcatel, BNP Paribas, Total), Italian (ENI), Korean (Hyundai), Chinese (PetroChina) and Russian (Statoil). The potential losses to pension funds are almost certainly minimal; a fund can find plenty of international stocks for its portfolio without touching those who do business in Iran.

At the same time, divestment can hurt the targeted companies enough to persuade them to change their ways. We learned this 20 years ago from the divestment movement directed against apartheid South Africa, which targeted many U.S.-based firms. Some of them withdrew from South Africa -- a fact that helped persuade South Africa's white rulers to end apartheid.

We can't expect the mullahs to change their system in the same way. But we can expect divestment to put a heavy economic squeeze on a regime whose economy already is deteriorating visibly. Iran produces lots of oil, but it doesn't have enough refinery capacity and must import gasoline. The mullah regime appears to be highly unpopular, and further economic deterioration might spark a peaceful overthrow -- the best result imaginable for us, as well as for most Iranians.

What of private pension funds? Here the lead is being taken by Teamsters Union President Jim Hoffa, who last week urged managers of 170 funds that invest Teamster pension money to sell all shares of companies that do business in Iran. Hoffa has vigorously protested the arrest and torture of union leaders in Iran and seems to be following in the steps of the late AFL-CIO President Lane Kirkland, who did so much to destabilize communism in Eastern Europe. Divestment by private pension funds will be aided if the Senate passes the bill (sponsored by Reps. Barney Frank and Mark Kirk, Sens. Barack Obama and Sam Brownback and already passed by the House) to shield investment managers from lawsuits based on any losses from terror-free investing.

In a time of great partisan strife, the divestment movement is deeply bipartisan....

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Fund managers don't like to consider non economic factors in making investment decisions, but they weigh concerns about supply all the time when it comes to the price of oil. They should consider the same things when investing in companies who are investing in Iran. Those companies long term investments are at risk because that regime is at risk and will become more and more at risk as it continues its clandestine war against the US and Israel.

Those who want to avoid a hot war with Iran should embrace this method of warfare against our enemies. Few people really doubt Iran's intentions. Her President clearly states them. We should take him at his word.