Iran Petroleum Investment Sanctions Approved by Panel

By Janine Zacharia

Oct. 28 (Bloomberg) -- The U.S. House Foreign Affairs Committee approved a measure that would impose sanctions on individuals and companies that help Iran produce refined petroleum products or send them to the country.

The Iran Refined Petroleum Sanctions Act seeks to cripple Iran’s petroleum sector by prohibiting a broad range of activities related to the industry, including shipping and consulting.

The panel approved the measure by a voice vote. It also must be considered by three other committees before it goes to the full House for a vote. A companion bill was introduced in the Senate in April.

Efforts to tighten sanctions on Iran are gathering steam on Capitol Hill as the Obama administration uses diplomacy to try to limit Iran’s ability to obtain nuclear weapons.

Committee Chairman Howard Berman, a California Democrat who introduced the measure, said he brought the bill to a vote today "to maximize the chances" of preventing Iran from getting a nuclear bomb by pressuring the country to halt uranium enrichment.

"I am not giving up on the possibility that diplomacy will succeed in bringing about a suspension of Iran’s uranium enrichment program," Berman said. "We have very little time to lose should diplomacy fail. We must be prepared."

Details of Bill

A person or entity that violates the House measure would be prohibited from doing business in the U.S. or with U.S. banks. Like a 1996 law imposing sanctions on Iran, the House bill would allow the president to waive penalties if he deems it "vital to the national security interest of the United States."

Ileana Ros-Lehtinen of Florida, the committee’s ranking Republican, said the House should bring the bill to a vote soon.

The world must know that Congress is "dead serious" about sanctions, said Gary Ackerman, a New York Democrat. Still, he said there may not be any level of sanctions "sufficient to compel a change in Iran’s nuclear program."

The Senate Banking committee plans to vote tomorrow on legislation that would impose sanctions on entities involved in petroleum exports and set other limits on international investment in Iran. Legislators hope the approach could persuade Iran to change course on its nuclear program.

The House bill would augment penalties already in place under the 1996 Iran sanctions law, which although never enforced, prohibited certain investments in Iran’s energy sector. Today’s measure specifically prohibits investment related to refined petroleum products.

‘Critical Tools’

Eliot Engel, a New York Democrat, said that, by passing the measure, "Congress will create critical tools to increase the pressure on Iran." He noted that, while Iran is a leading producer of crude oil, it has limited refining capability. Iran relies heavily on imports of gasoline.

Under the House legislation, sanctions would be imposed if the value of the services provided exceeds $200,000 for one contract, or $500,000 for all contracts undertaken over a 12- month period.

Texas Republican Michael McCaul asked whether the enforcement provisions are strong enough or whether the bill is simply a statement "without any teeth."

Venezuela and others are "going to continue to supply" shipments of refined petroleum products, McCall said. "If we pass this and do nothing, we are nothing but a paper tiger."

Diplomatic Moves

United Nations nuclear inspectors this week visited a recently disclosed uranium-enrichment site 100 miles (160 kilometers) south of Tehran near the city of Qom. The plant, whose existence was revealed last month, is Iran’s second facility after Natanz to enrich uranium and isolate isotopes to generate fuel used in a nuclear reactor.

In addition to those inspections, the U.S. and its partners are awaiting an Iranian response to a proposal by the UN’s International Atomic Energy Agency that Iran ship most of its low-enriched uranium to Russia for further processing.

Iran said it would give a formal reply to the IAEA this week about the plan, under which the material would be returned as metal rods that could only be used in a reactor and not in a nuclear weapon. Uranium enriched to higher concentrations can be used to form the core of a bomb.

Democrats Barbara Lee of California and Keith Ellison of Minnesota, dissenting from the majority in today’s vote, said the legislation would undermine such diplomatic efforts.

Ron Paul, a Texas Republican, said the legislation would "do a lot more harm than good."

Jeff Flake, an Arizona Republican, likened today’s move to U.S. sanctions on Cuba that failed to loosen the Castro regime’s grip on power.

"The unilateral sanctions that we have there have diminished the prospects of an effective end to that problem," Flake said. "And I fear that we will go down that road here."