Monday, Jun 25, 2007

By Ian Talley

Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--A key U.S. House panel will vote Tuesday on a wide-ranging bill that would toughen U.S. sanctions on Iran and on companies that invest in the country.

Given that there was bipartisan support for the bill when it was introduced, the Foreign Affairs Committee is expected to pass the legislation, called the Iran Counter-Proliferation Act of 2007. The measure is part of a concerted congressional effort to tighten an economic stranglehold on Iran to deter it from a nuclear fuel enrichment program that the U.S. and other countries believe is for nuclear weapons.

In May, the House Financial Services Committee passed a "name-and-shame" bill that would require the federal government to publish the names of companies investing in Iran and allow public and private pension funds with hundreds of billions of dollars in assets to divest from companies on the list.

The Senate is considering legislation similar to these two House bills.

Among the provisions in the Iran Counter-Proliferation Act is one that would require the administration to enforce the Iran Sanctions Act, ending the State Department's ability to waive its enforcement. Under the Iran Sanctions Act, foreign companies that invest more than $20 million in Iran's energy sector can be penalized by the U.S.

"Until now, by shamelessly exploiting its waiver authority and other flexibility in the law, the executive branch has never sanctioned any foreign oil company which invested in Iran," Foreign Affairs Committee Chairman Tom Lantos, D-Calif., said when he introduced the bill in March. "Those halcyon days for the oil industry are over," he said.

Several companies with multi-billion dollar operations in the U.S., or that are listed with the Securities Exchange Commission, including Royal Dutch Shell PLC (RDSA), Norsk Hydro ASA (NHY) and China's National Offshore Oil Corp. (CEO), are in negotiations for major oil and gas deals with Iran and could be hit by the bill if passed.

The U.S. State Department has balked at being forced to implement the Iran Sanctions Act, saying that enforcement could jeopardize an international coalition that is seeking to persuade Tehran to abandon its nuclear program. Instead, Under Secretary of State Nicholas Burns has said he's been trying to persuade heads of state and companies not to invest in Iran.

Lantos' Iran Counter-Proliferation Act also would eliminate some U.S. tax incentives for oil companies investing in Iran and close a loophole that allows foreign subsidiaries of U.S. companies to invest more than $20 million in Iran.

Victor Comras, a retired diplomat and a consultant on terrorist financing, told the Senate Commerce Committee in late April that around 35 subsidiaries of U.S. companies were known to be operating in Iran, including oil services company Smith International Inc. (SII), General Electric Co.'s (GE) Canadian, Italian and French subsidiaries, and a Swiss-owned Caterpillar dealership in Tehran. According to its Web site, Schlumberger Ltd. (SLB) also has a well services unit in Tehran.

The bill could affect economic production in Iran by prohibiting business deals with or funding for the Islamic Revolutionary Guards Corps, or the IRGC. The legislation, if passed, would designate the IRGC as a "foreign terrorist organization."

The IRGC's engineering arm, Khatam-al-Anbiya Construction Headquarters, or Ghorb, last year won a $2.3 billion contract to develop two phases of Iran's giant South Pars gas field in the Persian Gulf. Ghorb also is building a $1.3 billion pipeline that will carry gas from southwestern Iran to the Pakistan border.

-By Ian Talley, Dow Jones Newswires; (202) 862-9285; ian.talley@dowjones.com;

(END) Dow Jones Newswires

June 25, 2007 13:57 ET (17:57 GMT)