White House seeks to soften Iran sanctions

The Obama administration is pressing Congress to provide an exemption from Iran sanctions to companies based in “cooperating countries,” a move that likely would exempt Chinese and Russian concerns from penalties meant to discourage investment in Iran.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act is in a House-Senate conference committee and is expected to reach President Obama’s desk by Memorial Day.

“It’s incredible the administration is asking for exemptions, under the table and winking and nodding, before the legislation is signed into law,” Rep. Ileana Ros-Lehtinen, Florida Republican and a conference committee member, said in an interview. A White House official confirmed Wednesday that the administration was pushing the conference committee to adopt the exemption of “cooperating countries” in the legislation.

Neither the House nor Senate version of the bill includes a “cooperating countries” provision even though the administration asked the leading sponsors of the Senate version of the bill nearly six months ago to include one.

The legislation, aimed at companies that sell Iran gasoline or equipment to refine petroleum, would impose penalties on such companies, up to the potentially crippling act of cutting off the company entirely from the American economy. It also would close a loophole in earlier Iran sanctions by barring foreign-owned subsidiaries of U.S. companies from doing business in Iran’s energy sector.

Although Iran is one of the world’s leading oil exporters, it lacks the capacity to refine as much oil into gasoline as its domestic economy uses. Three years ago, the Iranian government imposed gasoline rations on the population.

“We’re pushing for a ‘cooperating-countries’ exemption,” the White House official said. “It is not targeted to any country in particular, but would be based on objective criteria and made in full consultation with the Congress.”

Mrs. Ros-Lehtinen, however, said the exemption “is aimed at China and Russia specifically.”

“The administration wants to give a pass to countries for merely supporting a watered-down, almost do-nothing U.N. resolution,” she said.

All past sanctions against Iran have included a waiver that lets the president refrain from penalizing foreign companies that are doing business with Iran.

The “cooperating countries” language that the White House is pressing would allow the executive branch to designate countries as cooperating with the overall strategy to pressure Iran economically.

According to three congressional staffers familiar with the White House proposal, once a country is on that list, the administration wouldn’t even have to identify companies from that country as selling gasoline or aiding Iran’s refinement industry.

Even if, as current law allows, the administration can waive the penalties on named companies for various reasons, the “cooperating countries” language would deprive the sanctions of their “name-and-shame” power, the staffers said.

The prospect that China and Chinese firms would be exempt from penalty follows reports that Beijing is cooperating with Iran’s missile program. On April 23, Jane’s Defense Weekly reported that China broke ground on a plant in Iran this month that will build the Nasr-1 anti-ship missile.

Mark Dubowitz, executive director of the Foundation for the Defense of Democracies, where he directs the group’s Iran energy project, said the “‘cooperating-country’ status would send a signal to the energy sector that the Obama administration is not serious about penalizing those companies that continue to do business with the Iranian energy sector, the lifeblood of the men who rule Iran.”

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