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Frequently Asked Questions about Iran Divestment

Frequently Asked Questions:
Iran Divestment

What is divestment?  What kind of divestment is the URJ supporting in particular?

Divestment is most simply a unified policy of “dis-investing” or pulling investments out of companies that do significant business with a particular country or industry.  In the past divestment was a tool that was used effectively to help end South Africa’s policy of apartheid.  Divestment has also been a major tool in the work currently focused on ending the genocide in Darfur.

Specifically in the case of Iran, the Union for Reform Judaism (URJ) and other like-minded organizations are advocating for a “targeted divestment” from companies that do significant business (i.e. more than $20 million/year) with the Iranian oil and gas industry.

Does divestment really work?  Shouldn’t we be pursuing other options? 

While divestment is an effective tool, it is unlikely to single-handedly bring down any particular government or particular program (like Iranian nuclear technology).  That said, divestment is an important first step that can a) provide a way to limit the effectiveness of particular programs which we as Americans and Jews find dangerous and b) shows how serious a community is in helping prevent, in the case of Iran, the creation of nuclear weapons and aid to terrorist organizations in the Middle East.  Divestment is therefore an important first step.

Isn’t “divestment” dangerous for Jews? How does Iran divestment impact Israel?

The Union for Reform Judaism (URJ) understands that divestment is a specific tactic which should only be used in the most extreme situations. It further recognizes that this economic tool has been, at times, inappropriately applied and misused, specifically in regards to Israel. In fact, the URJ has been an active force opposing campaigns which advocate for divestment from Israeli companies.
Divestment can and should be a strategy that is used to provide significant power to motivate change.  Iran is particularly vulnerable to economic pressure, especially in its energy sector, which comprises half of its national budget and 80 percent of its hard currency. Much of Iran’s oil industry is dependent on foreign investment. In addition, despite the fact that Iran produces oil, it does not have the technology to refine it and must import the majority of the gasoline it uses [1].

When has the Reform Jewish Movement divested in the past?

 The Reform Movement has promoted divestment two other times in its history.  First, in 1985, the Union passed a resolution supporting divestment from South Africa.  Then, in 2007, the URJ Executive Board passed a resolution explicitly expressing our support of divesting from Sudan.

I already thought that U.S. companies are not allowed to invest in the Iranian oil sector?  Why do we need Iran divestment legislation? 

Because of Executive (Presidential) Orders and Congressional actions which go back more than a decade, it is illegal for U.S. entities to invest directly in Iran.  However, there are two major loopholes which new divestment legislation at the state and local level attempt to fill.  The first of these loopholes is the “waiver” whereby the President is able to waive the no-investment rules.  The second and far more damaging loophole is that U.S. companies and state pension funds are able to invest in money market and index funds which in turn invest in European and other foreign conglomerates with significant investment in the Iranian oil industry.  The only way to end all investment is to closing these loopholes through legislation at the state and federal level.

Is Iran divestment a state issue or a federal one? 

Both.  States around the country are considering Iran divestment from their pension funds, which are some of the largest financial entities in America.  States including California, Missouri, Texas, and New Jersey have already divested either through a legislative process or executive order.  Divestment becomes a federal issue, however, because courts have traditionally categorized divestment initiatives as foreign policy initiatives, which states are not constitutionally allowed to set.  Therefore, we need to pass federal laws sanctioning state divestment, like were recently passed sanctioning Sudan divestment.  The House of Representatives already passed such a bill by an overwhelming bipartisan margin, however the bill has stalled in the Senate.  To support this bill now, the Iran Sanctions Enabling Act (S. 1430), click here.

What are the arguments against Iran divestment?

There are several main arguments against divestment from Iran.

First, some (including the U.S. State Department) argue that divestment policies will block diplomatic efforts. Such arguments focus on the belief that divestment and the other “sticks” of foreign policy will not motivate Iran to work with the United States toward a compromise, but will instead alienate the Iranian government and hinder progress. Unfortunately, it is too late to rely solely on back-channel diplomacy.  Divestment is one effective way to show Iran how serious the United States is about opposing the creation of nuclear weapons.

Second, some argue that the effects of divestment will be minimal in Iran while the portfolios and pension funds involved in divestment will be hit the hardest. This view calls for more substantial action to be taken by the United States and its allies, whether through robust multilateral sanctions or military action.

Third, some cite the possible implications for American businesses. The divestment movement targets our allies’ businesses and could also hurt United States efforts to work with them to prevent Iranian nuclear proliferation. On March 29, 2007, Undersecretary of State R. Nicholas Burns testified before the Senate Foreign Relations Committee, stating, “We could not support modifications to (ISA) now being circulated in Congress that would turn the full weight of sanctions not against Iran but against our allies that are instrumental in our coalition against Iran.”

Also see: “NFTC President Discusses Implications of States Using Public Pension Funds to Influence Behavior of Foreign Governments,” May 21, 2007.

Why is the focus on divesting from the energy sector?

80% of Iranian currency and 50% of Iran’s the budget are based in the oil industry.  Divesting from Iran’s energy sector will have an impact on a key part of Iran’s economy. 

If the US does not invest in Iran someone else will. What’s the point?

The more nations pursue divestment, the more effective it will be.  European nations, especially France, have shown an interest in divestment.  By taking serious action the U.S. could help promote such international divestment strategies.

What is the “National Intelligence Estimate (NIE)”?  Does the most recent NIE mean that Iran is no longer a threat?

On December 3, 2007, a National Intelligence Estimate was released regarding the Iranian nuclear program.  This interagency assessment reported that Iran had ended its attempts toward weaponization in 2003 in large part due to U.S. pressure.  This is not a reason to end our work on Iran.  In fact, it provides an even more important reason to implement divestment plans.  First, it showed that Iran had a clandestine program – a program which it has the knowledge and capacity to restart at any time.  Second, it showed that U.S. sanctions worked in the past and that Iran was susceptible to economic incentives to end its nuclear aspirations.  Third, it showed that though Iran had ended its weaponization it was still pursuing the other components needed to create nuclear weapons.

Recent polls by the Israel Project show how Americans have reacted to this report:

  1. 64% of Americans believe the NIE findings will make us less safe because it might lead to reduced pressure on Iran
  2. 69% of Americans believe Iranian nuclear weapons program still underway
  3. 75% of likely voters had heard a “great deal” or “some” about the NIE

See the actual NIE Report: "Iran: Nuclear Intentions and Capabilities"

 

UPDATED: 4/24/2008
Compiled by Jonah Perlin, Legislative Assistant at the Religious Action Center




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