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Global Insurers Targeted in Latest U.S. Bid to Expand Sanctions on Iran

08 Mar 2012

U.S. lawmakers are targeting global insurers as they seek to expand sanctions aimed at crippling Iran’s economy and forcing its leaders to make concessions involving the country’s disputed nuclear program.

Proposed legislation by Representative Brad Sherman, a California Democrat, and Senator Mark Kirk, an Illinois Republican, would penalize underwriters that insure or reinsure any deals with Iran prohibited under U.S. law, including oil and gas investments or insurance for companies or banks that are subject to U.S. sanctions.

 

Proposed legislation by Representative Brad Sherman, a California Democrat, and Senator Mark Kirk, an Illinois Republican, would penalize underwriters that insure or reinsure any deals with Iran prohibited under U.S. law, including oil and gas investments or insurance for companies or banks that are subject to U.S. sanctions. Photographer: Chip Somodevilla/Getty Images
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The draft, obtained yesterday, may be introduced in the House this week and offered as an amendment to a Senate Banking Committee bill involving other Iran sanctions as early as next week, Sherman said in an e-mail.

The measure would mostly affect Asia-Pacific or Russian underwriters because European insurance companies have scaled back or eliminated coverage of Iran-related deals. The European Union banned insurance and reinsurance to Iranian entities or their agents in 2010. U.S. insurance companies are banned from underwriting Iran-related business unless they get a special license from the U.S. government.

If any EU or U.S. entities are still providing insurance to non-Iranian entities involved in Iranian deals, “this will be the nail in the coffin preventing them from doing so,” Nigel Kushner, chief executive of Whale Rock Legal, a London-based law firm whose clients include companies engaged in legal trade with Iran, said in a phone interview.

Broadens Scope

The proposed measure “broadens the scope of U.S. sanctions to target Asian, Russian and other insurance and reinsurance companies looking to backfill on deals abandoned by their U.S. and European competitors,” Mark Dubowitz, executive director of the Foundation for the Defense of Democracies, a Washington research institute, said in an interview yesterday.

“If you are insuring the sale of Iranian petroleum without an exception granted to your country under the U.S. central bank sanctions law, underwriting a major oil or natural gas project in Iran, or insuring the sale of parts and components for Iran’s nuclear program, you could be the target of these new measures,” said Dubowitz, who has advised members of Congress and the administration on expanding Iran sanctions.

The U.S. and Europe have piled additional economic sanctions on Iran since a Nov. 8 United Nations atomic inspectors’ report raised questions about Iran’s nuclear program. The sanctions are meant to pressure Iran’s leaders to abandon any weapons-related work and head off conflict in the Persian Gulf region that holds more than half the world’s oil reserves.

Squeezing Iran

U.S. officials say those sanctions are crippling Iran’s ability to export oil and conduct trade, stoking internal dissent, and have compelled Iran’s leaders to agree to return to international talks on its nuclear program. The latest sanctions have targeted banking, shipping, oil transactions, ports, non- oil trade, gold, petrochemicals and energy ventures, complicating Iran’s commercial ties to the outside world.

In addition to the insurance measure, Kirk and Sherman are seeking to expand existing U.S. sanctions to all Iranian banks and to foreign financial institutions, including foreign central banks, engaged in non-oil transactions with Iran. Currently, more than 20 Iranian banks, including its central bank, have been targeted by the U.S. government.

President Barack Obama said March 6 there is a “window of opportunity” for diplomacy and sanctions to compel Iran to give up any effort to develop nuclear weapons, before military action might be needed.

Netanyahu Visit

Israeli Prime Minister Benjamin Netanyahu, wrapping up a two-day visit to Washington that included more than three hours of talks with Obama, told U.S. lawmakers March 6 that sanctions won’t work.

The U.S. and its allies say Iran is seeking the capability to make a nuclear bomb. Iran says its program is for civilian energy and medical research.

The White House meeting with Netanyahu was a high-stakes encounter for Obama, who’s under pressure in an election year to forestall military action against Iran while blunting attacks from Republicans who accuse him of not being tough enough.

Current U.S. law prohibits insurance or reinsurance for refined petroleum sales to Iran. Iran, the second-largest crude oil producer in the Organization of Petroleum Exporting Countries, has few refineries and imports gasoline. The proposed measure expands the insurance ban to any sanctioned activity or entity related to Iran.