Boeing, Exxon Say New Iran Sanctions Would Hurt Sales

Boeing Co. and Exxon Mobil Corp. are lobbying to fend off tightened sanctions against Iran that business groups say may cost $25 billion in U.S. exports.

Legislation before Congress would expand a 1996 law penalizing foreign companies that invest in that country’s oil industry. U.S. firms, already barred from investing there, say their sales worldwide could be hurt by provisions that ban doing business with companies in Europe, Russia or China that trade with Iran.

“We are up on Capitol Hill talking about the collateral damage,” William Reinsch, president of the National Foreign Trade Council, a Washington-based group that represents Exxon and Boeing, said in an interview. “There is legitimate, non- Iran business that will be cut off.”

The sanctions measure follows President Barack Obama’s difficulty in getting members of the United Nations to agree to expanded financial penalties on Iran, which the U.S. estimates may be three to five years from having a nuclear bomb. Lawmakers are trying to work out differences this month between Senate and House versions of the bill.

Cargill Inc., ConocoPhillips, Hannover Re, Bechtel Corp., Halliburton Co. and Siemens AG are among more than 20 companies that have lobbied on the proposed sanctions, according to congressional disclosure forms.

Photographer: Pankaj Nangia/Bloomberg

President of the National Foreign Trade Council William Reinsch. Close

President of the National Foreign Trade Council William Reinsch.

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Photographer: Pankaj Nangia/Bloomberg

President of the National Foreign Trade Council William Reinsch.

The 1996 U.S. law already provides for sanctions against foreign firms that invest to help Iran drill for oil, such as a cut-off from government contracts, denial of loans from U.S. banks or restrictions on imports. No president has imposed those sanctions.

‘Fill the Vacuum’

“It is time for Congress to fill the vacuum created by executive branch inaction,” Representative Ileana Ros-Lehtinen of Florida, the top Republican on the House Foreign Affairs committee, said at a hearing to discuss the legislation on April 22. Ros-Lehtinen is a cosponsor of the measure.

The legislation passed the House by a 412-12 vote on Dec. 15 and the Senate unanimously on March 11, and it is likely to pass Congress in final form this month or next, according to Christopher Wenk, the trade lobbyist for the U.S. Chamber of Commerce. While the administration has sought to dilute the bill, Wenk predicted Obama would sign it.

The measure would expand the investments that can be sanctioned to cover the sale and refining of oil. It also expands the penalties to property transfers or sales from U.S. companies to those that are sanctioned.

For U.S. companies, “virtually any transaction with foreign entities doing business related to the Iranian petroleum sector could be prohibited,” the National Association of Manufacturers said in a study that estimated the potential loss of $25 billion in exports.

Chamber, Manufacturers

Expanded Iran sanctions may mean another loss for the Chamber, the largest U.S. business lobby, and the manufacturers association, with members such as Caterpillar Inc. and Pfizer Inc. The Washington-based groups unsuccessfully opposed passage of Obama’s health-care legislation and are fighting provisions in the financial regulation overhaul now before the Senate.

Representative Howard Berman, a California Democrat who heads the House Foreign Affairs Committee, has pledged to make the new sanctions measure even tougher.

Companies doing business in Iran “will pay a significant economic price for doing so,” Berman said in an e-mailed statement. “The safest course for all such companies, and their subsidiaries, would be to cease any and all business operations with Iran at the earliest possible opportunity.”

‘Critical Partners’

The Chamber’s top lobbyist, Bruce Josten, wrote Berman and Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, on May 6 urging them to scale back the new rules, which he said would hurt U.S. oil companies, manufacturers and insurers by cutting them off from “critical partners around the world.”

The lobbying is aimed at modifying certain provisions, not killing the bill, according to Wenk of the Chamber.

“We know we can’t stop this bill,” Wenk said in an interview. “But the provisions go far beyond Iran. There are some real unintended consequences.”

Chicago-based Boeing, the world’s second-largest commercial plane maker after Airbus SAS, wants to strip out a provision banning U.S. companies from being aided by foreign export-credit agencies that also guarantee exports to Iran, spokesman Timothy Neale said.

Exxon, Lloyd’s

Exxon, the biggest U.S. oil company, wants to eliminate a prohibition on joint ventures with companies that separately have oil projects in Iran, said Alan Jeffers, a spokesman for the Irving, Texas-based company. Lloyd’s of London and other insurers based abroad want an exemption for “cooperating countries” working with the U.S. to curb sales to Iran, Charles Landgraf, the insurance market’s Washington lobbyist, said in an interview.

A report by the Government Accountability Office in March found 41 businesses, including PetroChina Co., Petroleo Brasileiro SA, Total SA, Gazprom OAO and Indian Oil Corp., investing in Iran’s oil development.

Supporters of the legislation say the pressure is already working, as companies such as Reliance Industries Ltd. of Mumbai announced they would stop sending gasoline to Iran. Most Western banks have stopped financing gasoline shipments to Iran, said Mark Dubowitz, executive director of the Washington-based Foundation for Defense of Democracies, which is pushing for the sanctions bill.

“The political-risk equation is changing for these companies as they fear the possibility of being cut off from doing business in the U.S.,” Dubowitz said.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net.

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