March 10--
Minnesota's
pension funds are dumping millions of dollars in stock they invested with Russian oil and gas giants vying for business in
Iran
.
A seven-year-old state law requires the sell-off, revealing how states like
Minnesota
must continue pushing back against
Iran's
government even after
President Obama and Western allies agreed to lift economic sanctions in exchange for
Iran
curbing its nuclear program.
The State Board of Investment's largest target is Lukoil. The board is scheduled to sell $1.3 million of stock in
Russia's
second-biggest oil producer this year as the company looks to renew exploration in
Iran
.
The board flagged Lukoil nearly a year and a half ago for possible ties to
Iran
, a designation that
Lukoil contested to
Minnesota
investment officials. The company wrote to the board that it made its final sale of gasoline to
Iran
in 2010, and wound down its business there that same year.
But as
Iran
opens its borders for business again -- particularly to the energy industry --
Lukoil is one of many foreign companies in talks to develop oil there as it faces declining reserves in
Russia
.
Lukoil has not contested
Minnesota's
final decision to sell off 39,175 shares of stock: half by the end of March, and the rest by October.
The state last year sold half its holdings in Gazprom for $830,039, and is scheduled to sell the rest by June. The Russian company is looking to expand
Iran's
natural gas industry.
Former Gov. Tim Pawlenty signed
Minnesota's
law in 2009 with the hopes that local governments could play a significant role in applying economic pressure to
Iran
, which had been sharply criticized for its nuclear program and for allegations it aided international terrorism.
The law requires the State Board of Investment to identify companies with business operations in
Iran
. Within 90 days, the board must send a notice warning the companies that the state board may divest of their stock and encouraging them to end their activities there.
Minnesota
must divest of its holdings in companies that continue business dealings with
Iran
.
More than two dozen other states have similar laws, while more are considering them.
Last year, Republicans nationally announced a Defund Iran initiative that sought to put constitutional amendments on the ballot strengthening
Iran
divestiture laws in presidential battleground states such as
Colorado
,
Arizona
and
Ohio
. The movement promises to "combat the terrible abuse of federal power" under Obama.
Minnesota
has been required to sell its holdings in 14 companies since the law took effect, records show. Given that
Iran
holds the world's second-largest reserve of natural gas and fourth-largest of crude oil, it's not surprising that foreign energy companies made up most of the list.
They include CNOOC, a Chinese offshore oil and gas company; Saipem, an Italian oil and gas contractor; Sasol, an energy and chemical company in
South Africa
;
PTT Exploration and Production, a Thai oil and gas company;
OMV AG, an Austrian oil and gas company; and Petrofrac, a British energy services company.
Mansco Perry, the investment board's executive director, declined to be interviewed. But as more companies race to profit from
Iran's
open doors, it's possible
Minnesota
could be forced to divest additional foreign energy stocks this year.
Government retirement funds also have faced calls to divest from other controversial industries, like guns and private prisons.
Minnesota
has
$6.4 million invested in firearm companies
Smith & Wesson and
Sturm, Ruger & Co. and
$1.5 million in
Corrections Corp. of America, which owns and manages private prisons.
In January,
Vermont
Gov.
Peter Shumlin called for the state pension system to divest from coal companies in an effort to curb global climate change, while
California's
retirement funds are just starting to sell their coal stock.
A
U.S.
Treasury spokesperson said the nuclear agreement doesn't require states to change their
Iran
divestiture laws, though the federal government is keeping states abreast of
Iran's
commitments to roll back its nuclear program.
One of the sponsors of
Minnesota's
law, Sen.
Terri Bonoff, DFL-Minnetonka, shared a legal opinion from an attorney with the state
Senate saying that the divestment requirement ceases to be in effect only if
Iran
is removed from the
State Department's list of countries that have been determined to support international terrorism, or the president finds that the state law interferes with foreign policy.
Critics see such measures as local overreach into foreign policy matters best left to the
U.S.
government. State pension funds are under great political pressure to ensure high returns, so placing new restrictions on how they are allowed to invest can be an added burden.
"It's hard enough to get these plans funded and earning decent returns, and then to add this issue -- which is really unnecessary -- on top is not helpful," said Alicia Munnell, director of Boston College's Center for Retirement Research.
"I think it's silly for states to be making foreign policy and I think it's potentially harmful for pension plans to take their eyes off the prize and look at anything other than the best return for any given level of risk," she added.
But Bonoff said she believes such laws "did help support
Iran
being willing to come to the table."
___
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