Even if US drops Iran sanctions, don't count on these 25 states to follow

Some two dozen states have measures in place divesting billions of dollars from companies that have ties to Iran. The measures are likely to stay in place whether the United States reaches a deal with Iran or not.

Once Iranian diplomats finish negotiating with the United States, France, Britain, and others to lift sanctions over the country's nuclear program, they might need to negotiate with the state of New York.

The future of international sanctions against Iran for its nuclear program remains a major sticking point in negotiations between the United States, Iran, and the P5+1 nations – China, Russia, France, Germany, and Britain. But whatever the international powers do, about two dozen states in America are unlikely to bow to Tehran's wishes.

In all, 25 states and Washington, D.C., have their own sanctions in place against Iran, and two states – Kansas and Mississippi – are considering introducing new sanctions, according to Reuters.

In most cases, the sanctions involve a state government directing its public pension funds to divest from firms that work with Iranian companies. New York, for its part, bans state and local governments from doing business with companies that invest in Iran's energy sector. Many of these measures, however, are not related to Iran’s nuclear activity, expiring only if the country is no longer designated to be supporting terrorism.

With the Obama administration describing terrorism as “tangential” to the deal, it looks unlikely Iran’s long-time sponsoring of terrorism will change. Yet Ayatollah Ali Khamenei, Iran’s supreme leader, has demanded that all sanctions against the country be lifted as soon as a deal is signed, whether they’re related to nuclear activity or not.

Though state pensions involve billions of dollars, the states' actions are largely symbolic.

“To me [divestments] always seemed a lot more of an emotional thing, meaning, ‘I’m not going to have my money go to these people,’ ” says Richard Nephew, a program director at the Columbia University Center on Global Energy Policy.

Divestments don't stop private companies from investing in Iran, though they create a disincentive.

“If you decided to no longer invest in Apple because Apple were selling iPhones in Iran, do you think Apple are not going to be able to find somebody else to provide investment?” says Mr. Nephew.

The more serious question could be one of a splintered message, with the Obama administration and states sending conflicting signals.

Iranian companies could be trying to deal with investment banks in New York, for example, but since New York is one of the states divesting from Iran, those banks would be in a tight spot.

“I think the bigger question [for Iran] is, ‘Which US are we negotiating with?’ ” says Nephew. “ ‘Are we, as the Islamic Republic, going to have to enter into negotiation with the state of New York?’ ”

The Iran negotiations have already seen US policymakers fracture in ways rarely seen in foreign policy. Forty-six Republican senators signed an open letter warning Iran against striking a nuclear deal with President Obama. House Republicans also invited Israeli Prime Minister Benjamin Netanyahu earlier this year, without consulting the president, to address Congress about the Iran negotiations.

This week, Mr. Obama has tentatively agreed to sign a bill that allows Congress oversight of a potential nuclear deal – adding more complications to the negotiations. The prospect of 26 states enforcing sanctions on Iran while the federal government does the opposite threatens to adds still more voices.

Iran is worried that a slow phase-out of the sanctions – the desired approach for the US – would never be fully realized and the sanctions would be restored. The US has asked for a “snapback” provision in the agreement, meaning sanctions would be restored if Iran violates any of the new requirements on limiting its nuclear program to peaceful pursuits.

“They don’t trust us very much either,” says Nephew. From their perspective, he adds, “the risk is that what the US is really intending to do is waiting to drop the hammer at some point in the future.”