U.S. Senators Kirsten Gillibrand (D-NY) and Mark Kirk (R-IL), and U.S. Representatives Ted Deutch (D-FL) and Dan Burton (R-IN) today introduced the Iran Transparency and Accountability Act designed to strengthen U.S. unilateral sanctions against Iran. Although the text of the bill is not yet on Thomas, the bill is described by a press release from Senator Gillibrand.

The bill has two major provisions. First, the bill would require publicly-traded companies to report to the SEC any dealings that the companies have with Iran including, presumably, dealings that are licensed and permissible under existing rules and legislation such as trade in agricultural and informational products. Further, the bill would require the SEC to post these dealings on its website.

The second part of the bill would deal with an unresolved issue from the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). Part of CISADA, which this blog reported on here, required the Office of Foreign Assets Control (“OFAC”) to promulgate regulations requiring U.S. financial institutions with foreign bank correspondent accounts to undertake one or more of four activities designed to determine whether the foreign banks are providing services to Iran in aid of its proliferation goals. These include audits and “due diligence” on the foreign banks. No time limit was imposed by CISADA within which OFAC had to adopt these regulations, and there is no indication that has taken any steps at this point to adopt the required regulations. The proposed legislation would require audit rules to be promulgated within 90 days of enactment of the proposed law.

Needless to say, rules requiring U.S. banks to perform audits on its foreign correspondent banks to determine if they are dealing with Iranian banks will be costly and burdensome and could threaten U.S. trade with our allies and trading partners. Moreover, requiring these rules to be rushed through OFAC in 90 days or less is likely to lead to poorly thought-out rules which would exacerbate this negative impact on U.S. trade with countries other than Iran.

Iran sanctions seem to be all in the news this week, particularly with respect to who is and who isn’t selling stuff to Iran.

• The Wall Street Journal ran an opinion piece that suggested that although Germany talks a good talk about Iran sanctions, it’s just that: talk. German exports to Iran increased by 5 percent between January and October 2010. In 2009, German authorized 16 exports of dual-use items to Iran, including protective suits that could be used in chemical weapons manufacture.
• The Swiss have imposed additional sanctions on Iran, now finally prohibiting military exports in accord with UNSCR 1747. The new sanctions also target items that could be used in nuclear proliferation. Additionally, financial transactions with Iran are limited by requiring approval for transfers over a certain amount, imposing new restrictions on insurance and reinsurance for Iranian companies, and requiring additional due diligence in dealings with Iranian banks
• Norwegian daily Aftenposten published a Wikileaks cable expressing concern by the State Department over Chinese exports to Iran of items that could be used in its missile program. The cable suggested that although the Chinese were doing a better job of controlling problematic exports to Iran, these efforts were being undermined by the Chinese federal government delegating some export decisions to provincial authorities which were more likely to put local economic interests ahead of interests in impeding Iran’s missile program.
• A fascinating article in Sunday’s New York Times details the likely participation of the United States and Israel in the Stuxnet worm which crippled around 900 centrifuges used by Iran in uranium enrichment. The worm targeted a Siemens device that controlled the centrifuges, causing them to spin at a high rate that destroyed the equipment while sending a “man in the middle” message to the control panel indicating that the centrifuges were operating normally, thereby preventing the Iranians from shutting the centrifuges down until it was too late. Sources that examined the code of the worm indicated that the attack would only occur if 984 controllers were linked together, thereby limiting the worm from hitting the wrong target.

Moral of the story: a well-targeted cyber attack probably has done more damage to Iran’s nuclear program than economic sanctions and export controls.

At last, on Christmas Eve, a federal holiday, the New York Times finally releases its analysis of documents it received from the Office of Foreign Assets Control (“OFAC”) as a result of its Freedom of Information Act request relating to licenses granted for exports to sanctioned countries such as Iran. The result? The reporters throw themselves on the fainting couch because a company has exported cupcake sprinkles to Iran, presumably on the notion that this will enrich the Iranian government and aid its nuclear program. I suspect that this conclusion may have prompted the Times editors to publish the story on a federal holiday when five people besides myself will be reading the newspaper. It keeps the laughter down.

The principal problem with Jo Becker’s story is her complete misunderstanding of the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), legislation which permits a wide variety of exports to sanctioned countries. She seems to believe that the act restricts such exports to humanitarian aid and then uses that misconception to criticize OFAC for licensing the aforementioned cake sprinkles as well as — and this is not a joke — popcorn, hot sauce, chewing gum, cigarettes, food coloring and sugar.

The problem is that TSRA isn’t restricted to humanitarian aid. It permits the exports of agricultural commodities, medicine and medical devices without reference to whether the New York Times or Ms. Becker thinks the product is humanitarian aid. All of the aforementioned products seem to fit clearly within the definition of agricultural commodities. Even if food coloring might not, does Red Dye No. 2 have some role in uranium enrichment which nuclear scientists have so far missed?

I’ll be writing more about the article over the coming days. I still have Christmas shopping to finish. But two other things deserve immediate comment.

First, the article is oddly silent about the large volume of licensed exports to Cuba under TSRA. This, at a very minimum, suggests an odd ideological bent by Ms. Becker. The article argues that food sales to Iran indirectly benefit the government of Iran, an argument that has traditionally also been made to support the Cuba blockade. The new foreign policy adopted by the Times would appear to be “Castro good, mullahs bad.”

Second, a note at the end of the article states, without any apparent realization of the hypocrisy involved, that “Ron Nixon contributed reporting from Washington, and William Yong from Tehran.” Unless Mr. Yong works for free, lives under a bridge in Tehran, and subsists solely on air, the New York Times is doing business in Iran at the same time it is whipping up a tsunami of outrage about other companies doing business there.

There is, however, one good side to the Times reporting. As part of the article, the Times includes a detailed summary of a number of the licenses granted and the reason they were granted. This information, which has heretofore been zealously guarded by OFAC, which prefers to operate under cover of darkness, will be of immense use to export compliance officers and lawyers because they reveal a number of broader rationales that the agency has used to grant non-TSRA licenses.

FULL DISCLOSURE: Both my law firm and I have represented companies named in the story and have obtained licenses permitting those companies to export items to Iran under TSRA.