Gov. Pawlenty sent a strong message when it comes to foreign companies doing business with Iran. Last week, he said he would withhold state funding for a northern Minnesota steel plant if the India-based company that bought it went forward with plans to build an oil refinery in Iran.
"I've been to a lot of funerals for our fallen soldiers in this country and many of them have been killed by IEDs and Iran is a country that as a terrorist nation that has been accused of putting together armaments for groups or individuals within our countries that have killed our soldiers," he said.
The company, Essar Global, assured Pawlenty that it would not move forward with any plans that violate U.S. or international law. The governor now supports the proposed steel plant. But Pawlenty isn't as firm when it comes to requiring Minnesota's public pension fund to shed holdings in companies that do business in Iran.
When asked last week if he would support efforts to divest the state's pension fund holdings from companies doing business in Iran, the governor said, "it's something that we have at least gotten a letter on, but we haven't taken any formal action and that's not what we're focused on in the context on in this case or this matter."
But more than a dozen other states are focusing on it. Illinois, California and Florida have passed laws requiring their public pension funds to sell shares in foreign companies that are doing business in Iran. American companies are already barred from such dealings, but some have foreign subsidiaries that operate in Iran.
Supporters of these divestment initiatives say companies will be less likely to do business in Iran if they know that public funds will sell their stock. Supporters say the economic fallout from divestment could force Iran's leaders to reconsider how they rule.
"This is a lot of money. There are billions of dollars invested in foreign companies that in turn are undergoing projects worth billions of dollars in countries like Iran," according to Christopher Holton, with the Divest Terror Initiative in Washington.
Holton says the divestment strategy works. He says a similar strategy in the 1980s helped raise awareness and end apartheid in South Africa. He says he'd like to see states divest their pension funds in companies that do business in Iran, Syria, Sudan and North Korea.
"We're investing in companies that give corporate life support to the countries that sponsor our enemies in the war on terrorism and are, in fact, killing American servicemen everyday in places like Afghanistan and Iraq," he said.
Holton's group, which is a part of the Center for Security Policy, released a report in 2004 stating that Minnesota invested state pension funds in 127 companies with ties to Iran. He says he's updating the report.
The Minnesota Legislature passed a law earlier this year that requires the State Board of Investment to divest any holdings in companies doing business in Sudan. But there aren't any bills calling for the divestment of companies with ties to Iran.
Howard Bicker, the executive director of the State Board of Investment, says the board is in the process of sorting through the Sudan holdings and finding out which companies have ties to Iran.
"The Sudan legislation does not have very serious investment ramifications," he said. "It will probably affect $20 million out of a $60 billion portfolio, but the Iran list could be potentially much more encompassing."
Some of these divestment initiatives have been blocked in court. A federal judge struck down an Illinois law that called for Sudanese divestment. The National Foreign Trade Council filed the lawsuit, arguing that it interfered with the federal government's ability to conduct foreign policy.
NFTC executive director Bill Reinsch says divestment bills harm the federal government's ability to conduct diplomacy with European and Asian countries on Iran.
"That's the problem here; these things fall on foreign companies. If their governments are not on the same page and not cooperating, our sanctions don't do much good and all they do is irritate the other governments and make it harder to get its cooperation on a multilateral approach," Reinsch said.
Reinsch also argues that many of the large European and Asian companies that may choose to do business in Iran won't be dissuaded by the actions of public pension funds.