By Dick Morris on June 14, 2007

Published on TheHill.com on June 13, 2007.

The past week has very possibly been the key turning point in the drive to cripple the Iranian government and force it to back off its nuclear weapons program. Uncovered by the mainstream media, a courageous and far-sighted effort by Reagan’s assistant secretary of defense, Frank Gaffney, to force state pension systems to stop investing in companies that do business with Iran or Sudan has won key victories in Florida, California and Ohio.

Spurred by vigorous lobbying by key legislators in each state, these massive pension funds are now committed to disinvest from companies that invest in Iran’s or Sudan’s energy industries.

Gov. Charlie Crist (R) of Florida signed legislation last week banning such pension-fund investments. On June 5, the California Assembly unanimously voted to require CalPERS and CalSTRS, the public employee and teacher retirement systems, to disinvest from companies that invested in Iran’s defense, nuclear or oil industries. CalPERS has about $2 billion now invested in companies that would be covered by the law. Imagine the hit that these companies’ CEOs and directors will take in their bonuses that are linked to stock prices when these shares are dumped on the market! California Assemblyman Joel Anderson, noting that “money is the mother’s milk of terrorism,” decried how California pension funds – the largest in the country – are “funding … terrorist groups that are trying to kill us.”

Meanwhile, in Ohio, the five public pension systems gave in to demands from state legislators that they too disinvest from companies that are doing business in Iran and Sudan. The pension funds had originally resisted calls for disinvestment, claiming they impeded their mission of maximizing returns on their investments, but they have now told the state House Speaker, Jon A. Husted -who brokered the deal – that “they would work to pull most of their money out of companies with ties” to Iran or Sudan, according to the Columbus Dispatch. Their decision came as a bill to require such disinvestment was working its way through the legislature.

These actions come on top of the trailblazing decision of Missouri state Treasurer Sarah Stillman to stop investing in companies that do business with Iran, Syria, Sudan or North Korea.

United Nations sanctions are important, but these state pension decisions directly impact the 485 companies that Gaffney’s group, www.disinvestterror.org, has found to invest in the four terror-sponsoring nations identified in the Missouri disinvestment program.

Iran’s key vulnerability is its economy, which is totally dependent on energy revenues. Eighty-five percent of government revenues come from the energy sector, and these revenues are expected to drop from $55 billion in 2006 to only $44 billion this year due to a rise in domestic demand for energy and decreasing energy production. By 2014, it is estimated Iran will export no oil at all unless foreign investment comes to the rescue and helps generate additional production. Iranian oil reserves are the second largest in the world, but are of no use to the ayatollahs unless they can get at them. By cutting off foreign investment in the energy sector, these state governments have gone a long way toward destabilizing the Iranian regime.

Now it is up to Congress to pass legislation requiring the Bush administration to apply the sanctions already legislated in the Iran and Libya Sanctions Act passed in the mid-90s but never applied due to national security waivers by Presidents Clinton and Bush. By forcing the president’s hand -even passing the bill over his veto – Congress will relieve Bush of a political quandary. The reason the president keeps granting waivers on the applications of the formidable set of sanctions that could descend on Iran is that Europeans resent the extraterritorial application of American power over their companies that invest in Iran. (That’s why state pension fund disinvestment is so effective: It is a way of leveraging foreign companies through market forces even though we have no political control over them.)

All the speculation about military action against Iran misses the point: It is through economic disinvestment in their energy and banking industries that we can exert maximum leverage and likely topple this pernicious regime – or force it to give up its nuclear program.

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