Divest Iran? Ehhhh, Maybe. But Maybe Not

California Gov. Arnold Schwarzenegger has signed a bill that would require the state’s public retirement pension fund to divest itself of holdings in foreign companies that invest in Iran. Said the Governator shortly before signing: “California has a long history of leadership and doing what’s right with our investment portfolio. Last year, I was proud to sign legislation to divest from the Sudan to take a powerful stand against genocide. I look forward to signing legislation to divest from Iran to take an equally powerful stand against terrorism.”

While the Iranian regime arms Iraqi militias with deadly roadside bonds and ships weapons to the Taliban in Afghanistan, argues Christopher Holton, director of the “Divest Terror” initiative at Center for Security Policy, it makes no sense for an American to invest in companies that do business with Iran.

Which brings us to the question, well, what’s happening in Virginia? According to “The Terrorism Investments of the 50 States,” the Virginia Retirement System has invested $4.3 billion of its $24.7 billion in equity assets in some 213 companies with ties to terrorist-sponsored states. The largest exposure was Iran, with 154 companies. Other such states, according to this 2004 document, which is based on 2003-2004 data, included Sudan, Libya, North Korea, Syria and “Saddam’s Iraq.”

Sample holdings included Alcatel SA (French), BNP Paribas (French), ENI (Italian), Hyundai Heavy Industries (Korean) and Total SA (French). Companies with terror ties contituted more than 17 percent of the VRS equity portfolio.

This January, Sen. Ken Cuccinelli, R-Fairfax, sponsored legislation that would have required VRS to divest itself of companies with active business operations in the Sudan, on the grounds that they directly or indirectly enabled the genocide in Darfur. As I interpret the General Assembly bill tracking, the House and Senate passed separate bills but conferees could not reconcile the two versions. No one, to my understanding, has yet proposed ordering the VRS to divest itself of companies doing business in Iran.

I’m of mixed minds on whether Virginia should follow in California’s footsteps. On the one hand, I approve of any measure designed to punish Iran economically. Not only is the Mullahcracy killing American soldiers, it is developing nuclear weapons and the means to deliver them long distances, oppressing its people and exporting instability to neighboring states like Azerbainjan. Furthermore, economic sanctions would have an effect. More moderate elements of the regime (if you can call them “moderate,” perhaps it would be better to say, “less odious”) want to dial back tensions with the United States and other western countries on the very grounds that its confrontational diplomacy is isolating the country.

On the other hand, I am reluctant to set a precedent for requiring the VRS to pursue socially conscious investing. Today the Sudan and Darfur, tomorrow Iran. What’s next? Divest companies that do business with Israel, as some leftist groups are agitating for? Divest from companies that pollute? Divest from companies that fail to pay a “living wage?” Divest from companies that peddle alcohol, smut and rap lyrics? At some point, you’ve narrowed the field so much that the VRS has very few companies to choose from. Then investment returns suffer — and taxpayers are on the hook to make up the difference.

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13 responses to “Divest Iran? Ehhhh, Maybe. But Maybe Not”

  1. Groveton Avatar

    Man, this is frustrating.

    Do the poor people who have their retirement accounts from the state get the choice of where those accounts should be invested? I certainly get that choice from my company.

    If they have a choice – good. However, if they don’t have a choice this would be just another case of the government confusing what is their money with what is owned by individuals. Retirement funds were earned by individuals as part of their compensation as they worked through the years. Nobody should be allowed to dictate how that money is invested. If the people want to invest in a socially concious fund – they should do that. If they don’t – then they shouldn’t.

    However, this whole debate brings me back to the Rainy Day Fund. That money is really owned by the taxpayers who funded it. However, the politicians have once again confused this matter and believe that the money is owned by them. Now, some politicians are grandstanding with the questionable practice of targeting investment at socially “responsible” companies.

    Now, I’ll give Ken Cuccinelli his due – he has a master’s degree in International Commerce and Policy from Virgini’s best run university (i.e. George Mason). So, he at least understands the matter.

  2. Larry Gross Avatar
    Larry Gross

    this is where the pedal meets the medal …. whether you’re talking about your own managed investments or those managed for you.

    We can’t have it both ways.

    We can’t have an advocacy that seeks to expose and censure companies that do business with those we don’t like/disagree with/etc.. and then look the other way for investments – which involve many more companies than are usually “exposed” for doing business with those unfavored.

    Is it about money – pure and simple? You invest dispassionately with whatever returns the best ROI?

    and an aside: The US is pretty famous for “funding” those we’d like to see in charge of a country… Russia, for instance, could have easily claimed that the US was funding the killing of Russian soldiers in Afghanistan.. or “freedom fighters/terrorists (pick your favorite term) in a host of other countries including those in Central and South America.

    In Irans eyes, they are only doing the same thing that we do when we support insurgents in other countries.

    which gets us back to … who should decide .. using what criteria.. that particular countries (or even industries) should be shunned investment-wise.

    I don’t know the answer but I do know there is ample opportunity for hyprocrisy…

    Remember the “boycott” Exxon for the Valdez or Citgo for giving fuel oil away as a “gift” from Chavez?

    gee.. how about we decide that WalMart is not socially responsible and put them on the ‘no-no’ list of investments?

  3. Groveton Avatar


    Good points.

    I’d only add that the key question is who owns the money in question? Who owns the money in the state employee retirement fund? The politicians or the people who work / worked for the state and will pay for their retirement with that money?

    In my opinion, the retirement funds are owned by the people who have contributed to those funds or who have received retirement funding as part of their compensation. The funds are private property and should not be subject to the politically correct whims of politicians in election years.

    This issue is instructive for the people on this site. I have read over and over again about “land rights” and the abuse of emminent domain by electric companies. The consensus is that the governemnt has little to no right to take your land or insist on how you use that land (e.g. demand that sidewalks be allowed). However, the private property in people’s investment funds is perhaps subject to the whims of politicians and should be used for the greater good.

    How does these two seemingly contrary views square?

  4. Anonymous Avatar

    My Walmart investment is among my worst performers. If they don’t start providing more incentive to their investors we won’t have to worry about boycotting them.

  5. Anonymous Avatar

    “However, the private property in people’s investment funds is perhaps subject to the whims of politicians and should be used for the greater good.”

    Isn’t that the same argument that is made for land use controls? It is subject to the (unsubstantiated)whims of politicians for the greater good, especially for the greater good of a favored few.


  6. Larry Gross Avatar
    Larry Gross

    …”argument that is made for land use controls? It is subject to the (unsubstantiated)whims of politicians”

    actually – no.

    Who do you think would win an election between two folks – one promising to get a handle on growth by restricting it – and one who would say that any/all proposals for development would be welcomed.

    You can continue to pretend…but to no avail…

    Your opposition on this issue is – your neighbors – who outnumber you in their feelings with respect to property rights verses growth.

    on the investment issue – I don’t politicians are involved at all but rather some State career administrators… in concert with private investment brokers.

    re: socially responsible great public purpose hooha…

    let’s expose those companies that use those “illegals” while we’re at it…

  7. Anonymous Avatar

    Total showmanship divesting from Iran. You may as well not buy anything or invest in China or most of Europe since they all get a lot of oil from Iran. It’s easier for politicians to make grandstanding policies like this than to actually discuss real foreign policies that make sense both for us and the middle east.


  8. Anonymous Avatar

    Groveton made the point that private property should not be mainipulated politically in favor of the greater good.

    I beleive that there are times when private property should be manipulated for the pblic good. I only claim that if private property is to be manipulated for the greater good, then there ought to be enough “goodness” to compensate those whose property has been manipulated. If there isn’t, then the claim of public goodness is bogus.

    I have no doubt who would win an election between two folks – one promising to get a handle on growth by restricting it – and one who would say that any/all proposals for development would be welcomed. Even I wouldn’t vote for the second one.

    Now what if there were three candidates, one of whom promised to get a handle on growth, and do it fairly, without stealing the “public good” from the private few? What if there was someone who presented some other scenario, one more balanced than “all growth is bad, developers are eveil, conservation is forever.” Someone who was willing to assess the true benefits and true costs on an equal footing? Someone who spoke common sense and had fairness figures that any reasonable person could understand?

    Lets face it, the only reason my neighbors outnumber me is because they were allowed to buy property that was developed. Government has an oblication to protect the minority.


  9. Larry Gross Avatar
    Larry Gross

    the problem with candidates is twofold.

    The first is what they say or don’t say.

    and the second is.. if they say something you like – can you believe them?

    Thus the guy/gal who talks about growth in the context of “reasonable” and “balanced” doesn’t stand a chance against the guy who sez he’s flat opposed.

    Which one of the two.. is more likely to go off the ranch …after elected?

    I actually do not think it is fair to have arbitrary restrictions on land but I also think if one really does want to effect change – good change – you have to recognize and acccept realities with respect to growth – how many of the voters perceive it – and the political outcome of such dynamics.

    Now.. if all one wants to do is hum a tune of how unfair it is – nah nah nah… then as long as that is fullfilling.. go for it!

    But if one really would like to see some changes with development restrictions – you have to be willing to get in the game with respect to WHY people are opposed to growth in the first place.

    And in a nutshell.. it is .. degradation of their quality of life… crowded roads and schools which directly result from not maintaining adequate infrastructure.

    Thus.. a positive approach – one in which you disagree with – is to advocate proffers and impact fees to pay for SOME (not all) of the required infrastructure and the rest by all property owners.

    If one dislikes this approach then find another path – because opposition and nothing else leads right back to … political gridlock… and the anti-growth folks win.

    Some my advocacy .. is partially on .. not the black and white of “rights” but rather the Grey nuances … and partially on political .. pragmatism.. about how to move the issue forward.

    Most folks in fast growing areas will accept modest increases in the property taxes without rebelling if they see progress being made on the infrastructure and believe that new folks are paying a fair share.

    If you tell existing property owners that they have no choice but to pay higher and higher property taxes for rampant, unchecked growth.. then you’re gonna lose – BIG…

  10. Anonymous Avatar

    Thus.. a positive approach – one in which you disagree with – is to advocate proffers and impact fees to pay for SOME (not all) of the required infrastructure and the rest by all property owners.

    Nope, I can agree with that approach.

    Chances are that the pro-growth fanatic and the no-growth fanatic will both be wrong, and the best answer for everyone is somewhere in the middle. Some but not all, on both sides. Now all we have to do is agree on what is some and what is all.

    It is widely accepted that residential does not pay. Therefore, in addition to preventing new residential, the only other thing you can say is that residential isn’t paying enough. If they paid more, then you could soak the farms less, and you wouldn’t need such high proffers.

    No growthers need to stop making that argument, because it works against them.

    But that is still only part of the problem.

    Degradation of quality of life is the real issue. As it stands now there is NO incentive, none, for existing homeowners not to be opposed to growth. It is a purely selfish motive, backed up as you say, by numbers at the poll.

    That is going to continue to be true as long as landowners pay more than their share of taxes, and as long as others get real, tangible benefits from open space that they don’t have to pay for.

    And the political reality is that if you point out to people that have the votes that they are being supported unfairly by someone else, their reaction is going to be, good, let’s keep it that way.

    They can avoid crowded roads and schools by paying more (upt to the point where residential at least breaks even), or they can shift the cost to others through no-growth (frequently masquerading as environmental concern).

    If you have the votes, it’s a no brainer: continue to steal with impunity. They are basically renting open space for their own benefit, (even public officials admit this) and paying no rent.

    What I want to see is the guy that says growth has problems, and so does no growth. Lets get real numbers on the table (Not AFT numbers) and figure out what’s best for all concerned.

    Because my condition is so far on the fringe, ANY change other than more growth restrictions is an improvement. Short of physically taking it away from me (which is a real possibility) my condition can hardly get worse.

    When my supervisor tells me to my face that his plan is to have someone wealthy buy my property, how can I think he is working in my interest rather than someone in his own eonomic strata?

    Failing some kind of rational economic discussion, I’d even look favorably on the public official that says (like others) farms and open space are paying more than they cost, let’s see if we can’t find a way to get more of their money back to them in the form of agriculture related services.

    Even a no-growth maniac can see that making open space more profitable reduces the pressure for (at least rural) growth.


    In this weeks Fauquier Democrat Lee smith published a letter. In it he blamed rising taxes on rampant subdivision growth, and on the fact that large landowners are not paying the full tax rate on all their empty land.

    Sure enough, if you charge them full burden on their land, won’t they then demand full subdivision rights? Won’t they have even more incentive to get out from under what would be truly burdensom taxes – far more burdensom thant the guy on a half acre, who is contributing relatively more to congestion?

    Land use taxation for farming is a half-ass situaton at best, but, bad as it is, a lot of farming would stop immediately without it. I know my modest efforts would stop immediately. Along with it would stop all the transfer of what is really off-farm money to farm related local businesses.

    So here’s a guy (Lee Smith) who wants not only stop growth, but charge those who are growth restricted even more, not realizing that the two are mutually exclusive.

    If you really want to stop growth, do what other countries do, and pay people to grow something other than houses, and pay them enough that they are not a permanently restricted underclass.

    If you want something (open space), pay for it. Doesn’t seem all that difficult or strange to me.


  11. Anonymous Avatar

    “If you tell existing property owners that they have no choice but to pay higher and higher property taxes for rampant, unchecked growth.. then you’re gonna lose – BIG…”

    And how are you going to reconcile that with calls for higher density, which amounts to rampant unchecked (and probably subsidized) local growth? You gonna campaign on a platform that says growth cause taxes to go up, but density causes them to go down?

    Where is the evidence?

  12. Groveton Avatar

    Farms are overtaxed relative to benefits received.

    Northern Virginia is overtaxed relative to benefits received.

    Who is undertaxed relative to benefits received?

    There has to be somebody receiving all these excess taxes – no?

  13. Anonymous Avatar

    Yep. In Fauquier it is the compact residential areas.

    In the case of Fairfax it is the ROVA.

    Everybody seems to know and recognize this, except the people who think users should pay for what they get.


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