As American and European governments debate how to deal with Iran’s nuclear programme, some of the nation’s largest public pension funds are leaning on European and Asian oil companies to reconsider their investments in Iran.

In letters citing the risk that international sanctions might jeopardise their investments, a coalition of funds from New York, California, North Carolina and Illinois has cautioned eight foreign energy companies working in Iran about investing there.

These pensions, which include New York City’s five main funds and the California Public Employees’ Retirement System, hold $3.7 billion worth of shares in energy companies involved in Iran, out of a total $570 billion in assets.

The two-page letters were sent to the chief executives of Royal Dutch Shell, Total of France, Repsol of Spain, Eni of Italy and Gazprom of Russia. In Asia, they were sent to the China National Petroleum Corp, the Oil and Natural Gas Corp of India and Inpex Corp of Japan.

A growing number of municipalities and legislatures are seeking ways to bar state investments in place like Iran and Sudan.

Recently, Florida passed US’ first such measure and others, like California and Texas, are considering similar ones.
Pension funds usually oppose these efforts, which they see as curtailing their ability to invest. They also point out that long-term investors very rarely divest themselves of any of their holdings.

But the funds in the coalition are taking their concerns to the companies directly, seeking to reduce their risks.
“It is increasingly likely that the worsening situation and tightening economic sanctions will negatively impact companies doing business there,” the letters said, which referred to Iran as a “state sponsor of terrorism”. The companies were asked to respond about their plans by August 31.

The public strategy recalls a similar campaign a few years ago when shareholders pressured American companies like Halliburton, ConocoPhillips and General Electric to shut down the offices of foreign-owned subsidiaries in Iran.
For European companies that have shares traded in American markets, the move by these institutional shareholders is another headache for their Persian Gulf strategy.

The Bush administration has warned foreign energy companies and some foreign governments lately that they might incur penalties if they pursued deals in Iran.

Given the recent tensions, several European companies have frozen plans to invest billions of dollars in several projects.

Iran is the world’s second-largest holder of oil and natural gas reserves. American companies are barred from doing business there.

Kenneth B Sylvester, assistant comptroller for pension policy at the New York City comptroller’s office, denied that the move by the pension funds was a response to pressure from state assemblies.
NYT