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Schwarzenegger lobbied by Netanyahu on divestment bill

As Gov. Arnold Schwarzenegger traveled across Europe on a mini-tour this week, a major foreign policy decision came a step closer to his desk. Legislation to divest from Iran California's public retirement account investments - which together account for $400 billion - passed out of a state Senate committee unanimously on Monday.

Assembly Bill 221, authored by Assemblyman Joel Anderson, a freshman Republican from El Cajon, previously passed unanimously out of the state Assembly and appears on the fast track to Schwarzenegger's desk.

Enter former Israel Prime Minister Benjamin Netanyahu.

Netanyahu has argued in public that encouraging American divestment from Iran could slow down an Iranian regime that continues to pursue nuclear weapons.

Military action, Netanyahu told the Wall Street Journal in May, "should be a last resort." And diplomacy has been tried and failed, he said.

But divestment "could stop Iran dead in its tracks," Netanyahu told the Journal. "We're talking about several dozen companies...that are propping up the energy sector in Iran and a few other relevant sectors. They are eminently susceptible to stock prices. Their chief executives are compensated by stock prices. Divestment depresses stock prices and immediately forces reconsideration."

More interesting, perhaps, Netanyahu is currently focusing his stop-Iran strategy in Sacramento.

More from the Journal, published on May 26:

"I spoke to Gov. Schwarzenegger on this a few weeks ago," Mr. Netanyahu says . "He said he'd look into it. I'm going to call him, possibly before I leave tonight." On Tuesday an official from the Israeli Embassy in Washington emailed me that Mr. Netanyahu "did get in touch with Governor Schwarzenegger yesterday. . . . The Governor was aware of the divestment bill and said that it may get passed by the end of the summer."

Schwarzenegger spokesman Aaron McLear said the pair "have a long relationship," but was unable to discuss any specifics of conversations they had on the Iran legislation.

The governor has not taken a public stance on AB 221, said McLear, citing the governor's policy of generally not publicizing his position until a measure reaches his desk.

Specifically, Anderson's divestment bill is modeled after similar Sudan legislation, passed by the Legislature and signed by Schwarzenegger in 2006 - so the governor is at least open to the notion of divestment.

The Iran-divestment bill calls for CalPERS and CalSTRS -- the nation's two largest public funds -- to get rid of investments in foreign-based defense, petroleum and nuclear companies operating in Iran.

Iran is one of five states the U.S. government has listed as state sponsors of terrorism. There is already a ban on American companies doing business in those five countries.

The bill is opposed by the trustees of both CalPERS and CalSTRS, who argue that divestment impinges on their fiduciary responsibility. CalPERS has estimated Iran divestment could ban around $2 billion in investments in 19 foreign companies, costing $20 million in fees and $66 million in lost asset value.

As for the world-touring Schwarzenegger, whatever his choice is on the bill, it gives the actor-turned-politician a chance to make a splash on the international stage.