National Defense Authorization Act for Fiscal Year 2012

April 14, 2011
June 6, 2011
Became Public Law

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This annual bill provides the legal authority for the Dept. of Defense to carry out its activities and helps to shape its policies and programs. A Conference Committee of House and Senate members reconciled the differing House and Senate versions of the bill. The Committee submitted a report with the final bill (report number 112-329) which specifies that the Missile Defense Agency may spend $216.1 m. to fund research, development and procurement for various missile defense systems for Israel. Of this amount $31.8 m. is allowed for improvements to the existing Arrow ballistic missile defense system, $58.2 m. is for continued research and development of the Arrow-3 system, $66.1 m. is for the David’s Sling short range ballistic missile defense system. Also included was an additional $60 m. ‘program increase’ which was added by committee members but not designated for a specific weapon system.

The Obama administration had only requested $106.1 m. for the missile defense programs, but the House Committee on Armed Services stated that the administration’s funding request was insufficient for Israel’s needs. In recommending a $110 m. increase, the committee cited several rockets fired from Gaza in 4/11 that were intercepted by Israel’s missile defense system. The committee stated its belief that the attacks were reminder of the immediacy of the missile threat to Israel and the need for the U.S. to support accelerated efforts to develop Israel’s missile defense capabilities.

The bill also authorizes $306,595,000 to be used for research and development of a land-based version of the existing ship-launched Standard Missile-3 (SM-3) ballistic missile defense system. The land-based SM-3 is being developed specifically both for use by the U.S. military and as a back-up system for Israel should development of the system specifically for Israel, the Arrow-3, fail.

Sanctions on the Iranian Financial Sector:

The bill also contains a provision that designates the Central Bank of Iran, and the country’s wider financial sector, as a primary money laundering concern for the illicit activities of the Iranian government, especially its nuclear program, support for terrorism, and efforts to avoid sanctions. Directs the president to prohibit foreign banks which conduct significant business with the Central Bank of Iran (CBI) or other Iranian banks from opening correspondent or pass through accounts in the U.S., essentially barring them from the U.S. financial sector. The prohibition extends to the central banks of foreign nations only if the banks facilitate the sale or purchase of Iranian petroleum products. The president may waive the sanctions on national security grounds, if he determines that there is inadequate supply of crude oil in world markets to compensate for the loss of output from Iran, or if he determines a country has significantly reduced its imports of Iranian oil.

Most Iranian oil exports are financed through transactions between the CBI and banks from the countries importing the oil. Much of the revenue Iran earns from foreign oil sales passes through its Central Bank. Cutting foreign banks off from the U.S. financial system was not expected to halt purchases of Iranian oil, but to make the financial transactions more complex and costly, forcing Iran to discount its oil.

Originally introduced by Sen. Robert Menendez (D-NJ) as an amendment to the Senate Defense authorization bill (see S. Amdt. 1414 to S. 1867 of 11/15/11), the amendment was identified as a top legislative priority by AIPAC. It passed unanimously in the Senate, 100-0, on 12/1/11, becoming part of the Senate bill. As written there, the provision would have given the president limited flexibility in applying the sanctions to foreign banks. During the negotiations between House and Senate members to finalize the defense authorization bill, the precise language of the sanctions provision came under debate, and the Obama a

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