[Senate Hearing 111-410]
[From the U.S. Government Publishing Office]
S. Hrg. 111-410
MINIMIZING POTENTIAL THREATS FROM IRAN: ADMINISTRATION PERSPECTIVES ON
ECONOMIC SANCTIONS AND OTHER U.S. POLICY OPTIONS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
ADMINISTRATION PERSPECTIVES ON RECENT DEVELOPMENTS IN IRAN AND FUTURE
U.S. POLICY OPTIONS
__________
OCTOBER 6, 2009
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky
EVAN BAYH, Indiana MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey MEL MARTINEZ, Florida
DANIEL K. AKAKA, Hawaii BOB CORKER, Tennessee
SHERROD BROWN, Ohio JIM DeMINT, South Carolina
JON TESTER, Montana DAVID VITTER, Louisiana
HERB KOHL, Wisconsin MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia KAY BAILEY HUTCHISON, Texas
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado
Edward Silverman, Staff Director
William D. Duhnke, Republican Staff Director and Counsel
Colin McGinnis, Professional Staff Member
Neal Orringer, Professional Staff Member
Misha Mintz-Roth, Legislative Assistant
John O'Hara, Republican Senior Investigative Counsel
Mark Oesterle, Republican Chief Counsel
Dawn Ratliff, Chief Clerk
Devin Hartley, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
?
C O N T E N T S
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TUESDAY, OCTOBER 6, 2009
Page
Opening statement of Chairman Dodd............................... 1
Prepared statement........................................... 47
Opening statements, comments, or prepared statement of:
Senator Shelby............................................... 3
Prepared statement....................................... 48
Senator Menendez............................................. 5
Senator Schumer.............................................. 9
Prepared statement....................................... 48
WITNESSES
Sam Brownback, a U.S. Senator from the State of Kansas........... 6
Prepared statement........................................... 49
Robert P. Casey, Jr., a U.S. Senator from the State of
Pennsylvania................................................... 7
Prepared statement........................................... 51
James B. Steinberg, Deputy Secretary of State, Department of
State.......................................................... 13
Prepared statement........................................... 53
Responses to written questions of:
Senator Vitter........................................... 63
Stuart A. Levey, Under Secretary for Terrorism and Financial
Intelligence, Department of The Treasury....................... 15
Prepared statement........................................... 57
Responses to written questions of:
Senator Vitter........................................... 65
Daniel O. Hill, Acting Under Secretary for Industry and Security,
Department of Commerce......................................... 17
Prepared statement........................................... 60
(iii)
MINIMIZING POTENTIAL THREATS FROM IRAN: ADMINISTRATION PERSPECTIVES ON
ECONOMIC SANCTIONS AND OTHER U.S. POLICY OPTIONS
----------
TUESDAY, OCTOBER 6, 2009
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 9:32 a.m. in room SD-106, Dirksen
Senate Office Building, Senator Christopher J. Dodd, Chairman
of the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD
Chairman Dodd. The Committee will come to order.
Let me welcome all of our guests who are here in the
hearing room this morning and welcome our witnesses to this
hearing, as well as my colleagues who are here today. Our
hearing is ``Minimizing Potential Threats from Iran:
Administration Perspectives on Economic Sanctions and Other
U.S. Policy Options.'' I am going to make some brief opening
comments. I will then turn to my colleague from Alabama.
Normally we move right into our witnesses, but this is a
subject matter, I know, in which many members have interest. So
I will ask if anyone has any very brief opening comments they
would like to make, and then we will turn to our two colleagues
who are here--Senator Brownback and Senator Casey.
I should let you know I extended the invitation to others
as well who have an interest in the subject matter. My
colleague from Connecticut, Senator Lieberman, and my wife this
morning are attending a funeral. We lost a wonderful young
captain who was killed in Afghanistan, and the funeral services
are for him this morning. And Joe, properly, and my wife are
there at the funeral services in New Haven this morning. So I
apologize for his absence. He has a strong interest in the
subject matter, as many of you know, along with Senator Kyl and
Senator Bayh, who have also offered a proposal dealing with
sanctions.
So we will move along here and get to our witnesses from
the administration as quickly as we can. But I thank everyone
for their tremendous interest, appropriate interest in this
subject matter.
Today we confront, of course, a serious threat to our
Nation's security and global stability: the prospect of a
nuclear-armed Iran. If Iran were to acquire a nuclear weapons
capability, it would pose, I think all of us agree, a serious
threat to peace and security in the Middle East, especially to
our closest friend in the region--Israel--not to mention to
ourselves and others as well.
At our last Iran hearing in July, Senator Shelby and I
agreed to hear from the Obama administration before moving
forward on any sanctions legislation. Much, of course, has
happened in that time.
Last week, in Geneva, after revealing another covert
uranium enrichment facility in Iran, the administration held
its first diplomatic meetings with Iran and other permanent
members of the U.N. Security Council and Germany. Under
Secretary of State William Burns met one-on-one with Iran's
chief nuclear negotiator. This dialogue demonstrated the United
States' commitment, in my view, to pursuing every avenue to
push Iran to come clean on its nuclear program and abide by
international nonproliferation commitments.
President Obama described the talks, and I quote, as ``a
constructive beginning.'' Participants agreed to follow-up
talks later this month. The International Atomic Energy Agency
is to be granted access to Iran's uranium enrichment site in
Qom, and Iran has indicated a willingness in principle to
export low-enriched uranium to Russia and France for processing
for medical uses.
Whether Tehran will keep these commitments, or if it will
prove yet to be another stall tactic to avoid tougher
sanctions, obviously remains to be seen. And the situation is
increasingly urgent, as I think many would agree. Over the
weekend, the New York Times reported that the IAEA scientists
believe Iran has enough sensitive data to assemble a nuclear
weapon. Ultimately, we will only succeed if Iran's leaders are
persuaded to cooperate or face sustained, progressively
intensifying multilateral economic and diplomatic pressure on
their government, including tougher sanctions. They must make a
clear choice: come clean on their nuclear program, suspend
enrichment, and stop supporting terrorists around the world, or
continue to deepen their international isolation.
Increased international pressure and the specter of biting
sanctions are clearly what have brought Iran to the table for
substantive talks, in my view. Worldwide condemnation of
Tehran's secret enrichment activities, its human rights abuses,
and post-election crackdown have unified the international
community to intensify the pressure on Iran's leaders. We must
not let up now.
I intend to move forward in this Committee this month on
comprehensive sanctions legislation. I am committed, as I think
colleagues are as well, to ensuring that this Congress equips
this President with all of the tools that he needs to confront
the threats posed by Iran. Just as last year, we will
incorporate the best of our Senate colleagues' contributions
into one original Committee bill, including penalties on
companies that support Iran's import of refined petroleum
products or bolstering its domestic capacity, advanced by
Senators Bayh, Lieberman, and Kyl, the authorization for State
and local governments to divest from companies involved in
critical businesses with Iran sponsored by our colleagues who
are here today, Senators Brownback and Casey.
In addition, our legislation will further tighten our trade
embargo on Iran, enhance Treasury's mandate to freeze assets
tied to Iran's terrorist and proliferation activities, and help
to cutoff Iran's access to the most sensitive and advanced
technology available through tougher export controls on these
products sent to Iran through its black market trading
partners.
I would hope our legislation will complement, as I believe
it will, and reinforce ongoing diplomatic efforts and send a
very, very clear signal to Iran's leaders of what is in store
if they continue to defy the will of the international
community.
We are very fortunate to be joined today by some of the
administration's chief architects of Iran policy:
Deputy Secretary of State James Steinberg will elaborate on
ongoing diplomatic efforts to curb Iran's nuclear ambitions,
assess our chances for success, and survey the policy options.
Under Secretary of the Treasury Stuart Levey joins us once
again. A welcome holdover from the Bush administration, he will
discuss the tough targeted financial measures already deployed
against Iran and explore with us other pressure points in the
global financial system that could be employed against Iran's
Government.
And, finally, we will hear from the Acting Under Secretary
of Commerce Dan Hill. It has been over 2 years since the Bush
administration proposed restricting export licenses to
countries where sensitive technology flows to rogue nations,
such as Iran, via third nations, combating black market
proliferation networks which flourish throughout Asia and the
Middle East.
But first we are going to hear from two of our colleagues
after we hear from Senator Shelby and others this morning who
may be here. Senator Casey and Senator Brownback will describe
their legislation currently under review by our Committee on
the role of divestment from firms doing business in Iran's
energy sector.
We welcome to the hearing those members who are here and
our guests who are in the audience, but let me turn first to
Senator Shelby.
STATEMENT OF SENATOR RICHARD C. SHELBY
Senator Shelby. Thank you, Mr. Chairman.
Recent developments in Iran underscore the importance of
this morning's hearing. Last month, we learned that Iran has a
secret uranium enrichment facility. Last week, the Iranians
announced that they had reached a last-minute deal to send
their supplies of low-enriched uranium to France and Russia for
further enrichment. Just yesterday, news reports revealed that
senior staff at the International Atomic Energy Agency have
concluded that Iran has acquired ``sufficient information to be
able to design and produce a workable nuclear weapon.''
Although Iran denies that it is trying to develop nuclear
weapons, it has taken no credible steps to prove otherwise.
Iran's troubling conduct is not limited to its pursuit of
nuclear weapons. Iran has the dubious distinction of being the
most active state sponsor of terrorism for 10 years running,
according to our State Department. Because of Iran's extensive
financing of terrorism around the globe, the Treasury
Department has referred to Iran as ``the central banker of
international terrorism.''
There should be no doubt that Iran remains a serious and
growing threat to the entire Middle East region, to our
European allies, and to the interests of the United States. The
issue is not whether we must take action to check Iran's
hostile ambitions but, rather, I believe, how to maximize the
effectiveness of the actions that we take.
There is a long history of failed policy designed to rein
in Iran. As Secretary of Defense Gates noted last October, and
I quote, ``Every administration since 1979 has reached out to
the Iranians in one way or another, and all have failed.''
Thank you, Mr. Chairman.
Chairman Dodd. Thank you very much, Senator.
Any opening comments? I know Senator Corker--it is a
modified Corker rule we are applying here this morning, but
several members----
Senator Shelby. Corker II.
Chairman Dodd. That is right. Any comments, Jack? No? Jim?
Go ahead, Jim.
Senator Bunning. Thank you, Mr. Chairman.
I believe this is probably the most important hearing that
I have been with you since I have been on the Banking
Committee. The danger of a nuclear Iran poses one of if not the
greatest threat to our national security. Now more than ever,
we need to use every economic and diplomatic tool at the
disposal of the United States and the rest of the free world to
prevent this from happening.
We have had sanctions against Iran on our books since 1987,
the first year I was in Congress. They, along with other
multilateral efforts, have served to put a financial choke on
Iran's rogue behavior. Now is the time to expand these
sanctions even further and close several loopholes in existing
laws.
In the past, I have authored legislation to enforce a
mandatory ruling of investigations of potential violations of
existing Iran sanctions under the Iran Sanctions Act of 1996. I
was pleased last year to see this Committee incorporate my
amendment into the Chairman's mark of S. 3445, the
Comprehensive Iran Sanctions Accountability and Divestiture
Act. I am looking forward to working with the Chairman and
Senator Shelby to ensure that this language and its stated
purpose are incorporated in any new Iran sanction legislation
that this Committee will take up.
As it stands, the State Department is encouraged but not
required to provide a determination on whether or not a company
is in violation of our sanctions, thus giving these sanctions
little or no enforceability. Time and time again, I have asked
the State Department for transparency on this issue as well as
guidance on how to develop workable guidelines on enforcement
that will give our sanctions real teeth. Now is the time to
enforce these sanctions and deny Iran the financial capital
needed to fully fund their nuclear proliferation and support
for international terrorism.
Thank you, Mr. Chairman.
Chairman Dodd. Thank you very much, Senator.
Anyone else wish to be heard? Bob, do you want to be heard
on this at all quickly? Senator Menendez.
STATEMENT OF SENATOR ROBERT MENENDEZ
Senator Menendez. Thank you, Mr. Chairman. I appreciate the
opportunity.
Mr. Chairman, I just want to say that I appreciate you
holding this hearing, incredibly important, incredibly timely,
in the midst of all the Committee's other work, and to state my
strong support for strong actions on Iran's financial and
energy sector should efforts to engage with the regime fail to
produce desired results.
You know, although the administration's meetings with Iran
officials in Geneva last week have been called ``a constructive
beginning''--and I look forward to hearing how that definition
was defined through our witnesses-what we need now is
meaningful action by the Iranian Government to live up to its
obligations under multiple U.N. Security Council resolutions.
Current engagement efforts must not be an open-ended
process. We cannot weather endless rounds of fruitless
negotiations while the Iranian regime surreptitiously advances
its nuclear ambitions. The Iranians have a history of using
talks to stall for time in developing their nuclear program.
This fact and the troubling disclosure of a covert enrichment
facility at Qom underscore the urgency with which we must be
prepared to resort to severe sanctions to arrest Iran's nuclear
ambitions.
I continue to ask, How long are we to pursue what up to now
have been fruitless negotiations while the Iranian Government
continues to pursue a clandestine nuclear program with the
clock running out?
And so I hope that the negotiations can provide a
resolution, but I also believe that there are many areas of
Iran's financial and energy sector where sanctions can have a
profound effect. Sanctioning Iran's central bank or, for that
matter, banks that continue to do business with Iranian banks
could cause the Iranian banking system to collapse. Sanctioning
suppliers of refined petroleum products to Iran and thereby
curtailing Iran's ability to import such products could be
devastating to Iran's economy. Those are but two examples.
I firmly believe, however, that use economic pressure is
far superior to the other alternatives which we might have to
consider in the future if we do not act now. And so I believe
that the opportunity for those sanctions, if the talks soon do
not really produce meaningful results, is a far better
alternative than the options that would be left to us on the
table.
Thank you, Mr. Chairman, and I would ask that my full
statement be included in the record.
Chairman Dodd. That will be the case. Thank you, Senator.
Chairman Dodd. By the way, for the record purposes, any
statements that members want to put in the record will be
included, along with any supporting documentation. That will be
true of all of our witnesses as well. I will make that point.
Senator Brownback and Senator Casey, we welcome both of you
to our Committee, and we are glad you are able to be here this
morning to present your thoughts and ideas. Senator Brownback,
we will begin with you.
STATEMENT OF SAM BROWNBACK, A U.S. SENATOR
FROM THE STATE OF KANSAS
Senator Brownback. Thank you very much, Mr. Chairman. I
appreciate that. Ranking Member Shelby, members of the
Committee, thank you very much for attending and for letting us
speak here today. I have worked for a number of years on
Iranian policy issues. It has been a difficult task and one I
cannot say we have got a whole lot to show for over a number of
years.
In spite of all the efforts and the diplomatic efforts, the
Iranian regime has continued to choose a collision course with
the free world. The Iranian Government is the leading state
sponsor of terrorism worldwide, as Senator Shelby noted, the
foremost exporter of extremist ideology, the primary source of
instability in the Middle East. The regime's leaders have
brutally oppressed their own citizens. They have threatened to
commit genocide against the state of Israel, the region's only
full-fledged democracy. And the regime's radicalism and
brutality not only harms our interest and threatens our
national security, but also challenges our moral obligations.
It simply, in my estimation, would be unconscionable to
allow the mullahs to acquire nuclear weapons. Were they to
achieve this goal, they would possess a trump card to ensure
the continuation and augmentation of all these dangerous and
destabilizing actions.
Mr. Chairman, you have been willing to hear us on our
simple piece of legislation. It is a piece of the puzzle, I
believe. It certainly is not the whole thing. It is an effort,
like Senator Menendez is saying, that you try to get out in
front with some things to try to head off a much bigger
collision, and that is what we are after with this.
There is a very simple divestiture piece. It is modeled
after something that was done 2 years ago on the Sudan
divestiture effort, which was modeled after the South African
divestiture effort. This allows State and local units of
government to divest from investments associated with Iranian
companies or companies doing business in Iran in such a way to
bring an economic pressure on them. A number of States have
already done this, and yet they are in this legal limbo whether
or not they can actually legally do it. This makes it clear
that they can do it.
Iran's Sanctions Enabling Act, S. 1065, currently has 33
bipartisan cosponsors of it. The administration I believe would
support it. Then-Senator Obama in the last Congress was the
cosponsor along with me of this same bill. So I think the
President--I know he is well aware of it and is supportive of
it.
I would say, though, that this is only one piece of it. We
have got to do, I think--and this Committee is a key one in
doing this--a broad set of sanctions proposal. I have pushed in
the past that we should look at human rights as being our first
concern and the last of our concessions, not the other way
around. I think we need to showcase that in this overall piece
because that gets the people of Iran, which are natural allies,
on our side if we emphasize the Iranian people and their need
for human rights. Along this line, I think appointment of a
special envoy for human rights in Iran to elevate and lift up
the issues would be good.
Another issue that is working its way through the foreign
operations budget now is the Global Interest Freedom
Consortium. It is a small amount of money, $30 million, to
allow people to be able to communicate over blogs, Facebook,
and Twitter from the Iranian revolution. We saw this during the
election. It has been very effective as the regime tries to
block people getting onto the Internet, and yet some of these
fairly simple mechanisms can allow them to communicate over the
Internet. I think that would be a key thing as well for this
Committee to support and add its voice to.
And, finally, Radio Farda I think has been a good key piece
of the overall communications effort with the Iranian people,
and I would urge its continuation and support.
That is hitting a round of issues, but, Chairman, I think
we have got to go at this strong, because the collision course
is what has been set by the Iranian regime, and anything we can
do to stop that prior to them developing nuclear weapons are
things I think we have to engage, and we have to engage them
now. We have got to push this forward at this point in time and
not wait and not dither, saying, well, we are waiting on
something else or we are waiting diplomatically for things to
move, because I think diplomatically the Iranians are just
using that to stall for time while the collision course gathers
steam.
Thank you, Chairman.
Chairman Dodd. Thank you very much, Senator.
Senator Casey.
STATEMENT OF ROBERT P. CASEY, JR., A U.S. SENATOR
FROM THE STATE OF PENNSYLVANIA
Senator Casey. Mr. Chairman, thank you very much, and I am
honored to be back before this Committee as a former member.
Chairman Dodd. Good to have you back. Anytime you want to
come back.
Senator Casey. We meet here at a time of grave challenge
with regard to what Iran has been up to, and I want to commend
the work of this Committee, Mr. Chairman and Ranking Member
Shelby and the entire Committee, for focusing, appropriately
so, on this grave challenge. I do want to commend the work of
Senator Brownback not just on his work on our particular piece
of legislation but generally over many years on these issues.
We have, as I said, a challenge before us, and I know that
many saw some hope in some of the discussions last week in
Geneva. But I do not think we should be under any illusions
with regard to what this regime has been doing.
This is a regime which has refused to recognize the will of
the Iranian people and last June's election. This is a regime
that has repeatedly disregarded U.N. resolutions on its nuclear
program. And this is a regime that previously agreed to send
uranium abroad for enrichment, only to later renege on the
deal. And, finally, this is a regime which continues to
threaten our ally Israel and, of course, is a direct threat to
our national security interests.
Iran, the regime in Iran, has repeatedly claimed that its
nuclear program is only for peaceful purposes. But the facts,
especially in recent weeks, do not add up. The United Nations
says Iran violated international law by not notifying the IAEA
when construction on the Fordu site started more than 3 years
ago. Why are international inspectors invited only after the
regime is caught misleading the world again?
So I believe we have several strategies here that have to
be employed, and they are on concurrent or parallel tracks.
First, the negotiations conducted by the administration are
important and should continue. At a minimum, this international
effort will help restore America's long-held reputation of
being an honest broker, of a country that values diplomacy, of
a country that values relationships with allies and welcomes
new ones. Internationally, the U.S. is on better footing on
this ground than it has been in years. Ties with traditional
allies in Europe have been strengthened, and those on the
fence, like Russia and China, are showing signs of cooperation
on issues that are critical to our national interests.
But, second, I believe the Senate must act, and in summary,
what we are trying to do is to give not only the Federal
Government all the tools it needs, the administration as well,
but in particular to give other levels of Government--in this
case, pension funds--give them the tools they need to
participate in this strategy.
I believe the Senate should do its part by providing the
administration all the tools it needs to put pressure on the
Iranian regime. Iran's leaders need to know that if they decide
to renege on their commitments, as has been done in the past,
the United States is prepared to impose a series of tough
sanctions--tough sanctions including measures that will allow
State pension funds to divest from Iran and restrict petroleum
imports.
The Iran Sanctions Enabling Act, which Senator Brownback
and I introduced last May, would allow State and local
government pension funds to divest from companies that do more
than $20 million in business with the Iranian energy sector. As
Senator Brownback noted, this measure is similar to legislation
used with regard to Sudan in the past. Eighteen State
legislatures have passed individual Iran sanction measures, and
we need to do the same thing at the Federal level to give these
pension funds the authority that they need to help us out on
this grave challenge.
Finally, in terms of a third strategy, we need to be
prepared--and I would add to the second part of that the Kyl-
Bayh-Lieberman legislation as well that I and many others are
cosponsors of.
Third, I would think we need to be prepared to support
democratic voices and human rights activists in Iran. This is
not about regime change, but a genuine commitment to democratic
values. In a speech before the U.N. General Assembly, President
Obama said, and I quote:
There are basic principles that are universal. There are
certain truths that are self-evident. And the United States
will never waver in our efforts to stand up for the right of
people everywhere to determine their own destiny.
Our long-held commitment to human rights should not fall
off the table during these important deliberations on Iran's
nuclear program. In fact, these should be fully addressed, and
our diplomats should raise specific concerns with regard to
human rights in Iran.
Ultimately, the political fate of Iran is up to its people
to decide, and we should take the lead from them. We should
remain open to their calls for assistance.
In closing, Mr. Chairman, if history is any indication,
Congress should be prepared to hand the President the leverage
he needs to send a message to the Iranian regime that America
cannot and will not accept an Iran with nuclear weapons. The
administration needs all the tools at its disposal to increase
pressure on the regime diplomatically, politically, and through
more stringent economic sanctions.
I call on my colleagues in the Senate to listen to
legislatures in so many States across the country who have
passed divestment legislation. The American people do not want
to do anything with investing in Iran's energy sector. We need
to send a strong message to the regime and the international
community that a nuclear-armed Iran is unacceptable.
Mr. Chairman, thank you very much.
Chairman Dodd. Thank you very much, Senator, and I
appreciate that very much.
We have been joined by a couple of our other colleagues
here, and I want to turn to Senator Schumer. I see Senator
Bayh, who is also one of the authors of one of the proposals
that we hope to incorporate in this bill.
Just to notify my colleagues, I want to thank people like
Senator Casey, Senator Brownback, Senator Lieberman, and
others. We had planned on this hearing actually prior to the
announcement of these talks that opened up on October 1, but I
think it is very timely that we do so. I think the point is
providing the tools necessary to go forward are essential.
So let me turn to Senator Schumer briefly. If I could ask
my colleagues to be relatively brief with opening statements,
we are going to have full statements in the record.
STATEMENT OF SENATOR CHARLES E. SCHUMER
Senator Schumer. I would ask unanimous consent that my
entire statement----
Chairman Dodd. You are excused, by the way. If you want to
sit for a minute, we will have these opening statements, and
then any questions we will ask you to hold up a minute.
Senator Schumer. I ask unanimous consent that my entire
statement be read in the record, and thank you, Mr. Chairman,
first, for holding these hearings. They could not come at a
better and more important time, and I want to thank all of my
colleagues, Senator Brownback, Senator Casey, Senator Bayh,
Senator Lieberman, Senator Kyl, who worked so hard on this.
Look, we have to do something. This has been an issue
important to me for about 10 years. I believe when it comes to
Iran, we should never take the military option off the table,
but I have long argued that economic sanctions are the
preferred and probably the most effective way to choke Iran's
nuclear ambitions.
The Obama administration has recently begun direct
diplomatic negotiations with Iran, and the first round of these
talks did yield some important concessions from the Iranians
last week. These negotiations certainly continue, but they do
not supplant the need for action by this Congress now.
Iran, when it is caught red-handed, has a habit of
promising just enough to avoid a strong response from the
international community. Not this time. We should continue
talks with the Iranians, but we should not trust them. The
threat of new sanctions will only serve to strengthen the
President's hand as we pursue a diplomatic solution. And as I
mentioned, economic sanctions are the right way to go. I am
going to try to summarize here in the interest of time.
The bill sponsored by Senators Bayh, Kyl, and Lieberman I
think is exactly the right way to go. Gasoline is one of the
few pressure points where, if we act unilaterally, we will have
real effect on the Iranian economy. Most of the other things we
have to do multilaterally. But that is one thing that we can
do, and I am glad it is in the legislation.
Two other things that we can do unilaterally: First,
Senator Graham and I introduced something called RICA, the
Reduce Iranian Cyber-Suppression Act, and what it would do, it
would bar companies that export sensitive communication
technology equipment to Iran from applying or renewing
procurement contracts with the U.S. Government. Many of the
large ones, particularly in Europe, do this. It allows the
Iranian secret police and others to spy and do other things
against their citizens. We should stop them from selling it by
using tough sanctions.
And another point in the bill, 27 of us last year called
for the Iranian central bank--we blocked off the bank, the
correspondent reactions of banks with one another, and that
really hurt Iran. So what they did is they had their central
bank move in, and now it does what commercial banks do. We
should block, and I hope we will put it in this legislation,
the Iranian central bank, called the Bank Markazi, from playing
a role in helping other banks circumvent U.S. financial
sanctions. We should treat them as a commercial bank and block
them off.
Finally, one other point, Mr. Chairman, and that is that we
need to enforce as well as put new tools to use sanctions. Our
existing sanctions are riddled with leaks in the form of
trading partners who funnel our exports through a back door to
Iran. We send them exports, and then they send them to Iran. We
can plug these leaks by increasing the amount of inspector we
have stationed in the United Arab Emirates and other countries
where black markets are serving to circumvent our sanctions.
A GAO report, for instance, found that enforcement is
lacking particularly in the UAE, and so today at least I am
asking the administration to deploy more inspectors to the UAE
and other areas of vulnerability of sanctions.
It is a very good bill, Mr. Chairman. I hope we move it
quickly. I ask that my entire statement be read into the
record, and I thank my colleagues.
Chairman Dodd. Thank you, Senator. It will be included.
Chairman Dodd. Senator Bayh, any opening comments?
Senator Bayh. Just very briefly, Mr. Chairman. First, I
would like to thank you for your leadership. With all the other
issues you have on your plate, this is a clear signal of how
seriously you take this matter, and so I want to thank you for
that.
Also, for your willingness to incorporate the legislation I
have worked on with Senators Lieberman and Kyl. We have 76
cosponsors of that legislation spanning both sides of the
political aisle and running, frankly, the length of the
ideological spectrum, from left to right. So there is real
consensus about the need to bring urgency to this issue because
time is not our friend. Iran is moving aggressively down a
nuclear path. If we don't take aggressive steps, 1 day, we will
wake up to the unpleasant surprise of them having become a
nuclear power, and at that point, it will be a much more
difficult problem to deal with.
Also, on the issue that I focused on here, vulnerability to
restricting imports of refined petroleum products. They
recognize that vulnerability. They are moving aggressively to
deal with it by increasing their refining capacity. So we have
a window of opportunity here in the next year or two to act, to
really raise the price that they have to pay for their nuclear
ambitions and hopefully get them to change their minds.
The last thing I will just say, Mr. Chairman, is this
legislation offers our best chance to avoid the very painful
dilemma of having to choose between either a nuclear Iran,
which is unacceptable, or military action to avoid that
eventuality, which would be very difficult in and of itself.
So I thank you for your leadership, for including our
approach. I want to thank our colleagues for focusing on this,
as well. Frankly, we need to use the entire spectrum of
sanctions to try and deter the Nation of Iran from pursuing
these weapons.
Thank you, Mr. Chairman.
Chairman Dodd. Thank you, Senator, very much.
Do any of our colleagues have questions for our two
friends, Senator Brownback and Senator Casey? If not, you are
both--I am sorry, Bob. Did you have----
Senator Corker. I would just--first of all, I couldn't
agree more with the opening statements and things that have
been said about this. I absolutely believe that Iran obviously
is pursuing a nuclear weapon and that is absolutely
unacceptable.
I guess the question I would have for all of the sponsors,
which it sounds like we have many of in the Senate, is are we
looking at something that is enabling, that gives the
administration tools that they can use should they decide it is
appropriate to use them, or are we prescribing? I mean, to me,
that is something that is of concern, especially with what has
just occurred. I mean, we do have an opportunity, hopefully, to
actually have sanctions in place that mean something for the
first time in decades, and I wonder whether the Senate and
House, acting in a prescriptive way, is actually helpful or
harmful. I guess the question is, are we talking about enabling
legislation or are we talking about directing, prescriptive
type of legislation?
Chairman Dodd. Do either one of you want to respond to that
very briefly?
Senator Brownback. Just briefly on ours, it is clearly
enabling, because what we are doing is allowing State and local
pension funds to divest, and right now, they have a
questionable legal authority whether they can do that. So this
is then their choice, but it is something a number of them will
take advantage of.
Chairman Dodd. Senator Casey, any quick comments?
Senator Casey. No. I would agree with that assessment in
terms of our legislation. But at the same time, if the other
major piece, the Bayh-Kyl-Lieberman, were to pass, it does give
the President authority. It is not--in my understanding, it is
not prescriptive, but I think it sends a very powerful message
to the Iranian regime and to the world that the U.S. Congress
is united on this. So I think it could be a combination of both
empowerment in terms of the pension funds, but also giving the
President authority that is unilateral.
Chairman Dodd. Thank you very much. We thank both of you
very much for your participation this morning. We look forward
to working with you.
That was a very good question, Bob, and it is an important
one, obviously. I think the enabling point is one, because we
do need to modify some laws that would allow the administration
to act, and thereby giving them those tools ahead of time--and
I suspect that there are other ideas they have which probably
will not be included necessarily in our legislation, as well.
So it is an excellent question and one that we are sensitive to
here, as well. I appreciate it very much.
Let me turn to our witnesses. Again, I thank you for being
with us. Jim Steinberg is well known to many of us here. He is
Deputy Secretary of State, the second highest official at the
Department. He works closely with Secretary of State Clinton,
our former colleague, and Under Secretary William Burns. By the
way, I want to thank Secretary Burns. I talked to him over the
weekend. He called and gave me a good briefing on the events as
they unfolded on October 1 and was constructive and somewhat
optimistic, although cautious, obviously, about progress. But I
appreciate very much his doing so.
During the Clinton administration, Jim Steinberg served as
Deputy National Security Advisor and Director of Policy and
Planning at the State Department. And while I don't mention it
here, he formerly sat behind these daises up here as a Senate
staffer, so he knows our job as well as the job of the
executive branch. Jim, welcome back to the Senate.
Stuart Levey is the Under Secretary for Terrorism and
Financial Intelligence at the Department of Treasury, the first
ever to hold this position. Appointed by President Bush, Mr.
Levey has earned renown for honing U.S. sanctions policy and
employing targeted financial measures against financiers of
terrorism and weapons proliferation. You have a wonderful
reputation. You have done a great job and we are delighted you
are staying on to continue this effort, so thank you for being
with us this morning.
I have already introduced Dan Hill, but let me just briefly
give you a little background. Dan Hill is the Acting Under
Secretary for Industry and Security at the Department of
Commerce. In this capacity, he oversees policies for licensing
exports of dual-use products, that is, goods and services that
have both military and commercial applications. A senior career
commercial official, Mr. Hill is playing a key role in the
administration's review of U.S. export control systems. We
thank you very much, Mr. Hill, for being with us.
I am going to ask you to try and keep your comments
relatively brief, if you could. And again, your full statements
and supporting documents will be a part of the record.
We will begin with you, Jim.
STATEMENT OF JAMES B. STEINBERG, DEPUTY SECRETARY OF STATE,
DEPARTMENT OF STATE
Mr. Steinberg. Well, thank you, Mr. Chairman, Ranking
Member Shelby, and all the Members of the Committee. It is
always good to be back in the Senate.
I want to express appreciation on behalf of the whole
administration for the interest you, this Committee, and the
entire Congress has expressed in this subject. It is an
important issue for all of us and I am confident that we will
have a very useful discussion this morning about how we can
best achieve our common objective, which is how to address the
challenge posed by Iran's nuclear programs. Strong
Congressional interest in this issue is extremely valuable to
us in our efforts and I am appreciative of all the work that
you have already done on this.
I ask, obviously, that my full statement be part of the
record, but I will just make a few points in summary.
I want to begin by being clear about our objective. Our
goal is to prevent Iran from achieving a nuclear weapons
capability, and we will work with our allies and partners
toward that goal, as well as to counter Iranian actions that
threaten to destabilize the greater Middle East and the rest of
the world.
To that end, as you have observed, we pursued a dual-track
strategy of economic sanctions and engagement. We think that
only by using them together and coordinating them closely can
we achieve this important objective.
Let me just take a minute to explain how we are
implementing the strategy, including last week's meeting in
Geneva, and I would be happy to take your questions when I am
finished.
We understand Congress's concerns and sense of urgency that
you have all expressed this morning and look forward to working
with you and consulting with you on any legislative effort with
the aim of maximizing our ability to pursue this two-track
strategy to convince Iran to meet its obligations while
preserving the President's flexibility to carry out the
strategy successfully. This Committee and others have already
provided crucial leadership and important work and we
appreciate the importance of working with you in this shared
objective.
I want to emphasize that we are pursuing engagement not
because we believe in talking for talking's sake, but because
we believe it will advance our goals. In the past, as we have
attempted isolation without engagement, Iran has developed a
growing mastery of the nuclear fuel cycle while flagrantly
flouting its international obligations. Its leaders have
neglected the rights of its citizens. Its government has
continued to pursue a wide range of destabilizing activities
abroad.
Now, we are realistic about the prospects of engagement. We
are and we have forcefully presented our concerns to Iran's
leaders and made clear the choices they have before them. But
engagement not only increases the chances of achieving our
goals through negotiations. As so many of you have observed, it
also forges a strong consensus with others if negotiations do
not produce the results that we seek.
Our objective is a positive outcome that successfully
addresses the security concerns posed by Iran's nuclear program
to the United States, to Iran's neighbors, and to the
international community. We are making clear the steps that
Iran can take to help resolve our concerns and those of the
international community and the benefits that that would bring
in turn.
Iran must demonstrate through its actions the exclusively
peaceful intentions of its nuclear program. That means allowing
unfettered access to international inspectors, cooperating
fully with the IAEA's investigation, and taking up the
longstanding proposals of the P5+1, including a halt to uranium
enrichment.
In response to the clear and unified message of the P5+1 in
Geneva last week, Iran pledged to take several concrete steps
along these lines, including IAEA inspections of the previously
undisclosed facility at Qom, now scheduled for October 25, and
an agreement in principle regarding a supply of low enriched
uranium for the Tehran research reactor.
If implemented--and I stress, if implemented--this
agreement would limit Iran's potential to achieve a short-term
breakout in developing weapons grade highly enriched uranium,
and in so doing would help demonstrate whether Iran is serious
about proving its peaceful--exclusively peaceful intentions.
But as Chairman Dodd noted in quoting President Obama earlier
last week, he said this is a constructive beginning, but it
must be followed by constructive action by the Iranian
government. We will look for and judge by the constructive
actions ahead of another meeting of the P5+1 with Iran, which
we anticipate to take place later this month.
While we are beginning this diplomatic process, our
patience is not limitless. We are sensitive to the security
concerns of many countries in the region, and these concerns
have heightened our sense of urgency. In the event that Iran
passes up this opportunity, our engagement will make it
possible to mobilize international action more effectively. By
our openness to a negotiated resolution, we can clearly
increase our ability to persuade others to stand by with us if
more forceful action is needed. Our efforts to convince Iran to
change course will be more effective if we act in concert with
others.
Our efforts have already shown some signs of paying off.
Three years ago, the United States was virtually alone in
applying pressure on Iran. Now, a growing number of countries
share our concern about Iran's negative policies and have
signaled willingness to join our dual-track strategy. We have
pursued a progressive tightening of U.N. sanctions on Iran with
Resolutions 1737, 1747, and 1803. We have worked with our
colleagues at Treasury and with the international financial
community through the Financial Action Task Force. The European
Union has adopted measures to delimit the granting of export
credits. And as a result of sanctions and international
efforts, the cost of doing business with Iran is going up.
I also want to note, as so many of you have done, that our
concerns with Iran go beyond the nuclear issue. The Iran
government's terrible repression of peaceful protesters,
opposition politicians, and journalists following the elections
reveal to the world much about the character of that government
and has increased its isolation.
We are also deeply concerned about the American citizens
held in Iran and urge the Iranian government to promptly return
them to their families. We have expressed those concerns
directly to the Iranian government.
Tehran's aggressive foreign policy presents another threat.
In recent years, Iran has benefited from and exploited
instability in Iraq, Afghanistan, Lebanon, and the Palestinian
Territories. Our strategy in the greater Middle East is aimed
at bolstering security for our partners while reducing Iran's
ability to exploit these challenges for its own gain.
We have been working with our regional partners, including
Egypt, Jordan, Iraq, Israel, Lebanon, and the Gulf States, to
develop cooperation that will enable us to manage the
political, diplomatic, and security challenges that Iran poses.
These efforts are beginning to show signs of success, including
the GCC+3 Forum, inter-Arab cooperation to help address the
political crisis in Lebanon, security and military talks with
the Gulf States, and Arab governments' increasing support for
Iraq. We are also working actively on a comprehensive Middle
East peace process.
And some regional governments have chosen to conclude
modeled nuclear cooperation agreements in partnership with the
United States, thus disproving Iran's claims that the West
seeks to block the pursuit of peaceful nuclear energy by
countries.
Well aware of the regional and global consequences of a
nuclear Iran, we will continue with our dual-track strategy. We
in the international community very much hope that Iran will
make the correct choices for itself, the region, and the world.
Yet we will be prepared to move ahead swiftly and effectively
with additional measures with the confidence that our
engagement today will make such measures unified and effective.
So in conclusion, again, Mr. Chairman, thank you for your
interest in this, for all the Members of the Committee, and we
look forward to working with you in the days and weeks ahead.
Chairman Dodd. Thank you very much, Mr. Secretary. We
appreciate very much your approach. We will have some questions
for you in a minute.
Secretary Levey, thank you again for joining us, and thank
you again for your service.
STATEMENT OF STUART A. LEVEY, UNDER SECRETARY FOR TERRORISM AND
FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY
Mr. Levey. Thank you, Mr. Chairman, Members of the
Committee. It is good to be back here again to discuss this
critical issue. We appreciate your focus on this issue and the
support you have given us at Treasury over the years.
Deputy Secretary Steinberg has already given an overview of
our two-track strategy toward Iran, focused both on engagement
and on being ready to impose clear consequences on Iran if that
engagement does not yield the outcomes we seek. For that
reason, we have been working with our colleagues across the
U.S. Government to develop a strategy for imposing substantial
costs on the government of Iran if the President determines
that that is what is needed.
The plan we are developing is necessarily comprehensive. As
many of you noted in your statements, no single sanction alone
is a silver bullet. We will need to impose measures
simultaneously in many different forms in order to be
effective. the plan we are developing also takes into account
Iran's potential vulnerabilities and those activities that are
likely to have the greatest influence on Iran's decisionmakers.
We should be realistic about the ability of sanctions to
achieve our political and security objectives with Iran. If,
however, we accurately target the key vulnerabilities and
fissures within Iran and then act together with a broad
coalition of governments and key private sector actors, we can,
at the very least, demonstrate to the Iranian government that
there are serious costs to any continued refusal to cooperate
with the international community.
Although we cannot describe the particulars of our planning
in an open hearing, I would like to explain some of our
thinking.
First, we will build to some extent on what we have done
before and the efforts that you mention, Mr. Chairman. As this
Committee knows well, beginning in 2006, we developed and
implemented a strategy to target Iran's illicit activities. We
used our authorities to designate more than 100 entities and
individuals supporting Iran's nuclear missile enterprises,
including the key organizations within Iran, scores of their
front companies, Iran's major banks that finance their conduct,
and Iran's major shipping line that handles illicit shipments
for these dangerous enterprises. We also acted against the IRGC
and several of its companies, as well as the Qods Force for its
role in supporting terrorist organizations.
Many of our actions have been implemented internationally
by the U.N. Security Council, and still others by the European
Union and Australia. We combined those government actions with
outreach to scores of banks and other private sector leaders
around the world. We discussed the risks of doing business with
Iran and shared information with them about Iran's illicit and
deceptive practices.
As a result, the international private sector amplified the
effect of our government actions as banks and companies around
the world came to understand that if they are dealing with
Iran, it is nearly impossible to protect themselves from being
entangled in that country's illicit conduct. At this point,
most of the world's major banks have cutoff or significantly
scaled back their business with Iran, and Iran is increasingly
dependent on an ever-shrinking number of trade and finance
facilitators.
The second point I would make is that if we must increase
sanctions, we will need to adjust our strategy to the current
situation in Iran. Due to economic mismanagement, some experts
estimate Iran's unemployment rate to be well over 20 percent,
with the lack of jobs disproportionately affecting the young.
Three out of four unemployed Iranians are under 30. Foreign
investment in Iran has declined substantially.
The Iranian government's reliance on corruption and
nepotism in business limits opportunities for all Iranians. The
government awards no-bid contracts to companies associated with
the IRGC. These companies operate under names that obscure
their IRGC affiliation so that many unwitting non-Iranians are,
in fact, doing business with the IRGC.
In the name of privatization, the IRGC has taken over broad
swaths of the Iranian economy. The IRGC seeks to monopolize
black market trade of popular items, funneling the proceeds
from these transactions through a patronage system and then
using them to help subsidize the government's support for
terrorist groups.
There is now a broad acknowledgment that the Iranian
government engages in deceptive financial and commercial
conduct in order to obscure its development of nuclear missile
programs and to facilitate its support for terrorism.
International understanding of those practices have been
underscored by the U.S. Security Council resolutions on Iran
and by six warnings issued by the Financial Action Task Force
about the risks Iran poses to the financial system. Secretary
Geithner reinforced all of these concerns this week, meeting
with his counterparts at the IMF in Istanbul.
Across the board, transactions with Iran are already
handled differently than transactions with any other country,
except perhaps for North Korea, engendering either heightened
suspicion or outright refusal to engage in them.
The vulnerabilities in Iran could be compounded by the
internal fractures resulting from the elections. As Secretary
Gates recently stated, it is clear in the aftermath of the
election that there are some fairly deep fissures in Iranian
society and politics, and probably even in the leadership.
Finally, and I think most important, as the Deputy
Secretary pointed out, we will need a united coalition. We are
intensifying work with our allies and other partners to ensure
that if we must strengthen sanctions, we will do so with as
much international support as possible. I think that will be
critical to our success.
Thank you, and I would be happy to answer your questions.
Chairman Dodd. Thank you very much, Mr. Secretary.
Mr. Hill, we appreciate you being here, Mr. Secretary, as
well.
STATEMENT OF DANIEL O. HILL, ACTING UNDER SECRETARY FOR
INDUSTRY AND SECURITY, DEPARTMENT OF COMMERCE
Mr. Hill. Thank you, Mr. Chairman. Mr. Chairman, Senator
Shelby, Members of the Committee, I welcome the opportunity to
appear before the Committee today to discuss the Department of
Commerce's role in administering and enforcing U.S. dual-use
export control policies toward Iran. We work closely with our
colleagues at the Department of State and the Department of
Treasury as well as other agencies to implement the
longstanding U.S. embargo on Iran.
All exports to Iran are subject to both the Export
Administration Regulations and the Department of Treasury's
Iranian Transaction Regulations. The Treasury is the lead
agency for administering the embargo, including licensing
activities, which features not only a prohibition on exports
and reexports of items under our jurisdiction at the Department
of Commerce, but also comprehensive restrictions on financial
transactions and investments.
Commerce, however, is responsible for several aspects of
the embargo of Iran. First, we provide critical technical
assistance to Treasury on the proper classification of items
proposed for export or reexport to Iran under a license.
Second, we play a vital role in enforcing the embargo by
investigating transactions that may constitute violations of
our regulations. An export or reexport of an item subject to
our regulations without Treasury authorization would generally
constitute a violation of law. The Bureau of Industry and
Security at the U.S. Department of Commerce has approximately
100 Federal law enforcement agents in ten field offices around
the United States. We have agents stationed at Main Commerce,
as well.
We have had a number of significant cases involving Iran
which have, in turn, led to successful enforcement actions.
Currently, we have 235 open investigations involving Iran,
which constitutes a little less than one-third of all the
investigations we have of possible violations of our
regulations. I have attached to my written testimony lists of
recent enforcement cases for Iran that sheds light on our
activities.
We also have Export Control Officers in five foreign
locations: Abu Dhabi in the United Arab Emirates, one in
Beijing, one in Hong Kong, New Delhi, and Moscow. We hope to
add more to Singapore and a second one in Beijing in the coming
year. These Export Control Officers conduct pre-license checks
and post-shipment verification visits to verify that items will
be and are being lawfully used and have not been diverted to
prohibited users or uses within the country or illegally
transshipped to another country, such as Iran.
We coordinate closely with the Department of State and
other agencies as we work with other countries, including
states that we have concerns that may be involved in
transshipments to Iran, to establish and strengthen these
states' export and transshipment control systems. This enables
those countries to cooperate with us, build their export
control system based on our best practices, and to cooperate
with us on specific transactions, as well as take actions
against parties in their own countries who are illegally
exporting items.
We have a set of unique tools at the Department of Commerce
to enforce the export controls. The first tool that I would
like to talk about is our Temporary Denial Orders. A Temporary
Denial Order is a legal order that can be issued quickly for
180 days at a time to prevent an imminent violation of the
Commerce regulations.
For example, in 2008, we issued a Temporary Denial Order
denying the export privileges of Balli Group PLC and related
countries and individuals known as the Balli Group, Blue
Airways, and Mahan Airways for 180 days. Evidence obtained by
our agents showed that the parties knowingly reexported three
U.S.-origin aircraft to Iran in violation of our regulations
and they were preparing to reexport three additional aircraft
to Iran in further violation of our regulations. Our Temporary
Denial Order effectively precluded the United States or foreign
parties from engaging in that activity, and ultimately, the
Temporary Denial Order prevented the illegal reexport of the
three commercial aircraft to Iran.
A second tool we have is what we call the Entity List. This
is a list that can be used to prohibit the export or reexport
of any item subject to our regulation to any listed entity. In
2008, for example, we added 75 foreign parties to the Entity
List because of their involvement in a global procurement
network that sought to illegally acquire U.S.-origin electronic
components and devices capable of being used to construct
improvised explosive devices. These commodities have been used
in IEDs and other explosive devices against our Coalition
forces in Iran and Afghanistan. This network acquired the U.S.-
origin commodities and illegally exported them to Iran.
As a consequence of the addition of these entities to our
Entity List, no United States or foreign party may export or
reexport any items subject to our regulations to these entities
without a license. Exporting or reexporting of any items to the
entities without the required license is a violation of law.
We maintain a robust outreach program to educate the
private sector on our embargo on Iran and we have detailed
guidance on our website. We focus on key companies, such as
freight forwarders, integrators, air cargo carriers, and
shipping lines with regard to the embargo of Iran. Our efforts
are targeted toward educating exporters on vigilance in
partnering with firms based in major transshipment hubs, not
only in the Persian Gulf region, but also in Southeast Asia.
In conclusion, I have detailed the role the Department of
Commerce plays in the administration's enforcement of the
embargo on Iran and I would be happy to answer any questions at
this time.
Chairman Dodd. Thank you very much, Mr. Secretary. I
appreciate very much your testimony. We will have some
questions about that.
Let me just say to my colleagues, I will try and keep
around that 5 to 6, 7 minutes if we can. There are ten of us--
roughly ten of us here, so we don't want to keep our witnesses
any longer than necessary.
Let me begin, if I can, Secretary Steinberg. Critics of the
administration deride the government's current approach as
rewarding Iran's misbehavior with just talks, in a sense. You
get a flavor of that with some of the comments that are made.
However, as you outlined, our strategy is more nuanced than
that and it has a dual-track approach, as you pointed out,
engagement backed by the threat of severe sanctions. How has
that open-hand diplomacy disarmed our international critics and
provided the United States with the cooperation that I think
all of you in one way or another have mentioned here?
Obviously, you can go it alone, and then we have seen in
the past--I recall the South African sanctions. We were almost
alone in that process and had the positive impact, even though
it would have been better had we had more cooperation. But
certainly, I think, ultimately, we had an effect on what was
occurring. But ideally, you get cooperation. If you are seeking
success here, you need to achieve that. So I am curious as to
whether or not this approach has helped in building that
additional support that is necessary.
And then I would second like to know whether Iran is using
the talks to make sincere commitments on nonproliferation or to
stall severe multilateral sanctions. Again, we have a history
here that raises concerns. You have raised them yourselves. We
don't know the answer to that yet. Obviously, there is a
history here which would cause one to have deep concerns about
how serious Iran is about complying here or just buying the
time, as many of my colleagues have indicated in their
statements.
So I would like to know what benchmarks that you are using
to correctly judge Iran's commitments down the road. What are
you looking at here specifically that will give you a stronger
sense of whether or not we are on the right track with all of
this. Why don't you begin with that, if you can.
Mr. Steinberg. Well, thank you, Mr. Chairman. As you said,
I think one of the keys and one of the important elements of
our decision to deepen our engagement here is because it does
strengthen our ability to get the international community to
support our dual-track approach. When there is a recognition
that we are going the last mile to seek a diplomatic
resolution, there is greater understanding if we have to take
other measures.
And I think you saw this coming out of the meetings that
both the President and the Secretary had in New York and
Pittsburgh over the last several weeks, the comments by
President Medvedev, for example, a clear indication that they
Russians understand in light of Iran's behavior and the fact
that we have made a good effort to try to solve this that the
Russians seem to be more open to additional sanctions. You are
seeing a coming together of countries around the world to
recognize that this is Iran's last opportunity, and if they
fail to take it, there is a greater openness to this.
I don't want to underestimate the difficulty. It is very
critical that we get the support of the Security Council, if we
can, because that really strengthens the effectiveness. I,
myself, was in Beijing last week to discuss this with very
senior Chinese leadership to make clear that we view this as
critical and a core interest of ours that is important to our
relationship with China, that they work with us as we engage,
that they be supportive of our efforts if we need to take
stronger measures.
So I think that there is a strong sense that these efforts
will pay off, and frankly, the spotlight now is on Iran. We
have come to the table. Everyone is looking for their response.
And I think by being able to focus that international spotlight
now on these discussions, people will judge Iran by its
actions, which leads nicely into your second question, which is
I think we now actually do have some very concrete benchmarks
that we can judge whether Iran is now beginning to get serious
in light of this additional pressure and the global attention
or whether this is a stalling tactic.
In particular, we have two very specific commitments that
we are going to be following up on in just the coming weeks,
the commitment to ship out the low enriched uranium for
fabrication into fuel for their research reactor, and the
commitment to provide the IAEA access to this previously
undisclosed facility. We have meetings with the Iranians
scheduled on October 19 to review the details of how to carry
out this shipment out of the LEU and the inspections of the Qom
site, the Fordu site are scheduled for October 25. So by the
end of the month, we will have some very clear indications
about what their intentions are.
Going beyond that, we have on the table, as you know well,
Mr. Chairman, a proposal for a freeze for freeze that would
begin us down the path of stopping their enrichment program,
and so we will expect a quick response by then, as well. So I
think we do have a number of concrete benchmarks.
I think it is very important that by giving the Iranians
the sense that the patience is not limitless that we have had
some success. At the July G8 meetings in Italy, the G8 leaders
made clear that they anticipated review where we were in
September, and I think that giving them that sense of a time
horizon had an impact on getting the Iranians to come forward.
The President has also made clear that his patience is not
limitless on this. He sent a very strong message, both publicly
and privately, that we expect a firm and clear response from
Iran in the near future.
Chairman Dodd. Let me ask both of you, quickly, a question
that has been raised and that is certainly in the minds of
many--I saw a small piece the other day--those who are
objecting to this stronger set of sanctions, particularly when
it comes to gasoline and petroleum issues, that this may have a
counter effect within the population of Iran, that it could
trigger a domestic backlash in Iran against the West. It has
been pointed out that, obviously, the protests have been
devastating, what has happened to people there, and yet
highlighted for the world the repressive actions of the Iranian
Government. But it has been a critical element--I think all of
us in talking about additional pressures--that we not lose the
support of the average Iranian in this process here who will
obviously be affected by these policies we are talking about.
How do you address that question? It seems to me I recall
other examples, having been here on the sanctions issues in
South Africa and elsewhere, that those same criticisms were
raised at the time, that this was going to have the reverse
effect. It did not, of course, and we have now learned since
how important those sanctions were to emboldening and
encouraging the population that were living under a regime that
was so repressive.
What is the answer here, in effect? Do you believe those
criticisms are legitimate? And if so, how do we address them?
Or do you believe the Iranian population themselves, those who
are putting so much on the line, would welcome this approach
that we are engaging in today?
Mr. Steinberg. Mr. Chairman, how to impose sanctions and
have them be effective is a matter of judgment and not science.
We have had a lot of experience, as you said, over the years
with sanctions. We know that sometimes they have an impact on
the population, and the government is able to insulate itself
from those sanctions. Other times they can provide leverage by
putting additional pressure on the government.
So I think that is something that we are going to have to
fine-tune as we go forward. I think it is important that we
have a broad range of tools available to us, but I think we do
need to have a more refined judgment about precisely how to
exploit the kind of vulnerabilities that Under Secretary Levey
talked about to see which are the smart sanctions that have the
biggest impact.
So, for example, Under Secretary Levey talked about the
role of the IRGC. That may be a place where we could be
particularly effective. And I think we will want to work with
you, working with the experts in this area, as we develop this
toolkit to think about how the targeting is most effective in
both supporting those we want to support in Iran and putting
the pressure on those who need to make the decisions to desist
from the program that they are currently involved in.
Chairman Dodd. Secretary Levey, do you want to quickly
comment on that as well?
Mr. Levey. Well, I agree with what the Deputy Secretary
just said. We have learned over the last few years how to do
this better, and some of the lessons that we have learned are
that, to the extent we can focus on illicit conduct of the
government in Iran, we will have a better chance of not only
getting better support within Iran, but getting a better
multilateral coalition to impose the measures with us, which is
my second point, that, you know, if we can do this with other
countries, we are much, much better off than if we do it
unilaterally. So as we go forward, as the Deputy Secretary
said, we need to be very careful and craft this plan in as
careful a way as possible to make sure we have the desired
effect.
Chairman Dodd. Are you concerned at all about the
population--not that that should be the sole determining
factor, but it is a critical element, it seems to me. You have
had great courage being shown by huge populations that have
responded to the elections, particularly in Iran. We have heard
over and over again the continued support among large
populations for what we are trying to do here and how we
maneuver and handle that situation so it does not become a
liability but a continuing asset for us in this effort.
Do you have any concerns about that?
Mr. Steinberg. Mr. Chairman, as I said, I do think we
always have to worry about the humanitarian impact and the
political impact, because we want to take advantage of the
dynamic there and not to undercut the opposition, not to hurt
those who are being courageous, as you said.
And I think part of it will be a judgment call, as Under
Secretary Levey has said, about whether there is a broad
international consensus, whether this is seen as the
international community taking an action so that it is not the
United States alone singling them out, that I think will have
an impact on the political dynamic within Iran. It may also
depend on what other measures are taken and how obvious it is
that Iran is refusing to take any kind of positive action.
So I think it is a delicate judgment. There may be other
steps that we want to take first. We need to look at the full
suite of tools that are available to us, both in terms of the
sequence and how it applies in the circumstances.
Chairman Dodd. I went way over the time, and I apologize.
Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
Secretary Steinberg, why have we allowed the Iranians a
month from the time the secret nuclear site was discovered to
the time that the International Atomic Energy Agency inspectors
will visit the site? There is a lag time there. It seems like a
pretty good sized one.
Mr. Steinberg. Thank you, Mr. Shelby. As you will recall,
these meetings took place on October 1st, and the inspections
are now scheduled on October 25th. We obviously need to do--we
want the IAEA to do the kind of work it needs to do to make
sure that these inspections are effective. It is the kind of
thing where it is not just a question of walking into the site,
but actually doing the preparatory work, assembling the right
equipment, materials, the background. They need to get
briefings from those who may have some insight to make their
inspections worthwhile.
There is a little bit of a danger than an unprepared
inspection will not be a very effective inspection. We had
asked for 2 weeks. It is going to take place in 3 weeks.
Obviously, we would have preferred 2 weeks. But I think it is a
short notice here. This is not an indefinite delay. It is
within a matter of weeks of the disclosure. And I think the
IAEA will be in a good position to determine what is going on
there. It is our judgment that this is within the period of
time that we will still get a good insight into what is going
on.
Senator Shelby. Mr. Secretary, did Iran enter into and then
abandon a similar pledge to have Russia enhance its low-
enrichment uranium in 2007?
Mr. Steinberg. To my knowledge, Mr. Shelby----
Senator Shelby. I know you were not doing that then.
Mr. Steinberg. I do not believe that the discussions were
similar to this particular understanding, which is to have the
fuel fabricated for this research reactor. I would have to
check, and I will give you the answer for the record. But I
think the specifics of this arrangement are somewhat different
than the past discussions, and I think this is a more concrete
set of proposals as to how this would be handled, including the
involvement of the French as fabricators of the fuel.
Senator Shelby. The State Department--you are the Deputy
Secretary there--continues to identify Iran as ``the most
active state sponsor of terrorism.'' Do you think that this
raises the possibility that any nuclear weapon that Iran builds
could find its way into the hands of terrorists?
Mr. Steinberg. Mr. Shelby, I think these are all grave
concerns. I think that there are so many different reasons why
the potential possession of a nuclear weapon from Iran would
pose a danger to us and to the region. We have the danger that
it would be either deliberately or inadvertently transferred to
a terrorist or a non-state actor. There is a very serious
concern that it would be used to threaten its neighbors. There
would be a concern that it would be used as a cover for it to
engage in more aggressive behavior in the region.
We can think of so many reasons why this is such a grave
danger that that is why we put such a high priority on
preventing them getting it.
Senator Shelby. Mr. Steinberg, Secretary Steinberg, in the
past 10 days we have learned of both the secret enrichment
facility and the International Atomic Energy Agency report that
concludes that Iran has acquired ``sufficient information to be
able to design and produce a workable nuclear weapon.''
Should these two revelations lead to a reevaluation of the
2007 U.S. National Intelligence Estimate on Iran, which stated
then that Iran had a weapons program prior to 2003 but stopped
it--in other words, update the estimate.
Mr. Steinberg. Mr. Shelby, as you know well from your past
service here in the Senate, there are aspects of this that I
can only go into in closed session, and we obviously are
prepared to do that.
This is something we constantly take a look at. It is
constantly under review because of the urgency that it takes.
Senator Shelby. In other words, you are saying you would
not ignore the new revelations.
Mr. Steinberg. Right. And the only thing I would say on
that is that we have seen the reports, obviously; we have not
seen the formal IAEA conclusions, so we will look forward to
that. But we take this all very seriously. This is something
that is not--you do not just kind of do the assessment once and
then look again. This is something that we put a high priority
on to keep under permanent review.
Senator Shelby. Secretary Levey, you have been involved in
this a long time, that is, dealing with terrorist financing.
The United Nations blacklists three of the five Iranian banks
explicitly sanctioned by the United States, and European Union
only sanctions two of them that you are aware of. What would
the effect be if the United Nations and the European Union
worked with the United States in sanctioning all the Iranian
banks? And because of the existing U.S. sanctions, banking
within Iran is quickly, I understand, moving from government-
run banks to private banks and unofficial banks. What are the
difficulties there? First with the U.N. and with the European
Union.
Mr. Levey. Well, Senator Shelby, as you indicate, even the
unilateral designation of the Iranian banks by the United
States has had a broad effect, not only because other
governments take it seriously, but most importantly because
banks around the world take it seriously. That effect is, no
doubt about it, multiplied and is made much more effective to
the extent it is done multilaterally.
So, to the extent we have had designations at the EU of
Bank Melli, that has been greatly enhancing of the effect of
our designation of Bank Melli; to the extent that the U.N.
designated Bank Sepah, that was devastating to Bank Sepah.
So there is no doubt that the premise of your question is
correct that the U.N. designation of these financial
institutions that we have already designated would be extremely
powerful.
Senator Shelby. Secretary Hill, last week, Secretary Locke
proposed to eliminate license requirements for dual-use exports
to a large number of countries which are our allies and partner
nations, so to speak. If original export license requirements
are removed for items exported, for example, to the European
Union, how will the United States be able to enforce its re-
export license requirements? In other words, once it goes into
the Union, what tentacles do we have there?
Mr. Hill. Thank you, Senator. As Secretary Locke clearly
said in his address last week, any export control reform must
be accompanied by a robust enforcement and compliance effort
and ramping up our efforts there. I have met with the Secretary
since his announcement, and he is very committed to that and
has asked us to carefully consider the very question that you
just raised as we craft our regulations to move that process
forward.
We currently have for Iran a total embargo on exports and
re-exports that would stay in effect, would not have any--there
would be no impact from our export control reform. For other
items that might be included in the export control reform, we
are looking at ways to control those, including requiring re-
export requirements out of those allied nations, including
monitoring and notification.
We are looking at a broad range of issues. We think it is a
very important issue that you have raised, and we intend to get
it right.
Senator Shelby. How is the administration ensuring that any
proposal to decrease controls, which comes under the State
Department--I mean, the Commerce Department, on sensitive U.S.
equipment will not find its hands--ultimately, the equipment
will not find it being in the hands of Iranians?
Mr. Hill. Thank you, Senator. Again, the answer remains the
same. We need to be very diligent as we craft that regulation
because we do not want that to happen, and a very robust
enforcement and compliance effort to guarantee that going
forward. We work today with allies. For example, we have had a
team with the State Department that has visited the UAE once to
twice a year over the past few years where we have helped them
develop an export control system, and we are starting to see
progress there. So we have that going on as well.
But, again, we are going to be very careful as we move
forward on export control reform to ensure that the bad guys do
not get the stuff. And, frankly, sir, some of the stuff they
get is not all that sensitive stuff. The electronics that go
into IEDs that end up on the battlefield hurting our young men
and women are not the highest-tech items. But we are very
conscious of that. Our enforcement efforts have been on that.
We were able to disrupt the international Mayrow ring and put
75 entities on our Entity List.
Senator Shelby. Mr. Chairman, I have one quick question, if
I could, of Secretary Levey. In our July hearing, Mr.
Secretary, reference was made to the notion that if one is
doing business in Iran today, then they are probably doing
business with the Islamic Revolutionary Guard Corps. In October
of 2007, the Office of Foreign Assets Control that you are very
familiar with listed the leading Iranian financial
institutions, the IRGC, and other entities as specially
designated global terrorist organizations.
At that time, or anytime thereafter, was there ever a list
with a complete financial footprint of who is trading with
Iran? And if there is no such list, then why do you suppose one
was never created?
Mr. Levey. Well, as you indicate, Senator Shelby, we did do
the very broad set of designations in 2007----
Senator Shelby. But not specific, was it?
Mr. Levey. Well, it was a little bit more specific than you
have laid out because we also subsequently have designated a
number of companies that are owned or controlled by the IRGC.
As you indicate, that has an effect in the United States,
of course. It freezes their assets and makes it a crime for
anyone to do business with them. But it is a good signal to the
rest of the world who really do not want to necessarily do
business with the IRGC. If we can identify the companies for
them that are IRGC owned and controlled, then they can take
steps themselves to avoid doing business with them.
So we have made an effort to continue to provide that
guidance to the international business community and continue
to take action ourselves to make sure that we are applying the
appropriate sanctions.
Senator Shelby. That is important, is it not?
Mr. Levey. I think this is a very, very important matter,
yes.
Chairman Dodd. Thank you very much.
Again, these are open hearings, and we invite people to
come. The signs are blocking the view of some other people in
the room from watching the witnesses, so I would ask them to
lower them a bit if they would. Thank you very much.
Senator Reed.
Senator Reed. Thank you, Mr. Chairman, and thank you,
gentlemen.
Secretary Steinberg, you have just returned from China. We
heard that the Russians were ready to stand with President
Obama on the stage in Pittsburgh along with President Sarkozy
and Prime Minister Brown, but the Chinese were reluctant. So it
seems to me that they are the most critical element of pulling
all the major powers together.
Can you comment on their position or what we are doing to
get them to pull together with the rest of the major countries?
Mr. Steinberg. Well, thank you, Senator Reed. It obviously
is critical because of the value that we get from having the
Security Council act in these cases. It gives a much more
powerful international message as well as legal tools.
I think it is important to recognize that China did not
stand in the way of the earlier Security Council resolution, so
they have accepted in the past that these measures are
necessary. And as you know, we have had some considerable
success with China in connection with North Korea recently. And
I think that is a very important step because the measures that
we took most recently with North Korea are very powerful tools
that are available to us and could be replicated in this
context with Iran.
I think it is very clear to me from my discussions with
them that the fact of our engagement strengthens our hands with
them. They obviously see this as the preferable course, and to
the extent that they see us seriously working in an attempt to
solve this diplomatically, it increases the chance that they
are going to do it.
They obviously have a number of economic interests there.
That makes it more challenging to get their support. But the
President has raised this at the very highest levels, and in
his meeting just a few weeks ago with President Hu, he made
clear that this is at the very top of our agenda in terms of
our concerns. And I believe that that strong connection that
the President has made will help us, should it become
necessary, to seek additional measures through the Security
Council.
Senator Reed. One of the issues that concerns the Chinese
is they have about 20 percent of their oil, I believe, comes
from Iran. But do they understand that if this situation gets
out of hand, one of the likely consequences is that oil prices
boom up and that they would suffer probably more than anyone
else--or as much as anyone else?
Mr. Steinberg. Well, Senator, I certainly made that point
to them when I met with them, and I also made clear that, more
broadly, as they become increasingly dependent on imported oil,
imported energy, they have a huge stake in stability in the
Middle East. And an Iran with nuclear weapons or nuclear
capability would create deep instabilities in that region.
So I think in some ways, although their energy needs create
ties with Iran and others, it also creates a recognition that
they have a stake in this in ways that they may not have seen
before. And I think this is one of the great challenges in our
broader engagement with China, is to make clear that they now
have a global stake in dealing with questions like this. They
cannot simply stay on the side and say, ``This is not our
problem.''
Whether that has successfully made it into their thinking,
we will only see in the event. But we have certainly been
making that explicit with them.
Senator Reed. Let me switch gears to the domestic situation
in Iran: unprecedented turmoil after their election, seems to
be continually below the surface, and occasionally breaking
through. What effect does this have on their deliberations,
their negotiations, their view of how they should proceed with
their nuclear program?
Mr. Steinberg. Senator, it is in some ways the $64,000
question, and I think it really is ultimately somewhat a matter
of speculation.
There is no question that this is a major factor, but
whether this is leading the Government of Iran to be more open
to a solution because it faces internal pressures or whether it
is making it more defensive I think is really hard to judge at
this point. And I think the only way we are going to be able to
tell is by testing the proposition by making clear, including
very clearly to the Iranian public, where the opportunities are
and how either the government can deepen its isolation
further--which is one of the arguments that the opposition made
during the campaigns, is pointing to the behavior the
government, which deepened its isolation and the costs it
imposed on the Iranian people. So I think we have to keep
focused on that aspect.
Senator Reed. Secretary Levey, you mentioned in response to
Senator Shelby that the IRGC has a significant economic role. I
heard that they have just bought a major position in the
telecom company in Iran. Is that correct?
Mr. Levey. Senator Reed, I have seen that report, and at
this point we are trying to confirm it. But there are some
indications to that effect, yes.
Senator Reed. And I would presume it is not just that they
have a good idea for a situation comedy, but they are looking
to control actually access to the Internet, Twitter, and
everything else.
Mr. Levey. That is certainly a possibility, and one is
seeing the IRGC injecting itself into so many different areas,
as I laid out in my testimony and as you pointed out. And as
Secretary Steinberg said, this may well be an area where we can
focus some attention and have the ability to bring others along
with us and make it more effective.
Senator Reed. Is the IRGC becoming so powerful that they
are a force unto themselves, that Ahmadinejad and the mullahs
have less and less control of them? Or have they allied with
Ahmadinejad as a front so that they can maintain their
presence, their growing presence?
Mr. Levey. I think that there are different indications
that we have in both directions on that. But at this point, it
looks like the IRGC is certainly well connected to the Supreme
Leader, and that is the assumption that we are going forward
on.
Senator Reed. Just a final question. How does the nuclear
program get their money? Do they go get bank loans? Or how
directly can we affect the funding of these specific programs
through sanctions?
Mr. Levey. Well, Senator Reed, the issue here is this is a
government-funded enterprise, obviously, so this is a regime--
this is, you know, a country that has a lot of income from its
natural resources. So we have to deal with that situation as we
find it.
Just because they have the money, though, does not
necessarily mean that they can easily engage in international
business transactions. So by trying to raise the costs and make
it more difficult and identify illicit transactions and get
partners around the world to scrutinize it and be suspicious,
we can slow them down and make it more difficult for them and
that way even if it is a situation where we cannot stop Iran
from having money that it gets from selling its oil.
Senator Reed. Thank you very much.
Thank you, Mr. Chairman.
Chairman Dodd. Thank you very much, Senator.
Senator Corker.
Senator Corker. Mr. Chairman, thank you, and I thank each
of you for your service and testimony, and we appreciate what
you have said today.
Secretary Steinberg, is there any question in anybody's
mind that during this period of time between now and October
25th that much of the facility that we are getting ready to
inspect is being dismantled?
Mr. Steinberg. Senator, as you can probably guess, what I
could tell you about that I cannot tell you in open session.
But I think that my broader point is that we are pretty
confident that the period of time, the delay, is not going to
have an impact, a significant impact on our ability to
understand what was going on there. So I guess to get to what I
think is underlying your question, which is, is this--they have
acknowledged that this is an enrichment facility. This is not a
case where we are accusing them of having a facility, they have
denied it, and they are going to then go hide all the stuff to
prove it was not. They have acknowledged that it is an
enrichment facility, and so I think we believe that the period
of time here is not likely to have an impact on our
understanding.
More important, in addition to inspecting what is there,
what we will achieve from this is making sure that this is put
under safeguard so that if they want to continue to go forward
with this facility, it will be fully safeguarded with monitors
and all the equipment that the IAEA has.
So given the state of this--and it is at a very preliminary
state--I think we feel confident that this delay is not one in
which significant deception or activities will take place that
would significantly impede our understanding of what was taking
place.
Senator Corker. And I have seen much of the classified--
probably not as much as you have on a daily basis, and I do not
think there is any question about that. I guess sometimes one
might wonder, you know, would it make sense to have somebody on
the ground immediately there and then let the inspectors come
in once they are prepared. But I guess that is too rational of
a thing to occur and just does not make sense in international
diplomacy.
Mr. Steinberg. Again, Senator, we obviously would have
liked to have had a somewhat earlier engagement, but given what
our understanding of the state of play is there, the slight
delay beyond the 2 weeks that we had suggested in our judgment
is not going to make a significant impact on that.
Senator Corker. And I appreciate the answer.
Senator Dodd asked a good question about what might happen
with the sanctions on refined product as far as the people go.
As just a tool itself, do you think the keeping of refined
product from actually coming in from other places to Iran is an
effective sanction, period? I mean, is it an effective
sanction? And the reason I ask, there have been a lot of people
that say that they can easily get around it and they have
subsidies in place that they could remove and that would
contain, you know, the amount that would actually be utilized.
There is a lot of smuggling that goes on to other countries
which they could stop.
I mean, is it or is it not an effective sanction?
Mr. Steinberg. Senator, I think we still have not reached a
firm judgment on whether that would be the best way to go, in
part because we need a better understanding of what the
efficacy would be, in part because it would depend on the
degree to which others participated in this. Obviously, this is
a hard thing to do unilaterally.
Senator Corker. Sure. But if everybody participated--I know
right now China is the major assistor, if you will. But if
everybody participated and the companies that have just
recently stopped continue to stop, would it be an effective
sanction or not?
Mr. Steinberg. Again, I think we have not reached a firm
conclusion about whether the net benefits and the net cost
would have the efficacy. The challenge is always to try to
translate the economic impact into what the political impact
would be, and our goal, as we think about what we might want to
do going forward, is to think, as Secretary Levey said, about
how does the government make its calculation. What would have
the biggest impact on them, whether it is transmitting through
its impact on the people or whether it is directly affecting
their own activities?
We found in many cases, for example, that the reason I
think a lot of us are focused on the IRGC is if you can focus
on kind of the cost/benefit calculation of the individuals who
are making these decisions, sometimes that has a more targeted
impact--sometimes called ``smart sanctions''--that things that
have to work as a transmission belt through the pain they
impose on the public.
But I do not think we want to take it off the table. I
think it is one of the things that we need to----
Senator Corker. Let me ask you this: Have you asked for
Congress to act? And the reason I ask that, my guess is with
all the testosterone, if you will, that shows itself as it
relates to Iran and other kinds of things, if you asked for
sanctions, they would be passed out of here in about 24 hours,
maybe more quickly. So the question is: Have you asked for us
to take any actions in Congress as it relates to sanctions?
Mr. Steinberg. I think, Senator, the key for us will in
part be timing, which is----
Senator Corker. No, no. But have you asked yet? Just yes or
no.
Mr. Steinberg. We have not asked for additional measures.
Senator Corker. Would you like for Congress to prescribe
what needs to be done? Or would you like for Congress to enable
you if you make decisions as it relates to sanctions?
Mr. Steinberg. Certainly, Senator, the President would like
to have the maximum flexibility in part because of his ability
to----
Senator Corker. He would like to be enabled.
Mr. Steinberg. He would like to be enabled.
Senator Corker. Then, in essence, just to get to the
legislation we have before us, you would oppose then the
Lieberman-Kyl bill that says you shall--you shall keep refined
product from coming into Iran?
Mr. Steinberg. Again, Senator, I think what we would like
to do is work with the Committee to give the President the
appropriate flexibility, and I know the Chairman and others
have indicated some willingness to look at actually how----
Senator Corker. So the answer--I am just going to say it
for you since you are being diplomatic, as a diplomat--is that
you oppose this legislation. And I guess, you know, it does
worry me that we might get in the middle of your work right
now.
But the counter to that--and this is my last question--some
of my colleagues up here on the dais, you know, we whispered
back and forth a little bit about, OK, what is different now? I
mean, there have been talks that have been going on for some
time. And, by the way, I am on the side of feeling that you
guys do need some flexibility, that we do not need to be
telling you guys what to do yet. OK? I mean, I think there is
an opportunity for actions to take. I think, though, the world
community is watching. I know many of us are watching. There
has been a lot of talk going on by many administrations, and
nothing has happened.
My final question is: What is different, in your opinion,
this time that would enable you, if you had the freedom and you
were not prescribed by others, what is different this time that
will allow you to be effective as it relates to Iran?
Mr. Steinberg. I think the most important thing is I think
we have a better chance of getting broad-based sanctions,
broad-based economic and political pressure because we
demonstrated that we have made every effort to solve this
through diplomacy and that the burden is clearly on Iran, that
they have clearly rejected any attempt to solve this
peacefully.
I think that is an enormous tool for us to get others to
act, and at the end of the day--because not only are sanctions
more effective when they are broad-based, but it also takes
away the political argument that the Iranian government may try
to make, which is that this is American hostility. This is
clearly an international rejection of their unwillingness to be
straightforward and open about their program, their
unwillingness to prove that it is peaceful.
And so I think that affects not only our ability to get
others to join us, but the dynamic that we have all been
discussing today about how this plays within Iran itself. It
becomes harder for them to try to use that line with their own
people about why these painful measures are now being employed.
Senator Corker. I thank you for your service and your
answers, and Mr. Chairman, for the hearing.
Chairman Dodd. Thank you very much, Senator.
Let me just point out, as I understand the legislation, by
the way, there is waiver authority in the legislation for the
administration. So it is not quite as prescriptive as my friend
from Tennessee has suggested.
And second, and I say this respectfully over the years,
that as a coequal branch of government, and obviously we
delegate to the administration and the executive branch to
conduct foreign policy, and you can't have 535 Members of
Congress conducting foreign policy, I understand that point,
but also, I think it is important on issues like this that the
world understand, particularly the Iranian government
understand, that our patience has run out, that this has gone
on too long and that we are running a great risk if they
acquire these weapons and pose a great threat to us and to our
allies.
And so while we don't relish this choice, they are giving
us no other choice at this point except for the one that we
would all like to avoid, and that is the one that we are trying
to avoid by what we are suggesting here. And so while it is
painful and it may impose some difficulties, in the absence of
doing so, there is the fear here collectively that the Iranian
government is taking us to the cleaners on the issue and the
end result would put us at great risk.
So I just think it is important to note that. This is not
something that we enjoy doing, and obviously working with you--
and I appreciate your response, Mr. Secretary--is exactly the
mood that we intend to engage with you on.
Let me turn to Senator Bayh.
Senator Bayh. Thank you, Mr. Chairman.
Just following up on that, to my friend from Tennessee and
the Chairman and our guests here today, the legislation does
use the word ``shall,'' but it also includes waiver authority,
that the President on a finding that it is not in the national
interest to impose the sanctions can waive the sanctions. So we
are trying to strike the balance between creating a sense of
urgency, clearly getting Congress on record as saying that this
is something that we are interested in doing--I personally
think it is the right thing to do--but maintaining the
appropriate balance of powers between the legislative and the
executive branch. We ultimately give discretion to the
executive branch to exercise its judgment as it sees fit. So
that is the balance that we were attempting to strike, between
being advisory and prescriptive, maybe a little of both. So
that is just for the record.
Thank you all for being here today, and my first question,
I guess, Mr. Steinberg--it is good to see you again--would be
for you. We are now engaged in this accelerated diplomacy, but
the clock is also running. And so my question for you would be,
what should the deadlines for the diplomacy be and what should
the consequences for failing to meet them be if the Iranians
just are dragging this process out in an attempt to achieve a
nuclear capability before the world can do anything about it?
Mr. Steinberg. Well, thank you, Senator. I think there are
some real opportunities here to test Iran's intentions and to
get a sense of the accelerated time line. One of the reasons
why we put such emphasis on this arrangement for shipping out
most of the low enriched uranium to be reprocessed into fuel
for the Tehran research reactor is that it has a real needed
impact, which is it takes away from Iran LEU which could be
fabricated into high enriched uranium, highly enriched uranium,
and potentially into material for a nuclear weapon.
So a prompt action by Iran on that would be a very
significant step. That is why we have put a lot of emphasis on
it. We will have an opportunity in a matter of days----
Senator Bayh. How would you define prompt?
Mr. Steinberg. We have a meeting on October 19 to discuss
the details of this, and as I indicated earlier, we anticipate
a meeting of the P5+1 with Iran by the end of the month. So we
are really talking about a matter of days and weeks for the
first two commitments that Iran made in the Geneva talks, as
the inspection of the Qom facility and trying to reach an
agreement on the shipping out of the LEU----
Senator Bayh. Is there any way for us to verify whether
they have actually shipped out all the enriched uranium that
they have?
Mr. Steinberg. Well, I think we have a fairly good idea--
not to the gram, but a fairly good idea--because the facility
is under IAEA inspection, that within a reasonable tolerance,
we have a pretty good idea of what their current LEU stockpile
is----
Senator Bayh. So you are for prompt deadlines----
Mr. Steinberg. Yes.
Senator Bayh. You are talking in terms of by the end of the
month or----
Mr. Steinberg. By the end of the month, I think we will
have a clear indication of whether on the first two specific
things that they apparently agreed to in Geneva, whether they
are taking action to show they are serious.
Senator Bayh. It was, I guess, typical that they apparently
agreed to things and then pretty quickly denied having agreed
to those very things. They don't seem to be speaking with a
unified voice. So the second part of my question is, if they
appear to be dissembling or delaying, what should the
consequences for that be?
Mr. Steinberg. I think the President and the Secretary and
others have made clear that if we see that they are unwilling
to take action on the things that they have said they are going
to do, that we are prepared to move to stronger actions,
ideally through the Security Council and multilaterally, but we
reserve the right to take actions by ourselves. I think we have
given them a good time horizon within which they have to do it,
which is not years but has to be quite promptly.
Senator Bayh. I think you are quite right in judging them
not by what they say, but by what they do, and my observation
is that the Iranians tend to respect the strength and that
seriousness of purpose or credibility is important here and a
willingness to actually take steps forward. Interestingly, it
maximizes the chance that you don't have to take those steps,
so----
Mr. Steinberg. I strongly agree with that, Senator.
Senator Bayh. My second question--and my clock must be on
fast-forward, I am only going to have time for two here-- I
would be interested in all three of you, it seems to me at the
bottom of all this is an assessment of the character of the
Iranian regime, and it may be--it is obviously opaque and it
may be somewhat internally divided. I think two of you have
indicated that. But ultimately, will they act as a nation
state, assessing their interests and acting in pursuant
thereof, or will they be motivated by religious fervor or
hatred toward Israel or the United States or the West, making
decisions that we would consider to be irrational?
If it is the former, we can ratchet up economic, financial,
diplomatic, cultural, all sorts of pressure, hopefully
ultimately attaining a level that they determine it is just not
in their interests to pursue nuclear weapons anymore. If, in
fact, the ultimate arbiters are motivated by other factors,
then perhaps not and that takes you down another line of
analysis.
So my question to all of you gentlemen is, ultimately, if
this regime as currently constituted were to obtain a nuclear
weapon, what are the chances that they would misuse that weapon
in a way that we would consider to be irrational?
Mr. Steinberg. Senator, it is obviously--it is hard to know
the answer to that question, but I think that is why we are--
the dangers that it potentially poses is why we place such an
urgency on preventing them from developing that capability in
the first place. We have a variety of tools available to us.
Nothing is off the table. We believe that there is a chance
through diplomacy, but we recognize that that may not succeed
and we may have to turn to other options. But we have made
clear that we have a very clear goal, to prevent them to
develop the capability to do that so that we can avoid the risk
that you have identified.
Senator Bayh. Mr. Levey? By the way, thank you for our
previous meetings over the years. You have done great work in
this area, one of the few things that actually has ratcheted up
the cost to the Iranian regime for their misbehavior, so I am
grateful to you for continuing on.
Mr. Levey. Well, thank you, Senator, and I appreciate your
interest in this and all the discussions that we have had about
it over the years.
I think the answer to your question about what is the
nature of this leadership in Iran is that while we don't know
for sure, what we are trying to do now is probe that. The
process that Deputy Secretary Steinberg laid out will give us--
will put before the leadership in Iran a rational choice,
either to engage and take the steps that they are being asked
of, or face the consequences of not doing so. And so we put
before them the rational choice and we will be able to learn by
what happens rather than by a prediction.
Senator Bayh. Mr. Hill, do you have an opinion about this?
Mr. Hill. Sure, but I think I will defer to my
distinguished colleagues. I would just say, at Commerce, we are
focused on preventing bad guys from sending things to Iran that
will hurt us on the battlefield.
Senator Bayh. Well, if I could just make two final points,
Mr. Chairman, my time has expired. It is possible that they are
operating as if they were in a bazaar and there are ultimately
rational decisionmakers at the end of the day, but we may not
be able to raise the cost so high as to ultimately affect their
decision about this, because even the reformers, as I
understand it, are under agreement about the nuclear
aspirations of the country. At least, they have been until
recently. So there seems to be a broad consensus within Iran
about this. That is number one.
Number two, even if you think there is a 95-percent chance
that they are rational decisionmakers and will behave like a
normal nation state, if there is only a 5-percent chance that
they will not, is that a risk that you are willing to run, and
that is a very hard question to answer.
So I encourage you in these efforts. We should ratchet up
the cost as high as we can. Mr. Levey, as you say, perhaps we
will then find out how they behave. Of course, then you always
have the question of will they comply with that, but that is
perhaps the subject for another hearing on another day. Thank
you, gentlemen. Thank you.
Senator Reed. [Presiding.] Thank you, Senator Bayh.
Senator Merkley?
Senator Merkley. Thank you very much, Mr. Chair, and I
appreciate your testimony today.
The question I want to ask you all to help us have insights
on, to the degree you can do so in unclassified fashion, is
certainly there is no long-term benefit to China and Russia to
having a nuclear-armed Iran, and yet they have been somewhat
reluctant to come to the table and join in the international
effort, multilateral sanctions. Can you give us a little
insight into how Russia and China have thought about this
issue, weighing their short-term trade deals against the long-
term risk, and how their perspectives are changing and how we
are working to continue to help them see the importance of this
effort?
Mr. Steinberg. Thank you, Senator. It is always a little
bit perilous to try to peer into the internal decisionmaking of
other countries, and particularly in these cases where it is
not so transparent, perhaps, as in our own, where you can read
about it in the newspapers.
It seems to me that the biggest challenge that we have is
that both Russia and especially China have a firm conviction
that the best results are achieved through diplomacy and they
are, frankly, more skeptical than we tend to be about the
efficacy of economic sanctions and the like. They aren't
opposed to them. As I said earlier, we have had the support of
Russia and China on three Security Council resolutions that
affect Iran, so they have recognized that at the end of the
day, you may have to take these measures, and again, most
recently with North Korea, we have opted to take some very
strong measures.
So I think they are slower to come to the conclusion. They
are more likely to conclude that the threat is
counterproductive than we often feel where the threat actually
is incentivizing to a country to negotiate. But as I say, I
think that it is not because there is a fundamental
disagreement about the objective, nor, I think, increasingly,
is there as much of a difference about how dangerous a nuclear
Iran would be. I think there is a growing acceptance among all
of the five that this is something that is of paramount
importance.
So that is why the engagement strategy has been so
important, because it helps us convince countries like Russia
and China, which are more inclined to put stock in diplomacy
and negotiation, that we have seriously pursued that and we are
not just kind of rushing over it to get to other kinds of
actions.
They obviously have economic interest there. Europeans have
economic interest there. And those must have an impact on their
overall calculation. But I think at the end of the day on these
issues, they understand of what paramount importance this is.
Again, you can never know for sure, but in my earlier
service during the Clinton administration, we worked with China
to end their direct support for Iran's nuclear program in the
mid-1990s, and again, they had an involvement with the zero
power reactor in Iran and the like, and they were reluctant to
do it, but over time, they did end that involvement. So I think
the record would suggest that if you work this hard enough,
there is no guarantee, but there is at least some prospect that
they will come around to the view that we share.
Senator Merkley. Let me ask this question. When Iran's
government looks around the world, they see Pakistan now as a
nuclear power, despite sanctions that were applied at one
point. They see certainly North Korea as a nuclear power and
they see how reluctant foreign nations are to mess with nations
that are nuclear powers. Is there a certain logic to their
pursuit, especially if you throw in national prestige? Are
these things so deeply rooted, their vision of kind of the
protection that a nuclear weapon provides them, and their
national prestige? Can sanctions be reasonably expected, even
in a multilateral, serious format, be expected to counteract
those two powerful forces?
Mr. Steinberg. Senator, I think we have to disrupt that
logic, if you take each of the elements. I think you have
raised some good questions there.
With respect to prestige, I think it is possible, and I
think this gathering of international consensus is how we do
it, is to actually reverse the calculation, that it isolates
it, that it makes it more of a pariah state. That rather than
gaining prestige and influence, it becomes less welcome in the
international community, less able to achieve its objectives.
So I think we have the ability to break that logic.
In terms of security, I think we can also show that they
are less secure, that they are uniting all of the countries in
the region to be concerned about them, to strengthen their
military ties with each other and cooperation with us.
So each of these potential logics are what we have to work
on and to demonstrate to them that if they think that is what
they are achieving, they are actually not going to achieve it.
They will achieve the opposite. They will be less secure, less
prestigious, less able to achieve their objectives by going
down this road. And here, the strong international consensus, I
think, is a critical part of that effort.
Senator Merkley. And to change that international
environment, we really have to have full cooperation of major
powers around the world, and I understand that that is the
foundation of your efforts and we all hope that those are
successful.
Mr. Steinberg. I agree.
Senator Merkley. Thank you.
Senator Reed. Senator Bunning?
Senator Bunning. Thank you, Mr. Chairman.
Mr. Steinberg, since the enactment of the Iran Sanctions
Act of 1996, approximately how much have foreign countries
invested in Iran's energy sector?
Mr. Steinberg. I would have to provide that for the record,
Senator. I don't have that.
Senator Bunning. I would appreciate that very much. Since
you do not know that answer, I happen to be aware that the
figure that you would give us does not include $70 billion in
pending transactions that are known about, most of which are
long-term contracts to purchase Iranian gas and oil, is that
correct? Do you know about those?
Mr. Steinberg. Senator, obviously, there are some long-term
contracts and there are--I mean, there are legal issues with
respect to investment and the coverage of the Iran Sanctions
Act as opposed to purchases and long-term contracts.
Let me just say, because I know of your interest in the
Iran Sanctions Act, that you have to look at this not only from
transactions that have taken place, but transactions that have
not taken place. And one of the powerful tools and one of the
ways that we work with the Iran Sanctions Act is to use this as
leverage to discourage people from investing in Iran. Again,
from my previous service, I know how powerful that can be, and
I know that the previous administration also used it as a way
to discourage actors, particularly Europeans, but others, as
well, from making these investments. And I think there is no
question----
Senator Bunning. Well, in that regard, then, under the Iran
Sanctions Act, how many of these countries that are in
violation of our sanctions, how many more countries--in other
words, does the State Department actually consider these
countries in violation of our sanctions?
Mr. Steinberg. We obviously look at each transaction that
comes to our attention, Senator, and if we find a violation, we
would obviously impose measures on this----
Senator Bunning. Do you rule on it? Does the State
Department then impose the ruling that is in the Iran Sanctions
Act?
Mr. Steinberg. We would impose sanctions if we found there
was a violation of the Sanctions Act.
Senator Bunning. You would? This is for the same gentleman.
Recent excerpts from the International Atomic Energy Agency
Annex confirms foreign intelligence reports that Iran has
restarted work on a nuclear warhead design. Does it remain the
position of the administration that Iran has not restarted this
design?
Mr. Steinberg. Senator, you are citing press reports. To my
knowledge, that IAEA report has not been completed or sent to
us, so I can't comment on the specifics of the IAEA report.
With respect to Iran's nuclear program, that is something
that we continue to keep under advisement and review. The
details, obviously, we would be happy to review in a classified
session.
Senator Bunning. Thank you. Mr. Levey, are you aware of
foreign banks that continue to conduct business with sanctioned
Iranian entities? If so, why have these banks not been
sanctioned?
Mr. Levey. Well, Senator Bunning, the question is, whose
sanctions are they violating?
Senator Bunning. Yes.
Mr. Levey. If they are violating----
Senator Bunning. I am speaking about ours.
Mr. Levey. Right. So we have acted against the Iranian
banks that----
Senator Bunning. What about the other foreign banks?
Mr. Levey. They are not permitted to use our financial
system----
Senator Bunning. That is correct.
Mr. Levey.----to do the business with any Iranian bank.
Senator Bunning. So if you find them in violation of that,
then you do sanction?
Mr. Levey. There would be consequences for any foreign bank
that was using our financial system to do business with an
Iranian bank.
Senator Bunning. Thank you. What role do large financial
clearinghouses, such as Euroclear, EBA, and the Asian Clearing
Union, play in allowing Iran to circumvent sanctions?
Mr. Levey. Well, Senator, as you know, those are all major
institutions that have to abide by not only U.N. Security
Council resolutions that apply to Iran, but also kind of the
financial rules of the road in terms of legitimate financial
activity. That said, there is--and we have engaged with the
institutions that you have mentioned to make sure that they are
aware of the risks of doing business with Iran, as I laid out
in my testimony--some of the institutions that you mention, we
do engage with very closely to make sure that they are not
being used as a way for Iran to obscure the underlying parties
to a transaction, and that is a concern that we continue to
have and engage on actively.
Senator Bunning. Mr. Steinberg, outside of the Qom
facility, how confident is the administration that there are no
other secret Iranian facilities?
Mr. Steinberg. Senator, this is obviously something that
the very fact of the Qom facility has to raise questions about
whether there are things that we don't know about. This is
something we obviously put as among our highest priorities in
terms of the intelligence community. I think this is something
that, while we have no specific evidence of other facilities,
it is not something that we take for granted, the fact that we
don't----
Senator Bunning. In other words, there could possibly be?
Mr. Steinberg. By definition, there could be, and I think
we have to take very seriously the possibility that there might
be.
Senator Bunning. OK. This will be my last question, since
my time is running out. For Mr. Steinberg, the P5+1 talks have
been described as slow and a constructive beginning. Will
Russia and China agree to the next steps if the negotiations
fail to show progress?
Mr. Steinberg. Senator, I obviously will have to see in the
event, but I think that certainly with respect to Russia, the
comments of President Medvedev are encouraging in terms of his
recognition, of explicitly recognizing the role of sanctions in
this case, and I am hopeful that with the Chinese, as well,
given their past practice, which is ultimately coming along
with supporting Security Council resolutions, that we can
persuade them, as well. But I can't obviously guarantee it at
this point.
Senator Bunning. Do you know if Russia will commit to
stopping anti-aircraft system sales to Iran?
Mr. Steinberg. It is certainly something we have raised
repeatedly with them. They have indicated that they understand
the concerns that we have, but we are not resting our laurels
on this one.
Senator Bunning. Thank you very much, gentlemen, for being
here.
Senator Reed. Thank you, Senator Bunning.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Secretary Steinberg, in your opening statement, you
basically said the Iranians can either negotiate in good faith
or they can face increasing international isolation and
pressure. And my question is, up to now, do you think the
Iranians have negotiated in good faith?
Mr. Steinberg. Senator, I think this is, frankly, the first
concrete evidence that we have had during this administration
of serious negotiation. I am an outsider with respect to the
earlier negotiations and whether those who are involved felt
that there was any progress made at that point. But I certainly
think that during the first months we were in office, we were
not seeing the signs of responsiveness at all from them, and I
think it has been both a growing focus of the two tracks of our
strategy that has brought the intense scrutiny on them and the
possibility of additional pressure, so----
Senator Menendez. Let me ask you this. Their first day of
talks seemed to produce a potentially positive first step that
Iran's agreement supposedly to ship most of its low enriched
uranium out of the country. Now, I have read press reports that
they are denying they made that commitment. Which one is it?
Mr. Steinberg. Senator, as I mentioned before, we have a
meeting with them on October 19 and I think we will see. I
think that----
Senator Menendez. But did they or did they not make that
commitment on the first----
Mr. Steinberg. They made a commitment to proceed with this
program.
Senator Menendez. All right. So they made a commitment. Now
they said they don't, which is an example to me of what they
have traditionally done as they have moved along in these
negotiations, you know, give you one step forward and then two
steps backward.
Let me ask you this. We can only sustain a process with
measurable, practical results, is your testimony. Well, my
question is, then, what is that? That is rather amorphous to
me. The President said by the end of the year, we should be
able to assess whether the talks hold real promise. What is the
time line you all have in mind? How will we know if the
Iranians are serious? How will we be able to palpably have a
sense of benchmarks in which we measure real progress versus
illusory progress?
Mr. Steinberg. I think the issue that we have just been
talking about is an important first step. The agreement, if
they implement it--and I agree we have to make sure they
implement it, although I don't think we should draw a lot of
conclusions from the press statements they make about it. I
think we put a lot more emphasis on what they actually agree to
when we come back together again.
But if they, in fact, move forward, not just agreeing, but
actually move forward, actually shipping out the LEU, that
would be a tangible sign of progress. It doesn't end the
problem. It is just the beginning of the process. But it would
be a very tangible step because it would reduce dramatically in
the near term their ability to move forward with enriching the
LEU to a high enriched uranium. That is significant. It is a
tangible, substantive step.
Similarly, putting the Qom facility under full IAEA
safeguards is important. We have a number of steps they need to
take. They need to implement the additional protocol to the
NPT. That is an important step that will give us significantly
greater confidence about what is going on in the rest of the
country. They need to suspend enrichment. That has been the
requirement of the Security Council and remains the requirement
of the Security Council.
So we have a number of steps beyond these preliminary steps
that they have to take and we have a very, I think, forced
march to this process to make sure that they are doing it.
Senator Menendez. You have listed about four significant
items that need to be pursued. What is the timeframe that we
need to see that happening?
Mr. Steinberg. Again, I think the President has made clear
that we need to continue to see tangible steps as we move
forward through the fall.
Senator Menendez. If, in fact, we come to December and
those four items have not been achieved, is that satisfactory?
Mr. Steinberg. I think we have to look at the state of play
at that point to see what has been accomplished, what has not,
and what the prospects are for moving it forward.
Senator Menendez. How long do we continue with these talks
before we see a verifiable suspension of Iran's enrichment
program?
Mr. Steinberg. That is the requirement of the Security
Council and it is the priority in our negotiations.
Senator Menendez. I know, but--I understand it is a
priority, but it has been our priority for how long now?
Mr. Steinberg. Again, Senator, what we are----
Senator Menendez. Would you quantify for me, how long has
it been the priority for?
Mr. Steinberg. It has been a priority since the Security
Council imposed these provisions, and I----
Senator Menendez. And how long has that been?
Mr. Steinberg. Again, I think we need to make sure----
Senator Menendez. Mr. Secretary, how long has that been?
Mr. Steinberg. When was----
Senator Menendez. Roughly?
Mr. Steinberg. Two-thousand-six.
Senator Menendez. Two-thousand-and-six. We are near the end
of 2009 and the clock is ticking. And so I am trying to get
from this administration what is a sense of time. Is this open-
ended in our pursuit? I mean, I hope you are successful,
believe me. I think we all hope you are successful. But, you
know, we have to have some quantifiable timeframe. You don't
want the Congress to pursue the legislation, but at the same
time, you don't give us a timeframe. That makes many of us very
uneasy.
Mr. Steinberg. Senator, I share your concern about this not
being either a cover for continuing the program or an unlimited
process, and the President has been very clear publicly about
the fact that he will not tolerate that. We set a timeframe of
September for a comprehensive review at the G8 and what we got
was the agreement to the October 1 meeting and some in
principal commitments to some steps. So it shows that, at least
in theory, we may be making some progress.
We don't want to interrupt that progress because we don't
know for a fact that sanctions will necessarily be effective if
we can make progress through negotiations. But we also don't
want to drag this out indefinitely. We will have some very
clear indications that either the decision to send out the LEU
or to not do it is a very powerful indication of what their
intentions are. It is an important step because it has an
impact on the ticking clock. That is to say, if they don't have
these stores of LEU, then their ability to move quickly to
break out to a nuclear capability is delayed.
So we understand very strongly, and I think the countries
in the region, as you know, understand as strongly as we do
about the danger of the ticking clock. The clock needs to stop
ticking. We have made it clear to the Iranians that that is
what we are looking for right now, because we recognize that it
may take some time to get a comprehensive settlement, but they
need to stop the clock ticking so that the danger doesn't grow,
and that is what we are focused on in the near term.
Senator Menendez. Well, I certainly hope that you succeed,
but I want you to know that I and I am sure others feel very
passionately that this is not a chess game where each get to,
after you make your move, you stop the clock. The clock is
continuously ticking, and regardless of what is said, what we
need is real action.
Thank you, Mr. Chairman.
Senator Reed. Thank you, Senator Menendez.
Senator Schumer?
Senator Schumer. Thank you, Mr. Chairman. Thank you to the
witnesses.
My first question is for Mr. Hill. Mr. Hill, as I mentioned
in my opening statement, black markets around the world have
been serving to circumvent our sanctions against Iran, and
until we address the illegal funneling of goods, any new
sanctions could be easily skirted, as well, at least some of
them. The UAE in particular has been a major hub for illegal
transshipments of goods to and from Iran. We have seen reports
that Dubai has now been working to prevent these transshipments
from going through, but those activities have merely shifted to
other countries. Malaysia and Oman continue to be key
intermediaries for Iran to illegally acquire U.S. technology.
A 2007 GAO report found fault with our enforcement of
illegal transshipments of goods to and from Iran. It cited that
only one inspector from each Treasury and Commerce were
stationed in the UAE. Would more inspectors on the ground in
this region make a difference in our ability to enforce
existing sanctions?
Mr. Hill. Thank you for the question, Senator, and of
course, more resources are always welcome as we work with the
Congress and with the administration----
Senator Schumer. That wasn't quite my question. They are
always welcome, but would more inspectors make a difference
here?
Mr. Hill. I would have to say, yes, probably. We have----
Senator Schumer. Thank you.
Mr. Hill.----a focus on Iran and around the world we are
trying to enhance our bootprint, our footprint for enforcement,
and the Secretary is very focused--Secretary Locke is very
focused on that.
Senator Schumer. How many U.S. officials are currently
working on the ground in these countries to investigate the
diversion of U.S. goods?
Mr. Hill. We have five agents stationed--we have five posts
overseas. In my testimony, I reference those----
Senator Schumer. How many agents?
Mr. Hill. We have 100 agents here in the United States
focused on this issue.
Senator Schumer. How many overseas?
Mr. Hill. There are five.
Senator Schumer. Just five, one in each place?
Mr. Hill. One in each.
Senator Schumer. OK. Well, I certainly think you need more,
and certainly, I guess, you agree we need more and we should
try to get you those, OK. I hope we will.
Could you describe the cooperation between Commerce,
Customs, FBI, OFAC, the State Department, in stopping and
prosecuting illegal export schemes?
Mr. Hill. Thank you, Senator. It truly is a good story to
tell. It has been a remarkable collaborative effort on the case
that I described in my oral comments where we added 75 names to
the Entity List, which interrupted an international smuggling
chain that was eventually ending up in components being shipped
to Iran to put in IEDs and ended up in Afghanistan. It was an
effort led by Commerce, but we were strongly supported and
worked closely with Justice, Customs, ICE, and all those.
I think--you know, I remember back in the 1980s--I have
been around for a while--where relations weren't so good.
Relations are good today and we work well with our sister
agencies.
Senator Schumer. OK. Next, I think I will ask this to Mr.
Levey, Mr. Steinberg, but any of you could answer it. I am
always looking for places where the United States, we can act
unilaterally and have some real economic effect on Iran, and it
seems to me that the legislation that had been introduced by
Senators Bayh and Kyl and Lieberman would do that, because
gasoline was a weak pressure point. What is your view as to the
effectiveness of that legislation, without commenting
specifically? I don't know if in your testimony you support it
or not. Does the administration support the legislation?
Mr. Steinberg. Senator, as I said to the Chairman, I think
we want to work with the Committee in terms of how we would
craft an overall package coming out of the Congress----
Senator Schumer. But the concept. I am not asking you for
language. I am asking, would the administration support the
concept of putting pressure on oil companies that sell gasoline
to Iran and making it virtually untenable for them to do that
by not selling here?
Mr. Steinberg. Again, Senator, I think we have to--in terms
of which of the potential measures of sanctions, whether they
are more targeted on individual entities in Iran as opposed to
a broad-based thing that would affect the Iranian economy like
that, I think we have not reached a judgment as to which of
those might be the most effective, in part because not only do
we want to have the impact on the economy, we want to make sure
that that is going to affect the decisionmaking in Iran and not
target the wrong people in Iran, and similarly to make sure
that we maximize the chance of getting international support
for these things because there is obviously a risk in these
things, that if we do not have international support, that
there will be diversions, there will be work-arounds, and the
efficacy of the sanctions will not nearly be as effective.
Senator Schumer. But it seems to me with gasoline, where
there are not that many large refiners and sellers, and most of
the large ones need a U.S. market, as well, that that is a
place that has real possibilities.
Let me ask you about Central Bank. I was very active in
preventing Iranian banks from being co-respondents--this is to
Mr. Levey and now their Central Bank has taken over some of
those roles. I do believe the one effective thing we have done
economically unilaterally was when we put pressure on their
banking industry. Would the administration support a move,
which I have already urged the Chair to put in this
legislation, to extend that in whatever way we could to the
Central Bank of Iran, who is now, as I said, assuming the same
functions that the commercial banks did?
Mr. Levey. Well, Senator, without commenting on what action
we might take in the future, let me just tell you what we have
done already with respect to the Central Bank because we have
publicly expressed some concerns about just what you have
mentioned, which is that they have engaged in certain deceptive
conduct and have assisted banks that are under unilateral
sanctions by the United States.
But what we did do is we cut off all Iranian financial
institutions, their commercial banks, their state-owned banks,
their private banks, and the Central Bank of Iran from all
access to the United States financial system. And at this
point, that is the state of affairs with respect to the Central
Bank of Iran, as well as with all other Iranian financial
institutions.
So the question now is getting--trying to broaden that to
what other countries can do----
Senator Schumer. Correct.
Mr. Levey.----and having the desired impact within Iran.
Senator Schumer. I guess I share the frustration expressed
by my colleague, Senator Menendez. I don't trust the Iranians
one bit. If you look at past history, whenever they are
squeezed a little bit, they feint, and then they back off. I am
not saying we shouldn't pursue these negotiations, but I find
it troubling that the administration is not looking at the same
time to be supportive of the toughest sanctions possible. It is
great that the Russians have finally said something, but again,
seeing will be believing there.
As you know, Mr. Steinberg, I worked really hard to try and
persuade the previous administration to look at the Russians
and the interconnection of the missiles in Eastern Europe and
sanctions in Iran, got nowhere, and I am glad that this
administration--I know the two are not related officially, but
I am glad you are pursuing both separately.
Tell us if you think there is a real chance that the
Russians will--I mean, to me, Putin sees Iran as leverage over
us and he doesn't want to give up that card very easily. Tell
me, is there any reason that you have some optimism that this
time it will be different?
Mr. Steinberg. Senator, as I think you have said, I mean, I
think we will see in the event--I mean, I think whether we are
optimistic or not, we will see in the event. We are encouraged
by the words of the public and the private words, but
especially the public words, because I think President Medvedev
has put himself out there in ways that I think creates some
credibility issues there.
But I also think that--I mean, for reasons that you
understand, the specifics of some of the things we are looking
at, we don't particularly want to bring up, but there is a very
intensive internal effort to examine precisely the questions
you are asking here. Would refined products be the right thing
to do? Are there other measures?
We are working very hard on this, because we recognize, as
Senator Menendez and you have said, that we may have to move
very promptly if we don't get a response in the next couple of
weeks on these things to take measures. We will be ready and we
will be coming back to you to tell you what we want to do, but
I think at this stage, for us to sort of kind of go through
publicly and precisely what we are doing----
So you are raising the right questions. We are very, very
focused and we welcome your thoughts about which of this whole
suite--because we have a lot of tools and a lot of things that
we might take as the next step as to what is going to be the
most effective, because there is no science in this. It is a
judgment call as to which of these various tools, what is the
sequence, do you do them all at once, do you do them in a
series, how do you sequence this with the international action,
unilateral, Security Council, otherwise.
But we recognize we need to be ready quickly, and the
President has asked us to be in a position to take measures,
strong measures, quickly if we don't see very prompt response
to the kinds of things that the Iranians have said that they
are prepared to do.
Senator Schumer. Well, I would recommend, just in
conclusion--and I thank the Chair--as tough of measures as
possible that are efficacious. You don't want to do what the
Bush administration did--this is my judgment, not yours--
sounded tough and did very little. You want to really be tough,
but I wouldn't back off any longer.
Thank you, Mr. Chairman.
Senator Reed. Do any of my colleagues have additional
questions? Senator Merkley?
Senator Merkley. Thank you, Mr. Chair.
I want to address this to Mr. Hill. In your testimony, you
lay out the export controls on U.S.-origin devices and the
efforts you go to enforce that. Have you done any sort of
evaluation of the impact that this has in terms of the Iranian
economy?
Mr. Hill. I am not aware of any internal evaluation we have
done. Again, our focus is to prevent the bad guys from getting
stuff to Iran and we haven't evaluated what that means to the
Iranian economy that I am aware of.
Senator Merkley. OK. It strikes me as very strange that you
wouldn't have such an evaluation. Could you get back to us on
whether you think this has had any impact?
Mr. Hill. I certainly would be happy to do that, sir.
Senator Merkley. One of the things that has limited its
impact is U.S. corporations have been allowed to set up foreign
subsidiaries to do business with Iran. Doesn't that just create
a huge loophole that almost makes the export controls
irrelevant?
Mr. Hill. Thank you, Senator. Under our regulations, any
U.S. item that is exported or reexported by any entity in the
world is under our regulations and has no effect if it is a
foreign sub or not.
Senator Merkley. No, but it does mean a U.S. company can
set up a foreign subsidiary to engage in trade with Iran, and
while the items can't be U.S. origin, isn't that basically the
only limitation?
Mr. Hill. Our regulations go to U.S.-origin items that
contain U.S. parts, made with U.S. technology, or they are in
their entirety U.S. origin.
Senator Merkley. So getting back to us in terms of
evaluating the effectiveness of the sanctions, if you could
address this issue of whether the ability of U.S. corporations
to set up foreign subsidiaries to do business with Iran has
undermined the effectiveness of trade factors, that would be
helpful.
I noticed in your testimony, for example, you talked about
three plans that--and you don't list what type of plane, or if
you did, I missed it, but three planes that were not reshipped
to Iran due to the efforts, and I think this was involving the
Balli Group, three U.S.-origin aircraft to Iran in violation of
the EAR, and I wondered, well, so Iran turns around and can buy
them from a U.S. company that has a foreign subsidiary, not
U.S.-origin planes but planes produced in some other nation.
Mr. Hill. Well, again, just be clear, they cannot export or
reexport any U.S.-manufactured planes. They cannot export or
reexport any foreign-made planes that incorporate U.S. parts
and components, and most of the major airlines and aircraft
today incorporate significant U.S. parts. And so they would be
prohibited from export or reexport to Iran under our current
regulations.
Senator Merkley. With anything with U.S. parts.
I wanted to turn to the effort to address the actions of
foreign companies, and particularly under the Iran Sanctions
Act. How many companies have been assessed penalties under the
Iran Sanctions Act?
Mr. Steinberg. Senator, there has only been one finding
under the Iran Sanctions Act. That was in 1998, but the
sanctions were waived at that time.
Senator Merkley. Is the answer zero?
Mr. Steinberg. That is correct.
Senator Merkley. OK. I believe that that Act, if you think
of the three components, investment, trade, and sales of
equipment, that of those three, the Act only addresses
investments. It doesn't address trade purchases, if you will,
or sales of equipment to Iran. And then, indeed, the investment
portion, we have had reason to not implement sanctions when we
found them, and so the kind of-- or penalties, so is
essentially the ISA toothless and perceived as such around the
world?
Mr. Steinberg. Senator, I think, as I mentioned earlier in
talking to Senator Bunning, I think one of the things that is
hard to judge, although I think we can give some impressions
about it, is the amount of investment that has been deterred as
a result of the Iran Sanctions Act. There have been a number of
companies which have indicated an intention, a number of
European countries and East Asian countries that have made very
explicit initial plans to make investments, and those
investments did not go forward because of the result of our
investigations.
I recall some explicitly when I was last in office where we
had conversations with the foreign governments, made clear that
we were prepared to impose what was then the Iran-Libya
Sanctions Act, and they desisted from those investments. So it
is one of those things that it is not always the case that you
can judge the efficacy of the legislation by the number of
times the sanctions have been imposed. It has been a deterrent.
It has been a substantial deterrent, and I will try to get the
Committee more details about what we think may have been the
impact in terms of other investments which at least were mooted
about and didn't take place. But I am aware of several.
And so I think that just the fact that it hasn't been
imposed doesn't mean that it was toothless in terms of its
impact. And as the sponsor said at the time, the goal was not
to impose the sanctions. The goal was to get other countries to
join with us in doing this, and what we tried to do was to try
to develop an international consensus around trying to
discourage investment.
And, in fact, one of the biggest problems Iran has had is
the difficulty that it has had in attracting investment. It is
way behind in its technology. Its output is much less. Its
technology is much less forward leaning and effective because
of our concerted diplomacy backed by the ISA to stop those
investments. So I think--I just don't want you to be drawing
the conclusion--the fact that sanctions were not imposed
doesn't mean that the Act in its deterrent value didn't have an
effect.
Senator Merkley. Can I follow up for a moment here, Mr.
Chair? Am I correct in thinking that Total SA, the French
company that was found in violation, proceeded with investments
and is still proceeding with investments today?
Mr. Steinberg. I would have to get back with you on the
specifics on that, Senator. But clearly, we keep these all
under review, and so in our judgment, there are no investments
that we are aware of that are in violation of the Act.
Senator Merkley. I will conclude with just this notion, and
that is that the loopholes limited the impact of U.S.
sanctions, but the biggest hole is the lack of multilateral
action. I know the administration is pursuing that
aggressively, because no matter what the United States does on
their own, if the rest of the world isn't with us, as my
colleague--my assistant said earlier today, it is like building
a dam halfway across the river. You don't stop the water from
flowing. And so we have to build that dam all the way across
the river, and thank you for your efforts in that regard.
Thank you, Senator.
Senator Reed. If there are no further questions, thank you
very much, gentlemen, for your testimony and your service.
The hearing is adjourned.
[Whereupon, at 11:50 a.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
follow:]
PREPARED STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD
Welcome.
Today we confront a serious threat to our nation's security and
global stability: the prospect of a nuclear-armed Iran.
If Iran were to acquire a nuclear weapons capability, it would pose
a serious threat to peace and security in the Middle East, especially
to our close ally Israel.
At our last Iran hearing in July, Senator Shelby and I agreed to
hear from the Obama administration before moving forward on sanctions
legislation. Much has happened in that time.
Last week in Geneva, after revealing another covert uranium
enrichment facility in Iran, the Administration held its first
diplomatic meetings with Iran and the other permanent members of the
U.N. Security Council and Germany.
Under Secretary of State William Burns met one-on-one with Iran's
chief nuclear negotiator.
This dialogue demonstrated the United States' commitment to
pursuing every avenue to push Iran to come clean on its nuclear program
and abide by international non-proliferation commitments.
President Obama described the talks as a ``constructive
beginning'': participants agreed to follow-up talks later this month,
the International Atomic Energy Agency is to be granted access to
Iran's uranium enrichment site at Qom, and Iran has indicated a
willingness, in principle, to export low-enriched uranium to Russia and
France for processing for medical uses.
Whether Tehran will keep these commitments--or if they will prove
to be yet another stall tactic to avoid tougher sanctions--remains to
be seen.
And, the situation is increasingly urgent--over the weekend, the
New York Times reported that IAEA scientists believe Iran has enough
sensitive data to assemble a nuclear weapon.
Ultimately, we will only succeed if Iran's leaders are persuaded to
cooperate or face sustained, progressively intensifying multilateral
economic and diplomatic pressure on their government--including tougher
sanctions.
They must make a clear choice: come clean on their nuclear program,
suspend enrichment, and stop supporting terrorists around the world--or
continue to deepen their international isolation.
Increased international pressure and the specter of biting
sanctions are clearly what have brought Iran to the table for
substantive talks.
Worldwide condemnation of Tehran's secret enrichment activities,
its human rights abuses and post-election crackdown have unified the
international community to intensify the pressure on Iran's leaders.
We must not let up now.
I intend to bring move forward in this Committee this month on
comprehensive sanctions legislation. I am committed to ensuring that
this Congress equips President Obama with all the tools he needs to
confront the threats posed by Iran.
Just as last year, we will incorporate the best of our Senate
colleagues' contributions into one original Committee bill, including:
penalties on companies that support Iran's import of refined petroleum
products or bolstering its domestic capacity, advanced by Senators
Bayh, Lieberman, and Kyl; and authorization for state and local
governments to divest from companies involved in critical business with
Iran, sponsored by Senators Brownback and Casey. In addition, our
legislation will further tighten our trade embargo on Iran; enhance
Treasury's mandate to freeze assets tied to Iran's terrorist and
proliferation activities; and help cutoff Iran's access to the most
sensitive and advanced technology available, through tougher export
controls on these products sent to Iran through its blackmarket trading
partners.
I hope our legislation will complement and reinforce ongoing
diplomatic efforts, and send a clear signal to Iran's leaders of what's
in store if they continue to defy the will of the international
community.
We are fortunate to be joined today by some of the Administration's
chief architects of Iran policy. Deputy Secretary of State James
Steinberg will elaborate on ongoing diplomatic efforts to curb Iran's
nuclear ambitions, assess our chances for success, and survey policy
options.
Under Secretary of the Treasury Stuart Levey joins us once again. A
welcome hold-over from the Bush Administration, he will discuss the
tough targeted financial measures employed against Iran and explore
with us other pressure points in the global financial system that could
be employed against Iran's government.
And finally, we will hear from Acting Under Secretary of Commerce
Dan Hill. It has been over 2 years since the Bush Administration
proposed restricting export licenses to countries where sensitive
technology flows to rogue nations such as Iran via third countries,
combating blackmarket proliferation networks which flourish throughout
Asia and the Middle East.
But first, we will hear from two of our colleagues, Senator Casey
and Senator Brownback, who will describe their legislation currently
under review by the Committee on the role of divestment from firms
doing business in Iran's energy sector. We welcome them to the hearing.
______
PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY
Thank you, Mr. Chairman.
Recent developments in Iran underscore the importance of this
morning's hearing.
Last month, we learned that Iran has a secret uranium enrichment
facility. Last week, the Iranians announced that they had reached a
last minute deal to send their supplies of low-enriched uranium to
France and Russia for further enrichment.
Just yesterday, news reports revealed that senior staff at the
International Atomic Energy Agency or IAEA have concluded that Iran has
acquired ``sufficient information to be able to design and produce a
workable'' nuclear weapon.
Although Iran denies that it is trying to develop nuclear weapons,
they have taken no credible steps to prove otherwise.
Iran's troubling conduct is not limited to its pursuit of nuclear
weapons.
Iran has the dubious distinction of being ``the most active state
sponsor of terrorism'' for ten years running according to our State
Department.
Because of its extensive financing of terrorism around the globe,
the Treasury Department has referred to it as the ``Central Banker'' of
international terrorism. There should be no doubt that Iran remains a
serious and growing threat to the entire Middle East region, our
European allies, and the interests of the United States.
The issue is not whether we must take action to check Iran's
hostile ambitions, but rather, how to maximize the effectiveness of the
actions we take.
Unfortunately, there is a long history of failed policies designed
to reign in Iran. As Secretary Gates noted last October: ``Every
administration since 1979 has reached out to the Iranians in one way or
another and all have failed.''
I hope this hearing will provide greater insight into the most
effective way forward.
______
PREPARED STATEMENT OF SENATOR CHARLES E. SCHUMER
Thank you, Mr. Chairman and Ranking Member Shelby.
And welcome to our esteemed witnesses who have agreed to testify at
this important and timely hearing, including my colleagues Senator Bob
Casey and Senator Sam Brownback. Mr. Chairman, I would like to thank
you for calling this hearing, and I commend you for putting forth a
comprehensive plan to arm the administration with the tools they need
to put a stop to Iran's rogue nuclear program.
I believe that when it comes to Iran, we should never take the
military option off the table.
But I have long argued that economic sanctions are the preferred
and probably most effective way to choke Iran's nuclear ambitions.
The Obama administration has recently begun direct diplomatic
negotiations with Iran, and the first round of these talks did yield
some important concessions from the Iranians last week. These
negotiations should continue, but they do not supplant the need for
action by this Congress. Iran, when it is caught red-handed, has a
habit of promising just enough to avoid a strong response from the
international community. Not this time.
We should continue to talk to the Iranians, but we should not trust
them. The threat of new sanctions will only serve to strengthen the
President's hand as we pursue a diplomatic solution.
By giving the administration the capability to impose crippling
sanctions on Iran should they continue to pursue a nuclear weapons
program, this Committee today is exploring a tough and smart plan to
address the real threat Iran poses to the United States and our allies,
particularly Israel.
First, Mr. Chairman, I want to commend you for including in that
plan key provisions of the Iran Sanctions Enhancement Act of 2009, a
bill introduced by Senator Evan Bayh of which I am an original
cosponsor.
This bill sanctions companies that export gasoline to Iran. This is
one of the few pressure points where we can act unilaterally and have a
real effect. The world knows that Iran does not currently have the
refining capacity to meets its domestic gasoline needs and is dependent
on imported gasoline. So now is the time to reduce Iran's energy supply
if they fail to suspend their nuclear enrichment program as called for
in several U.N. Security Council resolutions.
I am also glad that we will be strengthening export controls to
stop the illegal export of sensitive technology to Iran. During the
recent Iranian elections we witnessed the Iranian regime go as far as
to block the Internet and mobile phone communications of their own
citizens.
That is why I and Senator Lindsey Graham introduced ``The Reduce
Iranian Cyber Suppression Act'' or ``RICA'', a bipartisan bill that
would bar companies that export sensitive communication technology to
Iran from applying for or renewing procurement contracts with the U.S.
Government. I look forward to working with you to make sure that the
key provisions of this bill are also included in our plan.
Our comprehensive plan will also address the role that global
financial institutions play in enabling Iran to develop a nuclear
program. Mr. Chairman, I have long argued that financial sanctions are
one of the most effective way to crack down on the dangerous Iranian
regime. But we have to make sure that they are designed effectively.
Last year, 27 Democrats joined me and called for the Iranian
central bank, known as Bank Markazi, to also be included in our
economic sanctions, as they have been heavily involved in terrorism and
helping finance acquisitions of nuclear and conventional weapons
technology. The central bank has also played a role in helping other
Iranian banks circumvent U.S. financial sanctions. We should also
include the central bank in the sanctions plan we are developing in
this Committee.
All of these actions will go a long way to strengthen global
security and reverse Iran's dangerous course. Yet unless we have a
fool-proof enforcement regime in place, any new tools we deploy will be
less than effective.
Our existing sanctions are riddled with leaks in the form of
trading partners who funnel our exports through a backdoor to Iran.
We can help plug these leaks by increasing the amount of inspectors
we have stationed in the United Arab Emirates and in other countries
where black markets are serving to circumvent our sanctions.
A 2007 GAO report found that enforcement is lacking, particularly
for products that are sold to the UAE. At the time of that report,
Treasury and Commerce Departments each only had one inspector stationed
in the UAE.
To increase the effectiveness of any new sanctions, we must
authorize the Commerce and Treasury Departments to enhance their
manpower on the ground in UAE and other black market areas to ensure
that Iran is not skirting our sanctions. That is why today I am calling
on the administration to deploy more inspectors to the UAE and other
areas of vulnerability in our enforcement of sanctions.
I hope these proposals are given serious consideration and I look
forward to working with the Chairman to passing this important.
______
PREPARED STATEMENT OF SENATOR SAM BROWNBACK
A U.S. Senator from the State of Kansas
October 6, 2009
Thank you, Senator Dodd, and Senator Shelby. I am grateful for the
opportunity to testify today before this distinguished Committee
regarding the grave threats we face from the regime in Tehran, and how
Congress can, and must, confront these threats.
This Committee plays a critical role in shaping our nation's Iran
policy, and I thank the Chairman and Ranking Member for holding this
hearing and for being willing to move forward with legislation that
would impose meaningful sanctions on the Iranian regime.
Iran is the leading state sponsor of terrorism worldwide, the
foremost exporter of extremist ideology, and the primary source of
instability in the Middle East. The regime's leaders have brutally
oppressed their own citizens, and have threatened to commit genocide
against the State of Israel, the region's only full-fledged liberal
democracy. The regime's radicalism and brutality not only harms our
interests and threatens our national security, but also challenges our
moral obligations.
It simply would be unconscionable to allow the mullahs to acquire
nuclear weapons. Were they to achieve this goal, they would possess a
trump card to ensure the continuation, and augmentation, of all of
these dangerous and destabilizing actions.
We must do everything in our legislative power to prevent this from
occurring.
This means crafting robust and effective sanctions that pull the
plug on the regime's ability to pursue nuclear enrichment, support
international terrorism, and oppress the Iranian people. Our goal must
be to make it so that pursuing these hostile actions would be
existentially threatening to the regime itself.
To that end, divestment can play a key role in any sanctions
proposal that this Committee will consider. Divestment is part of a
broad political and economic strategy to force the Iranian regime to
reevaluate its dangerous and oppressive policies.
But the benefits of divestment extend beyond its effect on the
targeted regime. Divestment also is a wise financial decision. As a
major study last year indicated, companies with links to regimes that
violate human rights make poor investments. Not only that, but
divestment serves as a way of fulfilling our minimum moral obligation
toward the victims of oppression from brutal regimes, like that in
Tehran.
Divestment is not the sharpest diplomatic tool, but nor is it
ineffective. Indeed, as we know from the successful movement against
apartheid in South Africa, divestment can play a key role in a
government's decisionmaking, especially if that government depends on
large amounts of foreign investment for economic stability.
Less than 2 years ago, this Committee passed Sudan divestment
legislation that was ultimately signed into law by President Bush. In
that divestment model, the Federal Government authorized states and
local governments to divest their pension funds from companies that
were effectively subsidizing the genocide in Darfur.
Following that lead, several states have already passed divestment
laws targeting Iran. But in doing so without explicit Federal
authority, these legislatures have opened up their divestment laws to
potential constitutional challenges under the doctrine of Federal
preemption on matters of foreign affairs. Moreover, the fund managers
that seek to carry out divestment could be subject to legal action,
reducing the incentive and efficacy of the measure.
It is for these reasons that earlier this year Senator Casey and I
introduced the Iran Sanctions Enabling Act, S. 1065, which authorizes
states and local governments to divest from companies that invest in
Iran's energy sector, and provides safe harbor for fund managers that
divest according to the bill's guidelines. At this time, S. 1065 has 32
bipartisan cosponsors, and a companion bill has already passed through
committee in the House. And lest any of my colleagues worry about where
our President stands on this, you can rest easy. In the last Congress,
then-Senator Obama and I introduced almost this very same bill. At that
time, Senator Obama said this:
The Iranian government uses the billions of dollars it earns
from its oil and gas industry to build its nuclear program and
to fund terrorist groups that export its militaristic and
radical ideology to Iraq and throughout the Middle East.
Pressuring companies to cut their financial ties with Iran is
critical to ensuring that sanctions have their intended result.
All Americans can play a role in pressuring companies to cut
their ties with the Iranian regime, a state sponsor of terror
that is a threat to our allies in the region and international
security, as a means of convincing Iran to fundamentally change
its policies.
--Senator Barack Obama, May 15, 2007
I could not have said it better than the President. In that spirit,
and in the context of the Chairman and Ranking Member's intention to
markup comprehensive Iran sanctions legislation, I urge this Committee
to include the Brownback-Casey divestment bill in the final package.
One final word on sanctions: enforcing sanctions is as important as
legislating them. American products often end up in Iran in spite of
our sanctions, often because we are not able to deter third parties
from re-exporting U.S. origin items to Iranian companies.
I hope that we can provide a small increase to the budget for
export enforcement during this week's floor consideration of the FY10
Commerce Justice Science appropriations bill. And, I look forward to
working with the administration and my Senate colleagues to ensure that
we have the means to enforce both existing sanctions and any additional
sanctions that may emerge from this panel and ultimately be signed into
law.
I wish to make one other point today about our duty and ability to
confront the threats from Iran, and that is that we must not view
sanctions as the only tool at our disposal. We cannot ignore the power
of promoting liberty and confronting the violation of human rights,
wherever it occurs.
When it comes to foreign policy in general, I believe that human
rights should be the first of our concerns and the last of our
concessions, not the other way around. My belief stems from a
recognition of the inextricable link between a regime's domestic
repression and its aggression abroad.
We must make human rights the cornerstone of our Iran policy. For
too many years, the suffering of the Iranian people--the executions,
the arbitrary imprisonments, the religious repression, and the
suffocating censorship--has taken a backseat to everything else. The
Iranian people are our natural ally, and we have let them get crushed
under the weight of the mullahs' theocracy.
Instead of perpetuating this shortsighted policy, we should broaden
our scope and raise the profile of Iranian human rights in every
statement, every diplomatic meeting, and at every international forum,
both public and private.
The message should be simple and clear: We cannot continue to look
the other way as the Iranian people are starved of their basic human
rights and freedoms.
This approach makes good policy sense. Leaders of oppressive
regimes disdain criticism because it pushes back against the fiction of
success they peddle to the masses. As the fiction crumbles, their grip
on power dissolves. Like in the Polish Solidarity movement, the
defiance of the people eventually cracked the defiance of the
government.
In previous sessions of Congress, I have introduced legislation
requiring the President to appoint a special envoy for human rights in
Iran, and I would hope that the members of this distinguished Committee
would join me in introducing a similar measure in the near future.
We must also focus our efforts on promoting the freedom of
information, specifically Internet freedom.
In the past few months, one of the key battles inside Iran has
taken place on the Internet--on blogs, on Facebook, and on Twitter--as
Iranians struggle to tell their story while the regime fights back with
the instruments of censorship.
One thing is clear: while physical brutality will always be the
tool of oppressors, twenty-first century authoritarianism has already
been defined by the lengths to which autocrats will go to limit online
access to information.
The Iranian dictatorship, like the Chinese Communist Party, the
Burmese junta, and the Castro regime, derives a large share of its
power through media suppression and rigorous Internet censorship.
These dictators not only shield their populations from their own
brutality, but also block information about the basic freedoms enjoyed
by millions worldwide.
As individual information exchanges become effortless through
wireless communication, authoritarian regimes must devote ever more
resources to maintain their electronic wall.
We must ensure that Iranians, and all closed society residents for
that matter, have free and open access to the Internet. This is the
surest, and most costeffective, way to jumpstart liberty. To that end,
I would urge the members of this panel to support funding in the State
and Foreign Operations Appropriations bill that would go toward
technology that allows residents of closed societies to break through
the stifling firewalls and access open information.
We must also ensure that Radio Farda remains a key source of
information for the Iranian people by supporting additional reporters
and transmission capacity, and providing Farda with the technical means
to overcome the regime's jamming efforts. The surrogate broadcasts
provided through Radio Farda worked very well even when the regime
tried to block the free flow of information during the street
demonstrations earlier this year.
Indeed, the more Iranians understand the nature of their regime,
the more effective will be the sanctions this Committee prepares, and
the more power Iranians will have to determine their own future.
And this, in turn, will transform Iran from one of the lead sources
of global instability to a prosperous nation once more, in the great
Persian tradition of innovation, justice and magnanimity.
I thank you again for giving me the opportunity to testify at this
important hearing.
______
PREPARED STATEMENT OF SENATOR ROBERT P. CASEY JR.
A U.S. Senator from the State of Pennsylvania
October 6, 2009
Chairman Dodd, Senator Shelby, thank you for inviting me to speak
on U.S. policy options toward Iran. This is a timely and important
hearing and I appreciate your efforts to explore the options before us.
As we all now know, Iran has agreed to inspections of its uranium
enrichment facility in Fordu starting October 25th. The Iranians have
agreed to talks on October 19th regarding the shipment of uranium
abroad for enrichment and use for medical research purposes. The
international community has responded with guarded optimism. I support
the Administration's continued call for a freeze in Iran's nuclear
enrichment and encourage my colleagues to back up these diplomatic
efforts with sanctions.
While the prospects for progress grew with last Thursday's meeting
in Geneva, we should not be under any illusions about this regime. Let
me be clear. This is a regime which refused to recognize the will of
the Iranian people in last June's
election. This is a regime that repeatedly disregarded U.N.
resolutions on its nuclear program. And this is a regime that
previously agreed to send uranium abroad for enrichment only to later
renege on the deal. This regime continues to threaten our ally Israel.
And finally, Mr. Chairman, this regime continues to directly threaten
the national security interests of the United States.
Iran has repeatedly claimed that its nuclear program is only for
peaceful purposes, but the facts, especially in recent weeks, simply
don't add up. The U.N. says Iran violated international law by not
notifying the IAEA when construction on the Fordu site started more
than 3 years ago. Why are international inspectors invited only after
the regime is caught misleading the world again?
So what are our concurrent/parallel tracks moving forward? I
believe that we have three.
First, the negotiations conducted by the Administration are
important and should continue. At a minimum, this international effort
will help to restore America's long held reputation of an honest
broker, of a country that values diplomacy, and of a country that
values relationships with allies and welcomes new ones.
Internationally, the United States is on better footing than it has
been in years. Ties with traditional allies in Europe have been
strengthened. Those on the fence, like Russia and China, are showing
signs of cooperation on issues that are critical to our national
interests.
It is clearly in Russia's security interests to prevent Iran from
acquiring a nuclear weapon capability, but that has not stopped Russian
leadership in the past from engaging in commercial and military trade
with the regime. As we work to build confidence with the Russian
government, however, I believe that cooperation on issues like Iran can
continue to improve. President Medvedev's comments at the University of
Pittsburgh during the G20 meeting indicated a willingness to consider
sanctions and were an encouraging first step.
While China relies on Iran for a substantial fuel imports, I trust
that they are carefully weighing their need for energy against Iran's
increasingly erratic and irresponsible behavior. The political and
actual cost of doing business with Iran has risen considerably and may
now be too high a price to pay. I hope that the Chinese will support
international efforts to pressure this regime at this critical time
with the understanding that these efforts could ultimately result in a
more stable business and diplomatic partner in Tehran.
In short, the Administration's diplomatic efforts have put us into
a position where we have a strong coalition throughout these important
negotiations.
The onus will now be on the Administration to maintain and
strengthen this coalition as we move forward. In the past, Iran has
sought to drag out negotiations with the goal of weakening the resolve
of the international community. The dynamics have changed somewhat as
our French, German and British allies have been increasingly vigilant
in their efforts to expose threats from Iran. The question now comes
down to the Russians and Chinese, whom we hope will play an enhanced
role in pressuring the regime in Iran.
Second, I believe that the Senate should do its part in providing
the Administration all the tools it needs to put pressure on the
Iranian regime. Iran's leaders need to know that if they decide to
renege on their commitments, as has been done in the past, the United
States is prepared to impose a series of tough sanctions, including
measures that would allow state pension funds to divest from Iran and
restrict petroleum imports.
The Iran Sanctions Enabling Act, which Senator Brownback and I
introduced last May would allow state and local government pension
funds to divest from companies that do more than $20 million in
business with the Iranian energy sector. The measure is modeled on
similar legislation passed in response to the genocide in Sudan.
Eighteen state legislatures have passed individual Iran sanction
measures and our legislation would bring these state efforts into line
with Federal law. When President Obama was in the Senate, he introduced
an earlier version of this legislation. It was right in 2007, and it is
right now.
Analysts have estimated that Iran requires $20 billion annually in
investments for its oil and natural gas sector. That sector directly
provides funding for Iran's nuclear program as well as its support for
international terrorism. Iran will only cease its illicit nuclear
program, end its support for Hamas and Hezbollah and stop arming
militant groups in Iraq when it is compelled to pay an economic price.
Third and finally, I believe that we need to be prepared to support
democratic voices and human rights activists in Iran. This is not about
regime change, but a genuine commitment to democratic values. In his
speech before the U.N. General Assembly, President Obama said that:
There are basic principles that are universal; there are
certain truths that are self-evident--and the United States
will never waver in our efforts to stand up for the right of
people everywhere to determine their own destiny.
Our long held commitment to human rights should not fall off the
table during these important deliberations on Iran's nuclear program.
In fact, these should be fully addressed and our diplomats should raise
specific concerns with regard to the human rights situation in the
country. Ultimately, the political fate of Iran is up to its people to
decide and we should take the lead from them. We should remain open to
their calls for assistance.
In closing Mr. Chairman, if history is any indication, Congress
should be prepared to hand the President the leverage he needs to send
a message to the Iranian regime that America cannot and will not accept
an Iran with nuclear weapons. The Administration needs all the tools at
its disposal to increase pressure on the regime, diplomatically,
politically and through more stringent economic sanctions. I call on my
colleagues to listen to legislatures in so many states across the
country who have passed divestment measures. The American people do not
want anything to do with investing in this regime. Let's send a strong
message to this regime and the international community that a nuclear-
armed Iran is unacceptable.
______
PREPARED STATEMENT OF JAMES B. STEINBERG
Deputy Secretary of State, Department of State
October 6, 2009
Mr. Chairman, Ranking Member Shelby, and Distinguished Members of
the Committee:
Thank you for the opportunity to appear before this Committee
today. The challenge posed by Iran to U.S. interests, to our friends
and allies in the greater Middle East, and to the wider international
community is one of the Obama administration's central foreign policy
concerns.
First, let me be clear about our objective: our goal is to prevent
Iran from achieving a nuclear weapons capability and we will work with
our allies and partners toward that goal as well as to counter Iranian
actions that threaten to destabilize the greater Middle East and the
rest of the world.
To that end, the Obama Administration has embarked on a dual-track
strategy that presents a clear choice to Iran's leaders: they can
negotiate in good faith, prove their willingness to address the
concerns of the international community, and in turn improve Iran's
standing in that community, or they can face increasing international
isolation and pressure. We see these two tracks as complementary rather
than contradictory, with the understanding that engagement and pressure
used in coordination offer the best and most likely path to our
objective. We also understand the Congress's interest in taking action,
and look forward to consulting fully on any legislative effort, with
the aim of maximizing our ability to pursue this two track strategy.
The goals of engagement
Upon taking office, President Obama made clear that the United
States was prepared to join our P5+1 partners as a full participant in
future talks with the Islamic Republic of Iran. This marks a
significant departure from previous approaches. We are engaging not
because we believe in talking for talking's sake, but because the
strategy of refusing to engage failed to achieve our vital goals.
During the time when we refused direct engagement, Iran developed a
growing mastery of the nuclear fuel cycle while flagrantly avoiding
complying with its international obligations and responsibilities. The
Iranian government failed to respect the rights of its citizens, and
its support for terrorist organizations continued.
We are realistic about the prospects from diplomacy, particularly
given Iran's repeated intransigence and deception, most recently
demonstrated by the previously undisclosed uranium-enrichment facility
at Qom. We will state our concerns unequivocally and make clear to
Iran's leaders the choice they have before them. Engagement not only
opens up the prospect of better outcomes, but also strengthens our
position in negotiations--or in forging a strong consensus with others
if engagement does not produce the results we seek.
More concretely, engagement serves three purposes:
1. By leading with diplomacy and communicating directly, Iran will
know precisely what we expect and what we are prepared to do if
they take the necessary acts: they cannot hide behind false or
misleading accusations about our positions or point to the lack
of engagement as an excuse for inaction on their part. We in
turn will be better placed to judge whether Iran is willing to
seriously address our concerns.
2. As Secretary Clinton has said, engagement also opens up the
possibility that dialogue will persuade Iran to alter its
policies. Given the gravity and urgency of the situation, it is
important that we employ all the tools available to us.
3. Engagement also allows us to mobilize international action if
Iran refuses to respond positively to our efforts. By
demonstrating our openness to a negotiated resolution of
differences, the United States is significantly bolstering the
willingness of other nations to stand with us if additional
pressure should be necessary.
Early returns
Our dual-track strategy has led to some important steps in recent
months.
In last week's talks in Geneva, intensive multilateral and
bilateral engagement with our partners in the P5+1 and others laid the
groundwork for potential progress. After the talks, President Obama
explained that the meeting allowed the international community to
convey a clear and unified message to the Iranian government: ``Iran
must demonstrate through concrete steps that it will live up to its
responsibilities with regard to its nuclear program.'' He stated that
the day's meeting ``was a constructive beginning, but it must be
followed by constructive action by the Iranian government.'' As
Secretary Clinton emphasized, ``We are not involved in a process just
to say that we can check a box on process. We want to see concrete
actions and positive results.''
The test of Iran's seriousness in the coming weeks will be the
practical steps it takes. Iran agreed in principle in Geneva last week
to an international approach for supplying fuel for the Tehran Research
Reactor by shipping out Iran's low enriched uranium (LEU) to other
countries for further enrichment and fabrication. If implemented this
would significantly reduce Iran's current LEU stockpile, a major source
of anxiety in the region and beyond and demonstrate support for an
exclusively peaceful nuclear program. This step, if implemented, would
be a useful interim confidence building measure, allowing more time and
diplomatic space for negotiations on a resolution of the more
fundamental problems of Iran's nuclear program. Additional discussions
regarding the technical details are needed and are scheduled to take
place under IAEA leadership in Vienna on October 19. Iran also agreed
to allow the IAEA access to the previously undisclosed enrichment
facility near Qom on October 25, which must be the first step toward
full cooperation with the IAEA's investigation.
As we have always said, Iran's compliance with its international
obligations will lead to more constructive relations with the
international community and improved cooperation on security, economic,
and other matters, as outlined in previous offers made by the P5+1. We
anticipate another meeting between the P5+1 and Iranian officials
before the end of October. This is bound to be a very difficult and
uncertain process, and we will continue to build unity among our
international partners consistent with our dual track strategy, which
the P5+1 Ministers strongly reaffirmed in New York on September 23. We
are prepared to give this process a chance, but we are not interested
in engaging in talks for the sake of talking or an open-ended process.
We can only sustain a process with measurable, practical results.
A united front
In this regard, the importance of a broad and united international
coalition cannot be understated. With wide international support,
sanctions regimes can be enforced, pressure can be sustained, and
Iran's leaders are less able to shift the blame from themselves to the
United States for the pain caused by their behavior.
Three years ago, the United States was virtually alone in imposing
pressure on Iran. Now, a growing coalition shares our concerns about
Iran's negative policies, and has made clear the necessity for Iran to
change course. As the United States has shown its commitment to
engaging in serious, good-faith talks, we are also working together to
lay the groundwork for concerted and effective international action to
pressure Iran to change its policies if negotiations do not produce the
necessary results.
Multilaterally, we have pursued a progressive tightening of United
Nations Security Council sanctions on Iran through the adoption of
resolutions 1737, 1747, and 1803. These resolutions have sent a
powerful message to Iran that the international community will not
allow Iran to break the rules that everyone else must live by. We have
also worked with our colleagues at Treasury and with the international
financial community through the Financial Action Task Force. As a
result of sanctions and international efforts, the cost of doing
business with Iran is going up.
Consistent with the U.N. Security Council's call on member states,
the European Union has also adopted measures to limit granting of
export credits. As a result, a number of European countries have worked
successfully to reduce their export credit exposure to Iran, making it
more difficult for Iran to finance its international trade.
Iran's nuclear program
The disturbing revelation of the previously undisclosed enrichment
facility at Qom provides yet another example of why Iran's credibility
is so low in the international community. For years, in contravention
of its international obligations and responsibilities, Iran has
frustrated IAEA efforts to address the international community's
serious concerns with Iran's nuclear program, including Iranian efforts
to develop a nuclear warhead. Tehran has defied U.N. Security Council
resolutions and continued to enrich uranium.
While the United States, along with the international community,
has acknowledged Iran's right to pursue a peaceful nuclear program,
with those rights comes a crucial responsibility to prove
``convincingly,'' as President Medvedev put it last month, the
exclusively peaceful purposes of Iran's program.
President Obama stated this clearly last month at the United
Nations: if the government of Iran chooses to
ignore international standards; if they put the pursuit of
nuclear weapons ahead of regional stability and the security
and opportunity of their own people; if they are oblivious to
the dangers of escalating nuclear arms races in. the Middle
East--then they must be held accountable. The world must stand
together to demonstrate that international law is not an empty
promise, and that treaties will be enforced.
Beyond the nuclear issue
There are other important areas of significant concern to the
United States and the rest of the international community.
The United States and the broader international community remain
gravely concerned about the Iranian government's repression of its own
people. The internal turmoil and terrible repression of peaceful
protestors, opposition politicians, and journalists that followed the
June 12 elections in Iran revealed much about the character of the
government. Its use of unwarranted arrests, prolonged detentions, and
violence against ordinary citizens was condemned by our government at
the highest levels, including by the President, as well as by
counterparts in the international community. As President Obama
affirmed,
The Iranian people have a universal right to assembly and free
speech. If the Iranian government seeks the respect of the
international community, it must respect those rights, and heed
the will of its own people. It must govern through consent, and
not coercion.
It is still too early to tell what lasting impact the government's
focus on stamping out internal debate will have on Iran's internal
dynamics, or on Iran's destabilizing international and regional
behavior, but prospects for reform remain uncertain.
The post-election repression is part of a broader international
concern with Tehran's record of human-rights abuses, which has grown
significantly worse in the past year. As documented in our annual human
rights report on Iran, the government regularly uses torture and other
forms of inhumane treatment against its own people. The government also
severely restricts basic freedoms of expression, press, religion, and
assembly to discourage political opposition, and manipulates Iran's
electoral process, particularly through the mass disqualification of
candidates.
We are also deeply concerned for the fate of American citizens
currently detained or missing in Iran. Following on the recent consular
visit by the Swiss, we urge the Iranian government to promptly return
Shane Bauer, Sarah Shourd, and Josh Fattal to their families. We also
call on the Iranian authorities to release immediately American
citizens Kian Tajbakhsh and Reza Taghavi, and we ask Iran to use all of
its facilities to determine the whereabouts and ensure the safe return
of Robert Levinson.
Regional stability
Tehran's aggressive foreign policy also constitutes a threat to
both regional stability and broader U.S. interests. Iran's claim to
have its voice respected in the region depends on Iran's willingness to
play a positive and constructive role. Today, Iran is the leading state
sponsor of terrorism, providing financial and other support to
Hizballah, Hamas, Palestinian Islamic Jihad, certain Iraqi militant
groups, and the Taliban. The role of the Islamic Revolutionary Guard
Corps-Qods Force in supporting foreign militants continues to pose a
threat to regional stability.
As the international community is engaged in efforts to promote
dialogue between Israel and the Palestinian Authority, Iran is
supporting those who deny Israel's right to exist, refuse to renounce
violence, and work to sabotage efforts to re-launch negotiations that
would establish an independent Palestinian state. President
Ahmadinejad's inflammatory statements against Israel tarnish Iran's
international standing and undermine the interests and aspirations of
the Palestinian people.
Many governments in the region have grave and legitimate fears
about Iran's policies and aggressive posture. These concerns contribute
to our sense of urgency in making clear to Iran the need to resolve
tensions and reassure Iran's neighbors and the wider international
community.
In recent years, Iran has contributed to instability in Iraq,
Afghanistan, Lebanon, and the Palestinian territories. The Obama
administration's strategy in the greater Middle East has begun to
significantly reduce Iran's ability to exploit conflict for its own
gain.
Our broad engagement with regional partners has strengthened our
position relative to Iran. The President's June 4 speech in Cairo
conveyed a clear message to Muslim communities in the Middle East and
around the world: the United States is committed to a ``new beginning''
to our relations, based on the principles of mutual respect and mutual
interest. We are also working actively and intensively to bring a
comprehensive resolution to the conflict between Israel and its Arab
neighbors.
Regional governments threatened by Iran's activities are working
more energetically to counter and diminish Iran's negative influence.
As the Iraqi government continues to establish more capable and
effective institutions, Iran's destabilizing activities have
encountered new obstacles. Iraq and Iran share deep historic ties, but
as the Iraqi government's capacity and confidence grows, it has chosen
to assert its own sovereignty and speak out against Iranian influence.
Iraq's increasing re-integration into the region and the greater
international community reduces Iran's ability to manipulate and
exacerbate differences among its neighbors.
We are working with the Gulf nations to increase cooperation to
address security issues of mutual concern. These states support the
responsible and transparent development of civilian nuclear energy but
have publicly declared their opposition to the pursuit of nuclear
weapons and emphasized their grave concerns about Iran's nuclear
intentions. They also protest Iran's meddling in the affairs of others.
Some regional governments have signed arrangements with the United
States on nuclear-energy cooperation that provide strong guarantees of
peaceful intention by relying on the international market for nuclear
fuel services without the development of an indigenous fuel cycle. The
UAE-U.S. nuclear cooperation agreement, signed by both governments and
currently in the congressional review process, contains a commitment on
the part of the UAE not to pursue domestic enrichment or reprocessing
activities. These efforts by other countries disprove Iran's assertions
that the West seeks to block the pursuit of nuclear energy for peaceful
purposes.
We have been working with our regional partners to help them
develop the kind of cooperation that will enable them to better manage
the political, diplomatic, and security challenges Iran poses. Examples
include the GCC+3 forum to address Iran; inter-Arab cooperation to help
address the political crisis in Lebanon; security and military talks
with the Gulf states; and the increasing efforts on the part of Arab
governments in working with and supporting the Government of Iraq. We
are also supporting Lebanon's legitimate state institutions, in part so
that the Lebanese do not turn to Hizballah for the provision of
services or for security.
We continue to support military, law enforcement, and regulatory
mechanisms and promote robust anti-terrorism cooperation with our Gulf
partners to stem extremism and deny safe haven for terrorists
throughout the broader region. With our important allies Egypt and
Jordan, the only two Arab countries that currently have peace treaties
with Israel, we are working on a broad range of shared initiatives,
including promoting a comprehensive Middle East peace, countering
terrorism, and promoting good governance, human rights, and economic
prosperity. All these efforts work to constrain Iran's destabilizing
policies in the region and build support for the United States in
confronting and attempting to change those policies.
Conclusion
With our international partners, the United States will continue
with our dual-track strategy with Iran. We are sincere in our desire to
see Iran live up to its international obligations and responsibilities
and play a positive and constructive role in the international
community. We and the international community very much hope that Iran
will make the needed choices for itself, the region, and the world at
large. Yet we will remain vigilant and judge whether Iran is willing to
negotiate in good faith. If it is not, we will be prepared to move
ahead swiftly and effectively with additional pressure and sanctions--
with the confidence that our engagement will make such measures broad-
based and effective. We appreciate Congress' interest in making sure
that we have the tools we need to meet the challenge posed by Iran's
nuclear program.
We believe that we have the authorities necessary to take strong
action--alone and together with our international partners, should that
prove necessary. We look forward to consulting with Congress on how
best to use these as events develop.
Thank you. I look forward to answering any questions you have.
______
PREPARED STATEMENT OF STUART LEVEY
Under Secretary, Office of Terrorism and Financial Intelligence
U.S. Department of the Treasury
October 6, 2009
Chairman Dodd, Ranking Member Shelby and other distinguished
members of the Committee, thank you for this opportunity to update you
on our efforts involving Iran. I welcome the Committee's ongoing focus
on this important issue, and, more broadly, your continued support for
our efforts to protect the integrity of the international financial
system.
Less than a week ago, the five permanent members of the U.N.
Security Council and Germany--the P5+1--met with Iran in Geneva. As the
President said, that meeting was a constructive beginning to our
dialogue, but much work remains to be done. He was clear that,
[i]f Iran does not take steps in the near future to live up to
its obligations, then the United States will not continue to
negotiate indefinitely, and we are prepared to move toward
increased pressure.
Deputy Secretary of State James Steinberg has outlined to the Committee
our overall two-track strategy toward Iran, focused on both engagement
and clear consequences if Iran declines to take concrete steps.
Even as the Administration focuses on diplomacy, we have also been
working with our colleagues across the U.S. Government to develop a
strategy for imposing substantial costs on the government of Iran if
the President determines that is what is needed to affect Iranian
policies.
The plan we are developing is comprehensive. It takes into account
that no single sanction is a ``silver bullet''--we will need to impose
measures simultaneously in many different forms in order to be
effective. It also takes into account Iran's potential vulnerabilities
and those activities that have the greatest influence on Iran's
decisionmakers. As we consider various measures, we are particularly
mindful of potential unintended consequences on the people of Iran, and
the internal dynamic now playing out in that country.
Because financial measures are most effective when imposed as part
of a broad-based effort with the support of the largest possible
international coalition, we are working closely with our allies as we
put together this strategy. We believe that by consulting with them
closely and pursuing engagement genuinely we have a better chance to
generate the coalition we will need if dialogue does not lead to
demonstrated progress.
We should be realistic about the ability of sanctions to achieve
our political and security objectives with Iran. If, however, we
accurately target the key vulnerabilities and fissures in Iran and then
implement our plan with a broad coalition of governments and key
private sector actors, we can at least demonstrate to the Iranian
government that there are serious costs to any continued refusal to
cooperate with the international community. Although we cannot describe
the particulars of our planning in an open hearing, I would like to
explain some of our thinking.
Financial Measures
Beginning in 2006, we developed and implemented a strategy to
target Iran's illicit conduct. We took formal action against many of
the specific banks, government entities, companies, and people involved
in Iran's support for terrorism and its proliferation activities. We
did so using two powerful Executive Orders, E.O. 13382 and E.O. 13224,
that allow us to designate proliferators of weapons of mass
destruction, terrorists, and their supporters, freezing any assets they
have under U.S. jurisdiction and preventing U.S. persons, wherever
located, from doing business with them. We have designated more than
100 entities and individuals supporting Iran's nuclear and missile
enterprises, including the key organizations within Iran, scores of
their front companies, Iran's major banks that finance their conduct,
and Iran's major shipping line, the Islamic Republic of Iran Shipping
Lines, that handles illicit shipments for these dangerous enterprises.
We have also acted against the Islamic Revolutionary Guard Corps, or
the IRGC, and several of its companies for proliferation, as well as
the IRGC's Qods Force for its role in supporting terrorist
organizations.
As a result of the State Department's intensive diplomatic efforts,
the U.N. Security Council resolutions on Iran contain many of the same
designations we have implemented here in the United States. The
European Union and Australia have gone beyond implementing the Security
Council's list, joining us in other designations, such as that of
Iran's Bank Melli. These actions are particularly powerful in that they
give us an opportunity to explain publicly our reasons for acting,
thereby exposing the illicit conduct of those we have designated.
Importantly, we combined these government actions with
unprecedented, high-level outreach to scores of banks, banking
associations, and other private sector leaders around the world. We
discussed the risks of doing business with Iran and shared information
about Iran's illicit and deceptive practices. As a result, the
international private sector has amplified the impact of government
actions, as banks and companies around the world have come to
understand that, if they are dealing with Iran, it is nearly impossible
to protect themselves against becoming entangled in that country's
illicit conduct.
We have seen firsthand that the financial measures applied by the
United States and the international community on Iran since 2006 have
had an impact. At this point, most of the world's major banks have
cutoff or significantly scaled back their business with Iran because of
the reputational risks involved. Iran is increasingly dependent on an
ever-shrinking number of trade and finance facilitators. Many foreign
companies have pulled back from business deals with Iran, including
investment in Iran's energy sector. Iranian businessmen face greater
inefficiencies, higher operating costs, and increased difficulty
finding business partners and banks to provide them with financing.
Iran's foreign borrowing has sharply declined since 2006, a
significant change from 2002 to 2005, when foreign credit growth to
Iran outpaced that of the wider Middle East. External credit to Iran
fell 18 percent between September 2006 and September 2008, in stark
contrast to the 86 percent rise in external credit to the Middle East
region during the same period. And, to the extent that Iranian firms
have been able to replace lost credit with domestic credit, they are
likely doing so at a much higher cost.
Iran's Economic Vulnerabilities
The Iranian government's mismanagement of the Iranian economy, its
increasingly corrupt business practices, its ongoing threatening and
deceptive conduct, and its handling of the recent elections have
fostered dissatisfaction, divisions, and discord within Iran and have
made Iran an even less attractive business partner.
Some experts estimate Iran's unemployment rate to be well over 20
percent, with a lack of jobs disproportionately affecting the young--
three out of four unemployed Iranians are under 30. Inflation remains
high at about 13 percent. The banking sector is unhealthy and reliant
on government support. Iran is ranked 137th out of 183 countries on the
World Bank's Doing Business report, in terms of ease of doing business,
and 165th in terms of protecting investors. And, as a result of the
Iranian government's economic mismanagement and its self-isolating
conduct, foreign investment in Iran has declined. All of this results
in decreased opportunities for the people of Iran.
The Iranian government's reliance on corruption and nepotism in
business further limits opportunities for all Iranians. The
Transparency International Corruption Perceptions Index of 2008 ranked
Iran 141st out of the 180 countries. The Iranian government has
increasingly awarded no-bid government contracts to companies
associated with the IRGC--a group that counts Iranian President
Ahmadinejad and many senior government officials as former members.
These companies, some of which have been designated by the United
States and the U.N. Security Council for their role in Iran's illicit
missile program, operate under names that obscure their IRGC
affiliation, so many unwitting non-Iranians are in fact doing business
with the IRGC.
In the name of ``privatization,'' the IRGC has taken over broad
swaths of the Iranian economy. Former IRGC members in Iranian
ministries have directed millions of dollars in government contracts to
the IRGC for myriad projects, including developing the South Pars gas
field, managing the Imam Khomeini International Airport in Tehran, and
expanding Tehran's metro system. Furthermore, the IRGC seeks to
monopolize black-market trade of popular items, funneling the proceeds
from these transactions through a patronage system and using them to
help subsidize the government's support for terrorist groups.
There is broad acknowledgment that the Iranian government engages
in a range of deceptive financial and commercial conduct in order to
obscure its development of nuclear and missile programs and facilitate
its support for terrorism. International understanding of these
practices--underscored by the U.N. Security Council resolutions on Iran
and six warnings issued by the Financial Action Task Force about the
risks Iran poses to the financial system--has been brought about in
part by our efforts to share information about Iran's deception with
governments and the private sector around the world.
These deceptive practices taint all Iranian business because they
make it difficult to determine whether any Iranian transaction is
licit. Iranian banks request that their names be removed from
transactions so that their involvement cannot be detected; the
government uses front companies and intermediaries to engage in
ostensibly innocent commercial business to obtain prohibited dual-use
goods; and Iran's shipping line, the Islamic Republic of Iran Shipping
Lines, or IRISL, repeatedly manipulates bills of lading to shield
prohibited cargo from scrutiny.
To a greater extent than ever, private companies across industries
are now alert to these kinds of risks. Banks worldwide have been
repeatedly warned by regulatory and standard-setting bodies to regard
Iranian transactions with caution. Traders and shippers know that
transactions with innocent-sounding Iranian counterparts can expose
them to risk--both reputational and legal. Energy companies have put
Iranian investments on indefinite hold, cautious of the political risk
of investing too heavily in Iran. And exporters of sensitive and dual-
use technologies know that supplying Iran can lead to severe sanctions
and even prosecution. Across the board, then, transactions with Iran
are already handled differently than transactions with any other
country--except perhaps for North Korea--engendering either heightened
suspicion or outright refusal to engage in them.
Finally, the vulnerabilities in Iran could be compounded by the
internal fractures resulting from Iran's elections of 2009. As
Secretary of Defense Gates recently stated:
It's clear in the aftermath of the election that there are some
fairly deep fissures in Iranian society and politics and--and
probably even in the leadership . . . [T]his is one of the
reasons why I think additional and especially severe economic
sanctions could have some real impact . . . [W]e know that the
sanctions that have already been placed on the country have had
an impact.
United Coalition Necessary To Exploit Iran's Economic Vulnerabilities
This Administration has demonstrated that it is committed to a
diplomatic resolution of the international community's issues with
Iran. The world is now united in looking to Iran for a response. If
Iran does not live up to its obligations in this process, it alone will
bear the responsibility for that outcome.
Under these circumstances, the United States would be obliged to
turn to strengthened sanctions. We are intensifying work with our
allies and other partners to ensure that, if we must go down this path,
we will do so with as much international support as possible. For the
less united we are in applying pressure, the greater the risk our
measures will not have the impact we seek. This challenge will be
difficult, but not impossible. Over the past 3 years, the U.N. Security
Council has adopted three unanimous Chapter VII resolutions against
Iran. Those resolutions now represent the baseline. If Iran chooses to
defy the international community yet again, and not live up to its
obligations, these resolutions as well as other steps taken to date
have laid the groundwork for a concerted and meaningful international
response.
Conclusion
The Administration remains committed to the dual-track strategy and
views last week's developments as a step forward. We will now wait to
see whether Iran follows its constructive words with concrete action.
If it does not, and if the President determines that additional
measures are necessary, we will be ready to take action, ideally with
our international partners.
I would be happy to answer your questions.
______
PREPARED STATEMENT OF DANIEL O. HILL
Acting Under Secretary of Commerce for Industry and Security
Department of Commerce
October 6, 2009
Mr. Chairman, Senator Shelby, Members of the Committee:
I welcome the opportunity to appear before the Committee today to
discuss the Department of Commerce's role in administering and
enforcing U.S. dual-use export control policies toward Iran. We work
closely with our colleagues at the Departments of State and the
Treasury, as well as other agencies, to implement the long-standing
U.S. embargo on Iran effectively. The United States has had a trade
embargo on Iran since May 1995. The United States took these steps
because of Iran's continued active support for terrorism and concerns
that it is pursuing weapons of mass destruction.
All exports to Iran are subject to both the Export Administration
Regulations (EAR) and the Department of the Treasury's Iranian
Transactions Regulations. Treasury is the lead agency for administering
the embargo, which features not only a prohibition on exports and
reexports of items under the Commerce Department's jurisdiction, but
also comprehensive restrictions on financial transactions and
investments under the jurisdiction of the Treasury Department.
Commerce, however, is responsible for several aspects of the
embargo of Iran. First, Commerce provides technical assistance to
Treasury on the proper classification of items proposed for export or
reexport to Iran under a Treasury license. The Iran Iraq Arms Non-
Proliferation Act of 1992 (Note to 50 U.S.C. 1701) generally requires
BIS to deny licenses, absent a Presidential waiver, for the export or
reexport of items on the Commerce Control List (CCL) to Iran. In
considering an application to export an item to Iran, Treasury must
know whether the item is on the CCL and thus prohibited for export to
Iran without a waiver. Commerce determines whether the item is on the
CCL and informs Treasury.
Second, Commerce plays a vital role in enforcing the embargo by
investigating transactions that may constitute exports or reexports to
Iran in violation of the EAR. An export or reexport of an item subject
to the EAR without Treasury authorization will generally constitute a
violation of the EAR. The Bureau of Industry and Security (BIS) has
approximately 100 Federal law enforcement agents in ten field offices
throughout the United States. The field offices are located in Boston,
New York, Washington, Miami, Chicago, Dallas, Los Angeles, San Jose,
Houston; and the Washington, DC area. Additional BIS agents are based
in main Commerce here in Washington. These agents are on the frontlines
of the effort to prevent illicit transfers of items which would do us
harm if they fell into the wrong hands.
In addition, Commerce has export control officers (ECO) in five
foreign locations--Abu Dhabi, United Arab Emirates; Beijing and Hong
Kong; New Delhi; and Moscow. In Fiscal Year (FY) 2010, BIS has
authorization to post an ECO in Singapore and a second ECO in Beijing.
These ECOs are Bureau of Industry and Security enforcement agents
temporarily assigned to the U.S. & Foreign Commercial Service. The ECOs
conduct pre-license checks and post-shipment verification visits to
verify that items will be, or are being, lawfully used and have not
been diverted to prohibited users or uses within the country or
illegally transshipped to another country such as Iran.
The Commerce Department closely coordinates with the Department of
State and other agencies to work with other countries, including states
that may be involved in transshipments to Iran, to establish and
strengthen those states' export and transshipment control systems. This
enables those countries to cooperate with us on specific transactions
as well as take actions against parties in their own territory who are
illegally exporting items to countries such as Iran.
Commerce also can bring to bear unique tools to enforce U.S. export
controls on Iran. These tools include Temporary Denial Orders (TDO) and
the Entity List. A TDO is a legal order that can be issued quickly, for
180 days at a time, to prevent imminent violations of the EAR. For
example, in 2008, we issued a TDO denying the export privileges of
Balli Group PLC and related companies and individuals (``Balli
Group''), Blue Airways, and Mahan Airways for 180 days. Evidence
obtained by our agents showed that the parties knowingly reexported
three U.S.-origin aircraft to Iran in violation of the EAR and were
preparing to reexport three additional U.S.-origin aircraft to Iran in
further violation of the EAR. The TDO effectively precluded United
States or foreign parties from engaging in any activity related to the
aircraft. Ultimately, the TDO prevented the illegal reexport of three
commercial aircraft to Iran.
The Entity List is a regulatory tool that can be used to prohibit
the export, or reexport, of any item subject to the EAR, including
items not on the CCL, to any listed entity. In 2008, the Bureau of
Industry and Security added 75 foreign parties to the Entity List
because of their involvement in a global procurement network that
sought to illegally acquire U.S.-origin electronic components and
devices capable of being used to construct Improvised Explosive Devices
(IEDs). These commodities had been used in IEDs or other explosive
devices against Coalition Forces in Iraq and Afghanistan. This network
acquired U.S. origin commodities and illegally exported them to Iran.
As a consequence of the addition of these entities to the Entity List,
no United States or foreign party may export or reexport items subject
to the EAR to them without a license. Exporting or reexporting an item
to any of these entities without the required license would constitute
a violation of the EAR.
In addition, Commerce has led investigations of a number of
significant cases involving Iran which have in turn led to successful
enforcement actions. Commerce currently has 235 open investigations
involving Iran which constitute about 29 percent of all open
investigations of potential violations of the EAR. I have attached a
summary of prosecutions concluded in 2008 for illegal exports to Iran.
The Commerce Department's authority to enforce our dual-use export
controls is based on the Export Administration Act of 1979 (EAA). This
statute, however, has been in lapse since 2001. While the EAA is in
lapse, the U.S. dual-use export control system has been maintained
under the authority of the International Emergency Economic Powers Act
(IEEPA). Most recently, the president renewed Commerce authority under
IEEPA in August 2009.
Cooperation with our sister law enforcement agencies has been
paramount to the success of our efforts to prevent unauthorized exports
to Iran and obtain sanctions against those making such exports. We work
in concert with the Federal Bureau of Investigation, U.S. Immigration
and Customs Enforcement, and several other agencies, including by
participating in several FBI-led Joint Terrorism Task Forces, which
focus on export control violations, including those involving Iran's
support of international terrorism and violations of the Iran
sanctions.
Finally, the Commerce Department maintains a robust outreach
program to educate the private sector on the embargo on Iran. We have
detailed guidance on our website for exporters to follow. We also focus
on key companies such as freight forwarders, integrators, air cargo
carriers, and shipping lines with regard to the embargo of Iran. Our
efforts are targeted toward educating exporters on vigilance in
partnering with firms based in major transshipment hubs, not only in
the Persian Gulf region but also in Southeast Asia, which might result
in illegal transshipments of U.S.-origin goods to Iran.
In conclusion, the Department of Commerce plays a key role in the
administration and enforcement of the embargo on Iran. At this time I
would be happy to answer any questions you may have.
Summaries of Recent Commerce Enforcement Cases involving Exports or
Reexports to Iran
On January 30, 2009, James Gribbin, former sales manager
for Oyster Bay Pump Works, was sentenced to 3 years of
probation and a $100 special assessment in connection with an
attempted export of laboratory equipment, valued at
approximately $300,000, to Iran via the United Arab Emirates.
On May 1, 2008, Patrick Gaillard, President of Oyster Bay Pump
Works, was sentenced to 30 days in prison, a $25,000 criminal
fine, 3 years of probation, and a $300 special assessment for
his part in the attempted export.
On June 11, 2009, Traian Bujduveanu, the owner and operator
of Orion Aviation, was sentenced to 35 months in prison
followed by 3 years of supervised release for his role in the
illegal export of civilian and military aircraft parts to Iran
Defense Industries Organizations.
On December 10, 2008, Nicholas Groos was sentenced to 60
days in prison, 1 year supervised release, a $249,000 criminal
fine, and a $400 special assessment for his part in a scheme to
transship U.S.-origin fire fighting equipment to Iran using his
position as Director of the Viking Corporation subsidiary
located in Luxembourg.
On August 28, 2008, Desmond Frank was sentenced to 23
months in prison, a $500 criminal fine, and a $600 special
assessment for his part in the export of defense articles to
Iran and China.
On August 7, 2008, James Angehr and John Fowler, owners of
Engineering Dynamics Inc., were sentenced to 5 years of
probation for their part in an attempt to export software to
Iran via Brazil. Angehr was additionally sentenced to 6 months
of confinement in a halfway house, and Fowler was sentenced to
4 months of confinement in a halfway house. Each defendant was
fined $250,000, and ordered to forfeit $218,583. On May 22,
2008, Nelson Galgoul was sentenced to 13 months in prison, 3
years of supervised release, a $100,000 criminal fine, and a
$109,291 forfeiture for his part in the conspiracy.
On February 8, 2008, Mojtada Maleki-Gomi was sentenced to
18 months in prison and a $200,000 criminal fine for exporting
textile goods to Iran without the required export licenses, and
Babek Maleki was sentenced to 12 months probation for making
false statements related to the same export.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER FROM JAMES B.
STEINBERG
Q.1. Are you confident that Iran is not buying time for
continued enrichment of weapons-grade nuclear material by
merely pretending to engage in serious negotiations on this
issue? If so, why are you confident of this?
A.1. President Obama came into office willing to test whether
dialogue would yield more positive results with Iran, with full
awareness that dialogue might not achieve the results we seek.
This is exactly why we are employing a range of tools for
dealing with Iran including implementing existing UNSCR and
U.S. sanctions, together at the same time we seek to achieve
our goals through the engagement approach.
The results of engaging in this dialogue are clear: the P5-
plus-l is united, and we have an international community that
has reaffirmed its commitment to non-proliferation and
disarmament. The Iranian government heard a clear and unified
message from the international community in Geneva: Iran must
demonstrate through concrete steps that it will live up to its
responsibilities with regard to its nuclear program. This
message was reinforced by the IAEA Board of Governors' adoption
of a resolution on 27 November 2009 condemning Iran's
construction of the Qom enrichment facility as inconsistent
with Iran's safeguards agreement and demanding Iran's full
compliance with its international obligations without further
delay.
Going forward, we've made clear the necessity for Iran to
take swift action. If Iran does not take steps in the near
future to live up to its obligations, then we are prepared to
move toward increased pressure. If Iran takes concrete steps
and lives up to its obligations, there is a path toward a
better relationship with the United States, increased
integration with the international community, and a better
future for all Iranians.
The burden of meeting these responsibilities lies with the
Iranian government, and they are now the ones that need to make
that choice.
Q.2. In your opinion, how likely is it that Iran's nuclear
enrichment activities will result in weapons-grade material? If
this comes to pass, when do you think it will happen?
A.2. Our goal is to prevent Iran from acquiring a nuclear
weapons capability. The same technology that is used in
centrifuge-based enrichment for reactor fuel is used for
producing HEU and Iran has made significant advances in its
enrichment program. Iran's refusal to comply with its
international obligations over the past twenty years adds to
the concern that Iran's intent is to--at a minimum--preserve
the option to acquire nuclear weapons. Iran needs to take steps
to address the questions raised by the international community,
and suspend its proliferation-sensitive nuclear activities as
required by the United Nations Security Council.
We defer to the intelligence community for an update on
Iran's nuclear program, a timeline of possible HEU-production
scenarios, and any indication of a weapons program.
Q.3. Are the upcoming talks with Iran being conducted with a
sense of urgency appropriate to the situation, given the wide
evidence of Iran's enrichment activities in violation of UN
Security Council resolutions, along with the very real
possibility that Iran is ``running out the clock'' while it
pursues its nuclear ambitions?
A.3. Our whole approach is predicated on an urgent need to
prevent Iran from obtaining a nuclear weapons capacity. That is
why a united P5+1 has presented Iran with a very plain choice:
prove to our satisfaction that its program is, as they claim,
for peaceful purposes and open up its facilities to
inspections, freeze its uranium enrichment program, and follow
through on the agreement to provide fuel for enrichment outside
of the country or face real pressure and consequences.
This message was reinforced by the IAEA Board of Governors'
adoption of a resolution on 27 November 2009 condemning Iran's
construction of the Qom enrichment facility as inconsistent
with Iran's safeguards agreement and demanding Iran's full
compliance with its international obligations without further
delay. We--in coordination with our partners--will be taking
stock of where things stand in the coming weeks, and we will
make appropriate judgments about the next steps, including the
option of imposing additional pressure.
Q.4. Can you provide some concrete examples of potential steps
the Iranian regime could take that you would consider
``progress'' as a result of the current negotiations?
A.4. The October 1 meeting in Geneva, as well as Iran's
acceptance of an initial inspection in Qom, offered a
cumulative set of options. We regret that Iran has not followed
through. As a result, the IAEA Board of Governors' adopted a
resolution on 27 November 2009 condemning Iran's construction
of the Qom enrichment facility as inconsistent with Iran's
safeguards agreement and demanding Iran's full compliance with
its international obligations without further delay.
The P5+1 has made clear that Tehran must agree to another
P5+1 political director level meeting, focused on the nuclear
issue. We have stressed the need for continued cooperation
regarding the Qom enrichment facility, including access to
personnel and documents. And we have called upon Iran to
implement the IAEA's Tehran Research Reactor proposal to which
it agreed in Geneva on October 1. Iran must demonstrate through
these concrete steps that it will live up to its
responsibilities with regard to its nuclear program.
We have conveyed to Iran that, if it expects the world to
believe in the exclusively peaceful nature of its nuclear
program, then Iran must engage fully and immediately with the
IAEA to address all outstanding issues surrounding its nuclear
program. As set forth in numerous resolutions of the IAEA and
the U.N. Security Council, Iran must fully implement its IAEA
Safeguards Agreement and bring into force its Additional
Protocol.
Additional confidence building measures would include
Iran's full implementation of its UN Security Council
obligations as well as answering the IAEA's outstanding
questions, particularly with regard to the possible military
dimensions to Iran's nuclear program. These steps are clearly
outlined in U.N. Security Council resolutions 1737, 1747 and
1803 as well as in the plethora of IAEA Director General's
reports from the past 7 years. Iran knows what it needs to do
to restore international confidence in the exclusively peaceful
nature of its nuclear program. Now is the time to take
advantage of an historic opportunity to constructively engage
and find a diplomatic resolution to the nuclear issue.
Q.5. How confident are you that United States intelligence-
gathering operations are providing an accurate picture of
Iran's nuclear capabilities, given the recent failure to detect
the scope of operations at the Qom facility?
A.5. Due to the sensitive nature of our intelligence programs,
we will address this question in a separate, classified
submission to the Committee.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER FROM STUART A.
LEVEY
Q.1. What is your assessment of the current set of sanctions
against Iran? In what ways are these sanctions succeeding and
in what ways do they fall short of achieving our objectives in
this situation?
A.1. In addition to the broad country sanctions the United
States has in place against Iran, the Treasury and State
Departments launched an effort in 2006 to target Iranian
illicit conduct and, specifically, Iranian entities' and
individuals' use of the international financial system to
support proliferation and terrorism. This effort combined
formal government measures against the specific Iranian banks,
companies, and people involved in this conduct with
unprecedented high-level outreach to scores of banks, banking
associations, and companies around the world.
Our strategy of targeting illicit conduct has resulted in
broad international support. In terms of formal government
actions, the U.N. Security Council resolutions on Iran contain
many of the same designations we have implemented here in the
United States. The European Union and Australia have gone
beyond implementing the Security Council's list, joining us in
other designations, such as that of Iran's Bank Melli. On the
private sector side, banks and companies around the world have
come to understand that, if they are dealing with Iran, it is
nearly impossible to protect themselves against becoming
entangled in that country's illicit conduct.
Government and private sector actions have increased
pressure on Iran. These mutually reinforcing actions have not
only had an impact on Iran's ability to use the international
financial system to support its illicit activities, but have
also put Iran at a competitive disadvantage in the world
marketplace due to its increasing financial and commercial
isolation. Iran is increasingly dependent on an ever-shrinking
number of trade and finance facilitators. Many foreign
companies have pulled back from business deals with Iran,
including investment in Iran's energy sector. Iranian
businesses face greater inefficiencies, higher operating costs,
and increased difficulty in finding business partners and banks
to provide them with financing.
We are working to build on this effort by developing a
comprehensive plan aimed at imposing additional substantial
costs on the government of Iran, and we are coordinating this
plan with our international partners. As the President recently
stated:
[T]he dual-track approach requires Iran to get a clear message
that when it fails to take advantage of these opportunities
[offered by the P5+1], that in fact it is not making itself
more secure, it's making itself less secure.
Q.2. What steps are being taken to target the efforts of
foreign financial institutions and foreign governments, such as
Venezuela, which have assisted Iran in evading the full impact
of the sanctions?
A.2. The United States takes very seriously its obligation to
protect the international financial system from abuse. The
Treasury and State Departments have taken domestic action
against specific banks, entities and individuals complicit in
Iranian illicit activity. We have also acted against the
subsidiaries of the banks we have targeted. For example, on
October 22, 2008, we designated Banco Internacional de
Desarollo, a subsidiary of the Export Development Bank of Iran
(EDBI) located in Venezuela, under Executive Order (E.O.) 13382
for being owned or controlled by, or acting for or on behalf
of, EDBI. More recently, on November 5, 2009, we designated
First East Export Bank (FEEB), a Bank Mellat subsidiary located
in Malaysia, under E.O. 13382 for being owned or controlled by
Bank Mellat. Through the designation of over 100 entities and
individuals supporting Iran's nuclear and missile enterprises,
the United States has not only cutoff illicit actors from the
U.S. financial and commercial systems, but has also highlighted
publicly the risks of doing business with Iran and Iran's
efforts to evade sanctions.
In addition to the formal actions we have taken, the
Treasury Department has also engaged bilaterally with its
foreign government partners and the private sector around the
world to share information about Iran's illicit and deceptive
conduct. Where releasable information has been available on
specific foreign financial institutions or entities supporting
Iranian proliferation efforts, the United States has actively
worked to inform the host government and request assistance in
disrupting the activity.
Finally, we have worked through the Financial Action Task
Force (FATF) to build awareness of the risks stemming from
Iran's deceptive practices and lack of an adequate anti-money
laundering and counterterrorist financing (AML/CFT) regime. In
October 2009, the FATF issued its seventh statement on Iran,
reiterating its call for jurisdictions to apply effective
countermeasures to protect their financial sectors from these
risks.
Q.3. In what ways would sanctions targeting companies that
assist Iran in importing refined petroleum help to discourage
those companies from continuing those activities? Would these
sanctions, in your estimation, succeed in increasing economic
pressure on Iran?
A.3. Sanctions by their very nature create a disincentive to
engage in the activities against which they are targeted.
However, the effectiveness of any specific measure needs to be
considered in the context of our overall package of sanctions
and our broader policy and objectives. If desired, I would be
pleased to provide a more detailed briefing in a closed
setting.