[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





       IMPLEMENTING TOUGHER SANCTIONS ON IRAN: A PROGRESS REPORT

=======================================================================


                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            DECEMBER 1, 2010

                               __________

                           Serial No. 111-136

                               __________

        Printed for the use of the Committee on Foreign Affairs









 Available via the World Wide Web: http://www.foreignaffairs.house.gov/

                                 ______



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                      COMMITTEE ON FOREIGN AFFAIRS

                 HOWARD L. BERMAN, California, Chairman
GARY L. ACKERMAN, New York           ILEANA ROS-LEHTINEN, Florida
ENI F.H. FALEOMAVAEGA, American      CHRISTOPHER H. SMITH, New Jersey
    Samoa                            DAN BURTON, Indiana
DONALD M. PAYNE, New Jersey          ELTON GALLEGLY, California
BRAD SHERMAN, California             DANA ROHRABACHER, California
ELIOT L. ENGEL, New York             DONALD A. MANZULLO, Illinois
BILL DELAHUNT, Massachusetts         EDWARD R. ROYCE, California
GREGORY W. MEEKS, New York           RON PAUL, Texas
DIANE E. WATSON, California          JEFF FLAKE, Arizona
RUSS CARNAHAN, Missouri              MIKE PENCE, Indiana
ALBIO SIRES, New Jersey              JOE WILSON, South Carolina
GERALD E. CONNOLLY, Virginia         JOHN BOOZMAN, Arkansas
MICHAEL E. McMAHON, New York         J. GRESHAM BARRETT, South Carolina
THEODORE E. DEUTCH,                  CONNIE MACK, Florida
    FloridaAs of 5/6/       JEFF FORTENBERRY, Nebraska
    10 deg.                          MICHAEL T. McCAUL, Texas
JOHN S. TANNER, Tennessee            TED POE, Texas
GENE GREEN, Texas                    BOB INGLIS, South Carolina
LYNN WOOLSEY, California             GUS BILIRAKIS, Florida
SHEILA JACKSON LEE, Texas
BARBARA LEE, California
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
MIKE ROSS, Arkansas
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
JIM COSTA, California
KEITH ELLISON, Minnesota
GABRIELLE GIFFORDS, Arizona
RON KLEIN, Florida
                   Richard J. Kessler, Staff Director
                Yleem Poblete, Republican Staff Director














                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable William J. Burns, Under Secretary for Political 
  Affairs, U.S. Department of State..............................    12
The Honorable Stuart A. Levey, Under Secretary for Terrorism and 
  Financial Intelligence, U.S. Department of Treasury............    22

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Chairman, Committee on Foreign 
  Affairs: Prepared statement....................................     5
The Honorable William J. Burns: Prepared statement...............    16
The Honorable Stuart A. Levey: Prepared statement................    25

                                APPENDIX

Hearing notice...................................................    66
Hearing minutes..................................................    67
The Honorable Dan Burton, a Representative in Congress from the 
  State of Indiana: Prepared statement...........................    68
The Honorable Russ Carnahan, a Representative in Congress from 
  the State of Missouri: Prepared statement......................    70
The Honorable Joe Wilson, a Representative in Congress from the 
  State of South Carolina: Prepared statement....................    72
The Honorable Theodore E. Deutch, a Representative in Congress 
  from the State of Florida: Prepared statement..................    73
The Honorable Gene Green, a Representative in Congress from the 
  State of Texas: Prepared statement.............................    74
Questions for the record submitted by the Honorable Russ Carnahan 
  to the Honorable William J. Burns (responses not received prior 
  to printing)...................................................    75

 
       IMPLEMENTING TOUGHER SANCTIONS ON IRAN: A PROGRESS REPORT

                              ----------                              


                      WEDNESDAY, DECEMBER 1, 2010

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:33 a.m. in room 
2172, Rayburn House Office Building, Hon. Howard L. Berman 
(chairman of the committee) presiding.
    Chairman Berman. The committee will come to order.
    And in a moment I will recognize myself and the ranking 
member for up to 7 minutes each for purposes of making an 
opening statement. I will then recognize the chairmen and 
ranking members of the Middle East and South Asia Subcommittee 
and the Terrorism, Nonproliferation and Trade Subcommittee for 
3 minutes each to make their opening statements.
    We have to end today's hearing by noon. So, without 
objection, all the members may submit opening statements for 
the record.
    Before I begin my statement, I want to say a few words 
about Steve Solarz, one of our most distinguished former 
colleagues, who passed away on Monday after a long battle with 
cancer.
    Steve had struggled for several years with this terrible 
illness, but with his typical discipline and good humor he 
maintained an active and productive schedule. He served in 
Congress from 1975 to 1992. On this committee he was chairman 
of the Africa Subcommittee and later chairman of the Asia 
Subcommittee, where his hearings and activism played a key role 
in ending the dictatorship of Philippine President Ferdinand 
Marcos.
    Steve was one of the most creative legislators I have ever 
worked with. Time after time, the committee would be debating 
an amendment to a bill that was resisted by the committee 
leadership; arguments would be made on both sides; and then 
Solarz would seek recognition, offer the perfect synthesis 
between the two positions, and get the unanimous backing of the 
committee for his compromise. He was a unique talent.
    After leaving Congress, Steve continued his activism as a 
leader of the International Crisis Group. Those of us who had 
the privilege of calling Steve both a friend and colleague will 
remember him for his sharp insights, good humor, and 
willingness to push American foreign policy beyond the 
boundaries of conventional thinking.
    We express to his wife Nina and his family our deepest 
regrets and condolences at this loss to them and to our Nation. 
And I ask for us just to sit to take a moment of silence while 
we remember Steve.
    Now to my opening statement.
    Iran's nuclear program is a fundamental threat to the 
United States, our friends and allies, and to the global 
consensus on halting and reversing the spread of nuclear 
weapons.
    As we meet this morning, Iran's centrifuges continue to 
spin, making more and more enriched uranium that could 
ultimately be turned into fuel for nuclear weapons. This threat 
continues to grow with each passing day.
    This summer, in response to that threat, Congress passed 
the most rigorous sanctions ever imposed on Iran, the 
Comprehensive Iran Sanction, Accountability, and Divestment 
Act, or CISADA, as it is widely known.
    The overwhelming vote for CISADA--408 to 8 in the House, 98 
to nothing in the Senate--was a powerful demonstration of the 
bipartisan commitment to a tough approach to halting Iran's 
nuclear program.
    This act broadly expanded the applicability of the original 
Iran Sanctions Act, including sanctioning third-country 
companies and banks involved in activities such as sales of 
refined petroleum to Iran, assistance to Iran's domestic 
refining capacity, and financial dealings with the Iranian 
Islamic Revolutionary Guard Corps, or IRGC.
    The fundamental premise of our approach is that companies 
should choose the U.S. market over the Iranian market. It is a 
sound approach but by no means a silver bullet for addressing 
Iran's desire to acquire a nuclear weapons capability.
    Our legislation, even before the President signed it into 
law on July 1, helped to galvanize international opinion 
regarding the Iranian nuclear issue. The European Union, 
previously a key source of Iranian commerce and investment, 
passed its own set of tough sanctions in late July. Other 
states--Canada, Australia, South Korea, Japan, and Norway--
followed with their own national sanctions.
    As a result of our sanctions and additional financial 
measures pursued by the administration, most major Western, 
Japanese, and South Korean energy companies have ceased selling 
Iran refined petroleum and investing in Iran's energy sector, 
and the doors of much of the financial, insurance, and shipping 
worlds have been closed to Iran.
    Major oil companies, such as Royal Dutch Shell, Total of 
France, Italy's ENI, Vitol, Norway's Statoil, Spain's Repsol, 
and Japan's INPEX, have all ended or are in the process of 
ending their energy projects in Iran. And there are numerous 
reports that these sanctions have seriously hurt the Iranian 
economy and deepened political fissures in the Iranian 
leadership. But is that, in fact, the case? And, if so, how 
much closer does it bring us to our real objective, which is to 
persuade Iran to suspend its nuclear enrichment program and end 
its nuclear weapons program?
    [Audio difficulties.]
    Chairman Berman. Roll the clock back. I get 10 more seconds 
for the last play.
    The purpose of this hearing is to attempt to answer these 
very questions. I would like to hear the witnesses' candid 
assessment of the current sanctions regime. Is it helping us to 
achieve our goal of an Iran without nuclear arms? Are sanctions 
having the desired impact on Iran's economy, and are we getting 
closer to persuading Iran to suspend its uranium enrichment 
program, as repeatedly demanded by the international community? 
In particular, is international support for sanctions holding 
firm? How much back-filling is there by companies whose 
governments have not imposed national sanctions?
    On that last point, there seems to be no doubt that Chinese 
companies are pursuing energy investments in selling Iran 
refined petroleum. The Chinese acknowledge it. I would like 
know why we haven't sanctioned any of the Chinese companies 
engaged in clearly sanctionable actions. I am concerned that we 
will not be able to sustain a robust sanctions regime if we 
don't impose sanctions in an evenhanded manner.
    Many leading Western, Japanese, and South Korean companies 
have pulled out of Iran because they feared we would otherwise 
impose sanctions. Will they stay out if they see that others 
are getting off scot-free? Is the problem that we lack leverage 
over the Chinese companies? What kind of message do we send if 
we fail to sanction companies that are transparently engaged in 
sanctionable activities?
    I know the administration did impose sanctions on one 
company, NICO, which is based in Switzerland. But since NICO is 
an Iranian state-owned company that, by definition, would be 
barred from dealing with the U.S. market, that action doesn't 
seem to me to have much of a deterrent effect. I hope 
Undersecretary Burns, in particular, will address these issues.
    And, in addition, I would welcome Under Secretary Burns's 
views on other key aspects of Iranian nuclear issue, such as 
the recent interruption in Iran's enrichment activities and the 
general diminishing of its enrichment efficiency, as reported 
by the IAEA. How meaningful is that slowdown? Should it alter 
our previous calculations regarding Iran's nuclear program? 
Have the recent revelations regarding North Korea's apparently 
enhanced nuclear facilities affected those calculations? What 
can you tell us regarding upcoming negotiations in Iran, now 
scheduled to commence in a few days in Geneva?
    Lastly, this month marks the 1-year anniversary of the last 
major demonstrations by Iran's reformist Green Movement, which 
mushroomed in the wake of the June 2009 hijacking of the 
Presidential elections by Ahmadinejad. Where does the Green 
Movement stand today? What can we do to affirm our clear 
support for the pro-democracy forces in Iran?
    And I would like to close by reaffirming my own strong 
support for our sanctions effort. It is our last best hope for 
resolving the Iran nuclear issue in a peaceful manner. As I 
have said on many occasions, the alternatives are military 
action and, even worse, acquiescence to a nuclear-armed Iran. 
Both of these alternatives are unpalatable.
    And I also want to really commend the administration for 
placing such a high priority on the Iranian nuclear issue and 
for the effectiveness of its policies thus far. Thanks to this 
administration's artful diplomacy, we have far more 
international support on this issue than most of us thought 
even remotely possible as little as 6 months ago.
    From the outset, this administration has made Iran a top 
priority item in virtually every meeting with foreign leaders, 
and the results show. The administration's successful jawboning 
of many banks and energy companies have also made a significant 
contribution to the effort to isolate Iran economically.
    So, 5 months to the day since CISADA became law, I look 
forward to your candid assessment of the effectiveness of our 
sanctions effort, and how it can be improved, as well as your 
assessment of the prospect that we will succeed in our larger 
goal of preventing Iran from achieving nuclear-weapons status.
    I also want to give the witnesses every opportunity, should 
they choose, to comment on the significant number of documents 
concerning Iran which were unfortunately released by Wikileaks. 
However much one might deplore the unauthorized release of 
internal U.S. diplomatic communications, they do disclose the 
very high priority that this President, from the outset, has 
put on ending the Iranian nuclear weapons program.
    I am very pleased to recognize the ranking member, the 
gentlelady from Florida, Ileana Ros-Lehtinen, for her opening 
remarks.
    [The prepared statement of Mr. Berman follows:]
    
    
    
    Ms. Ros-Lehtinen. Thank you very much, Mr. Chairman.
    I would like to start by recognizing some of my 
constituents who are in the audience. They are Iranian 
Americans who are staunchly opposed to the Iranian regime, who 
have shed light on Iran's nuclear program through the unveiling 
of information on different Iranian nuclear facilities. Many 
have relatives in Camp Ashraf. I raised with Assistant 
Secretary of State Feltman a few weeks ago the need for the 
administration to ensure that the Iraqi Government lives up to 
its human-rights commitment and protects the residents of Camp 
Ashraf.
    Welcome.
    With respect to Iran, Mr. Chairman, as we all know, the 
United States must have one vital objective, and that is to 
stop the regime's pursuit of nuclear and other unconventional 
weapons and the missiles to deliver them, its sponsorship of 
terrorism, and other activities that threaten Americans, our 
interests, and our allies.
    However, since the 1990s, the U.S. and international 
efforts to stop the growing Iranian threat have been half-
hearted at best, with results to match. The problem is not that 
a tough approach has failed but that it has yet to be fully 
tried. The sanctions were not fully implemented or enforced. 
The focus was not on measures the U.S. could easily take but, 
instead, on persuading the so-called international community to 
act ``collectively,'' meaning agreeing to the lowest common 
denominator while continuing to cultivate ties with the regime 
in Tehran.
    Russia, of course, has a long record of cooperation with 
Iran on missiles and on nuclear matters, particularly its 
construction of the Bushehr reactor, which is scheduled to come 
on-line in January. To secure Russian cooperation, the current 
and previous administrations resorted to a series of 
concessions to Moscow. What did we buy at so great a price? 
Tacit support for U.N. sanctions and ``assurances'' that Russia 
will wrap up investments in Iran's energy sector and that 
Russia will not, at this time, proceed with its sale of advance 
missiles to Iran. Of course, despite all of our concessions, 
Russia has indeed offered a nuclear cooperation agreement and 
advance missile sales to the Syrian regime.
    China is another key ally and protector of Iran and has 
made it clear that it will prevent significant pressure being 
placed on Tehran. Chinese companies are eagerly expanding their 
trade with and investments in Iran, many taking advantage of 
opportunities created by Western and other companies which are 
curtailing or finally severing their ties. Recent reports 
indicate that China has actively facilitated North Korea's 
providing Iran with advanced missiles and ingredients for 
chemical weapons in violation of U.N. Security Council 
sanctions.
    But support for Iran comes from other places as well. 
Determined to demonstrate its growing distance from the U.S., 
Turkey has publicly embraced Tehran, increased its economic 
cooperation, signed a major gas pipeline deal, and tried to 
undermine U.S. efforts to stop the Iranian threat, including 
voting against U.N. Security Council Resolution 1929. Turkey 
recently prevented NATO from designating Iran as a missile 
threat to be countered with a proposed anti-missile shield, 
despite Tehran's expanding missile capabilities. Armenia is 
expanding financial trade, transport, and energy cooperation 
with Iran.
    Unfortunately, securing effective action by one 
administration after another has been an uphill battle. For 
over 14 years, since the passage of the Iran Sanctions Act, 
only one determination of sanctionable activity has ever been 
made, and the resulting penalties were immediately waived. 
Efforts to strengthen existing laws were opposed by each 
administration, citing a reluctance to tie the President's 
hands or upset other countries who want to keep doing business 
with Tehran.
    This past June, after a long, hard-fought struggle, the 
Comprehensive Iran Sanction, Accountability, and Divestment 
Act, CISADA, was enacted. Although weaker than some of us had 
hoped, this law could represent a major step forward, 
especially through its energy, refined petroleum, and financial 
sanctions. This congressionally driven effort has led some 
countries, including the EU, Japan, Australia, and South Korea, 
to finally impose their own, albeit more limited sanctions on 
Tehran.
    On the financial front, the actions taken by foreign 
governments to sever their ties with the Iranian financial 
institutions and other Iranian entities designated as involved 
in Iranian proliferation and sponsorship of terrorism is 
encouraging.
    Under Secretary Levey, let me again thank you and your team 
at Treasury for your pivotal role in these developments and 
your years of dedication in acting against the Iranian regime 
and its enablers. Thank you, sir.
    I am, however, concerned that history may be repeating 
itself regarding the State Department's implementation efforts. 
For example, the law requires the administration to investigate 
upon receiving credible evidence of suspected sanctionable 
foreign investment in Iran's energy sector. The U.S. has known 
for years about Chinese energy investment in Iran, but only 
this past September did the administration initiate 
investigations of sanctionable activity. Yet State still 
refuses to publicly disclose whether Chinese companies are 
among the targets.
    The State Department has issued one determination under 
CISADA, just one, imposing the minimum number of sanctions on 
NICO, an Iranian subsidiary, for its role in Iran's petroleum 
sector. Likewise, the administration has listed and sanctioned 
just eight Iranian regime officials responsible for human-
rights abuses.
    We have wasted enough time, 14 years. No more waivers, 
exceptions, or excuses. We cannot live with a nuclear Iran. We 
must ensure that the tools we have are used to their maximum 
effectiveness and look for new means of compelling Iran to 
cease activities that threaten our security, our interests, and 
our allies.
    I am not just referring to this nuclear pursuit but also to 
its state sponsorship of terrorism. Of particular concern is 
Iran's support for Hezbollah in Lebanon, Mr. Chairman, which 
has threatened violence if, as expected, its operatives are 
indicted for the assassination of former Lebanese Prime 
Minister Hariri, has amassed an arsenal of about 50,000 
rockets, and participates in and has veto power over the 
current Lebanese Government. I would ask Under Secretary Burns 
what the U.S. is doing to address this situation before it 
becomes a full-blown crisis and Hezbollah takes over 
completely.
    Thank you, Mr. Chairman. And I will ask the administration 
also about the continued military assistance to the Lebanese 
armed forces.
    Thank you very much, Mr. Chairman. And I thank the 
witnesses.
    Chairman Berman. Well, thank you.
    And now I am pleased to recognize for 3 minutes the 
chairman of the Middle East and South Asia Subcommittee, the 
gentleman from New York, Mr. Ackerman.
    Mr. Ackerman. Thank you, Mr. Chairman.
    In the 112th Congress, the challenge before our witnesses 
and before those of us returning in January will be the same: 
How do we prevent Iran from acquiring nuclear weapons? It is, I 
believe, the most critical national security question facing 
our Nation today, and the success or failure of our efforts 
will determine what kind of world our children will inherit.
    Iran's drive to acquire nuclear weapons is near to success, 
but it has not yet succeeded, and it must not. The consequences 
of a successful effort by Iran to acquire nuclear weapons, in 
open defiance of numerous U.N. Security Council resolutions, 
solemnly undertaken treaty obligations, and amid an endless 
stream of genocidal rhetoric against the state of Israel, would 
change the world. And this must not happen.
    The implementation of new sanctions so far has been 
surprisingly successful, with the combined effect of U.N. 
sanctions and the new CISADA sanctions imposing real economic 
pain on the ayatollahs' regime. But for pressure to succeed, it 
must be comprehensive.
    And here there are two points to make. First, the economic 
pain must be as severe as we can make it. Sanctions must be 
applied without exception or distinction. The Congress will 
accept nothing less.
    Second, economic pain is not enough. By luck or providence, 
the mullahs' regime is facing an internal political crisis more 
severe than any since the creation of the Islamic Republic. 
While it is true the Green Movement has been effectively 
suppressed by the tools of repression, the legitimacy of the 
Iranian regime has been permanently undercut in the eyes of the 
Iranian people. Elections whose results have to be forced down 
an unwilling population's throat by means of mass murder, rape 
and torture are a sign of weakness, and that weakness needs to 
be aggressively exploited.
    I again call upon the Obama administration to emulate 
President Reagan's approach to the Soviet Union, which applied 
comprehensive, across-the-board pressure, combining economic, 
political, diplomatic, cultural, and military pressure, with 
arms control negotiations--what we might call today 
``engagement''--that advanced American interests.
    The Iranian regime is likewise ripe for comprehensive 
pressure. Multilateral forums and multinational institutions 
need to be pushed to focus on Iran's deplorable human-rights 
record. Our broadcasting into Iran must be ramped up to let the 
Iranian people know that they are not alone. The President and 
the Secretary of State need to consistently remind the world of 
the oppression of the Iranian people by the illegitimate 
Iranian regime.
    The Armed Forces of the United States need to be deployed 
and exercised with key partners to demonstrate our ability to 
respond overwhelmingly to aggression and provocation. Those 
willing to take up arms against Iranian influence should have 
our material support. Iranian agents attempting subversion or 
the acquisition of illicit materials or arms must feel the 
shadow of the United States pursuing them with vengeance.
    It is not too late to stop Iran, to roll back their nuclear 
program, to aid the Iranian people in taking back their 
country. But we must engage in this great and necessary 
challenge with even greater effort and vigor than we have 
managed so far. Time is running out.
    Thank you, Mr. Chairman.
    Chairman Berman. Time has run out. And the ranking member 
of the Subcommittee on Middle East and South Asia is not here, 
so I am going to recognize the chairman of the Terrorism, 
Nonproliferation and Trade Subcommittee of this committee, the 
gentleman from California, Mr. Sherman, for 3 minutes.
    Mr. Sherman. Thank you for holding these hearings, Mr. 
Chairman. I believe that CISADA and its implementation is the 
most important work for us to do this month. I think that we 
need to see even more enforcement of existing law and the 
adoption of new statutes. I hope that later this month or early 
next year we consider the Stop Iran's Nuclear Program Act, 
which would strengthen the sanctions still further.
    In addition, I should note that our colleague, Congressman 
Filner of California, has a bill with over 106 co-sponsors to 
take the PMOI off the terrorism list. And I hope that respect 
for our 106-plus colleagues that have co-sponsored that bill 
would lead to a serious consideration of the bill and hearings 
on it. So we have much legislating to do, just as is our 
friends from the administration have much to do, as well.
    Major oil companies from the West for the most part won't 
invest in Iran's oil sector or sell refined petroleum. This is 
a success. It is a success that comes, perhaps, a dozen years 
too late.
    At this point, we have to not only prevent investment in 
the energy sector of Iran, we have to prevent Iran from getting 
refined petroleum products. Had the executive branch of 
government decided to follow the law when it was passed over a 
dozen years ago, we would be in a much better position now. Now 
the only way to stop Iran's nuclear program is not only what is 
already being done, but the much, much more difficult job of 
preventing Iran from getting refined petroleum.
    And I would point out that we are where we are not because 
there has been a radical change in State Department policy. The 
policy has been, since the Iran Sanctions Act was adopted, to 
follow the law only to the extent that its implementation did 
not offend any foreign government except that of Iran. This is 
described by our ranking member as the ``lowest common 
denominator'' of policy. The good news is the lowest common 
denominator is now a higher number than it used to be, 
especially for Japan and western Europe. And we have obtained a 
lot of cooperation, and it is now difficult for Iran to find 
partners to invest in its oil fields.
    We also ought to give credit, however, to the wisdom of our 
allies, but especially to the corruption and ineptitude of 
those who are running Iran, who make doing business with that 
country so difficult.
    As to the Stop Iran's Nuclear Program Act, it would, for 
example, prevent--or sanction the $5 billion euro sovereign 
bond issuance that Iran is now engaged. They have realized that 
they may not be able to get Western investment in their oil 
fields, so they feel they will borrow the money and do the 
investment themselves. The way to stop that is new legislation, 
which I look forward to taking up expeditiously.
    I yield back.
    Chairman Berman. Time of the gentleman has expired.
    The ranking member of the Terrorism, Nonproliferation and 
Trade Subcommittee, the gentleman from California, Mr. Royce.
    Mr. Royce. Thank you.
    Chairman Berman. You are recognized for 3 minutes.
    Mr. Royce. There is no mike?
    Chairman Berman. I got one.
    Mr. Rohrabacher. Does this one work? There. You can take 
this one, Ed.
    Mr. Royce. Mr. Chairman, I want to thank you for holding 
this hearing because we face a crisis. And this has to sink in. 
Here is the headline from The Washington Post recently: ``The 
Obama administration has concluded that Chinese firms are 
helping Iran to improve its missile technology and develop 
nuclear weapons.'' That represents a crisis.
    When we learned yesterday that China declined to act on 
multiple--multiple--U.S. requests that it stop shipments of 
ballistic missile components from North Korea that were going 
through Beijing on Korean airlines, North Korean airlines, on 
Iranian carriers as well; when we learn that our Secretary of 
State has asked China to act on the fact that Iran was trying 
to buy gyroscopes and carbon fiber for its ballistic missiles 
from Chinese companies; when we find that Chinese companies 
were supplying Iran with precursors for chemical weapons; when 
we find that Iran gets both its parts and its technology from 
China, we face a crisis.
    And I am appreciative of the fact that Mr. Levey is here, 
because, as he puts it in his testimony, foreign financial 
institutions have a choice. If you conduct certain business 
with Iran, you risk losing access to the U.S. financial system.
    The message we need to convey, Republicans and Democrats 
alike, is this conduct on the part of China, in terms of 
violating these sanctions and helping give Iran the wherewithal 
to develop the missile technology and the nuclear weaponry, has 
to stop immediately. And if it does not stop, there certainly 
is going to be legislation from this Congress to bring it to a 
halt. The way to do it is to simply have an understanding that 
this is now the law on the books of the United States. It needs 
to be followed by China, and it needs to be followed now.
    Thank you, Mr. Chairman. I yield back.
    Chairman Berman. The time of the gentleman has expired.
    And now I am quite pleased and honored to introduce our two 
witnesses, two people who I think are among the most 
exceptional public servants we have working for the United 
States Government. The first is Ambassador William Burns, the 
Under Secretary of State for Political Affairs.
    Previously, Ambassador Burns served as Ambassador to 
Russia, Assistant Secretary of State for Near-Eastern Affairs, 
and Ambassador to Jordan. A career Foreign Service officer, he 
has also served as Executive Secretary of the State Department 
and as a special assistant to Secretaries of State Christopher 
and Albright.
    Ambassador Burns is a central player in the Obama 
administration's Iran policy team. In October 2009, he led the 
U.S. negotiating team in the P5-plus-1 talks with Iran in 
Geneva, where he struck an agreement with the Iranian 
negotiators that would have removed significant amounts of low 
enriched uranium from Iran stocks. The agreement was widely 
praised internationally at the time but was subsequently 
rejected by the leaders in Tehran. As I understand, he will 
once again be leading the U.S. negotiating team at upcoming P5-
plus-1 talks with Iran scheduled to begin in a few days in 
Geneva.
    Stuart Levey is the Under Secretary of Treasury for 
Terrorism and Financial Intelligence, a position he has held 
since 2004. In this position, he has played a central role in 
the efforts of both the Bush administration and the Obama 
administrations to combat Iran's illicit conduct in the 
international financial system. In fact, he is widely 
considered a key architect of those efforts. That, no doubt, is 
why the Obama administration asked him to remain in his 
position.
    Previously, Mr. Levey served as the principal associate 
deputy attorney general in the United States Department of 
Justice and, before that, as an attorney in a private law firm.
    Gentlemen, thank you for coming this morning. We look 
forward to hearing your testimony. If you decide to, you can 
summarize. Your entire statements will be part of the record.
    And, under Secretary Burns, why don't you lead off?

 STATEMENT OF THE HONORABLE WILLIAM J. BURNS, UNDER SECRETARY 
        FOR POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE

    Mr. Burns. Thank you very much. And good morning, Chairman 
Berman, Congresswoman Ros-Lehtinen, members of the committee. 
Thank you for the opportunity to appear before you again with 
my friend and colleague, Under Secretary Levey.
    We meet today at a moment of great consequence in the long 
and complicated history of international concerns about Iran 
and its nuclear ambitious. In recent months, working closely 
together, the administration, Congress, and our international 
partners have put in place the strongest and most comprehensive 
set of sanctions that the Islamic Republic of Iran has ever 
faced. It is a set of measures that we are determined to 
implement fully and aggressively. It is a set of measures that 
is already producing tangible results. And it is a set of 
measures that we reinforces or collective resolve to hold Iran 
to its international obligations.
    A great deal is at stake for all of us. A nuclear-armed 
Iran would severely threaten the security and stability of a 
part of the world crucial to our interests and to the health of 
the global economy. It would seriously undermine the 
credibility of the United Nations and other international 
institutions and seriously weaken the nuclear nonproliferation 
regime at precisely the moment when we are seeking to 
strengthen it.
    These risks are only reinforced by the wider actions of the 
Iranian leadership, particularly its longstanding support for 
violent terrorist groups like Hezbollah and Hamas, its 
opposition to Middle East peace, its repugnant rhetoric about 
Israel, the Holocaust, 9/11, and so much else, and its brutal 
repression of its own citizens.
    In the face of those challenges, American policy is 
straightforward: We must prevent Iran from developing nuclear 
weapons. We must counter its destabilizing actions in the 
region and beyond. And we must continue to do all we can to 
advance our broader interests in democracy, human rights, 
peace, and economic development across the Middle East.
    President Obama has made clear repeatedly that we will 
stand up for those rights that should be universal to all human 
beings and stand with those brave Iranians who seek only to 
express themselves freely and peacefully. The simple truth is 
that a government that does not respect the rights of its own 
people will find it increasingly difficult to win the respect 
that it professes to seek in the international community.
    We have emphasized from the start that what is at issue 
between Iran and the rest of the world is not its right to a 
peaceful nuclear program but, rather, its decades-long failure 
to live up to the responsibilities that come with that right. 
If Iran is sincere, it should not be hard to show the rest of 
the international community that its nuclear program is aimed 
at exclusively peaceful purposes.
    Facts are stubborn things, however. And it is a telling 
fact that Iran, alone among signatories of the NPT, continues 
to fail year after year to convince the IAEA and the United 
Nations of its peaceful nuclear intentions.
    Nearly 2 years ago, President Obama began an unprecedented 
effort at engagement with Iran. We did so without illusions 
about whom we were dealing with, with the scope of our 
differences over the past 30 years. We sought to create early 
opportunities for Iran to pursue a different path and to build 
confidence in its intentions. This was both a serious 
demonstration of our good faith and also an investment in 
partnership with a growing collation of countries profoundly 
concerned about Iran's nuclear ambitions.
    When, regrettably, those early efforts made little headway, 
we and our partners were left with no choice but to respond to 
Iran's intransigence by employing another tool of diplomacy: 
Political and economic pressure.
    The cornerstone of this campaign was U.N. Security Council 
Resolution 1929, passed early last June. By far the toughest of 
the four Chapter 7 resolutions enacted in recent years, 1929 
broke important new ground in curbing arms transfers to Iran; 
targeting the central role of the IRGC in Iran's proliferation 
efforts; banning for the first time all Iranian activities 
related to ballistic missiles that could deliver a nuclear 
weapon; sharply limiting Iran's ability to use the 
international financial system to fund and facilitate nuclear 
and missile proliferation; and, for the first time, 
highlighting formally potential links between Iran's energy 
sector and its nuclear ambitions.
    Russia's partnership was particularly crucial to passage of 
such an effective resolution, which led directly to its 
enormously important cancellation of the S-300 surface-to-air 
missile sale to Iran.
    The significance of 1929 is only partly about its content. 
It is also about the message of international solidarity that 
it sent and the platform that its carefully crafted language 
has provided for subsequent steps.
    Barely a week after the passage of 1929, the European Union 
announced by far its most sweeping collection of measures 
against Iran, including a full prohibition of new investment in 
Iran's energy sector, bans on the transfer of key technology, 
and the strictest steps to date against Iranian banks and 
correspondent banking relationships.
    Canada, Australia, Norway, Japan, and South Korea have 
followed the EU's example. New provisions in 1929 regarding 
cargo inspections are already being applied, resulting, for 
example, in the recent seizure by Nigeria of an illicit Iranian 
arms shipment.
    None of this is accidental. We have worked intensively with 
our partners, in conversation after conversation and trip after 
trip, around the world to produce an unprecedented package of 
measures and to ensure robust enforcement.
    Central to our strategy have been the efforts made by the 
Congress, by all of you, to sharpen American sanctions. When 
the President signed into law CISADA in early July, the 
administration and the Congress sent an unmistakable signal of 
American resolve and purpose, expanding significantly the scope 
of our domestic sanctions and maximizing the impact of new 
multilateral measures.
    We are enforcing the law rigorously and energetically. 
Already, more foreign investment in Iran has been curbed than 
at any time since Congress enacted the original Iran Sanctions 
Act nearly 15 years ago. In late September, Secretary Clinton 
imposed sanctions for the first time in the history of the ISA 
on a Swiss-based Iranian-owned firm involved in hundreds of 
millions of dollars' worth of deals in Iran. Deputy Secretary 
Steinberg announced that we have opened formal investigations 
into other firms.
    Just as importantly, we have used the powerful instrument 
provided by CISADA's ``special rule'' to persuade major 
European and Asian firms, including Shell, Statoil, ENI, Total, 
and INPEX, to terminate existing sanctionable activities in 
Iran and provide clear assurances that they would not undertake 
any such activities in the future. According to reliable 
estimates, Iran may be losing as much as $50 billion to $60 
billion overall in potential energy investments, along with the 
critical technology and know-how that comes with them.
    Faced with new international concerns and the choice 
between doing business with Iran and doing business with 
America, more and more foreign companies are pulling out of the 
Iranian market. Major energy traders like Lukoil, Reliance, 
Vitol, Glencore, IPG, Tupras, and Trafigura have stopped sales 
of refined petroleum products to Iran.
    Until last July, according to open sources, Iran imported 
roughly 130 barrels per day of refined petroleum products. In 
October, that figure had dropped by 85 percent to 19,000 
barrels per day. Large shipping companies like Hong Kong-based 
NYK are withdrawing completely from the Iranian market. Major 
firms like Lloyd's have stop insuring Iranian shipping. 
Daimler, Toyota, and Kia have stopped exporting cars to Iran. 
Major banks like HSBC and Deutsche Bank have pulled out.
    Stuart will address the impact of these developments in 
more detail. And his own personal efforts with firms and 
governments around the world remain hugely important. But the 
short answer is that the net result of all of the measures that 
we have applied in recent months is substantial--far more 
substantial than any previous set of steps.
    I would also like to emphasize that we take very seriously 
CISADA's provisions regarding human-rights concerns in Iran. 
Earlier this fall, we designated eight senior Iranian officials 
for human-rights abuses, and we are working with Treasury on 
other potential designations. One of the best ways in which we 
and others can support the cause of universal human rights in 
Iran and the brave people who defend them is to hold 
accountable people who deny them.
    I cannot honestly predict for you with any certainty how 
all these collective and individual measures will affect the 
choices that Iran's leadership makes. We will continue to 
sharpen those choices. We will show what is possible if Iran 
meets its international obligations and adheres to the same 
responsibilities that apply to other nations. We will intensify 
the cost of continued noncompliance and show Iran that pursuit 
of a nuclear-weapons program will make it less secure, not more 
secure.
    And, in the meantime, we will continue to reassure our 
friends and partners in the Gulf of our long-term commitment to 
their security, a commitment clearly reflected in the visits to 
the region that both Secretary Clinton and Secretary Gates will 
be making in the next 2 weeks.
    Let me conclude by emphasizing two simple but important 
realities. First, Iran is not 10 feet tall. Its economy is 
badly mismanaged. Iran's leaders have tried very hard to 
deflect or divert the international pressures building all 
around them, itself an acknowledgement of their potential 
effect.
    Second, and just as significant, sanctions and pressure are 
not an end in themselves. They are a compliment, not a 
substitute, for the diplomatic solution to which we and our 
partners are still firmly committed.
    There is still time for diplomacy if Iran is prepared to 
engage in serious discussions. There is still room for a 
renewed effort to break down mistrust and begin a careful, 
phased process of building confidence between Iran and the 
international community. There is still an opportunity for an 
outcome which ensures both Iran's rights and the fulfillment of 
its responsibilities.
    The P5-plus-1, led by EU High Representative Ashton, will 
approach next week's meeting with Iran with seriousness of 
purpose and a genuine readiness to engage constructively on 
international concerns about Iran's nuclear program. The door 
is open to serious negotiation if Iran is prepared to walk 
through it.
    Thank you.
    [The prepared statement of Mr. Burns follows:]

    
    

    Chairman Berman. Thank you very much, Secretary Burns.
    And Secretary Levey.

STATEMENT OF THE HONORABLE STUART A. LEVEY, UNDER SECRETARY FOR 
   TERRORISM AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF 
                            TREASURY

    Mr. Levey. Thank you, Mr. Chairman, Ranking Member Ros-
Lehtinen, members of the committee. Thank you for inviting me 
here today to discuss the current status of the global effort 
to impose sanctions on Iran. I appreciate the true partnership 
we have had with this committee over many years.
    And I am happy to be here with Under Secretary Burns, who 
has been an excellent leader on this issue and on many others. 
And he has given an excellent overview of our overall Iran 
policy. I can assure you that we share the sense of urgency 
that you all expressed and we have the same priority placed on 
this challenge.
    I can report to you today that we have made significant 
progress in implementing our strategy to impose sanctions on 
Iran, and the strategy is beginning to have the effect it was 
designed to have. By sharpening the choice for Iran's leaders 
between integration with the international community, premised 
on their living up to their international obligations, and 
ever-increasing isolation, we are beginning to create the 
leverage we need for effective diplomacy.
    The strategy we designed and are now implementing has 
several critical elements.
    First, we recognized from the outset that no one measure 
would put enough pressure on Iran, and so we are imposing a 
variety of measures simultaneously.
    Second, as Bill pointed out, we took steps in advance to 
generate the support necessary for a broad coalition of 
governments and the private sector to support us on sanctions.
    Third, we focused our measures on Iran's illicit conduct, 
such as WMD proliferation and its support for terrorism, since 
that has proven to be an effective way to build the broad 
coalition.
    And, finally, we designed a strategy that uses Iran's 
expected attempts to evade sanctions to our advantage, by 
aggressively exposing Iran's deceptive conduct and, thus, 
underscoring Iran's riskiness as a commercial partner.
    It is difficult to overstate the importance of Security 
Council Resolution 1929 in building our international coalition 
and in implementing this strategy. In addition to the 
provisions that Bill mentioned, the resolution's financial 
provisions are particularly powerful, as they call upon member-
states to prevent the provision of financial services if there 
are reasonable grounds to believe that such services could 
contribute to Iran's nuclear and missile programs.
    And given the vast body of public information demonstrating 
the scope of Iran's illicit conduct and deceptive practices, it 
is virtually impossible for banks and governments to assure 
themselves that transactions with Iran could not contribute to 
proliferation-sensitive activities.
    Indeed, in the aftermath of the resolution's adoption, many 
of our partners, as was mentioned by several of you and Under 
Secretary Burns, have enacted robust sanctions programs. These 
sanctions regimes impose asset freezes and financial 
restrictions on a wide range of illicit Iranian actors, 
including the IRGC and IRISL, the Iranian shipping line, and 
they have enacted broad measures to protect their financial 
systems from Iranian abuse, such as reporting or pre-approval 
requirements for transactions involving Iran.
    Also critical to our strategy is the passage and 
implementation of CISADA. As you know, the financial provisions 
of CISADA are quite powerful, as they indeed force the stark 
choice that Mr. Royce pointed out: If you conduct certain 
business with Iran, you risk losing access to the U.S. 
financial system. It is a very draconian potential sanction.
    We have moved quickly to implement CISADA. We published 
required regulations promptly. And we have traveled to 24 
countries since June, both to educate governments and the 
private sector about CISADA and also to share information about 
Iran's illicit conduct. We have reached out to governments and 
financial institutions in more than a dozen countries to 
investigate conduct that could be sanctionable under the act. 
What we have seen thus far is very dramatic. Even banks that 
had previously been willing to do business with designated 
Iranian banks are now reversing course and cutting ties with 
Iran altogether.
    Beyond this outreach, Treasury has used its authorities to 
designate a wide range of Iranian actors involved in illicit 
conduct. As I mentioned earlier, we expected Iran to try to 
evade any sanctions we imposed, and continued actions, such as 
designations, are critical to counteract this evasion and to 
maintain the effects of our sanctions. Just since June, we have 
designated 53 IRISL-related entities, 9 IRISL-linked 
individuals, 10 individuals or entities linked to the IRGC, and 
2 Iranian-owned banks, Post Bank and the Hamburg-based EIH. We 
have also identified 43 entities as being that of the Iranian 
Government.
    The cumulative effect of sanctions has been to increasingly 
isolate Iran from the international financial system. Iran is 
effectively unable to access financial services from reputable 
banks and is finding it increasingly difficult to conduct major 
transactions in dollars or euros. Iran's reduced access to the 
international financial system has also made it very difficult 
for Iran to make payments on loans and maintain insurance 
coverage on IRISL's ships and is having an impact on IRISL's 
ability to continue operations. It has even led to the seizure 
of some IRISL ships by its creditors.
    As the chairman indicated in his opening statement, with 
great regularity, major companies across a range of 
industries--finance, engineering, energy, manufacturing, 
automobile, insurance, accounting firms--they are all 
announcing that they are curtailing their business dealings 
with Iran.
    There are clear signs that the speed, scope, and impact of 
sanctions have caught the Iranian regime by surprise. In the 
face of pressure, the Iranian Government has increasingly 
turned to the IRGC for key economic projects. That trend meshes 
perfectly with our conduct-based strategy, since it is hard to 
imagine a better sanctions target than the IRGC. Relying on the 
IRGC is likely to exacerbate Iran's isolation, as companies 
around the world have begun to shun all business with the IRGC, 
given its support for terrorism and involvement in Iran's 
proliferation activities and human-rights abuses.
    Our efforts to consistently expose Iranian sanctions 
evasions are also paying off. In September, a high-ranking 
Iranian Government official underscored exactly the effect we 
have tried to create when he said, ``We have never had such 
intense sanctions, and they are getting more intense every day. 
Whenever we find a loophole, they block it.''
    In order to maintain and even increase the impact we have 
created, we need to remain vigilant and intensify our efforts. 
By doing so, we can continue to create the leverage needed for 
our diplomacy to be effective. I look forward to continuing our 
work with this committee to achieve that goal.
    Thank you.
    [The prepared statement of Mr. Levey follows:]
    
    
    
    Chairman Berman. Well, thank you very much, Secretary 
Levey, for the testimony and the overview.
    I will now yield myself 5 minutes to begin the questioning.
    Neither of you mentioned China in your testimony. Are 
Chinese companies involved in Iran's energy sector? And, if so, 
why are we not sanctioning them?
    I understand the dilemma. What are the implications for our 
relations with China if we were to sanction a state-owned 
energy company? But I would also throw out the alternative 
proposition: What are the implications for our entire sanctions 
regime if we don't?
    How important are Chinese companies to Iran's energy sector 
and refined petroleum products? And are there other countries 
or companies that are currently supporting Iran's energy 
sector?
    Mr. Burns. Well, Mr. Chairman, first, we take very 
seriously, just as you and Congressman Royce emphasized, 
concerns about Chinese involvement in the Iranian energy 
sector. We have, at the very highest levels, including in 
President Obama's most recent meeting with President Hu a few 
weeks ago, emphasized the importance that we attach to 
restraint on the part of China in its dealings in the Iranian 
energy sector.
    We have seen reports--and also the importance we attach to 
not only slowing down existing investments, not engaging in new 
ones, but not backfilling behind companies, the large number of 
companies that are pulling out of the Iranian energy sector.
    We have seen reports since then in the trade press and 
other open sources of slowdowns in Chinese activities in the 
Iranian energy sector. It may be that the Chinese are 
concluding that the Iranians, as so many other companies around 
the world have found, are not reliable energy partners. The 
Chinese are clearly trying to diversify their energy 
partnerships around the world.
    It is also clear, with regard to your question about 
refined petroleum products, that rising domestic demand in 
China is occupying a much greater proportion of the attention 
of Chinese refined-petroleum producers.
    So, for all those reasons, we will continue to push very 
hard on this issue, which remains quite significant, I think, 
to our hopes to apply the sort of pressure that is going to be 
needed.
    Chairman Berman. Thank you.
    I don't like raising points based on revelations from 
WikiLeaks, but I am going to make an exception here because it 
concerns a matter of potentially great significance. And I 
think both the ranking member and Mr. Royce made references to 
this.
    Do you wish to comment on the New York Times claim, based, 
it says, on WikiLeaks documents, that Iran has acquired 19 
medium-range nuclear-capable missiles from North Korea? 
According to the article, these missiles can reach Berlin or 
Moscow. The article also says that possession of these missiles 
can facilitate Iran's development of intercontinental ballistic 
missiles. And I should point out that that claim was treated 
skeptically today in today's Washington Post, based on the 
Post's interpretation of the same WikiLeaks documents.
    Rather than take one or the other slant, what are your 
thoughts about this issue?
    Mr. Burns. Well, I mean, just several quick comments, first 
on WikiLeaks in general.
    I think, you know, the reality is that the despicable 
breach of trust that we have seen through the WikiLeaks 
disclosures has done substantial damage to our ability to carry 
out diplomatic efforts like the one we have just described to 
you. Confidentiality of conversations is at the core of what we 
do as diplomats, just as it is for journalists or doctors or 
lawyers or others.
    And it has done damage. Secretary Clinton is literally 
working night and day, in conversations with countless leaders 
around the world, to try as best we can not only to express 
regret but to work through these issues. And we have also taken 
some quite stringent measures to ensure that information in the 
State Department that doesn't need to go to other agencies of 
the U.S. Government isn't going to people who don't need to 
know it. So that is the first general point on WikiLeaks.
    I can't comment on the contents of, you know, particular 
alleged cables that WikiLeaks has referred to. What I will, 
however, stress--and this is in response to Mr. Royce's, I 
think, you know, very serious reinforcement of concerns about 
any evidence that we come across of support for Iran's illicit 
missile or nuclear activities--we take seriously every piece of 
information that we see. We have, on a number of occasions, 
raised that information with the Chinese Government as well as 
with other governments. In some cases, we have seen them act on 
it, but the record is a mixed one, to be honest.
    And we are continuing to press those specific concerns that 
we have. Because I agree with you that it is extremely 
important to fully implement the provisions, particularly in 
Resolution 1929, which add significantly to the flat 
prohibition of any support, technical or otherwise, for 
ballistic missile activity in Iran that is capable of 
delivering a nuclear weapon. So we will continue to take this 
very seriously and follow up on it vigorously.
    Chairman Berman. My time has expired. And I yield now 5 
minutes to the ranking member.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Chairman.
    Thank you, gentlemen, for your testimony.
    As you pointed out, Secretary Burns, the next round of the 
P5-plus-1 negotiations with Iran is tentatively scheduled to 
take place in just a few days in Geneva. However, in the lead-
up to these talks, Iranian leaders have reiterated their 
commitment to continuing their uranium-enrichment program.
    Given these statements and the position of the Iranian 
leadership, what does the administration expect to accomplish 
with these upcoming negotiations?
    And related to that, previous negotiations were aimed at 
reaching an agreement that would require Iran to suspend its 
uranium-enrichment activity, as mandated by the United Nations 
Security Council. So is a complete halt to enrichment a 
prerequisite, or is the administration willing to consider a 
partial halt?
    Also, there are rumors of a new P5-plus-1 offer to the 
Iranians. Does such an offer exist? And what type of incentives 
and disincentives are included in the proposals?
    Also, what is the administration's plan regarding the 
uranium that Tehran has enriched to the 20 percent level? Will 
we insist that Iran surrender the entire amount, or is a deal 
in the works allowing Iran to keep some portion of what it has 
already amassed? And how do you plan to deal with Iran's using 
the negotiations as a stalling procedure by the U.S. and other 
countries?
    And then lastly, I know the chairman has talked about the 
energy and refined petroleum activities with Iran, and China 
being a repeat offender, but we also have the Iran, North 
Korea, Syria Non-Proliferation Act, INKSNA, and that is also a 
sanctionable procedure that we can use. And I wanted to ask 
about the administration possibly taking action against Russia 
and their entities implicated in the proliferation assistance 
to Iran.
    I don't know if we will have time for all of that, but 
thank you, sir.
    Mr. Burns. Sure, no, thank you. And I will try as best I 
can, very briefly, to go through four or five points.
    First, in terms of our general approach, as I emphasized in 
my opening statement, the P5-plus-1 will go into what we hope 
will be a serious round of discussions with the Iranians, 
prepared to engage seriously about our very profound concerns 
about Iran's nuclear program. We will continue to emphasize the 
importance of taking tangible steps to address those concerns, 
tangible steps which are necessary as a result of Iranian 
noncompliance over many years and the mistrust that that has 
created.
    We will be guided--and this is in response--this is my 
second point--in that approach, the P5-plus-1 will be guided by 
a whole series of Security Council resolutions and IAEA 
decisions--Security Council resolutions which include the 
mandate in the provision that you mentioned.
    Third, we will certainly look for ways in which we could 
build confidence and steps the Iranians could take, that could 
be taken together to build confidence. Last year, as you know, 
we made an attempt through the original Tehran research reactor 
proposal to do that. We are still prepared to consider the P5-
plus-1 or the possibility of making use of that concept. But 
last June, we made clear to Mr. Amano, the director general of 
the IAEA, that we, the Russians, and the French, our partners 
in the so-called Vienna Group on the TRR issue, had several 
concerns that would have to be addressed if the TRR is to be a 
real confidence-building measure, because circumstances have 
changed since this was originally proposed last October.
    Ms. Ros-Lehtinen. You talked about the steps. Are they 
tangible steps? And is there a deadline? Are we really 
providing these deadlines for them to make good on what they 
supposedly offer, or just keep stalling and stalling and run 
out the clock?
    Mr. Burns. No. Well, first, in terms of the tangible steps, 
you mentioned the issue of enrichment, almost 20 percent. That 
is one of the concerns that we made clear. I mean, that is 
something that would have to be addressed.
    In terms of----
    Ms. Ros-Lehtinen. Thank you. We will discuss that later. 
And I wanted to ask about the Russian entities. Any movement in 
sanctioning those?
    Mr. Burns. Well, on INKSNA, which was the question I think 
you had asked----
    Ms. Ros-Lehtinen. Right.
    Mr. Burns [continuing]. The State Department has finished 
its draft of the report for 2008. We are trying quickly to 
catch up. We have provided the 2007 report, I think, a few 
months ago, and that is in circulation interagency right now.
    So we take very seriously the importance of following 
through on INKSNA and hope to have that report to you early 
next year.
    Ms. Ros-Lehtinen. Thank you very much.
    Sorry I ran over time. Thank you, Mr. Chairman.
    Chairman Berman. The time of the gentlelady has expired.
    The chairman of the Middle East and South Asia 
Subcommittee, the gentleman from New York, Mr. Ackerman, is 
recognized for 5 minutes.
    Mr. Ackerman. Thank you, Mr. Chairman.
    Thank you for your testimony.
    Several thoughts first. It seems that the evil twins of 
Iran and North Korea had been separated at birth and have now 
reunited and found each other and have certain things in common 
and certain things that are different, with Iran insisting that 
its nuclear program is for energy only, and the North Koreans 
protesting very, very loudly that theirs is absolutely for 
nuclear weaponry, and demonstrating that at every moment that 
they can. The combination of the two of them joining in their 
mutual interests is very lethal.
    It seems to me that, among terrorists and terrorizing 
nations, it almost seems that possessing a nuclear program is a 
rite of passage to becoming a respected member of the 
international community. And they are pursuing that at all 
costs.
    Trying to evaluate the effectiveness of placing sanctions 
on Iran to drive it to the point where they become an economic 
basket case such as North Korea--where we really don't have to 
have too many economic sanctions because they are there already 
at the bottom of wherever they have to be, but still not giving 
up their program--I think we should reflect a bit on what 
happens when the Iranians are driven to that economic low 
point, should the program of imposing strangling sanctions, as 
the successes seem to indicate that we will have, whether or 
not that produces the goal that we are looking for.
    Some of the things we have seen in these leaks that have 
appeared in the media a lot of us have found to be true. Those 
of us who have spoken personally to world leaders, especially 
in the Middle East, who tell you you have to impose tough 
sanctions and when you ask them the question, ``Will they 
work?'' they say, ``Hell no, there is no way that they are 
going to work.''
    At what point do we make the determination that the 
sanctions, no matter how successful in measurable aspects, are 
not going to prevent the Iranians, whose game is intent to just 
run the clock on us till they have the weapon, that we have to 
find and exercise an alternative means? Where is that point?
    Mr. Burns. Well, Mr. Ackerman, I can't give you a precise 
point. I mean, all I can say is that I think there is still 
time to continue the approach that we have used, to tighten 
pressure, to try to make clear that there is an alternative 
pathway through which Iran could have a peaceful nuclear 
program and enjoy the benefits of contacts with the 
international community, but it is going to have to take some 
very concrete steps to address international concerns about its 
nuclear program. I think there is still time for a serious 
diplomatic effort to try to produce that outcome.
    Mr. Ackerman. And I will ask the same question, as well, to 
Secretary Levey.
    Mr. Levey. I was just going to comment, Mr. Ackerman, I 
think the distinction that you have drawn between North Korea 
and Iran, and also--that there are differences, I think, also 
in the potential effectiveness of sanctions. And the basic 
point, I think, is that Iran doesn't want to be isolated, and 
perhaps that is not so much the case with North Korea.
    Iran doesn't want to be isolated. They are facing 
situations--as they look out from where they are now, they see 
a lack of investment coming in. They see the inability to do 
business with major financial firms. They see the inability to 
do business with first-tier energy firms. They see that that 
has potential impact on their oil and gas production in the 
medium term, the inability to create jobs, et cetera. They 
don't want to be this kind of pariah.
    And while, as Bill pointed out, there is no guarantee here, 
that at least gives us some reason for confidence that they 
will want to change that dynamic.
    Mr. Ackerman. Let's assume that you are wildly successful 
and in a period of, I will give it 90 days, you have cut their 
GNP, their economy, and everything else by 99 percent, and they 
have an atomic weapon, they have a nuclear weapon, where are 
we?
    Mr. Levey. I think the point is----
    Mr. Ackerman. I think your clock runs faster than theirs, 
is the point I am making. And I think that we have to have a 
plan B. Because plan A, by anybody's estimation, even if 
successful beyond our wildest dreams in a real quick time 
frame, is not going to change the dynamic.
    Chairman Berman. The time of the gentleman has expired.
    The gentleman from Florida, Mr. Mack, is recognized, the 
ranking member of the Western Hemisphere Subcommittee, 
recognized for 5 minutes.
    Mr. Mack. Thank you, Mr. Chairman. And thank you to the 
ranking member, as well, and for the witnesses today for being 
here.
    Someone earlier said that they didn't hear you talk about 
China in your opening statements. I also didn't hear you talk 
about Venezuela in your opening statements. And let me suggest 
that Venezuela is in violation of the Iran Sanctions Act.
    That being said, if both of you could answer, why have we 
not sanctioned Hugo Chavez? That is question one. And I will 
let you answer that real quick, and then I have a couple 
follow-ups.
    Mr. Burns. Well, sir, I will just start by saying we did 
sanction one Venezuelan bank because of its connection to an 
Iranian bank, the Export Development Bank of Iran, which we had 
already sanctioned.
    We will continue to monitor very carefully the Venezuelan-
Iranian relationship and, particularly, Venezuelan compliance 
with U.N. Security Council resolutions and hold them to their 
international obligations.
    Mr. Mack. Secretary Levey?
    Mr. Levey. As Bill pointed out, we have taken action when 
we identify conduct that is in violation of the sanctions and 
will continue to do so.
    Mr. Mack. What information do you have on the allegations 
that gasoline in excess of 1 million U.S. dollars has been sent 
from Venezuela to Iran, utilizing China's National Petroleum 
Corporation and the Emirates National Oil Company?
    Mr. Burns. I will have to try to get you an answer on that, 
sir. I don't know.
    Mr. Levey. I have no further information at my fingertips.
    Mr. Mack. Okay. Well, let me suggest that Venezuela has 
violated the Sanctions Act by its shipment of gasoline to Iran.
    Next question. What is the status of the joint Venezuela-
Iranian international development bank and its U.S.-alleged 
connections to Iranian military entities and nuclear ambitions?
    Mr. Levey. I will get back to you with a more complete 
answer, but, in general, let me say that we have been looking 
very carefully at banking ties between Iran and Venezuela. When 
we have identified sanctionable activity, we have taken action. 
There was a subsidiary of the Export Development Bank of Iran 
in Venezuela which we have sanctioned.
    But there is also a fair amount of bluster that we have 
also seen from Venezuela, where they are playing up some of 
these ties and sometimes there is not as much substance behind 
the bluster as they would like us to believe. And we have to 
make sure that we cut through all of that and act based on the 
evidence.
    But we will have to get back to you with a more detailed 
answer on the----
    Mr. Mack. Well, let me suggest this. That is their problem. 
If they choose to bluster about it, then we need to hold them 
accountable. I mean, I think that, you know, as you have 
listened to some of the other members, the clock is running--
they are trying to run the clock out. And so, let's take their 
word for it. If Hugo Chavez says that he is sending gasoline, 
let's take his word for it. If his banks are in violation with 
this Iran Sanctions Act, let's take his word for it.
    Now, if you don't want to take his word for it, I think 
there is plenty of evidence, also, to suggest that in both 
those cases he is in violation. And the problem that I have is, 
when you have an act like the Iran Sanctions Act and you apply 
it to some and you don't apply it to others and you are slow on 
the draw, others figure out a way to game it.
    So if we are going to be serious about the Iran Sanctions 
Act, it starts with countries like Venezuela. We need to hold 
Hugo Chavez accountable. I think that, as you look through, you 
will find even more connections that are in direct violation of 
the Iran Sanctions Act.
    Let me ask you this, Secretary Levey. Will you set up a 
task force on PDVSA involving the developing of Iran's nuclear 
capacity and other corrupt activities?
    Mr. Levey. I guess the question of PDVSA would be more of a 
State Department lead, but we are happy to take a look at it in 
detail and take whatever action is appropriate.
    I want to assure you, there will be no hesitation to take 
action against Venezuela, or any other country for that matter, 
but no hesitation to take action against Venezuela if we 
identify sanctionable activity. This is not--no question about 
that.
    Mr. Mack. Well, I will suggest again that he is in 
violation, and so actions need to be taken.
    Secretary Burns?
    Mr. Burns. Just to reinforce what Stuart said, we will 
devote all the resources we need to get to the bottom of all 
the concerns that you rightly raised. And where we come across 
evidence, we will certainly hold the Venezuelan Government 
accountable.
    Mr. Mack. Thank you.
    Chairman Berman. The time of the gentleman has expired.
    The gentleman from California, chairman of the Terrorism, 
Nonproliferation and Trade Subcommittee, Mr. Sherman, for 5 
minutes.
    Mr. Sherman. The chair and several members have focused on 
China. China attacks us in a hundred ways: Attacks the economic 
security of Americans, attacks the national security of our 
country, cooperates with and subsidizes rogue regimes. And this 
is best exemplified in the example from the ranking member of 
our subcommittee, where China facilitates the transfer of 
missile technology from North Korea, which it subsidizes, to 
Iran, which it uses the threat of its U.N. veto to protect.
    And I don't blame so much Beijing as I blame Washington. 
We, in Congress, have a choice between two approaches. One is 
to continue to denounce China, in this room and others, in the 
hopes that our words will sting so badly that Beijing will 
change its policies. And occasionally we grant to the 
administration the authority to actually hit China a little 
bit, just as CISADA would allow you to sanction Chinese 
companies. But we know you are not going to do it to any 
significant degree.
    So one approach is to continue our current policy. The 
other is to take a radical approach, such as the bill I have 
proposed, which within 6 months would end most-favored-nation 
status for China. Given the power of Wall Street, I think it is 
clear that at least at the present we are going to continue our 
present policy.
    As to plan B, the King of Saudi Arabia told us what our 
plan B was. I am hoping plan A works.
    Secretary Burns, I was struck by your opening comment in 
which you said that sanctions were a mere complement to 
negotiations. Now, one view is that Iran really wants a Kumbaya 
moment with the United States. Another view is that Iran wants 
nuclear weapons so badly that nothing but the prospect of the 
brutal murder of all regime leaders by their own people would 
cause them to abandon their nuclear program.
    Assume--and I realize I may be less optimistic than you--
assume the second Iran. Are our sanctions policies enough not 
to just encourage a Kumbaya Iran to join us in negotiations; 
are you building toward sanctions strong enough to force a 
determined, belligerent Iran to choose between regime survival 
and abandonment of their nuclear program?
    Mr. Burns. Well, Mr. Chairman, Kumbaya moments are not 
something I have ever associated with doing business with this 
Iranian leadership. It is a pretty unsentimental leadership, 
and I think our approach is also pretty unsentimental. What we 
are----
    Chairman Berman. A little closer to the mike, Bill.
    Mr. Burns. Sorry. What I said is that Kumbaya moments are 
not something that I normally associate with dealings with the 
Iranian leadership.
    What we are determined to do is to sharpen the choices that 
that leadership faces to try to ensure that it sees both the 
possibilities of addressing international concerns about its 
nuclear program but also the costs. And the costs are rising.
    Mr. Sherman. Secretary, the question is, do you have a plan 
A that will force this regime to choose between regime survival 
and a nuclear program? Or do you only have a plan of sanctions 
that would encourage a rational regime to try to reduce the 
sanctions?
    Mr. Burns. Yeah, as we have described to you, Mr. Sherman, 
what we have is an approach which is very unsentimental which 
seeks to sharpen the choices for that leadership and imposes a 
stiffening set of costs. And I think what we have seen----
    Mr. Sherman. Let me move on. The idea of stiffening implies 
that we have a lot of time. Had the executive branch complied 
with the law back in the mid-1990s, we might have that time, 
but we don't. We have to take action that immediately bites the 
Iranian economy.
    Toward that, the recently enacted law provides for 
sanctions for those who provide gasoline to Iran. The standards 
are a million, five million in the law.
    Is the failure to launch formal investigations and actually 
sanction firms due to a lack of will or just a belief that we 
don't know who it is that is providing this gasoline? Do we not 
know which tankers are arriving at Iranian ports? Do we not 
know who owns those tankers? Even if we don't know who owns the 
oil on them, do we not know from which refineries they arrive? 
What do we have in intelligence? Why have you not sanctioned or 
even begun formal investigations against any entity taking 
gasoline to Iran?
    Mr. Burns. With regard to gasoline, refined petroleum 
products, I think it is pretty striking that, just in the few 
months since CISADA was passed, you have seen an 85 percent 
drop, according to open sources, in the amount of refined 
petroleum product that Iran is importing. We all have mentioned 
a number of companies which have pulled out of that business. 
So I think what we have seen is a quite significant move in the 
direction that we have all intended----
    Mr. Sherman. Secretary, thank you for your answer, but it 
wasn't to my question.
    Chairman Berman. The time of the gentleman has expired.
    The gentleman from Texas, Mr. Poe, 5 minutes.
    Mr. Poe. Thank you, Mr. Chairman.
    And I want to thank all of the Iranian Americans that are 
here in the audience today, concerned about a mutual concern 
that we all have, and that is Camp Ashraf and a delisting of 
the MEK as a foreign terrorist organization.
    I know the State Department and Foreign Affairs Committee 
are supposed to work very close together. My question, 
Secretary Burns, is, why has the State Department refused to 
brief the subcommittee chaired by Mr. Sherman on the delisting 
of the MEK?
    Mr. Burns. Well, sir, we are in the midst of a review that 
was ordered by the court last summer, as I understand it, in 
which----
    Mr. Poe. I guess my question is this: Will the State 
Department brief this committee and the subcommittee on 
information it has on the MEK and why the State Department 
relentlessly believes it should still be on the FTO list?
    Mr. Burns. The first thing is----
    Mr. Poe. No. Just answer my question.
    Mr. Burns. Sure. Yesterday afternoon, we provided an 
intelligence briefing, as I understand it. Second, I would be 
glad to take back your question and see if, in addition to the 
briefing we provided yesterday afternoon, there is more that we 
can provide at this stage. The only----
    Mr. Sherman. Will the gentleman yield? I would point out 
the State Department has refused to do a classified briefing at 
the request of our subcommittee for over a month, but did 
arrange for the classified briefing from the CIA, which 
couldn't address many of the questions but did address some.
    Mr. Poe. Reclaiming my time, that is exactly my point. That 
briefing yesterday, which I attended, was not by the State 
Department; it was by the CIA. And those two agencies aren't 
the same.
    I am just curious why the State Department, it appears to 
me, is so obstinate, even after going to court and the court 
ruling against the State Department, ordering them to provide 
information about the MEK in this lawsuit, information that is 
required to be delivered in January, which is next month, the 
way I figure it, and why Secretary Clinton in 2009 said that 
she would review the whole designation of the MEK in the next 2 
years. That has not been done. The 2 years is up in January.
    I want to know what information the State Department has 
that is so relentless on your part that they should remain on 
this list. Do you know that information?
    Mr. Burns. We are reviewing in response to what the court 
said and what Secretary Clinton said. One step in that review 
is to allow the MEK to have an opportunity to review the 
unclassified material which led to former Secretary Rice's 
decision in January 2009. We have provided that to the MEK. We 
await their input, and then we will complete the review as we 
promised.
    And if there are other questions beyond the briefing that 
was conducted yesterday afternoon, as I said, sir, I would be 
glad to take that back and see if we can provide further 
answers in the meantime.
    Mr. Poe. The situation in Camp Ashraf appears to me to just 
be getting worse, not better. People are very concerned about 
their relatives that live there. What are some hardline new 
procedures that we are taking, as the United States, to ensure 
the safety of those people at Camp Ashraf?
    Mr. Burns. As Assistant Secretary Feltman said when he 
testified before you, we take very seriously the concerns that 
have been raised about inadequate availability of medical 
treatment and other kinds of activities at Camp Ashraf. There 
were two individuals in particular who had been raised in that 
hearing, and we made sure afterwards that they did have access 
to the cancer treatment that they needed.
    We, along with the U.N. mission in Iraq, meet regularly 
with the Iraqi Government to hold them to their obligation to 
ensure that the basic human and individual rights of the 
residents of Ashraf are protected. And we will continue to do 
that.
    Mr. Poe. In other words, our position is we are just 
encouraging the Iraqis to do the right thing. I mean, is there 
hardline evidence that we are really encouraging in a way, I 
guess a diplomatic way, that they protect the safety of the 
people at Camp Ashraf, other than talking about it?
    Mr. Burns. We and the U.N. mission will continue to insist 
that the Iraqi Government meet its obligation to ensure the 
human rights of the residents of Ashraf. And that is to say 
that they are not subject to forcible repatriation to a place 
that might persecute them; that is to say that they have access 
to the medical treatment that they need. And we will continue 
to push that hard.
    Mr. Poe. Lastly, my own opinion is that the greatest hope 
for Iran and the world is a change, peaceful change, in regime 
in Iran. It is not to go to some type of military conflict. 
And, hopefully, the good folks in Iran will change their own 
rogue, unauthorized, illegitimate government, in my opinion.
    What are we doing to encourage that, if anything?
    Mr. Burns. Well, sir, as I said in my opening statement, 
the President and the Secretary take very seriously the 
importance of supporting universal human rights of Iranians. We 
do that in several ways: First, by applying CISADA, designating 
individual senior Iranian Government officials who are guilty 
of human-rights abuses, to hold them accountable; second----
    Mr. Poe. Reclaiming my time, Mr.----
    Chairman Berman. No, the time has----
    Mr. Poe. Mr. Chairman, may I have that answer in writing? 
My question was, what are we doing to promote the opposition in 
Iran, not human rights. And I would like to have an answer to 
that, Mr. Chairman.
    Chairman Berman. Okay. Would the administration be willing 
to lay out a number of the different things that you are 
involved in doing in communication to the committee or to Mr. 
Poe. Thank you.
    And the time of the gentleman has expired. The gentleman 
from Florida, Mr. Deutch, is recognized for 5 minutes.
    Mr. Deutch. Thank you, Mr. Chairman.
    Mr. Chairman, I would like to commend you and Congresswoman 
Ros-Lehtinen for your leadership on these issues. And thank 
you, Secretary Burns and Secretary Levey, for your testimony.
    On September 30th, Deputy Secretary Steinberg announced 
that Total, Statoil, ENI, and Royal Dutch Shell have pledged to 
end their investments in Iran's energy sector. And, as a 
result, pursuant to the special rule provided for in CISADA, 
there would be no investigation into their activity. The 
special rule provides that, and as the notice sent to our 
committee stated, that they are either no longer engaging or 
have taken significant verifiable steps toward stopping 
activity.
    My question, first question is: To what extent do those 
four companies continue to operate in Iran's energy sector?
    Mr. Burns. Well, just to add, sir, there is a fifth company 
since then to which the special rule has applied, INPEX, a 
Japanese company. So I think, broadly speaking, it is a 
demonstration that that instrument, which is a very important 
one, is working to produce the outcome that we want.
    With regard to the companies that you mention, I can try to 
get you a more detailed answer, but we have had quite detailed 
conversation with those companies. They are winding down their 
operations quite rapidly. And they have given us very clear 
assurances that, not only are they winding them down, the 
current operations, but they are not going to engage in any 
sanctionable activity in the future.
    Mr. Deutch. All right. Do we know how quickly they will 
wind down? When will they stop doing business in Iran?
    Mr. Burns. I can't give you that precise answer, but it is 
in the very near term and, in some cases, I think, already 
wrapped up. But I will try to get you a clearer answer.
    Mr. Deutch. If you could, for each of those. And, I mean, 
do you know, though, is it weeks, is it months? Are they 
finishing existing contracts?
    Mr. Burns. No, it is--you know, I can't give you a precise 
answer. I promise I will get you one. But it is in the very 
near future. I mean, these are companies that are pulling out 
of the Iranian energy sector and have also, as I said, 
committed not to engaging in future activity.
    Mr. Deutch. Okay. I would----
    Mr. Burns. So I think in most cases we are talking about 
weeks. I, you know, can't tell you if it stretches much beyond 
that, but I will certainly try and get you as clear an answer 
as I can.
    Mr. Deutch. If you could, I would appreciate that, Mr. 
Secretary. If you could confirm that those companies that, at 
the end of September, had certified that they would be leaving 
will no longer be doing business in Iran within the next 
several weeks, I would appreciate that very much.
    That, then, leads to the next question, again, with respect 
to what companies have said they are going to do and when they 
are going to do it and what constitutes credible evidence. The 
Boston Globe reported on November 12th that Schlumberger has 
promised the United States Government that it will end 
operations in Iran upon completion of existing contracts. But 
then it cites internal Schlumberger documents that existing 
contracts worth hundreds of millions of dollars will keep them 
in Iran until 2013. And, in fact, according to that report, 
they had entered into 12 new contracts, valued at more than 
$400 million, even after telling U.S. officials in February 
2009 that they would cease activities.
    First of all, do you have anything further on their efforts 
and when Schlumberger will be leaving Iran?
    Mr. Burns. No. We remain concerned about Schlumberger for 
all the reasons that you just described and will continue to 
press those concerns. I don't have anything further to add on 
that, at this point, unless you do, Stuart.
    Mr. Deutch. Mr. Secretary, then, does this report--and this 
is, I think, the main question I have today. Does a report that 
cites internal documents of the company, like this report that 
was published in the Boston Globe, does this constitute 
credible evidence that either has or will cause an 
investigation to be launched against Schlumberger?
    Mr. Burns. Well, you know, in trying to determine what the 
threshold is for credible evidence, I mean, we go through all 
of those reports. We also talk to companies, themselves. We 
talk to governments, you know, of which those, you know, 
companies are hosted. We also, obviously, go through all the 
information in our intelligence community. So I can't give you 
a simple answer on that, except to say that we try to exhaust 
all the information we have at our disposal to make a 
judgment----
    Mr. Deutch. Right, I understand. If you determine that 
these internal documents are valid and actually come from the 
company itself, and the broader question then is, if any one 
company identifies, self-identifies, as a company that is doing 
business in Iran, does that constitute credible evidence? And 
if it is not clear, shouldn't that constitute credible 
evidence?
    Mr. Burns. Well, it is certainly a very important factor in 
coming to that judgment, just as you said. I mean, I think, 
just to take a step back for a second, you know, last summer 
when we were asked the question about, you know, how many 
instances are there where there may be sanctionable activity, I 
mentioned in a hearing that there were 7 to 10 that we were 
looking at carefully.
    That was in July. Since July, we have actually formally 
sanctioned one company; five, through the use of the special 
rule, have pulled out or are pulling out of the Iranian energy 
sector; and we have launched formal investigations into several 
others. So we are trying to follow through quite energetically 
and thoroughly on these issues.
    Chairman Berman. The time of the gentleman has expired.
    I am just going to interject here. It is probably not the 
way you should do it, but I will, sort of, take it as the 
privilege of the last hearing of my chairmanship, at least for 
a while, and just point out: The law provides for this 
credible-evidence threshold, and then it provides for a 180-day 
investigation.
    I don't know if that was what Mr. Deutch was getting at, 
but, to my mind, there is a difference between the finding that 
comes at the end of a 180-day investigation, or within that 180 
days, and the threshold of credible evidence. And we shouldn't 
fall into the trap of needing enough evidence to make the final 
determination about a sanction in order to decide whether or 
not to launch an investigation.
    And, with that, I think I have exhausted whatever privilege 
I gave myself, and I better go on to the next member. The 
gentleman from California, Mr. Royce, is recognized for 5 
minutes.
    Mr. Royce. Thank you, Mr. Chairman.
    The story that I pointed out from the Post actually 
predated WikiLeaks, the story on the Obama administration, 
concluding that Iran was being helped by China, in terms of the 
development of its nuclear weapons and its missile technology. 
And it comes from a story last month. Our State Department 
special advisor for nonproliferation presented Chinese 
officials with what was called a significant list of companies 
and banks that were assisting Iran with its missile and nuclear 
technology.
    I think what concerns us is, as the Wall Street Journal 
said yesterday, China's role in Iran's procurement activities 
is growing; it is on the upswing. And we know that China looks 
the other way as weapons trade between North Korea and the 
Islamic Republic of Iran, ends up entrenching both regimes. And 
that reality pours cold water on the latest U.N. Sanctions 
resolution that the administration lodged this morning, a 
resolution that put congressional sanctions on the back burner. 
And I can't help but feel a sense of lost time.
    But, as Stuart Levey has pointed out, the new legislation 
does include potent new financial sanctions. And these are 
patterned after section 311 of the PATRIOT Act, which was once 
used to great effect on North Korea.
    Which brings me, Stuart, to my question. I remember when 
that was imposed on the Bank of Delta Asia, and it had a 
certain effect on the hard currency that ended up being 
constricted from the hands of the regime.
    And I thought you might want to lay out for us what the 
effect was on North Korea at the time. And it worked, probably, 
because there was some concern about reputational risk on the 
part of the banks that participated in that effort. But I would 
also ask you, is it possible that Chinese banks today would be 
concerned about reputational risk and, therefore, this could be 
just as effective?
    But let's go through the effect of it, if you would.
    Mr. Levey. Well, thank you, Mr. Royce.
    You are referring to an action that we took under the 
PATRIOT Act back in 2005, I believe, to designate a bank in 
Macau as being a primary money-laundering concern under the 
PATRIOT Act, under section 311. And to summarize quickly, the 
overall effect was it led banks around the world to stop doing 
business with North Korea because we had put into the public 
domain a catalog of the kind of illicit activity that North 
Korea engages in. And the fear that banks had that they might 
be inadvertently swept up into that led the responsible 
financial institutions to say it wasn't worth the risks to 
continue doing business with North Korea.
    I think, as I said to Mr. Ackerman, I think North Korea was 
a more contained target, if you will. And so we have applied 
some of the same principles in going after the Iranian 
strategy, in that there is a much broader integration into the 
financial system that we are already dealing with, and I think 
just one action like that wouldn't have had the same dramatic 
effect. But we have drawn upon the same principle, which is 
that reputable financial institutions will not want to do 
business if they fear that they might get caught up in illicit 
activity like Iran's nuclear procurement, its missile 
procurement, its support for terrorism, and so forth.
    And that is the reason why we have had the ability to have 
the effect we have had thus far on the banks. And we had 
already had a significant effect, and then CISADA dramatically 
increased it, because it created a situation where any bank 
that continued to do business with the banks that we had 
already pointed out is now at risk of losing access to the U.S. 
financial system. It made, if you will, a multiplier effect on 
our designations, and it has had a dramatic effect thus far.
    And to come down to your final point, which is I think that 
that effect even applies with respect to Chinese banks. As many 
people have expressed and as Bill has said, we are quite 
concerned about the role of China in this whole strategy, and 
we are continuing to press it.
    But we do have one thing going in our favor, which is that 
Chinese financial institutions seek to have a global business 
model and a global footprint, and, therefore, they do take 
these sort of reputational concerns seriously. And that gives 
us the ability to be somewhat persuasive with them.
    Mr. Royce. My only regret, Mr. Chairman, was that those 
sanctions were ultimately lifted. And I think, you know, it is 
sanctions enforcement, it is sanctions enforcement. The stakes 
are too high for subtlety. It is the enforcement that is going 
to get the demonstrative effect.
    Thank you, Mr. Chairman.
    Chairman Berman. The gentleman from California, Mr. Costa, 
is recognized for 5 minutes.
    Mr. Costa. Thank you very much, Mr. Chairman and the 
ranking member, for this timely hearing. Unfortunately, I don't 
think that time is necessarily on our side.
    Clearly, as has been noted by many of the members here on 
the dais, China continues to be a key and a challenge as we try 
to impose these sanctions. And sanctions, I agree with Mr. 
Royce, must be enforced. I would like to move this a little 
westward on another country that I think is an important 
participant, a NATO ally, Turkey.
    Secretary Levey, how have the Turkish banks reacted to the 
new sanctions? And are Turkish banks continuing to conduct 
business with entities that the U.S. has sanctioned?
    Mr. Levey. With respect to Turkey, I think there are a 
couple of points worth making.
    One is that, while Turkey did vote against the resolution, 
as we all know, they have stated that they will implement the 
resolution. And they have also stated that they will leave to 
their private sector decisions about what business the private 
sector will do.
    And I have been to Turkey since CISADA was passed, and 
other Treasury officials have also been to Turkey since CISADA 
was passed. And we have engaged with the private sector there. 
We have engaged with their banks, their banking association. We 
have engaged with their government officials. And what we are 
finding is that the private sector, the banks in Turkey are 
reacting similarly because they are concerned about the 
potential of losing access to the U.S. financial system and 
they are concerned about their reputation.
    I can't give you more detail in an open setting about that, 
but that is the general trend.
    Mr. Costa. Will it be our policy to enforce sanctions if, 
in fact, we find that their banks continue to do business, and 
would we impose the CISADA sanctions?
    Mr. Levey. Yes.
    Mr. Costa. Secretary Burns, I would like to bring this back 
around--we discussed earlier Russia's role in making these 
sanctions work.
    Do you believe that there is a correlation or a connection 
with regards to our efforts to secure the START treaty that is 
pending over in the Senate as to how Russia's behavior will be 
as we go forward on enforcing these sanctions? Do you think 
there is, in your view, a direct correlation here?
    Mr. Burns. Well, just two points, sir. First, I think 
Russia's partnership in the diplomacy which led to Resolution 
1929 and to its own decision to cancel the S-300 sale was 
crucial. Without Russia's partnership, I don't think we would 
have had Resolution 1929. Without Resolution 1929, I think it 
is most unlikely that we would have seen as significant a set 
of measures from the EU and from many others.
    So that painstaking effort to work together with regard to 
a shared concern about Iran's nuclear ambitions has been right 
at the core of our relationship with Russia over the last 
couple of years.
    Certainly, the START agreement is in the interests of both 
of our countries. It is very much in the American national 
interest. And as the President and the Secretary have made 
clear, we hope very much that it can be ratified this month, 
because I think it is an important demonstration of a 
partnership with Russia, which has also produced important 
dividends with regard to our shared concerns about Iran.
    Mr. Costa. I would like to ask a final question, and I 
noted it earlier. The Revolutionary Guard in Iran, how 
effective are these sanctions in trying to impact their ability 
to continue to operate? Have we made any determination?
    I mean, clearly they are, in essence, a part of the 
government. But, obviously--and I don't know whether, Secretary 
Levey, you feel best prepared to respond to this. But it seems 
to me that the Revolutionary Guard in Iran is at the head of 
many of the problems we deal with here.
    Mr. Levey. The short answer is that you are right that they 
are involved in many of the problems, but the only good news I 
have is that that is now something that is not just recognized 
by the United States but recognized by the international 
community.
    So one of the most significant pieces of 1929, which I 
think was widely underestimated when it was first passed, one 
of the significant pieces of 1929 is its designation of a 
number of IRGC companies for sanctions in the resolution. That 
led to other countries, including the EU, designating the IRGC 
as an organization. Similar action was taken by Japan and South 
Korea. The overall effect of this has been to create a dynamic 
that has companies around the world saying they won't do 
business with the IRGC.
    And if you add to that the way Iran engages in deceptive 
conduct so you don't know who you are really dealing with in 
Iran and the increasing likelihood that if you are doing 
business with Iran you are doing business with the IRGC, this 
adds to the overall effect of sanctions.
    I will give you a good example of this.
    Chairman Berman. I think----
    Mr. Levey. But I don't have to.
    Chairman Berman. Well done.
    The gentleman from California, Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman. And let 
us note the good job that you have done in conducting, being 
chairman of these hearings over the last 2 years. And it has 
been an honor to work with you, knowing and also considering 
the fact that we are demonstrating for the world that, here in 
the United States of America, people can disagree but we have 
respect for one another and we treat each other fairly in 
trying to decide policies. So thank you, Mr. Chairman, for your 
leadership over these years.
    I would like to associate myself with the concerns of 
Congressman Poe in terms of the citizens of Camp Ashraf. And I 
think that it is disconcerting to understand that we have to 
play games with the Government of Iraq after we have invested 
such a massive amount of treasure and blood.
    We need to hear from Iraq, from the Government of Iraq, a 
solid commitment that they will not betray the people of Camp 
Ashraf to the Mullah dictatorship. That would be a terrible 
sign for anyone opposing the Mullah dictatorship in Iran. We 
would lose leverage, et cetera. So if you could pass that on, I 
would appreciate that.
    What we hear today--and thank you, Secretary Burns, for 
your analysis there of the relationship we have with Russia in 
dealing with the Iran. It is easy to put this in one-
dimensional to understand, the Russians built that nuclear 
power plant. We also understand that, when they signed the 
contracts, they were in a horrible economic situation and felt 
that they were being pushed to make such deals.
    So you have testified today that we have cooperation from 
Russia now in dealing with Iran, but I think also this hearing 
has demonstrated that our China policy has been a dismal--
dismal--failure. Not only are the Chinese not cooperating, but 
we can see that not just Iraq and Iran and that area but the 
Chinese, of course, provided the nuclear weapons for Pakistan 
through Korea, and the Chinese seem to be using Korea as a 
puppet. And the Chinese, of course, have just been playing a 
very negative role in the world.
    And my compliment to the chairman also should suggest that 
in his opening statement he outlined the problem with China. If 
we are going to have a peaceful world, we are going to have to 
start dealing with China in a more forceful way.
    One last note, and then I would like you to answer this. 
But I understand that oil now is being transferred--some of the 
sanctions you are talking about have been working, but oil is 
now being transferred, and a large amount of oil, from Iraq, 
from the Kurdish areas of Iraq. Is that true?
    And let me just note, if it is, that we passed a resolution 
that I authored that would establish a consulate in Arbil, for 
a Kurdish consulate. We passed that, and that would not have 
passed had we known that the Kurds were shipping large amounts 
of oil to Iran.
    So what is going on with that oil shipment?
    Mr. Burns. Well, sir, we share the concerns about reports 
of oil smuggling across the border in northwest Iraq. We have 
had a State Department-Treasury team in Baghdad, as well as in 
Arbil recently, to talk specifically about those concerns and 
emphasize the need for this practice to stop.
    I don't know if Stuart wants to add to it. But we take it 
very seriously. We have followed up, and we will continue to.
    Mr. Rohrabacher. Well, is this oil smuggling, or is this a-
wink-and-a-nod-with-the-government oil smuggling?
    Mr. Burns. Well, there have been reports of smuggling that 
are worrisome, you know, whatever their origins or content. And 
it needs to stop because it runs counter to obligations.
    Mr. Rohrabacher. Okay.
    One last note here about this WikiLeaks. I find it 
disconcerting that I have to find out information about 
wrongdoing of other governments and other countries through 
these type of leaks of classified documents.
    Mr. Chairman, one of the things we are going to have to 
work on is the fact that we, as Members of Congress, deserve to 
know--if hostile countries know what is going on and our 
Government is protesting something that is going on with the 
hostile government, meaning our Government knows about it, the 
American people and certainly Congress should know about these 
things.
    And, for example, there is a--we know that at least one 
weapons system from China has been shipped over where we 
protested it. The American people don't know anything about it.
    Thank you very much.
    Chairman Berman. The time of the gentleman has expired.
    The gentlelady from Nevada, Ms. Berkley, 5 minutes.
    Ms. Berkley. Thank you, Mr. Chairman. I appreciate your 
holding this hearing.
    And thank you, gentlemen, very much for being here. It is a 
very important issue, and I appreciate all of your efforts on 
behalf of our country.
    I was an early supporter of tough sanctions at the U.N. and 
an original cosponsor of our Iranian sanctions bill here. I 
think they are working. Obviously, not as fast as any of us, 
including yourselves, would like. But you just can't----
    Chairman Berman. Shelley, why don't you come up here? Your 
mike is not working.
    Ms. Berkley. I hope you heard all the accolades.
    Chairman Berman. Take 30 seconds off for the accolades.
    Ms. Berkley. Sorry I mentioned it.
    I had an interesting exchange of ideas with a high-ranking 
Turkish official yesterday. And in the discussion, he assured 
us, the members of the Foreign Affairs Committee, that Turkey 
was, in fact, doing everything they can to help implement the 
sanctions against Iran and have a successful result from the 
implementation.
    That seemed to me a bit out of sorts with the fact that 
they voted against the sanctions, and it is my understanding 
that they have done just about everything they can not to be 
helpful.
    My question to you is, do you think that they have done 
anything to hamper U.N./U.S. efforts to make these economic 
sanctions successful?
    Mr. Burns. Well, let me start, ma'am, and then Stuart may 
want to add to this.
    The Turkish Government has made clear, as it did to you, 
that they are determined to implement Resolution 1929 and all 
the other sanctions. Whatever their vote in the Security 
Council, they are obligated to do that, and we will work 
closely with them to ensure that.
    We have already seen evidence of some Turkish companies--I 
mentioned earlier Tupras, which has pulled out of the supply of 
refined petroleum products to Iran. You know, the truth is that 
the total volume of Turkish trade with Iran is not that great. 
I think something like 2 percent of Turkish exports go to Iran 
and 2 percent of Turkish imports come from Iran. So, beneath a 
lot of the public statements, I think, as Stuart said, you 
know, Turkish firms, banks, and businesses have a lot more at 
stake, in a sense, in their business with the rest of the 
international community and with the United States than they do 
with Iran right now.
    I think Turkey has made clear that they share our profound 
concern about a nuclear-armed Iran. We have had technical 
differences sometimes over this, but I think they have a lot at 
stake in this, too. I think they have played a constructive 
role in Iraq, for example, in working with us to help Iraqis 
produce a broadly inclusive government. I think they are very 
mindful of the danger sometimes of Iranian behavior in Iraq.
    So I think there is a partnership with Turkey that is not 
perfect but that we need continue to work at, because it is 
significant for us in a lot of different ways.
    Ms. Berkley. Let me ask you a question. Is there anything 
more that Congress can provide you so that you can make the 
sanctions more effective? Are there any loopholes in the law 
that need tightening? Is there anything we can do as a Congress 
that can help the State Department implement these sanctions?
    Mr. Burns. No, ma'am. We are just trying to make the best 
possible use of the instruments that have been provided, 
especially in CISADA. And as we have both described today, that 
is what we are working very hard to do.
    Ms. Berkley. If there is a glaring--as you work through 
this and do what you are doing, if there is something glaringly 
missing or a tool that you find could be helpful, would you 
share that with Congress so we can remedy that situation?
    I think it is very important, and the ramifications of this 
not working are catastrophic, in my mind. And while I think 
nothing should be taken off the table--and I have been very 
vocal about that the reality of not taking everything off the 
table is challenging.
    So these sanctions have to work, because the alternatives 
are far more dire. So, anything we can do to help you to make 
this work and bring the Iranian economy to its knees, I think 
you need to share with us.
    Thank you very much, again, for your service.
    Chairman Berman. The time of the gentlelady has expired.
    The gentleman from Nebraska, Mr. Fortenberry, is recognized 
for 5 minutes.
    Mr. Fortenberry. Thank you, Mr. Chairman. And let me add my 
voice to those who have thanked you for your leadership over 
these few years. We are grateful for your service; look forward 
to continuing to work with you.
    And thank you, gentlemen, for coming today. I appreciate 
your hard work, and I do think the administration's dual-track 
policy is very important.
    With that said, the Iranian people have a deeply historic 
and deep cultural sensitivity to the fundamental notions of 
justice. And yet, they are ruled by a religious autocracy that 
is bent on repressing its people and preventing Iran from 
taking its place among the members of the responsible 
international community.
    We will all soon awaken to the headline that Iran has the 
bomb, and this will be a geopolitical game-changer. And if we 
look back at this, we see a pattern here where Russia, in its 
previous engagement, has empowered this development; China is 
clearly committing a sin of commission; North Korea has an 
exchange program with the country; and the European business 
interests are still involved there.
    Having Iran obtain nuclear weapons in the most volatile 
region of the world is going to leave very, very difficult 
defense questions for countries like Saudi Arabia and the 
Egyptians and the Turks and may spark a nuclear arms race, 
again, in this most difficult part of the world.
    And no one in the international community is going to be 
served if Iran uses a bomb or gives it to a proxy and it goes 
off in Berlin or Chechnya or Tel Aviv or New York. I just don't 
think that we can get our minds around the horror that would 
ensue.
    So, with that said, again, I appreciate your hard work on 
this, but here we are, as a committee in the United States 
Congress, holding hearing after hearing on this. And we are 
talking about the minutiae of Iran sanctions, which is 
important; it is an important part of the dual-track strategy. 
Is this going on in the EU? Is the Russia Duma doing the same 
thing? Expound upon your discussions with the Chinese. You had 
earlier said, we have emphasized restraint with China. Okay, 
thank you, but ``restraint.''
    The nature of this dilemma and the probability of what is 
coming has to compel us all to act swiftly. And the burden of 
this shouldn't just fall to this committee and on you. This has 
to be an international effort of the highest urgency.
    So, again, the question primarily being, give me the 
disposition of your counterparts in Russia and the European 
Union and talk further about China's engagement here.
    Mr. Burns. Sure. Let me start.
    First, I absolutely agree with you, there is an enormous 
amount at stake here. I think what is striking about the last 
year is the growing realization on the part of many other 
partners around the world, in the EU, in Russia, parts of Asia, 
about what is at stake and about the dangers of a nuclear-armed 
Iran.
    And what that has led to is an unprecedented set of 
measures, not only Resolution 1929--that provided the 
foundation for it--but a truly unprecedented set of steps that 
the EU took, steps that they had been reluctant to take before; 
that, as Stuart said, Australia, Japan, South Korea, Canada, 
Norway, and other countries have taken; steps that Russia has 
taken that it hadn't been prepared to contemplate in the past, 
like significant curbs on arms transfers to Iran in a U.N. 
Resolution and canceling of a major arms sale. All that 
reflects, I think, a widening realization of what is at stake.
    And we will continue as energetically as we can to work 
with our partners to drive home to Iran the choice that it 
faces and the importance of it choosing a path that is going to 
allow its people that connection to the rest of the world, as 
you rightly said, that I think they thirst for and that we saw 
very vividly in the rioting and the other concerns that played 
out on Iran's streets the summer before last.
    Mr. Fortenberry. Do we have the time?
    Mr. Burns. We feel a real sense of urgency. And we need to 
see action as quickly as we possibly can. And that is why we 
are going to drive this as energetically as we possibly can.
    Mr. Fortenberry. Who else is driving it outside of the 
United States?
    Mr. Burns. Well, I think, as I said, in the European Union 
you see a much greater recognition of what is at stake and a 
willingness to act. You see that on the part of Russia. You see 
that on the part of our major allies in Asia. You certainly see 
that on the part of many of our partners in the Gulf.
    So, you know, I think there is a growing recognition of 
what is at stake here, and we are going to do everything we can 
to build on that.
    Mr. Fortenberry. All right. Thank you.
    Chairman Berman. The time of the gentleman has expired.
    The gentleman from Georgia, Mr. Scott, is recognized for 5 
minutes.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Again, welcome to the committee.
    So, it is without any question in both of your minds that 
Iran is after a nuclear weapon?
    Mr. Burns. I think we see increasing concerns which lead 
people toward that conclusion. I mean, if Iran wanted to 
demonstrate the exclusively peaceful purpose of its program, it 
wouldn't be hard to do it. It can answer questions the IAEA has 
posed over the years and the U.N. Security Council has posed.
    Mr. Scott. So, without question, you will go on record 
saying they are after a nuclear weapon? That is your conclusion 
and your conclusion; is that correct?
    Mr. Levey. I think we have to, as policymakers, we have to 
make that assumption, because we have to pursue a policy that 
assumes that that is what they are doing.
    Mr. Scott. Okay. We have talked about China, we have talked 
about Russia, we have talked about North Korea, and all of this 
presents a very dangerous geographical, geopolitical scenario 
of an impending, sort of, axis. Within that context, we have 
not touched upon another country which I think could hold the 
balance here, and that is India.
    And I would like to ask you--India fascinates me, in terms 
of their approach to this. I think it is very important for us 
to examine India, particularly in view of the fact that they 
now are, from some information, rejecting the sanctions. And 
that is particularly peculiar in view of the fact that, just a 
few years ago, 2005, 2006, they supported the sanctions that 
were put forward under the Bush administration.
    Tell me what is going on in India.
    Mr. Burns. Well, sir, I mean, the Indian Government has 
made very clear its commitment to uphold the new U.N. Security 
Council sanctions resolution, 1929. And everything we see of 
its behavior suggests that it is serious about that commitment.
    For example, one Indian company, Reliance, which had 
supplied a considerable amount refined petroleum product to 
Iran, has pulled out of that business already. India vote has 
voted three times in the IAEA Board of Governors to condemn 
Iranian behavior. In its last vote last November, it voted to 
condemn the Iranians at a moment when a number of other 
countries were on the other side of the vote, including Brazil, 
Turkey, Egypt, and South Africa.
    So the Indians, I think, have made very clear their 
determination to do everything possible to ensure that Iran 
does not develop a nuclear weapon.
    Mr. Scott. That is what bothers me. I have information here 
that says, for example, India's foreign secretary, Nirupama 
Rao, made India's position explicit early this month, when she 
said restrictions on investments in Iran's energy sector could 
have a direct and adverse impact on Indian companies. And, in 
fact, that they look forward to more investment by Indian 
companies directly into that energy sector. And, sort of, goes 
on to say that the United States is thousands of miles away; 
they are next-door and have a long, centuries-old relationship.
    That seems to run counter to what your assessment just 
said.
    Mr. Burns. Well, sir, I would just say two things briefly.
    First, the Indians at the very highest level have made 
clear their concern about a nuclear-armed Iran.
    Second, I think you have to judge by the practice on the 
ground. Reliance, one of the major Indian firms, has 
essentially pulled out of business in Iran. Secondly, in the 
South Pars gas field, an Indian company that was involved in 
the past in development there has also begun to pull out.
    So I think the facts suggest a real concern on the part of 
India.
    Mr. Scott. Do you think that the sanctions are going to 
work? There is some worry about that. And, particularly, as I 
mentioned earlier, with North Korea, China, even with Russia, 
we wouldn't be in this position with Iran if it weren't for 
Russia investing first of all in the Bushehr plant, which seems 
to me might have been a convenient cover for them to pursue.
    So I guess my point is that I would like to--is a military 
option on the table, in your opinion? And how realistic is 
that?
    Mr. Burns. Well, let me just make a quick comment first on 
Bushehr.
    I mean, I think it is significant--the last administration 
recognized this, as well--that Russia has significantly 
adjusted the terms of the Bushehr project so that it would not 
only supply the fuel for the reactor but it also would take 
back the spent fuel, all under IAEA safeguards, which just 
simply helps to reinforce the point that Iran doesn't need a 
domestic enrichment capability in order to have a peaceful 
nuclear program.
    That is the first point. Then the second----
    Chairman Berman. Finish the answer to the last question, 
but the time has expired.
    Mr. Burns. All I can say is on the second point you made, 
sir, is the President has made clear we haven't taken any 
options off the table, but what we are focused on now is making 
diplomacy in all of its dimensions--engagement and negotiation, 
but also political and economic pressure--work.
    Chairman Berman. The time of the gentleman has expired.
    The gentleman from Illinois, Mr. Manzullo, is recognized 
for 5 minutes.
    Mr. Manzullo. Thank you.
    If you take a look at the Iranian Sanctions Act, passed in 
1996 I believe, and then the latest act that we passed this 
spring--all, of course, dealing with sanctions--can you give an 
opinion or at least some thoughts on the best way to, as it 
were, toughen up these laws, to give them real teeth, to come 
up with the real results that we are looking for?
    Mr. Burns. I would just start simply by saying that I think 
what we have before us now in the laws passed by Congress, 
signed by the President, but also in Security Council 
resolutions, steps that other countries have taken, is a very 
broad array of instruments.
    What we need to do now and what we, as we have described, 
have been doing very energetically in recent months is to apply 
those and enforce those as vigorously as possible. I think we 
can continue to have a significant impact if we do that.
    Mr. Levey. I would agree with that. The sanctions that we 
have on Iran are the toughest in the world. And we have made it 
a very, very high priority to implement them.
    One thing that--when we say that CISADA has had a very 
positive impact, I think, to put that in context, the effect 
that CISADA is having is on behavior of companies outside of 
the United States. It does have that impact. And so, if we go 
ahead and continue to implement that, I think it can have a 
great effect, because now there is a broader recognition of how 
important this is. Going beyond the United States, we have a 
much broader set of governments that agree with us in the 
fundamental principle that this is a very high priority.
    Mr. Manzullo. If these sanctions don't work, then the next 
step would be a blockade, and the next step would be some type 
of--you hate to use the word, but military action. Do other 
countries around the world realize to the extent that the 
United States does the importance of complying with these 
sanctions?
    Mr. Burns. I think so. As I mentioned before, there is an 
increasing recognition of that. You see that in the behavior of 
many other countries--I won't say all of them, but many other 
countries, in recent months in particular. I think there is a 
growing awareness of what is at stake here and of the 
importance of trying to make this approach work.
    Mr. Manzullo. I agree 100 percent with what you are saying, 
but how do you increase the awareness? How do we get the 
message across to other countries in the world that this is 
probably the last best shot that we have diplomatically to do 
something?
    Mr. Burns. Well, as I said, I mean, I think many other 
leaderships around the world have already come to that 
conclusion. They have concluded that because of Iranian 
behavior itself. They have concluded that because they also see 
the concerns of many others in that part of the world, whether 
it is in the Gulf or in other parts of the Middle East. And 
they understand the risk that a nuclear-armed Iran would pose 
to a part of the world that is central to the health of the 
global economy. So I think many other leaderships are coming to 
those same conclusions.
    Mr. Manzullo. Mr. Levey, did you want to comment on that?
    Mr. Levey. I entirely agree with what Under Secretary Burns 
said.
    Mr. Manzullo. Okay. Well, I appreciate your time on it. It 
is obviously an issue of utmost concern to our country and, 
actually, to the stability of the whole area. Thank you.
    I yield back.
    Chairman Berman. I thank the gentleman and recognize the 
representative from American Samoa, Eni Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman and our ranking 
member, for calling this important hearing.
    I certainly want to commend both Secretary Burns and 
Secretary Levey for not only testifying before the committee, 
but too often I think we don't say enough on this side of town 
about how much we appreciate the services that you gentlemen 
provide not only to our President but to our Nation.
    On the important question of whether implementation of 
stronger economic sanctions against Iran have been proven 
effective or not--and I think this seems to be the question 
that we are trying to determine here--I would like to share 
with you a statement from research that was conducted by the 
Congressional Research Service. And I want to share this with 
you, and I certainly would like to add your comment on it.
    It says, and I quote:

        ``Because so many major economic powers have imposed 
        sanctions on Iran, the sanctions are, by all accounts, 
        having an effect on Iran's economy. However, data on 
        Iran's economy is often sparse or incomplete, and it is 
        difficult to form a precise picture on the impact of 
        sanctions on it.''

    Now, officials have spoken and said that it has this 
effect, and yet it says again,

        ``However, there is not a consensus that sanctions are 
        causing a demonstrable shift in Iran's commitment to 
        its nuclear program, the key strategic objective of the 
        whole idea of sanctions.''

Would you care to comment on that?
    Mr. Burns. I would be glad to start. I think in terms of--
--
    [Audio difficulties.]
    Mr. Burns. Can you hear me? Now ours are going out.
    I will be very brief, and I will turn to Stuart since it is 
his microphone.
    Chairman Berman. That is not working.
    Mr. Levey. We promise we are pressing the buttons.
    Chairman Berman. How come mine works?
    Mr. Faleomavaega. I think these mikes are bugged, Mr. 
Chairman, or something.
    Well, I am losing time, Mr. Chairman, and I know the 
gentlemen----
    Chairman Berman. We are told there is a rebooting process 
going on, which take a minute or so.
    Try yours.
    Mr. Burns. I think we are back in.
    Mr. Faleomavaega. So much for modern technology. Please 
proceed.
    Mr. Burns. Sir, let me just start to answer your question 
about the impact of sanctions in Iran.
    I mean, I think in terms of objective impact on the Iranian 
economy, I think sanctions clearly have amplified what is 
already considerable mismanagement of the economy. And you can 
look at a number of indicators: The fact that oil revenues for 
the Iranian Government have declined steadily over the last 3 
or 4 years----
    Mr. Faleomavaega. Let me ask--I don't mean to interrupt 
you, Mr. Secretary, but how much is the estimate of the value 
of the oil reserves that Iran currently has? And I also would 
like to know how much oil reserves Iraq has worldwide, in terms 
of its capacity for whatever it has.
    Because it seems to me that this is one of the fundamental 
reasons why we are in the Middle East, the concern about 
whoever is going to take possession of this oil supply. And, 
ironically, if I am correct that when 30 companies offered bids 
on the oil in Iraq, it was a Chinese company that won the 
bidding. They didn't even lift a finger. After all the billions 
and billions of dollars that we expended, the Chinese got the 
oil.
    And I wanted to ask you, Mr. Secretary, how much oil 
reserve does Iran have?
    Mr. Burns. Iran has considerable reserves of both oil and 
gas. I will have to get you the specific figures. And, of 
course, Iraq does, too, particularly in terms of oil reserves.
    So I don't know whether Stuart wanted to add to the answer 
on the economic impact on Iran.
    Mr. Faleomavaega. Well, I know from the administration's 
point of view, you feel that sanctions have proven successful. 
But here is the problem that I have and that has been raised by 
my friend from Florida, as well as Mr. Ackerman.
    China is in this mix in the most important way, to the fact 
that it is in China's national interest to get as much energy 
resources it can get. And I don't think Iran is any other 
exception in all the efforts that have been made worldwide--
Africa. Wherever they can get energy supplies, they will do 
this. And so is India.
    So is it in China's national interest that they get this 
oil from Iran one way or another?
    Mr. Burns. Sir, I think it is clearly in China's national 
interest to have stable access to energy reserves in the Gulf. 
And if you have a nuclear-armed Iran or greater instability 
caused by Iranian behavior in the Gulf, then you can easily put 
at jeopardy access to energy resources in a part of the world 
that is critical not only to the global economy but to Chinese 
economic growth. So I think that strategic concern has very 
much focused attention in Beijing.
    Mr. Faleomavaega. Here is one question I would like--and I 
know I have 6 more seconds, Mr. Chairman.
    It is very, very difficult for us----
    Chairman Berman. It will get answered, though.
    Mr. Faleomavaega [continuing]. Very, very difficult for us 
to tell the Chinese what to do. And I think this is the biggest 
problem we are faced with.
    Thank you, Mr. Chairman.
    Chairman Berman. That is an observation.
    The gentleman from Florida, Mr. Klein, is recognized for 5 
minutes.
    Mr. Klein. Thank you, Mr. Chairman.
    And, again, I want to thank the chairman and the ranking 
member for the opportunity to serve on this committee, and the 
staff for being great support, making us all look good. And, of 
course, Mira Resnick, Mira Kogen Resnick, who has worked with 
me for the last 4 years, has been an invaluable tool.
    And I would like to thank our guests today, who have really 
provided a tremendous amount of resources, going back to the 
last administration to the current administration. So thank you 
for your work.
    A few thoughts. Number one, there has been a lot of talk 
about China, which--I certainly support a consistent and 
aggressive enforcement across the board. I think we saw that 
even before the sanctions were actually passed word was already 
getting out and we already started seeing some anticipated 
reaction by businesses around the world. But more particularly 
since the sanctions have passed, the United Nations, United 
States, European Union, and other countries--we are starting to 
see more. And I would heartily and aggressively encourage you 
as fast and as quickly as possible to continue that process.
    As it relates specifically to China, though, we have lists 
of China National Petroleum, China Petroleum and Chemical, and 
other companies that specifically and very openly are doing 
things that would be considered sanctionable, as I understand 
it. So it is not so much of a question, but it is a very strong 
statement that I would make and I think would be joined by most 
of the members of this committee: We need to go after them.
    I know there are a lot of delicate issues between China and 
the United States relating to a whole variety of things. But if 
China supported this at the United Nations level and 
understands, for all the reasons you just explained, the 
importance of why a stable Middle East and a non-nuclear Iran 
is essential to its future and everyone else's future, they 
have to get on board, and they have to be held accountable just 
like every other country in the world. That is my first point.
    Number two, the Central Bank of Iran has been a 
facilitator, if you will, in stepping in the void when other 
banks are being sanctioned. What is it that we can do, and why 
are we not sanctioning the Central Bank of Iran?
    Mr. Levey. With respect to the Central Bank of Iran, for 
the first time the U.N. Security Council resolution actually 
expressed concern about the activities of the Central Bank of 
Iran, which had previously been something that we had been 
expressing some concerns about, in that we had seen it engaging 
in the sorts of deceptive conduct that other Iranian banks were 
engaging in.
    With respect to the Central Bank, though, it is already, in 
the United States, a violation of sanctions to do business with 
the Central Bank of Iran. In fact, it is a crime for a U.S. 
person to engage knowingly in a transaction with the Central 
Bank of Iran.
    Mr. Klein. And to take it to next level. Other countries, 
our allies, or----
    Mr. Levey. Well, I think that having this in the Security 
Council resolution helps to bolster us when we do what we do 
all the time, which is to go and share information and express 
concerns and try to raise awareness.
    Now it is not only a U.S.-expressed concern, but it is one 
where we can point to the Security Council resolution. And that 
does help the conversation considerably. And we will continue 
to do that and continue to raise those concerns.
    Mr. Klein. How big a problem is that, though, in terms of 
them stepping in and, you know, facilitating transactions when 
other banks are being sanctioned? How big a problem is it in 
terms of the overall scheme of clamping down and isolating 
Iran?
    Mr. Levey. I would speak more generally, that Iran is going 
to do whatever it can--that is our presumption, that they will 
do whatever they can to evade the sanctions. And that is a 
presumption that we had going in.
    And so, what we have tried to do is continue to expose 
that, so that not only do we make that more difficult for them, 
but we also, in the process, make the private sector around the 
world even more wary of doing business with Iran.
    So the Central Bank of Iran is one concern that we have in 
that regard, but it is not the only one. And so our engagement 
on this issue, you know, has a number of concerns that we would 
raise.
    Mr. Klein. Okay, again, I would encourage that.
    Also, there are a number of examples that have been brought 
forward, the UAE as being one country, where companies are 
getting around restrictions in terms of----
    [Audio difficulties.]
    Mr. Klein [continuing]. By shipping through, facilitating 
through UAE and other countries. That is something--obviously, 
we are trying to close every door that is opening.
    How big a problem is that?
    Mr. Levey. I would say that we have--is my mike working it?
    Chairman Berman. Yes.
    Mr. Levey. We have engaged very intensively with the UAE. 
They take the implementation of 1929 very seriously. They take 
very seriously their desire not to be abused by Iranian illicit 
conduct. And so, that seriousness of purpose has been 
reflected, I think, in recent months in their actions, as well.
    Chairman Berman. The time----
    Mr. Klein. Can I just make one last comment--it is not a 
question, but just--as it relates to this? It is my closing 
comment.
    It relates to--the anticipation of what happened with the 
sanctions coming online I think were very indicative of a 
process. We are now in the enforcements stage, and, again, we 
all feel very strongly about that. But you heard from some of 
the members about the notion of layers of additional things 
that can come down the road.
    Now, we all know time is of the essence, and we want to 
continue that process. But to the extent that ideas can 
continue to come forward from the experts about additional 
things that we can and should be doing, even in the form of 
``these are the next steps we will continue to take,'' I think 
they will continue to build layers of enforcement and message 
that are very, very substantively important at getting the 
possibility of change of behavior.
    Thank you.
    Chairman Berman. The time of the gentleman has expired.
    The gentlelady from California, Ambassador Watson, is 
recognized.
    Ms. Watson. Thank you so much. And I am very conscious----
    [Audio difficulties.]
    Chairman Berman. I just want to say--oh, boy.
    Ms. Watson. I think my mike has just--is it on?
    Chairman Berman. Yes. We know you have to leave soon, and--
--
    Ms. Watson. As time grows short in many ways, I want to get 
to a bottom line. We have talked about sanctions. We have 
worked with the EU and the surrounding countries of Iran. This 
is really going to Ambassador Burns.
    You see Ahmadinejad--and I have been told by a panel of 
British parliamentarians, who were able to go into the back 
door of Iran, that the people in the streets don't necessarily 
go along with the ideology of Ahmadinejad.
    Do you think that we can converge on the current leadership 
of Iran to sit down and negotiate with us about the sanctions, 
about nuclear power and so on? Are we at that point?
    And is there a separation of the top leaders, the ones that 
are speaking, and the common people in the street? I remember 
Iran in other decades, and we have a very--the czar came here, 
if you remember. And we had a very good working relationship 
with the Carter administration.
    What do you project in the very near future in terms of the 
ideology that comes from Ahmadinejad?
    [Audio difficulties.]
    Mr. Burns. Ambassador Watson, can you hear me? No, sorry.
    Chairman Berman. Just speak as loud us you can.
    Mr. Burns. Can you hear me?
    Ms. Watson. I can hear you.
    Mr. Burns. Two comments. First, what was made clear in the 
summer of 2009 and all the discontent you saw unfolding on the 
streets of Iran was a real disconnect between the first of 
many, many Iranians for connections to the outside world and 
for the individual rights that are so important to us and to 
any society in the world.
    I think what the leadership has done since then is quite 
ruthlessly suppressed the Green Movement, but I don't think it 
has eliminated those concerns, that discontent, that thirst for 
connections to the rest of the world.
    Second, with regard to the prospects for negotiations, I 
mean, all I can tell you is that we will approach--we and our 
P5-plus-1 partners will approach the next set of discussions 
with the Iranians with real seriousness of purpose. And what we 
will emphasize is that there is a choice available here.
    We are not taking issue with the right of Iran or any other 
country to a peaceful nuclear program. What is at issue here is 
its responsibility, like any other country in the world, to 
demonstrate that it is going to conduct a purely peaceful 
program. And because of all the mistrust that has been built up 
because of Iranian behavior in recent years, it is going to 
take time and hard work to build some confidence.
    But we are going to approach this with real seriousness and 
with a clear focus on that choice. Because there is a path 
whereby Iran and its people can have access to peaceful nuclear 
power, just like any other country in the world. They just have 
to convince the international community of the seriousness of 
their willingness to live up to their responsibilities. And 
that is really what is at issue here.
    Ms. Watson. Just yesterday, several members of this 
committee, under the leadership of our great chair, met with 
Turkey--the minister from Turkey, the ambassador, et cetera. 
And the gist of it, to me, is that they are acting as a go-
between between Iran and the countries of the West.
    And I felt a little differently after hearing them, Mr. 
Chairman, than what we felt before we went into that meeting. I 
think it was explained quite clearly that they wanted to 
continue trade with Iran, they wanted to continue to address 
them in terms of being, shall I say, more cooperative in terms 
of the sanctions and looking at their nuclear development of 
uranium as something that cautions the rest of the world 
because we feel the irresponsibility of the leadership.
    I somewhat applaud the Turks for playing that role for us. 
We are going to continue our discussions with them, hoping that 
they will have an impact.
    And can you comment?
    Mr. Burns. Simply to say that, you know, whatever our 
technical differences with Turkey in the past, Turkey is an 
important partner for the United States in many, many areas. 
Certainly, Turkey has made very clear that its interest argues 
very strongly against a nuclear-armed Iran. Turkey has a border 
with Iran. You know, Turkey has as much at stake as anyone in 
that region in avoiding the instability and the risk that would 
come from a nuclear-armed Iran.
    So we are going to continue to work with the Turks on these 
issues, not just on that issue but on Iraq, on Lebanon, many 
other areas where I think the Turks can continue to play a 
constructive role.
    Ms. Watson. Thank you very much.
    Chairman Berman. The time of the gentlelady has expired.
    And our last questioner is the gentlelady from Texas, Ms. 
Sheila Jackson Lee.
    Ms. Jackson Lee. Mr. Chairman, let me thank you very much. 
And, Mr. Chairman, do we believe this will be our last hearing 
for the month, or will there be greater opportunities?
    Chairman Berman. Let's put it this way: It is my hope this 
is the last hearing.
    Ms. Jackson Lee. Well, allow me the personal privilege to 
thank you for your leadership----
    Chairman Berman. Thank you.
    Ms. Jackson Lee [continuing]. And to add my appreciation 
for my dear friend, Ron Klein, who has been such a value to 
this committee.
    I will follow--and thank you again--the line of questioning 
that some of my colleagues mentioned regarding China and the 
value of sanctions. One lieutenant general in the Israeli 
defense forces asked a question, do sanctions really work? And 
I would like to pose that question to you, particularly as it 
relates to human rights.
    And we note, in particular, that we have had a series of 
stoning deaths that have occurred, particularly Sakineh 
Mohammadi Ashtiani, the verdict of death by stoning. We know 
that there is discrimination, religious discrimination.
    So my question is, what do we in the United States expect 
to get out of sanctions, strong or not-so-strong?
    Mr. Burns. Well, I think, ma'am, we are aiming for the 
strongest possible set of measures that produces changes in 
behavior, certainly with regard to the nuclear issue, so that 
Iran chooses a path of demonstrating to the rest of the world 
that it wants to pursue a responsible, peaceful nuclear 
program, but also on issues like human rights.
    And I think on human rights we will try to take full 
advantage of the provisions you have provided in CISADA. I 
think identifying individual officials who are responsible for 
abuses is a way to hold them accountable and demonstrate our 
commitment.
    I think the truth is that the Iranian leadership would like 
nothing better than to paint opposition movements as foreign 
agents, and we need to be careful of that, because the Green 
Movement, for example, has made clear that it is a homegrown 
movement, and it can't afford to be seen as an instrument of 
anybody outside the country. So we are very mindful of that. We 
don't support particular opposition groups or political 
factions. But what we do--what we are determined to do is stand 
up for universal human rights.
    And finally I would say, it is important for us to work to 
mobilize others in the international community to make those 
same points.
    Ms. Jackson Lee. Do you see any direct movement as a result 
of sanctions, any direct changes in behavior as a result of 
sanctions?
    And let me just--as my time runs out, let me conclude with 
the fact that I would like to receive the same answers that 
Congressman Ted Poe asked for. And you might want to comment on 
whether or not any----
    [Audio difficulties.]
    Ms. Jackson Lee. Let me just finish so you can take up the 
rest of my time. And thank you. Do we have any movement--a lot 
of my colleagues have asked about China, India, and others. Do 
we have any ability to impact their behavior as they seek a 
very necessary resource, and that is the energy that they are 
using for their----
    [Audio difficulties.]
    Mr. Burns. I think we have seen some movement, for example, 
on the part of India, as I mentioned to you before, as a 
result, as they look at not only Resolution 1929 but what other 
countries in the world are doing. I think you have seen an 
interest in diversifying their sources of energy in the world.
    I think, with regard to human rights, we have from time to 
time seen some movement and changes in behavior when you have 
had a strong international chorus of concern, in particular 
cases. In the Third Committee in the United Nations a few weeks 
ago, there was by far the largest vote yet of countries 
condemning Iran for human-rights abuses. So the more that other 
countries speak out, I think the more impact it may have on 
concrete behavior.
    Ms. Jackson Lee. If we speak directly to the Iranian 
people, for example, they will listen. The world is frustrated 
by the inertia of the Iranian Government. Certainly we are not 
in support of the efforts to dismantle it in a nondemocratic 
manner, but there has to be some movement for this country to 
come into the world forum of the 21st century, meaning 
democracy, trade, and interaction with the other world 
countries. I hope the Iranian people are listening and will not 
accept human-rights abuses and begin to demand that Iran work 
with the world community.
    I yield back.
    Chairman Berman. The time of the gentlelady has expired.
    And I am going to just--you won't get off quite that easy--
ask one last question. In September, the Treasury Department 
sanctioned Iranian-owned bank EIH, incorporated in Germany, for 
providing financial services to Iranian WMD proliferators and 
facilitating transactions on behalf of other sanctioned banks.
    Why has the German Government refused to take action 
against the bank? What are we doing to convince the German 
Government to close them down? And are we considering any 
sanctions against any entities doing businesses with EIH?
    Mr. Levey. Mr. Chairman, you are right, we did take that 
action against EIH in September. We consulted in detail with 
our German colleagues on that action. They are looking at the 
evidence that we were able to share and looking into it 
themselves.
    We do, as you know, have authorities that go beyond what 
most other countries have, in our ability to take action on 
administrative record and to rely on information that we don't 
have to make public. But the Germans have been good partners on 
this, and they are looking at this seriously.
    The answer to your final question, though, is answered by 
the effect of CISADA, which is, now that we have designated 
EIH--which, for those who are not familiar with it, was a very 
big financial facilitator for Iran in Europe and was one of the 
main ways in which they were accessing euro transactions--but 
now that we have designated EIH for its involvement in Iran's 
proliferation program, any bank that does substantial business 
or engages in substantial transactions with EIH puts at risk 
their access to the United States financial system. And we will 
take that provision very seriously and enforce it as 
appropriate.
    Chairman Berman. Well, thank you.
    And thank you both very much for coming here. I know how 
busy you are. I know how much is coming up even on this subject 
in the near future. We appreciate you very much taking the time 
to come to us. And also, for what is really--I mean, so much of 
it is quiet. Some of it is government-to-government. And the 
time you are spending on this--I think the other aspect of 
WikiLeaks, as terrible and deplorable as that was, is it 
demonstrates that this administration's commitment to this 
issue is intense, sincere, enduring, and hopefully, at the end 
of the day, successful.
    Thank you.
    [Whereupon, at 12:13 p.m., the committee was adjourned.]
                                     

                                     

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