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







                    IMPLEMENTATION OF IRAN SANCTIONS

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 29, 2010

                               __________

                           Serial No. 111-110

                               __________

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             JOHN J. DUNCAN, Jr., Tennessee
JOHN F. TIERNEY, Massachusetts       MICHAEL R. TURNER, Ohio
WM. LACY CLAY, Missouri              LYNN A. WESTMORELAND, Georgia
DIANE E. WATSON, California          PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts      BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                JIM JORDAN, Ohio
GERALD E. CONNOLLY, Virginia         JEFF FLAKE, Arizona
MIKE QUIGLEY, Illinois               JEFF FORTENBERRY, Nebraska
MARCY KAPTUR, Ohio                   JASON CHAFFETZ, Utah
ELEANOR HOLMES NORTON, District of   AARON SCHOCK, Illinois
    Columbia                         BLAINE LUETKEMEYER, Missouri
PATRICK J. KENNEDY, Rhode Island     ANH ``JOSEPH'' CAO, Louisiana
DANNY K. DAVIS, Illinois             BILL SHUSTER, Pennsylvania
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 29, 2010....................................     1
Statement of:
    Einhorn, Robert J., Special Advisor for Nonproliferation and 
      Arms Control, U.S. Department of State; Daniel Glaser, 
      Deputy Assistant Secretary for Terrorist Financing and 
      Financial Crimes, U.S. Department of the Treasury; Joseph 
      A. Neurauter, Deputy Associate Administrator, Office of 
      Acquisition Policy, U.S. General Services Administration; 
      and Joseph A. Christoff, Director, International Affairs 
      and Trade, U.S. Government Accountability Office...........    15
        Christoff, Joseph A......................................    42
        Einhorn, Robert J........................................    15
        Glaser, Daniel...........................................    26
        Neurauter, Joseph A......................................    38
    Jorisch, Avi, president, Red Cell Intelligence Group; and 
      Mark Dubowitz, executive director, Foundation for Defense 
      of Democracies.............................................    97
        Dubowitz, Mark...........................................   106
        Jorisch, Avi.............................................    97
Letters, statements, etc., submitted for the record by:
    Christoff, Joseph A., Director, International Affairs and 
      Trade, U.S. Government Accountability Office, prepared 
      statement of...............................................    44
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   134
    Dubowitz, Mark, executive director, Foundation for Defense of 
      Democracies, prepared statement of.........................   108
    Einhorn, Robert J., Special Advisor for Nonproliferation and 
      Arms Control, U.S. Department of State, prepared statement 
      of.........................................................    18
    Glaser, Daniel, Deputy Assistant Secretary for Terrorist 
      Financing and Financial Crimes, U.S. Department of the 
      Treasury, prepared statement of............................    28
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................     9
    Jorisch, Avi, president, Red Cell Intelligence Group, 
      prepared statement of......................................   101
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York, article dated March 6, 2010.........    63
    Neurauter, Joseph A., Deputy Associate Administrator, Office 
      of Acquisition Policy, U.S. General Services 
      Administration, prepared statement of......................    40
    Quigley, Hon. Mike, a Representative in Congress from the 
      State of Illinois, prepared statement of...................   136
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York, prepared statement of...............     3

 
                    IMPLEMENTATION OF IRAN SANCTIONS

                              ----------                              


                        THURSDAY, JULY 29, 2010

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:18 a.m., in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Maloney, Cummings, 
Kucinich, Tierney, Clay, Connolly, Quigley, Kaptur, Davis, Van 
Hollen, Cuellar, Foster, Speier, Driehaus, Chu, Issa, Burton, 
Duncan, Jordan, Flake, Fortenberry, Chaffetz, Luetkemeyer, and 
Cao.
    Staff present: John Arlington, chief counsel--
investigations; Kwane Drabo, investigator; Brian Eiler, 
investigative counsel; Linda Good, deputy chief clerk; Adam 
Hodge, deputy press secretary; Carla Hultberg, chief clerk; 
Mike McCarthy, deputy staff director; Steven Rangel, senior 
counsel; Ophelia Rivas, assistant clerk; Ron Stroman, staff 
director; Gerri Willis, special assistant; Alex Wolf, 
professional staff member; John Cuaderes, minority deputy staff 
director; Rob Borden, minority general counsel; Jennifer 
Safavian, minority chief counsel for oversight and 
investigations; Frederick Hill, minority director of 
communications; Kurt Bardella, minority press secretary; 
Benjamin Cole and Seamus Kraft, minority deputy press 
secretaries; Justin LoFranco, minority press assistant and 
clerk; Tom Alexander, minority senior counsel; Christopher 
Bright, minority senior professional staff member; Mark Marin 
and Brien Beattie, minority professional staff members; and 
Sharon Casey, minority executive assistant.
    Chairman Towns. The committee will come to order.
    Good morning and thank you all for being here.
    The United States has banned nearly all trade with Iran. We 
have done so for good reason: the extremists who currently rule 
Iran are a major threat to the safety and security of their own 
people and to the rest of the world.
    It is vitally important to the national security of the 
United States and its allies to persuade the Iranian regime to 
end its quest for nuclear weapons and to end its support for 
terrorism.
    Since 1995, our nation has attempted to do that, by banning 
U.S. companies from doing any business in Iran. In 1996, the 
Iran Sanctions Act provided for sanctions against foreign firms 
that invest in Iran's energy sector.
    It was revealed earlier this year that the Federal 
Government has awarded more than $100 billion in contract 
payments, grants, and other benefits over the past 10 years to 
foreign and multinational American companies while they were 
doing business in Iran.
    So, not only are some companies doing business in Iran, but 
they are also getting Government contracts at the same time. 
Obviously, Federal agencies all need to get onto the same page.
    Earlier this month, Congress acted to strengthen economic 
sanctions against Iran. Recognizing that banking is the life 
blood of international trade, the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act imposes tough new 
restrictions on banks and insurance companies. It also requires 
Federal contractors to certify that they are not doing business 
with Iran.
    However, for U.S. sanctions to be successful, they must be 
fully implemented and enforced, and I am looking forward to 
hearing from our witnesses about how they intend to do that.
    I particularly want to thank the State Department and the 
Treasury Department for agreeing to testify at today's hearing.
    I understand that both agencies are in the process of 
investigating companies that may be doing business with Iran. 
We certainly don't want to compromise ongoing investigations, 
and in that regard I am going to ask the Members to be 
judicious in their questions.
    Sanctions cannot just be a cat and mouse game where the 
Government tries to chase after companies who are evading 
sanctions and undermining global security in the name of 
profit. Companies, especially those doing business with the 
Government, need to take responsibility and avoid supporting 
the Iranian regime.
    With each passing week, as Iran moves closer to developing 
nuclear weapons, the stakes are raised higher and higher and 
higher. Today, I look forward to hearing how we can ensure that 
economic sanctions are effectively implemented.
    I now yield 5 minutes to the ranking member, the gentleman 
from California, Congressman Issa.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

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    Mr. Issa. Thank you, Chairman Towns, and thank you so much 
for holding yet another hearing on this important subject.
    When we began, as a body, trying to figure out what to do 
with the religious-based extreme takeover, it was 1979. I was 
an Army lieutenant. The world was a very different place 31 
years ago.
    So although, for the most part, today we will be talking 
about sanctions, whether the President's outreached hand has 
been good or bad toward dissuading Iran on its nuclear 
ambitions, it is very clear to all of us who today have graying 
hair and 31 years ago were comparatively young, comparatively 
fit, and ready to bomb the hell out of Iran in order to get 
them to release our embassy people that they had taken in 
violation of international law, protocol, and any sense of 
common decency.
    Mr. Chairman, nothing has changed in 31 years. Or has it? 
Thirty-one years ago, as the Ayatollah took over and ``a 
sleight of hand'' caused radical students to take our embassy, 
not the government, we all looked and said how do we resolve 
this. Well-meaning people, bipartisan and bicameral parts of 
Congress looked to try to find a way to work out a diplomatic 
solution. Day after day after day, throughout all the waning 
days of the Carter administration, people of good faith and 
good will tried to do the right thing without violence, and to 
no avail.
    Mr. Chairman, only the coming of a President willing to do 
anything necessary to end the humiliation for the American 
people and this violation of world protocol brought an end to 
it.
    I look forward today to hearing how actual sanctions with 
greater teeth, passed on a bipartisan basis in this Congress, 
are working. I look forward to a day in which not only will we 
be talking about Iran giving up its ambitions for nuclear 
weapons; a day in which Iran will realize that those sanctions 
will not just be lifted if they ``stop trying to develop a 
nuke,'' but they also abandon their expansionist views of a 
Shia-greater state that goes from the Mediterranean to who 
knows where.
    Mr. Chairman, this is about an organization that began on a 
lie, has continued a lie, and has transitioned over these many 
decades. At one time people thought it was a theocracy. I think 
people who have looked at Iran in more detail realize that, 
over time, all parts of government have become, to a greater 
extent, controlled by the Revolutionary Guard by people who 
come up through a very limited, very exclusive military 
background. That is how you move ahead in Iran.
    But, at the same time, there is a religious vein. It is a 
vein of radical Islam, one that is willing to see people killed 
or kidnapped in Lebanon as early as the 1980's, one that 
continues to fund death and a lack of peace in the Middle East, 
particularly in the Lavant.
    Mr. Chairman, I look forward to all of the good that can be 
done by this sanction. I look forward to hearing that it is 
working at last. But until or unless we can truly say we look 
forward to a day in which Iran becomes a part of the nations 
that obey all of the rules, including not exporting terrorism, 
not funding overthrow of peaceful governments, we will not have 
an Iran we can truly work with.
    I am not an extremist. I am not a person who wants to use 
weapons. But if the only weapon we have doesn't work, America 
will eventually have no choice but to use alternate means in 
order to prevent nuclear holocaust.
    With that, Mr. Chairman, I look forward to the hearing and 
yield back.
    [The prepared statement of Darrell E. Issa follows:]

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    Chairman Towns. I thank the gentleman for his statement.
    Let me just indicate that we are going to have two opening 
statements on each side, 3 minutes, so you will select in terms 
of the two on your side.
    I now yield 3 minutes to the gentlewoman from New York, 
Congresswoman Maloney.
    Mrs. Maloney. Thank you, Chairman Towns, for your 
leadership on this issue and for having this very important and 
timely hearing.
    Iran is on a fast path toward achieving nuclear weapons 
capability. In Iran, a nuclear weapon would likely spell the 
end of the nuclear non-proliferation regime. If Iran acquires 
such a capability, nuclear weapons could spread throughout the 
region.
    As Iran's nuclear capabilities have increased in the last 
few years, more than a dozen Arab states have discovered a 
newfound interest in peaceful nuclear energy. And if nuclear 
capabilities proliferate in the Middle East, they will spread 
across the world. The chances for nuclear technology to fall 
into the hands of terrorists will rise and we will all live in 
a much more dangerous world.
    It is not just the United States that thinks so; five 
United Nations Security Council resolutions have mandated that 
Iran stop all its nuclear enrichment and reprocessing 
activities. And yet Iran has yet to heed the calls of the 
international community. Its brutal repression of the Iranian 
people continues unabated. Millions of Iranians rose up against 
a stolen election last summer, electrifying the entire world; 
it was inspiring. And according to the International Atomic 
Energy Agency, Iran has already stockpiled enough low-enriched 
uranium that, if further enriched, it would be enough for the 
cores of two nuclear weapons.
    So this is very, very troubling and it underscores the 
importance of the hearing. Despite the efforts of President 
Obama to reach out to the Iranian government and to engage it 
diplomatically over the course of the last 18 months, the 
regimes in Tehran continue to spurn our efforts and that of our 
allies. That is why the United Nations Security Council adopted 
more stringent sanctions on Iran this past June; it is why the 
European Union announced this week the strongest set of 
sanctions on Iran it has ever proposed; it is why President 
Obama announced stepped up U.S. sanctions; and it is most 
assuredly why Congress overwhelmingly, last month, passed the 
Comprehensive Iran Sanctions, Accountability, and Divestment 
Act.
    I strongly believe that, if fully implemented, this 
legislation, in combination with the new multilateral efforts, 
presents perhaps the best last hope of changing Iran's nuclear 
ambitions through diplomatic, economic, and political activity.
    I would like to remind the committee that this is the 
fourth law that has been enacted over the past 14 years that 
imposes sanctions against Iran. We must ensure that it is the 
one that finally will make the difference and once and for all 
squash this enrichment activity.
    I see that my time is up, but I have a great deal more to 
say. I ask unanimous consent to place my entire statement into 
the record.
    Chairman Towns. Without objection, so ordered.
    I now yield to the gentleman from Indiana, Congressman 
Burton for 3 minutes.
    Mr. Burton. Thank you, Mr. Chairman. I was one of the 
conferees on the Iran sanctions bill and I am not optimistic 
that it is going to work. But I would like to refer to some 
things that my predecessor, the young lady, just mentioned.
    There have been three moves to try to control or get Iran 
to stop its nuclear program. In 1995, on March 15th, President 
Clinton signed an Executive order. A subsequent order was on 
May 8, 1995, and that banned virtually all trade with Iran. And 
Warren Christopher warned the International community that the 
path Iran was on was following the mirror image of states taken 
by other nations that sought nuclear weapons capabilities. Then 
in 1996 Congress passed the Iran and Libya Sanctions Act, and 
that was to encourage foreign persons to withdraw from the 
Iranian market, and it also was supposed to impose sanctions on 
any foreign entity that invested $20 million or more in Iran's 
energy sector.
    Now, the reason I bring that up is because we passed what I 
thought was a very, very strong bill, and, in conjunction with 
the EU and others, I thought it was going to have a pretty 
strong impact on Iran. But it gave the president waiver 
authority. And that bothers me a great deal because this $20 
million penalty that was supposed to be imposed in 1996 has 
never been imposed on anybody. So whether it is a Republican 
president or Democrat president, whatever it is, these 
penalties have not been imposed, and we have given waiver 
authority to the President once again.
    So the one thing I would like to say today, Mr. Chairman 
and Mr. Ranking Member, is that we ought to do everything we 
can to make absolutely sure that the sanctions are followed 
through and there is no waiver. The reports that are required 
from the President should be complete and they should make sure 
that no waivers have been granted. If we don't do that, in my 
opinion, I think we are on the precipice of a war which could 
threaten the economy of the United States; not just the Middle 
East, but the economy of the United States, because we get 
about 30 to 40 percent of our energy from that part of the 
world, and we certainly are not even close to energy 
independence.
    With that, I will yield back the balance of my time.
    Chairman Towns. I thank the gentleman from Indiana for his 
statement and now yield 3 minutes to the gentleman from Ohio, 
Congressman Kucinich.
    Mr. Kucinich. Thank you, Mr. Chairman.
    As some of you know, I voted against H.R. 2194, the 
sanctions bill. I opposed it because I think that these 
sanctions will inflict economic hardship on the Iranian people 
and have no impact on the Iranian government. As a matter of 
fact, it will probably strengthen the Iranian government, which 
relies on confrontation. And instead of working to build a pro-
democracy movement by taking care not to have sanctions that 
are inevitably going to hurt the people of Iran, we are doing 
exactly the opposite.
    And if there is anyone in this room who thinks that the 
United States can afford still another war with troops in Iraq, 
in Afghanistan, in Pakistan, if there is anyone who thinks we 
can afford another war, then maybe you don't need to be in this 
discussion. But what we ought to be looking for is a more 
effective means of engaging Iran and continue to work behind 
the scenes to try to work behind the scenes to try to bring 
Iran to the table.
    This is not an easy issue, granted, but the easy reach that 
some inside the Government, and I am not speaking about this 
committee, some inside the Government have to seek to escalate 
is very dangerous, quite dangerous; and I think that we should 
be thinking more about how you promote democracy without 
creating sanctions which are going to undermine the very people 
we say we care about.
    I opposed nuclear proliferation for military purposes for 
all countries. At the same time, I think it is pretty clear 
that sanctions have proven to be a failed policy. I have argued 
that the sanctions included in the legislation play into the 
hands of leaders in Iran, undermine the efforts of Iranian 
people who have courageously challenged their government, often 
at the cost of their lives.
    So I am hopeful that, as we get into this discussion today 
and down the road, we will look at the situation as it is; at 
what happens when you try to use sanctions as an excuse for 
diplomacy and what happens when we get off the diplomatic track 
and start to move toward escalation. We cannot have military 
escalation. Matter of fact, I want to ask unanimous consent to 
submit for the record a recent comment by Admiral Mike Mullen, 
who advised against an attack on Iran.
    Chairman Towns. Without objection, so ordered.
    Mr. Kucinich. Thank you, Mr. Chairman.
    Chairman Towns. On that note, I now recognize the gentleman 
from Missouri, Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Chairman Towns. For 3 minutes.
    Mr. Luetkemeyer. Thank you.
    I think that today we need to acknowledge the fact that we 
have a very fragile political situation in the Middle East and 
that Iran is a major portion of that problem. I think the 
ranking member alluded to the situation that has been brewing 
now for many, many years. This is not a new situation, but now 
it has continued to grow and fester to the point where we need 
to acknowledge what is going on and need to take some action.
    The first thing that needs to happen is that we, as a 
country, and the President himself, needs to acknowledge that 
terrorism exists. These people are there wanting to do us harm. 
Many Americans, Mr. Chairman, believe that the President 
doesn't understand the threat and is ill-prepared to meet it. 
According to surveys, 57 percent of Democrats, 59 percent of 
Independents, 80 percent of Republicans think the President has 
not been tough enough on Iran.
    Meanwhile, the President's reticence to support popular 
opposition to the Ahmadinejad regime has extracted an 
incalculable cost to our strategic efforts and the Nation's 
moral standing. Indeed, President Obama's general approach to 
Iran seems to be based on the absurd belief that the Iranian 
nuclear program has been encouraged by American belligerence 
and American diplomatic intransigency. In response, President 
Obama has offered a course of conciliation and supplication. 
This response is beyond naive; it is very dangerous.
    I think it is also important to note that, going forward, 
the fact that we are here today discussing sanctions would seem 
to indicate that the tacit acknowledge that the past program 
and protocol of holding hands and the approach of trying to be 
friends with these people at the expense of our friend, Israel, 
an ally there in the Middle East, has not worked.
    I look forward to the discussion and I yield back the 
balance of my time. Thank you, Mr. Chairman.
    Chairman Towns. Thank you. I thank the gentleman for his 
statement and I now ask unanimous consent to leave the record 
open for 7 days so Members may submit their opening remarks and 
questions for the record.
    We have two panels today. The first panel, we will turn to 
them now.
    Mr. Robert J. Einhorn, who is Special Advisor for 
Nonproliferation and Arms Control with the U.S. Department of 
State.
    Our next witness is Mr. Daniel Glaser, Deputy Assistant 
Secretary for Terrorist Financing and Financial Crimes at the 
U.S. Department of Treasury.
    The next witness is Mr. Joseph A. Neurauter, Deputy 
Associate Administrator with the Office of Acquisition Policy 
at the U.S. General Services Administration.
    Our final witness in this panel is Mr. Joseph A. Christoff, 
who is the Director of International Affairs and Trade at the 
U.S. Government Accountability Office.
    It is committee policy that all witnesses are sworn in, so 
if you would stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that the witnesses 
all answered in the affirmative.
    You may be seated.
    I will begin with you, Mr. Einhorn. Of course, as you know, 
the lights start off on green, then go down to 1 minute and it 
turns to yellow, and then, after that, it turns to red. Now, 
red means stop, so we would appreciate it if you would 
recognize that, which will allow the Members to have an 
opportunity to raise questions with you. You may begin, and you 
have 5 minutes.

     STATEMENTS OF ROBERT J. EINHORN, SPECIAL ADVISOR FOR 
 NONPROLIFERATION AND ARMS CONTROL, U.S. DEPARTMENT OF STATE; 
    DANIEL GLASER, DEPUTY ASSISTANT SECRETARY FOR TERRORIST 
    FINANCING AND FINANCIAL CRIMES, U.S. DEPARTMENT OF THE 
TREASURY; JOSEPH A. NEURAUTER, DEPUTY ASSOCIATE ADMINISTRATOR, 
      OFFICE OF ACQUISITION POLICY, U.S. GENERAL SERVICES 
      ADMINISTRATION; AND JOSEPH A. CHRISTOFF, DIRECTOR, 
INTERNATIONAL AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

                 STATEMENT OF ROBERT J. EINHORN

    Mr. Einhorn. Thank you very much, Chairman Towns. Mr. Issa, 
members of the committee, thank you very much for the 
opportunity to appear before you this morning.
    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.
    In the face of this challenge, American policy is 
straightforward. We have pursued our broad policy goals through 
both engagement and pressure. We have sought to sharpen the 
choice now before the Iranian leadership.
    Last year we embarked on an unprecedented effort to engage 
with Iran. Engagement is both a test of Iran's intentions and 
an investment in a partnership with a growing coalition of 
countries deeply concerned about Iran's nuclear ambitions. We 
have sought and continue to seek opportunities for Iran to 
demonstrate convincingly that its nuclear program is intended 
entirely for peaceful purposes. These opportunities have not 
been embraced by Iran.
    Iran's intransigence left the international community no 
choice but to employ a second tool of diplomacy, namely, 
pressure. The adoption of U.N. Security Council Resolution 1929 
was an essential first step in that effort, building upon and 
strengthening previous sanctions resolutions.
    It bans transfers of major conventional weapon systems to 
Iran; it bans all Iranian activities related to ballistic 
missiles that could deliver a nuclear weapon; it establishes a 
framework for cargo inspections to detect and stop Iran's 
smuggling and acquisition of illicit items; it prohibits Iran 
from investing abroad in sensitive nuclear activities, such as 
uranium mining; it creates important new tools to help block 
Iran's use of the international financial system to fund and 
facilitate its nuclear and other destabilizing weapons 
programs; it targets directly the role of the Islamic 
Revolutionary Guard Corps in Iran's proliferation efforts, 
adding 15 IRGC entities to the list of designees for asset 
freeze; and, for the first time, the Security Council 
highlighted formally in the Security Council Resolution the 
potential links between Iran's energy sector and its nuclear 
ambitions.
    Our goal now is to ensure the most aggressive 
implementation of these sanctions as possible. We are not 
alone. The European Union has acted strongly to followup by 
endorsing a series of significant steps, as have Australia and 
Canada. We have called on states around the world to take 
additional measures, and will continue to engage with these 
partners.
    Our efforts to implement and endorse the multilateral 
sanctions are supplemented by a number of important national 
tools, in particular, the Iran Sanctions Act and the recently 
passed Comprehensive Iran Sanctions, Accountability, and 
Divestment Act. As was the case with the original Iran 
Sanctions Act, the obligations of the new legislation are 
already a regular part of our dialog with foreign governments 
and the private sector.
    Our efforts have yielded significant results. At least $50 
billion to $60 billion in oil and gas development deals have 
either been put on hold or have been discontinued in the last 
few years, due in part to our conversations with companies 
about the threat of ISI sanctions. Our pressure has contributed 
to the decisions by major international oil companies such as 
Total, Statoil, ENI, Lukoil, and Repsol not to undertake any 
new activities in Iran. In addition, major fuel suppliers, such 
as Vitol, Shell, Reliance, IPG, Glencore, and Trafigura have 
announced that they will no longer sell refined petroleum 
products to Iran. The net result is that Iran now faces 
profound challenges in securing the foreign investment in its 
energy sector that it desperately needs.
    The administration has also undertaken to review past 
activity that could trigger sanctions under the ISA to ensure 
that we are appropriately implementing the act. We have already 
seen that pressure, in combination with other goals, can have 
an impact on Iran. Through rigorous trade restrictions and 
active work to interdict WMD trade, illicit WMD trade, we have 
denied Iran access to items that it needs for its nuclear 
program.
    As Treasury Deputy Assistant Secretary Glaser can describe 
in greater detail, Iran is having greater difficulty in 
obtaining access to financial services that are the lifeblood 
of international commerce and Iran's proliferation programs. 
The international private sector has grown wary of conducting 
business with any Iranian banks. International financial 
institutions have voluntarily gone beyond their legal 
requirements to curtail their interactions with Iran.
    The same can be said of Iran's government-owned shipping 
industry, which lacks both credibility as a legitimate entity 
and has difficulty obtaining foreign insurance for most of its 
fleet. Impeding Iran's shipping lines access to foreign ports 
hinders Iran's ability to exploit those ports for proliferation 
purposes.
    Chairman Towns. Mr. Einhorn, could you summarize? Your time 
is up. Could you summarize?
    Mr. Einhorn. Sure.
    The designation of IRGC's construction arm, Khatam al-
Anbiya, has had a similar effect: the company is pulling out of 
operations in South Pars, Iran's major natural gas field, and 
KAA referenced recent sanctions in its announcement on why it 
was doing so.
    So, in conclusion, our aim has been to use these tools of 
pressure to sharpen the choice that the Iranian government 
faces and to press it to negotiate seriously with the 
international community and the P5+1 countries on its nuclear 
program. Pressure is meant to complement, not replace, the 
diplomatic solution to which we and our partners are still 
committed. We continue to acknowledge Iran's right to pursue 
civilian nuclear power, but with that right comes a profound 
responsibility to meet its international obligations. Our 
foremost objective is a durable diplomatic solution to the 
world's concerns about Iran's nuclear program. There is growing 
international pressure on Iran to live up to its obligations 
and growing international isolation for Iran if it does not.
    Security Council Resolution 1929----
    Chairman Towns. Mr. Einhorn, Mr. Einhorn----
    Mr. Einhorn. I am just finishing, Mr. Chairman.
    The Comprehensive Iran Sanctions Accountability and 
Divestment Act, and the amplifying efforts that I have 
discussed help significantly sharpen that choice for Iran. We 
are pleased that Congress has given the administration the 
tools to increase pressure even further. We will continue to 
work very hard to implement them and continue to urge our 
partners to follow suit with their own tough national sanctions 
to complement Resolution 1929.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Einhorn follows:]

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    Chairman Towns. Thank you.
    Mr. Glaser.

                   STATEMENT OF DANIEL GLASER

    Mr. Glaser. Thank you, Chairman Towns, Ranking Member Issa, 
distinguished members of the committee. It is a pleasure to 
appear before you today.
    Over the last several weeks, the international community 
and the United States have significantly enhanced our ability 
to apply financial pressure on Iran and obstruct its ability to 
further develop its nuclear capabilities. In particular, new 
sanctions adopted by the United Nations, United States, and 
allies such as the European Union, Canada, and Australia, 
highlight Iran's increasing isolation. These multilateral and 
national measures give us new and powerful tools that enable 
us, acting in concert with the private sector, to increase the 
financial pressure on Iran and further protect the 
international financial system from Iranian abuse.
    Our objective over the next few months will be to broaden 
and deepen the existing sanctions framework. We will, of 
course, begin by implementing the provisions of the newly 
enacted Comprehensive Iran Sanctions, Accountability, and 
Divestment Act, and by continuing to take actions under 
existing sanctions authorities. These domestic actions will be 
accompanied by a strong diplomatic effort to ensure that the 
financial isolation of Iran is not limited to the countries 
that have already acted, but in fact extends throughout the 
world.
    A series of U.N. Security Council resolutions form the 
corps of the international community's Iran sanctions 
framework. This framework was substantially strengthened last 
month with the adoption of U.N. Security Council Resolution 
1929. UNSCR 1929 contains important new financial provisions 
that should meaningfully impact Iran's ability to access the 
international financial system.
    This progress at the U.N. has been enhanced by a number of 
significant national measures taken by the United States and 
our allies. In the United States, the Comprehensive Iran 
Sanctions, Accountability, and Divestment Act provides the 
Treasury Department with a powerful new set of tools with which 
to put additional financial pressure on Iran, particularly 
relating to corresponding banking. In addition, the Treasury 
Department continues to use preexisting sanctions authorities 
to designate individuals and entities involved in facilitating 
both Iran's WMD programs and its support for terrorism. On June 
16th, Secretary Geithner announced numerous Iran designations 
under our counter-proliferation authority, including Post Bank 
and several entities related to the IRGC.
    Many of our partners have also taken recent action. Just 
this week, the EU adopted a Common Position on Iran sanctions. 
The Common Position substantially augments the EU's current 
sanctions program and not only implements but goes well beyond 
Europe's obligations under UNSCR 1929. It imposes a range of 
restrictions with regard to business with Iran in the trade, 
energy, and transportation industries.
    With regard to financial services, the Common Position 
designates seven Iranian banks, designates the IRGC and others, 
freezing their assets and prohibiting them from engaging in 
nearly all transactions. The EU also imposed a set of systemic 
measures aimed at restricting Iran's ability to abuse the 
European financial system.
    Australia and Canada have also taken substantial steps 
beyond what is required by UNSCR 1929. Like the United States 
and the EU, Australia has recently designated Bank Mellat and 
the head of the IRGC's construction arm. Indeed, just this 
morning, just within the last few hours, Australia announced 
that it is designating over 100 individuals and entities 
connected to Iran's nuclear program and revealed new 
restrictions on Australian businesses dealing with Iran's oil 
and gas sector.
    Canada has also adopted systemic measures that go well 
beyond UNSCR 1929. In that respect, all of these countries 
represent a model for the rest of the world to emulate.
    As I mentioned earlier, our objective is to broaden and 
deepen the international sanctions framework. At the same time, 
we will continue to engage with the private sector, describing 
the potential effects of the new Iran sanctions legislation on 
their business and encouraging them to curtail their business 
with Iran.
    As Mr. Einhorn just said, we have already seen how this is 
producing results. The IRGC's construction arm, Khatam al-
Anbiya, recently pulled out of developing the South Pars gas 
field. The recent imposition of sanctions on the IRGC and on 
Khatam al-Anbiya is likely to have played a significant role in 
this decision, as international corporations are increasingly 
unwilling to do business with those entities.
    We will continue to put in the hard work required to ensure 
broad, global implementation of sanctions. Actions by the 
United States, EU, Canada, and Australia should be reinforced 
by the actions of countries in Asia, the Middle East, and South 
America. Mr. Einhorn and I, as well as many of our other 
colleagues, will be traveling to those regions in the weeks to 
come to encourage them to do just that.
    Recent actions have demonstrated that the international 
community is increasingly united in its efforts to apply 
financial pressure on Iran. This effort will make Iran's choice 
increasingly clear: to choose the path of engagement offered by 
President Obama and the international community or to further 
deepen its isolation.
    Thank you, Chairman. I welcome any questions.
    [The prepared statement of Mr. Glaser follows:]

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    Chairman Towns. Thank you very much, Mr. Glaser, for your 
statement.
    Mr. Neurauter.

                STATEMENT OF JOSEPH A. NEURAUTER

    Mr. Neurauter. Good morning, Chairman Towns and 
distinguished members of the committee. Thank you for providing 
me the opportunity to testify on the implementation of Iran's 
sanctions.
    Section 102 of the act we have been discussing this morning 
requires that no later than 90 days after the enactment of the 
act, the Federal Acquisition Regulation [FAR], shall be revised 
to require a certification from each person that is a 
prospective contractor stating that the person, and any person 
owned or controlled by that person, does not engage in any 
activity for which sanctions may be imposed under the act.
    The FAR is overseen by the Federal Acquisition Regulatory 
Council, which consists of the Administrator for Federal 
Procurement Policy, along with three signatories from DOD, GSA, 
and NASA, respectively.
    To work on a rule, we open a FAR case, and this case, No. 
2010-012, opened on July 14, 2010, and assigned to the FAR 
Acquisition Law Team, whose responsibilities include foreign 
acquisitions and sanctions activities. The FAR case was opened 
as an Interim Rule due to the time line requirements of the 
act. Interim Rules become effective upon publication in the 
Federal Register. We project that the publication of this rule 
will occur on or before September 29, 2010, a date that falls 
within the timeframe provided by the act.
    The Law Team held its first meeting on July 20, 2010, to 
begin drafting the FAR text to implement Section 102 of the 
act. The Team is drafting solicitation provisions, contract 
clauses, and a preamble that will be published with the rule to 
help the public and the affected stakeholders understand the 
new rule. The Team is consulting with Department of State's 
Terrorism, Finance, and Economic Policy Office, and Treasury's 
Office of Foreign Assets Control as part of this effort. This 
is what we have accomplished so far, and we certainly have a 
sense of urgency in this matter.
    Let me now briefly describe where we go from here. Going 
forward, once the Law Team finishes developing the new or 
revised FAR text and the Federal Register notice, the Team's 
proposal will be discussed by two councils, the Civilian Agency 
Acquisition Council and the Defense Acquisition Regulations 
Council. These bodies are staffed with acquisition policy 
officials who square their agency's views and offer 
refinements, as necessary, to address any concerns and achieve 
consensus on FAR changes and supporting materials.
    After GSA's Office of General Counsel goes over the agreed-
upon Rule for legal sufficiency, the case will be forwarded to 
the Office of Management and Budget for final review. 
Subsequent to that, the Regulatory Secretary and GSA will then 
prepare the rule for formal publication, obtain signatures from 
GSA, DOD, and NASA, and transmit the Rule to the Federal 
Register.
    I want to personally assure you, Mr. Chairman and 
distinguished members of the committee, that we take this 
matter very seriously and are fully confident that everyone 
working together in the FAR rulemaking process, we will 
complete this FAR case on time. We know how vital it is to 
expedite the process and get this done.
    Thank you very much for the opportunity to testify here 
today, and I look forward to any questions you may have.
    [The prepared statement of Mr. Neurauter follows:]

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    Chairman Towns. Thank you very much for your statement.
    Mr. Christoff.

                STATEMENT OF JOSEPH A. CHRISTOFF

    Mr. Christoff. Mr. Chairman, members of the committee, 
thanks for inviting GAO to this important hearing. I am here 
today to discuss our work on the implementation of U.S. 
sanctions against Iran. The United States has banned most trade 
and investment with Iran, prohibited firms from shipping U.S. 
goods through other nations, and constrained investments in 
Iran's energy sector.
    The Comprehensive Iran Sanctions, Accountability, and 
Divestment Act of 2010 expands existing sanctions and requires 
the administration to report on its implementation efforts.
    My testimony will discuss three key challenges the United 
States faces in: first, deterring the illegal transshipment of 
U.S. goods to Iran; second, restricting foreign investments in 
Iran's energy sector; and, third, assessing the effectiveness 
of U.S. sanctions. I also will discuss how the new act 
addresses these challenges.
    First, we found that Iran has circumvented the U.S. trade 
ban by transshipping U.S. military and dual-use items through 
other countries. Between 2007 and 2008, the United States 
prosecuted 30 firms and individuals for illegally transshipping 
U.S. aircraft components, night vision goggles, and other 
sensitive technologies to Iran. In particular, the United Arab 
Emirates, Malaysia, and Singapore have served as key 
transshipment routes for U.S. goods.
    The new act authorizes the President to designate a country 
as a destination of diversion concern if the country continues 
to allow illegal transshipments of U.S. goods. The United 
States would either provide technical assistance to strengthen 
the country's export controls or restrict U.S. exports to the 
country.
    Second, we found that the United States faces challenges in 
restricting foreign investments in Iran's energy sector. Iran 
seeks such investments to increase production from its vast oil 
reserves, the third largest in the world. According to the IMF, 
Iran's oil production has remained virtually flat in recent 
years, and will likely stagnate without more investment. In 
addition, Iran must import about 130,000 barrels of gasoline 
each day to meet domestic demand.
    In March we identified 41 foreign firms that had commercial 
activities in Iran's energy sector between 2005 and 2009. Seven 
had contracts with the U.S. Government valued at almost $880 
million. Under existing law, foreign firms that invest more 
than $20 million in Iran's energy sector in any 12-month period 
are subject to U.S. sanctions. However, the only time the 
United States tried to impose sanctions was in 1998, when it 
determined that the investments of three foreign energy firms 
were sanctionable. At that time, the Secretary of State waived 
the sanctions, citing U.S. national interests.
    The new act requires additional action on the part of the 
President. The President is now required to investigate any 
report of sanctionable activity where there is credible 
evidence, and determine in writing to the Congress whether the 
activity had in fact occurred. The President would then be 
expected either to impose or waive sanctions.
    Finally, we found that U.S. agencies had not collected data 
on the results of the sanctions they enforced and had not 
established baseline information for monitoring and reporting. 
In addition, we found no comprehensive assessment of the 
effectiveness of U.S. sanctions. A comprehensive assessment 
becomes more critical as the new act expands sanctions and 
imposes new reporting requirements. For example, the United 
States can now sanction foreign firms that sell refined 
petroleum products or sensitive communications technologies to 
Iran. And the administration must now report on foreign firms' 
investments in Iran's energy sector, the activities of foreign 
export credit agencies, and destinations of diversion concern. 
A comprehensive assessment would provide important information 
on whether or not the sanctions helped the United States 
achieve its security and foreign policy goals.
    Mr. Chairman, Mr. Issa, that concludes my statement and I 
look forward to your questions.
    [The prepared statement of Mr. Christoff follows:]

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    Chairman Towns. Thank you very much.
    Let me thank all of you for your statement. Now we have the 
question and answer period.
    Let me begin with you, Mr. Glaser. The Treasury Department 
has had some success in getting certain financial institutions 
to stop doing business with Iran. The new U.S. sanctions target 
certain banks. Why shouldn't the U.S. Government target all 
foreign banks that do business with Iran?
    Mr. Glaser. Why shouldn't we target? Well, I think that is 
the goal. I think the goal that we have at the Treasury 
Department, what we have been trying to achieve over the past 
few years is to create a dynamic in the international financial 
system that encourages banks throughout the world, no matter 
where they are, no matter what their size is, to make the 
decision not to do business with Iran.
    With respect to the actual legal authorities we have, I 
think Congress made the right decision in the types of 
activities that it chose to target. I think it is important 
that we keep our sanctions activities based conduct focused to 
demonstrate, to get to Mr. Kucinich's point, that the goal here 
is not to harm the people of Iran.
    So by focusing on U.N.-designated entities, by entities 
that have been designated by the Treasury Department for being 
involved in terrorism and for being involved in proliferation, 
which, frankly, is virtually all of the Iranian banks, we get 
the effect that I think we are looking for, which is increased 
financial pressure on Iran, increased difficulty for Iran to 
engage in regular international transactions, increased ability 
to obstruct Iran's proliferation-related transactions, while at 
the same time ensuring that, when we go and talk to other 
countries about this and try to enlist their support, we can 
emphasize that this is a conduct-based effort, this is an 
activity-based effort; what we are targeting is the illicit 
conduct that Iran is engaged in.
    Chairman Towns. Thank you very much. There is nothing that 
we need to do legislatively in order to make it possible for 
you to have more success?
    Mr. Glaser. Mr. Chairman, I think you have just done 
legislatively something very important to allow us to have more 
success. As you have indicated, and as I indicated in my 
testimony, I think we have had tremendous progress over the 
last 3 or 4 years in creating a shift in attitude among 
international financial institutions away from Iran.
    We have been largely successful in that, but we have not 
been completely successful in that. There do still remain 
financial institutions that we are concerned about that are 
engaged in business with Iranian institutions that are engaged 
in deceptive financial practices, that are designated by the 
United Nations, that are designated by the United States, that 
are designated by the European Union and Canada and Australia, 
and it is important that we be able to get at those 
institutions; and that is precisely what the new legislation 
allows us to do.
    You have given us 90 days to issue regulations under that 
bill. We have every intention of issuing those regulations in 
the time allotted to us and we have every intention of robustly 
and responsibly implementing that legislation. I think we have 
a pretty good track record of using the authorities that have 
been given to us by Congress to target banks that we think pose 
a threat to the international financial system, a threat to 
U.S. security, and a threat to the U.S. financial system, and 
we will certainly continue to do so.
    Chairman Towns. Thank you very much.
    Mr. Christoff, let me direct this question to you. Your 
report identified 41 foreign firms with commercial activity in 
Iran's energy sector. You have named names. What reactions have 
you gotten from those firms? And let me also ask what reactions 
have you gotten from the State Department and Treasury, as 
well?
    Mr. Christoff. Well, let's start with the reaction from the 
firms. There were many firms that did not comment on our 
report, and we gave them a full opportunity to comment. 
Generally, those firms were from China, India, Russia, and 
Korea. The European companies did comment, and I think Websol 
of Spain, in particular, met with GAO twice now over the past 3 
months since we issued our list. They gave us a letter which 
they had sent to the Iranian government indicating that they 
were pulling out of the $10 billion L&G project, where they had 
a 25 percent stake. They just met with us again on Monday and 
said that they had informed their partner Shell that they were 
officially pulling out effective July 31st, the day after 
tomorrow.
    Other companies such as Shell told us that they were still 
considering the extent to which they were going to continue 
their investments. They also have a 50 percent stake in a $10 
billion project. I would think, though, that with the new EU 
sanctions, they would be accelerating their decisions as to 
whether or not they are going to continue with those kinds of 
investments.
    State Department's reactions. We have, in the past, back in 
2007, we also put out a list of companies that had commercial 
activities in Iran's energy sector. We have been told by that 
bureau within State Department that is responsible that they 
are reviewing those kinds of lists and anticipate that there 
will be actions taken, but we are not aware of what those 
specific actions will be.
    Chairman Towns. Thank you very much.
    My time has expired. I now yield 5 minutes to the gentleman 
from California, Ranking Member Congressman Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Einhorn, I listened for about 10 minutes to your 5 
minute opening statement. If I believe everything you said, 
things are going great; it is all working, you're having 
tremendous accomplishment. Would you like to shorten that and 
characterize it perhaps a little differently just so that I not 
misunderstand? Because everything you talked about, I heard it 
again and again, and I reread it while the others were 
speaking. You are telling me it is all working; after more 
three decades, suddenly it is all working. Is that what you 
want us to have us leave believing?
    Mr. Einhorn. Congressman, what I would ask you to recognize 
is that we are working aggressively to implement the law and to 
implement and to achieve the objectives of the law, which is to 
reduce investments in Iran's petroleum sector.
    Mr. Issa. Mr. Einhorn, did you seek this legislation on 
your watch?
    Mr. Einhorn. I am sorry?
    Mr. Issa. Did you seek this legislation on your watch? Is 
this legislation you would have had us pass?
    Mr. Einhorn. The administration worked very closely with 
Members of Congress on this legislation. We believe it is 
strong legislation; that is why the President signed it on July 
1st.
    Mr. Issa. Then, Mr. Einhorn, why all the out clauses? Why 
is it the administration wanted something that didn't tie its 
hands one bit, but gave the symbolism of strength because there 
are many things that could be done, but ultimately the 
President still has tremendous waiver authority under the 
current law?
    Mr. Einhorn. The administration worked with the Congress to 
develop a tool that could be effective, and sometimes you need 
flexibility in the tool to persuade key targets to do what we 
want them to do, and we have used that flexibility to good 
effect.
    Mr. Issa. Thank you, Mr. Einhorn. Thank you.
    Mr. Glaser, you were a little less rosy, but you are at the 
tip of the spear; you have to actually follow the money, is 
that right?
    Mr. Glaser. Yes, certainly, part of it is following the 
money. Part of it is just applying broad systemic pressure.
    Mr. Issa. OK, the UAE is very often mentioned. On one hand 
we have their leader outright making statements that are very 
bold, and on the other hand we have some of the Emirates openly 
trading with Iran, isn't that true?
    Mr. Glaser. I don't know about the trade side, but on the 
financial side there are certainly financial----
    Mr. Issa. Financial and others.
    Mr. Glaser. Absolutely.
    Mr. Issa. There is movement of goods and money. It is a 
facilitation, but it is a facilitation in one region. What are 
you going to be able to do about that? You have a partner here 
who doesn't have control, and I think this is something Mr. 
Christoff touched on, is we have this lack of control. What are 
you going to do to empower a union, a federation of Emirates 
that is one of the key challenges to this sanction working?
    Mr. Glaser. Thank you for the question. As I said in both 
my oral and written remarks, it is not enough what has happened 
to date. We have seen vigorous implementation of the U.N. 
resolution in Europe, in America, Canada, Australia; and now 
our challenge is to ensure that it is vigorously implemented 
elsewhere, and I specifically mentioned the Middle East as one 
of the key places.
    And it goes without saying, but I will say UAE is 
absolutely key in that as well. I visited the UAE many times; 
my boss, Stuart Levey, is planning to go to the UAE in the next 
couple of weeks, and an important part of that discussion is 
going to be the provisions of the new legislation, the 
provisions that force banks to choose to put their 
corresponding banking at risk with the United States if they 
continue to engage in relationships and significant 
relationships with designated Iranian banks. That is going to 
be an important part of that discussion.
    Mr. Issa. I appreciate that.
    Mr. Christoff, among other things, you touched on this and 
some of the other failures over time. You probably would not 
characterize the current success at the same level as others. 
Iran is in the process of what they call privatization, and it 
is a shell game. They announce that they are going to sell 
something from the government and then people who somehow have 
money, but in fact the only thing they have ever been is 
connected to their military, buy it.
    As that privatization goes on, isn't it going to get harder 
and harder to enforce a sanction that right now is failing 
already? And if so, what do we need to do to create a regime in 
which individuals who can operate much more globally, and 
without the cover of the government, are in fact part of a 
shell game of buying assets, often nuclear-related?
    Mr. Christoff. I think you are right, and privatization is 
going to be a challenge in the future.
    Mr. Issa. Or crony privatization, if you will.
    Mr. Christoff. Absolutely. But also I think you made a very 
good point about having more of a collective approach to 
dealing with the UAE in this transshipment issue. I really 
think that is an important issue. The UAE is now the No. 1 
exporter of goods and services to Iran. The UAE remains the No. 
1 country that the Commerce Department is concerned about with 
these post-shipment verifications that fail. We sell our goods 
to the UAE; we go over and inspect them; they are either not 
there or they are not being used as intended. So there needs to 
be a concerted focus on the United Arab Emirates.
    Mr. Issa. Thank you.
    Mr. Chairman, in closing, I went into Libya on the first 
trip into Libya after we lifted all visitation sanctions, it 
was in a U.S. military aircraft, and we had several hours 
before we met with their ``leader,'' and what I discovered was 
that there was more American goods, more American brand names 
in Libya on that first trip than I would typically see at Wal-
Mart.
    So I have been somebody who is critical not of the laws we 
pass; I think the sanctions we are passing are right and they 
are attempting to give real power, but it is very clear that 
unless we get implementation from the administration, some day, 
somewhere, we are going to have an event no different than 
October 23, 1983, at the Beirut barracks, where 241 Marines 
lost their lives. The next one will be nuclear and it will be 
exponentially greater, and it is likely to be here in the 
United States.
    I yield back.
    Chairman Towns. That is why we are having this hearing.
    Yes, Congresswoman Maloney for 5 minutes.
    Mrs. Maloney. First of all, I would like to thank you, Mr. 
Chairman, for having the hearing and all of the panelists for 
your testimony and for your commitment of implementing the 
sanctions. I would like to direct my question to Mr. Neurauter, 
since this committee has direct responsibility, both 
legislatively and with oversight over procurement.
    Mr. Neurauter, under the new sanctions signed by the 
President, GSA is required to revise the Federal Acquisition 
Regulations to require a certification from each person that is 
a prospective contractor; that the person, and any person owned 
or controlled by the person, does not engage in any activity 
for which sanctions may be imposed under Section 5 of the Iran 
Sanctions Act. Specifically, can GSA commit to meeting the 
timetable? You have committed to meeting the timetable under 
the law to require this particular part to certify that 
contractors are not conducting any prohibited business.
    Mr. Neurauter. Yes, we are definitely committed to doing 
that. We are definitely committed to having the interim rule in 
place. The folks in GSA are fully aware that this has started. 
Because the key is to implement the rule once it is in effect, 
and that is what we will do.
    Mrs. Maloney. Well, specifically what steps has GSA taken 
to ensure that companies that are making accurate and complete 
certifications, how do you know they are telling you the truth 
when they sign that box? Are you reviewing it or doing any 
research to make sure that they are accurate in what they are 
saying? Because obviously many companies have been conducting 
business in the prior sanctions that we had before the world, 
actually?
    Mr. Neurauter. In the context of certifications and 
representations, that is a normal part of our business, and 
that is what companies do, and they certify as to many things.
    Mrs. Maloney. But what do you do to make sure that what 
they are certifying is accurate? What if a company knowingly 
makes a false certification and you find out, as we found out 
in Mr. Christoff's report, that many companies were doing 
business with America and Iran, in direct conflict with the 
prior Iran sanctions act? What do we do if a company knowingly 
signs that box and made a mistake or is just outright lying?
    Mr. Neurauter. Speaking from my view as the GSA Suspension 
and Debarment official, I am very concerned about contractor 
integrity and honesty. If that kind of situation comes to my 
attention, if need be, I will ask the IG to investigate further 
to get me the facts; otherwise, I have the ability to call in 
the company and ask them whether the certification was accurate 
or not and, if not, to tell me what the facts are.
    Mrs. Maloney. The question is what if you find out that 
they made a mistake or were outright lying? Is there a fine? Do 
you debar them? Do you terminate the contract? What do you do 
if you find that situation?
    You know, there was this one article that was in the New 
York Times--I would like permission to put it in the record, 
Mr. Chairman--about U.S.'s richest companies defying its 
policies on Iran. This was in March 6, 2010, and it talks about 
companies that were defying our law, yet getting billions, 
literally, in American contracts.
    What happened? Did we terminate that contract? Did we fine 
the people? If you find someone knowingly really violates the 
law, you said you would do an IG investigation. What if the IG 
investigation comes back, or the investigation by the New York 
Times comes back and says that they are defying our policies, 
violating the law? Do we find them? Do we terminate our 
Government contracts with them? What do we do?
    Mr. Neurauter. Specifically, I can speak to what I would 
do. If I find that contractor non-responsible based upon an 
integrity issue, I would debar them.
    Mrs. Maloney. You would debar them.
    Mr. Neurauter. Yes.
    Mrs. Maloney. But there is no real requirement in law. What 
happened to these companies that are getting billions in 
American contracts and defying prior Iranian sanctions? Did 
anything happen to these companies?
    Mr. Neurauter. I don't know, ma'am.
    Mrs. Maloney. Well, could you find out and get back to us 
and let us know?
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    Mr. Neurauter. Yes.
    Mrs. Maloney. The new sanctions also prohibit the head of 
an executive agency from entering into or renewing a contract 
for the procurement of goods or services with a person that 
exports sensitive technology to Iran. What role will GSA play 
in administering this portion of the law? That is a very 
sensitive area, sensitive technology. What role will GSA play 
in administering this section of the law?
    Mr. Neurauter. Of this statute here?
    Mrs. Maloney. Yes.
    Mr. Neurauter. As far as I know, that would be included in 
the FAR case.
    Mrs. Maloney. That will be included.
    My time has expired. Thank you very much. Thank you for 
your service.
    Chairman Towns. The gentlewoman's time has expired.
    I now yield to the gentleman from Indiana, Congressman 
Burton.
    Mr. Burton. One of the things that has concerned me was I 
guess back during the Clinton administration, Madeline Albright 
waived the penalties on a Russian company and, I think, a South 
American company because they had done business with Iran, in 
violation of the law. I think it was Gazprom 1998 and Petronas 
Oil Companies.
    But Madeline Albright waived them at the direction of the 
President, and the President said that the United States would 
not impose sanctions on violators from the European Union, 
presumably with the hope that the EU would, instead, 
immediately take action on its own, but it didn't. So these 
early sanctions made it clear to violators that they were not 
seriously threatened by the sanctions.
    One of the things that concerns me, as I said before, and I 
think Mr. Issa mentioned as well, is that there is so much 
waiver authority by the President on almost every one of the 
sanctions that are in the bill, which I opposed in the 
conference committee. But, nevertheless, it is in there, and I 
just would like to, once again, express my concern about that, 
because, in the past, no President, going back to beyond 
Clinton, has ever imposed any sanctions that have been carried 
through.
    The other thing I would like to ask is I noticed in the 
United Nations legislation it does provide a mechanism for 
civil penalties for financial institutions that are involved in 
any kind of a bank transaction of a $250,000 penalty or an 
amount that is twice the amount of the transaction that is the 
basis of the violation. But one thing that I can't really 
ascertain is whether or not the language in the bill that we 
passed provides a mechanism for freezing Iranian assets in the 
United States. I am not sure that the U.N. resolution does as 
well.
    Can you tell me, any of you, whether or not freezing assets 
in banks, their money in the United States, is allowed in the 
bill that we passed and went through conference committee, or 
in the U.N. or any of the other bills that passed, the EU or 
any of them? Freezing their assets, absolutely saying you 
cannot let them have their money.
    Mr. Glaser. Most Iranian assets in the United States would 
already be frozen now under a whole wide variety of Iran 
sanctions legislation. The Treasury Department, over the past 
few years, has designated most Iranian banks under our counter-
terrorism or counter-proliferation authority, that freezes 
their assets to the extent that there are assets in the United 
States. There would be, frankly, very few assets, if any, of 
those banks in the United States.
    So I think the problem that the bill was trying to get at 
with respect to banks was not freezing their assets that are 
under U.S. control, because there aren't any assets under U.S. 
control, and we have already designated these banks and applied 
sanctions on them. What I think it was trying to get at was 
third-party banks that were providing these designated Iranian 
banks indirect access into the United States.
    That is what the bill tries to get at and I think it was a 
very important problem that Congress identified and it is 
something that we are going to try to use to solve. But the 
assets of these banks, to the extent in U.S. jurisdiction, are 
likely already frozen.
    Mr. Burton. Mr. Einhorn, you are with the State Department. 
In the event that General Electric, which has been accused of 
doing business through their subsidies with Iran, if they 
continue to do business in any way and there are sanctions 
imposed upon them because of that business being conducted, 
would the State Department in any way recommend a waiver of 
that penalty? Because that has been done, as I said before, by 
Madeline Albright during the Clinton administration.
    Mr. Einhorn. Congressman, without reference to any 
particular U.S. entity----
    Mr. Burton. Well, any company. I just used that as an 
example.
    Mr. Einhorn. Any company, when we get information, credible 
information that a company is involved in sanctionable activity 
under the law, we will examine this very closely. We will go to 
the company itself; we will go to U.S. embassies, see what they 
can find out; we will inquire of the intelligence community.
    Mr. Burton. Let me just say will the recommendation of the 
State Department be that they will not waive the sanctions to 
the President?
    Mr. Einhorn. I can't predict what the recommendation of the 
State Department will be; it will depend on the situation. You 
mentioned, Congressman Burton, you talked about waiver 
authority and so forth.
    Sometimes it is very useful to have that authority in 
there, and I will tell you why. Sometimes you deal with a 
company that may have engaged in sanctionable activity. What 
you want them to do is to stop that activity and to pledge not 
to repeat it again. You need some flexibility in the law 
essentially to bargain with that company. And if there is a 
situation where a company has stopped all sanctionable activity 
and pledges not to resume it, then perhaps the waiver of 
authority, the ability to waive sanctions is a useful tool to 
stop that sanctionable activity, and that is worthwhile.
    Chairman Towns. The gentleman's time has expired.
    I now recognize the gentleman from Illinois, Congressman 
Quigley.
    Mr. Quigley. Thank you, Mr. Chairman.
    Mr. Einhorn, I guess what you are getting from some of 
these questions is whether or not any administration has been 
strong enough on any of these sanctions through time. While I 
have faith in this administration, with all due respect, I am 
not sure your testimony would evoke greater faith that we would 
move forward appropriately with the new sanctions. From page 4 
of your testimony: In this review, we identified a number of 
cases dating from before the Obama administration which 
appeared problematic and warranted more thorough consideration.
    Given the extraordinary circumstances here, and the fact 
that the timeframe for a viable deliverable weapon seems to be 
collapsing upon itself, what does problematic mean? If you add 
that into the equation, and the fact that we are reading 
articles every day about how spry other countries seem to be 
circumventing these actions, are we spry enough? Are we 
forceful enough? And can you be a little more forceful from 
that testimony?
    Mr. Einhorn. Thank you, Congressman. I can't speak for 
previous administrations. I certainly can't speak for the 8 
years of the George W. Bush administration, where no 
determinations were made, no sanctions were made, no 
determinations of even sanctionability. All I can speak for is 
the Obama administration; and Secretary Clinton, early on, 
instructed us to act aggressively to implement the law. We have 
carried out a thorough review of a large number of cases. We 
winnowed those down to less than 10.
    We are now in the process of engaging other agencies. The 
Secretary of State has been delegated authority to take 
decisions. We have to get the input from other agencies; we 
will provide that input to Secretary Clinton and she will make 
decisions. I would say that she, before very long, will have to 
make determinations under the law as to the sanctionability of 
this relatively small number of cases, fewer than 10.
    Mr. Quigley. And can you ballpark the timeframe here?
    Mr. Einhorn. She wants us to move expeditiously. As I say, 
the dossiers are out to other agencies. We need to hear back 
from them, get their recommendations, and feed those to the 
Secretary, and she can make decisions.
    Mr. Quigley. And I appreciate that.
    For the panel, switching directions, given the short 
timeframe we have with you, to the extent you can, tell us a 
little more of your thoughts about how China plays into this 
equation, filling the gap, perhaps flooding everything else, 
overwhelming everything else we are trying to do here.
    Mr. Christoff. I think China is one of the countries in 
which the U.S. attention has to turn to. The EU sanctions were 
passed, but China has gone, over the past 15 years, from having 
minimal trade with Iran to being either the first or the second 
biggest importer and exporters of goods and services to Iran. 
They are aggressive in investing in Iran's energy sector. Their 
companies have been sanctioned under the nonproliferation 
provisions multiple times, to no effect. So that is the next 
country that I think we need to turn our attention to.
    Mr. Quigley. And by attention, your suggestions?
    Mr. Christoff. Mr. Einhorn certainly has some suggestions, 
but I think there has to be a recognition that, at least with 
some of the nonproliferation sanctions, when you have Chinese 
companies that have been sanctioned three or more times, there 
has to be a reevaluation of the effectiveness of those 
particular sanctions, because it is not changing their 
behavior.
    Mr. Einhorn. If I can just followup, Congressman. You are 
right to identify China. China is of concern to us in this 
regard. China has backfilled, when a number of responsible 
countries has distanced themselves from Iran. We need to speak 
with the Chinese.
    We have begun to raise this at the highest levels with 
Chinese leaders. Deputy Assistant Secretary Glaser and I will 
be going to China in August to begin a dialog, and this dialog 
will be pursued at all levels. We need for them to enforce the 
Security Council resolutions conscientiously, and we also need 
for them not to backfill when responsible countries have 
distanced themselves from Iran.
    Mr. Quigley. Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much.
    I now yield 5 minutes to the gentleman from Tennessee, Mr. 
Duncan.
    Mr. Duncan. Thank you, Mr. Chairman.
    I want to read some quotes from when this issue, a couple 
of times that it came up before, and if there is any time left, 
then I would be happy for you to respond.
    A little over 3 months ago, the Congressional Quarterly, on 
April 22nd, had an article that said, ``Business groups say the 
House and Senate bills could effectively prohibit U.S. 
businesses from partnering with certain foreign companies even 
if the relationships have nothing to do with Iran.'' Then they 
added: ``The National Association of Manufacturers released a 
study arguing that at least $25 billion in exports and 210,000 
jobs could be lost if sanctions legislation is enacted.''
    The next day, in the Hill newspaper, Patrick Disney and 
Lara Friedman, and I am not familiar with who they are, wrote 
this in an article, they said: The United States has sanctioned 
Iran for decades, with little to show for it, and added that, 
``Certain sanctions have unambiguously failed to achieve their 
objective, contributing instead to the suffering of ordinary 
Iranians.''
    Last December 15th, the National Security Subcommittee had 
a hearing in this very room in which I participated, and four 
witnesses testified, and I will tell you that all four of them 
were against sanctions. Dr. George Lopez, Chair of the Kroc 
Institute at Notre Dame, said that sanctions ``will inflict 
economic pain in Iran, but produce no political gain on issues 
important to the United States. In fact, research on the 
history of sanctions cases predicts that these sanctions 
imposed on this Iranian government in the manner imposed in 
H.R. 2194 will do more harm than doing nothing.''
    James F. Dobbins, director of the International Security 
and Defense Policy Center, said that while sanctions are 
sometimes appealing, they are not without cost to the imposing 
states and ``some of that cost is eventually transferred to the 
American taxpayer. Further, sanctions against Iran are not 
likely to alter Tehran's nuclear policies. Sanctions will 
weaken the state economically and even militarily that imposes 
it, and strengthen the regime's domestic support and hold on 
power.'' In other words, strengthen Iran's hold on power.
    Journalist Robin Wright said, ``The regime could exploit 
new sanctions as an excuse to clamp down further on the 
opposition'' and said, ``Sanctions also hold the potential to 
hurt the public more than the regime.''
    Finally, Suzanne Maloney, a senior fellow at the Brookings 
Institute, said, ``Sanctions do not offer a cure-all or a 
silver bullet for resolving our longstanding concerns about 
Iranian policy. There should be no illusions about the 
likelihood that even more rigorous and more broadly implemented 
sanctions can produce a reversal of Iran's nuclear calculus.''
    What I am concerned about is that sanctions will end up 
hurting the poor and lower income people of Iran more than 
anybody, while doing very little good for us. And I noticed 
that Mr. Christoff said, in his testimony a while ago, that 
because these sanctions we have imposed now are the toughest 
ever, that we need to very soon have a very good analysis of 
the effectiveness of these sanctions.
    Now, if anyone wishes to respond. Yes, sir, Mr. Einhorn.
    Mr. Einhorn. Thank you, Congressman, for the question. 
There is a long debate on the utility of sanctions; do they 
work, what is their impact, and so forth. Our view is that 
sanctions are not an end in themselves; they are a vehicle for 
changing Iran's behavior. We want them to recalculate costs and 
benefits and come up with a conclusion that they are better off 
ending their defiance of the international community and 
meeting their international obligations.
    I think, until recently, Iranians have been very self-
confident that they could have their cake and eat it too; they 
could have their nuclear ambitions, but they could also have 
good commercial financial relationships with the international 
community.
    What we have been trying to do is turn up the pressure on 
Iran so that it has to make a choice between one or the other, 
and there is pretty good evidence coming in every day that 
Iranians are feeling the pressure. Every day another major 
company decides to distance itself from Iran, and we think Iran 
is beginning to feel the heat.
    We read in the papers by Iranian economists that their 
economic situation is worsening, that oil production is 
declining, that the cost of imports is increasing because of 
the difficulty of getting financing. So we believe we have 
begun to turn the corner on this and that Iran is feeling the 
pressure, but we have to continue stepping that up.
    Mr. Duncan. Well, let me just say, because my time is up, 
we have given people in our Government great power through this 
sanctions legislation. But I hope that power is exercised in a 
humane and judicious manner so that we don't end up hurting an 
awful lot of people in the process.
    Chairman Towns. The gentleman's time has expired.
    I now recognize Mr. Foster from Illinois.
    Mr. Foster. Thank you, Mr. Chairman.
    Director Christoff, were the Chinese companies that were 
sanctioned state-owned or privately-owned companies?
    Mr. Christoff. I don't know that, Mr. Foster, but I can try 
to get that information for you for the record.
    Mr. Foster. OK. Well, what I am getting at is whether it is 
reasonable to view the Chinese government as basically a 
holding company, so that the sanctions--you know, presumably, 
if there is a subsidiary that violates the sanctions, that 
reflects onto the holding company as a general principle. Is 
that how it works?
    Mr. Christoff. Yes.
    Mr. Foster. So in the case, which I think is likely, that 
at least some of these sanctioned companies, you could make a 
reasonable logical argument that in fact the holding company, 
namely, the Chinese government, might be sanctioned as a whole. 
I am just wondering if you can explore that for the record.
    Mr. Christoff. Yes, I will look into that.
    Mr. Foster. Deputy Secretary Glaser, what do you view the 
biggest holes are in the financial net that we are trying to 
cast around the IRGC? For example, how are illicit arms or 
technology shipments typically paid for? Are there enhancements 
to the international reporting that would really do you a lot 
of good that we could encourage at the congressional level?
    Mr. Glaser. Thank you for the question. I am glad you 
focused on the IRGC, because I think that is really one of the 
key entities we should be looking at. The IRGC is engaged in 
the whole range of bad conduct that we associate with Iran, 
from proliferation activities, terrorist activities, 
suppression of democracy within Iran. The IRGC is engaged 
across the board. It is also a very attractive target because 
they have such extensive economic and financial networks both 
within Iran and throughout the world. So that is their 
strength, but it is also their weakness; it also creates a 
target-rich environment.
    The challenge that we have had up until, really, the last 
month is getting universal action with respect to the IRGC. We 
have had tremendous success with that recently with 1929, and 
really most especially with the European Union's Common 
Position this week, which applies sanctions to the IRGC and 
Europe across the board, the IRGC as an entity plus numerous 
subsidiaries.
    Again, the challenge I don't think is a legislative one; I 
don't think it is an authority challenge. The challenge is to 
make this as broad and deep as possible, to get out on the 
road, to present information to the private sector, to present 
information to foreign governments to let them know what kind 
of activity the IRGC is engaged in in their countries, and then 
expect them to live up to their obligations under international 
law and under the domestic law.
    That is what we have been doing and that is what we are 
doing. And as Mr. Einhorn said, I think we are starting to see 
that is working. And we both mentioned it, but I think it is 
worth underscoring, Khatam al-Anbiya is one of the primary 
companies owned by the IRGC, and they just had to pull out of 
South Pars, and they had to pull out because, as they 
themselves admitted, it was against Iran's national interest 
for them to be involved because they couldn't get the 
international----
    Mr. Foster. Well, are you seeing evidence that individuals 
are transferring money to private accounts offshore that you 
can't identify in havens, or is that something with acceptably?
    Mr. Glaser. Well, the issue of bank secrecy havens is a 
broader issue than it applies to Iran.
    Mr. Foster. Absolutely.
    Mr. Glaser. Look, the Iranians are very sophisticated and 
they are very smart, and they have complex financial systems, 
and they know how to engage in deceptive financial practices, 
and they do. And we try to prevent that from happening, but the 
fact of the matter is that, on a case-by-case basis, on a 
transaction-by-transaction basis, they are going to be able to 
do transactions that they want to do. The challenge is on the 
systemic level, because you can't run an economy on deceptive 
financial practices. So the challenge is to make it costly or 
risky or less effective for them to do that, and I do think we 
are succeeding in that.
    Mr. Foster. OK.
    Mr. Einhorn, the Iran Sanctions Act, as recently amended, 
states that the President shall initiate an investigation when 
credible evidence is presented, and I think a report within 180 
days. How is that going?
    Mr. Einhorn. Well, Congressman, this law was only enacted 
less than a month ago, and we are now in the process of 
figuring out how to implement it effectively and how to deal 
with the 180-day period. Often, thorough investigations of 
these activities take longer than 180 days because often you 
get some initial public indication that a deal is in the works, 
but it may not be consummated for 3, 5, 10 years. So it is a 
challenge to wrap everything up in 180 days. We are trying to 
figure out how to do that.
    Mr. Foster. But you are committed to----
    Mr. Einhorn. Absolutely.
    Mr. Foster [continuing]. At least some kind of finding in 
180 days?
    Mr. Einhorn. Absolutely. We are committed to implementing 
that aspect of the law, all aspects of the law.
    Chairman Towns. The gentleman's time has expired.
    I now yield to the gentleman from Arizona, Congressman 
Flake.
    Mr. Flake. I thank the Chair and I thank those who have 
testified. I am sorry I missed part of it; other obligations. 
So I hope you are not plowing the same ground here.
    Mr. Einhorn, in your view, let me just step back, is it 
possible to have an effective sanctions regime without the 
active participation of Russia and China?
    Mr. Einhorn. As your question implies, it is very important 
for Russia and China to be involved. They were involved to some 
extent already, in the sense that they voted for Security 
Council Resolution 1929, which is the base for many of the 
national measures that have subsequently been taken. So that is 
positive.
    But we also need their effective enforcement of 1929, and 
we also ask them to recognize their responsibility as permanent 
members of the Security Council to go beyond 1929 and to join 
with the European Union and us and the Australians and 
Canadians and have a strong regime of pressure that can move 
Iran to meet its international obligations. But Russia and 
China are very important.
    Mr. Flake. Very important, but not really helping is what 
you are saying?
    Mr. Einhorn. Well, recently Russia took an important 
decision: it decided that, in accordance with the Security 
Council resolution, it would not deliver an advanced air 
defense system, the S-300, to Iran. We have been pressing 
Russia very hard for a number of years not to make that 
delivery, and they have agreed not to make it, and that is 
positive.
    Mr. Flake. Should we worry about getting too far ahead of 
our allies, European allies and ahead of Russia and China as 
well? I mean, there are two schools of thought here: if we 
lead, they will follow; but there is also the notion that if we 
get too far out ahead, they won't. Where do you think we are 
now? Do we risk getting too far ahead so we don't have active, 
enthusiastic ongoing cooperation, not just public, but 
privately, in enforcing these resolutions as well with Russia 
and China?
    Mr. Einhorn. We are very grateful that the European Union 
took the decision it took this week. It set some very high 
standards for sanctions. We will use those high standards in 
our discussions. Danny Glaser and I will be in Seoul and in 
Tokyo next week to see if Japan and South Korea could come up 
to that mark. We will also go to China later in the month. It 
is important that China step up and recognize its international 
responsibilities here.
    Mr. Flake. We keep saying that we are targeting the regime 
and not the people of Iran; we are just looking at items that 
would help them build nuclear capacity. How is gasoline used to 
build nuclear capacity?
    Mr. Einhorn. Well, gasoline is not directly used, 
obviously, to build nuclear capacity, but I think by putting 
some pressure on their access to refined petroleum products you 
encourage them to recompute what is in their best interest and 
to recognize that unless they stop their defiance of the 
international community, the future for Iran will look a lot 
dimmer; and hopefully they are coming to that conclusion.
    Mr. Flake. That is my point. It is not directly, but we all 
know how these sanctions regimes usually work. They only work 
if you have leaders that care a little more bout the plight of 
the people. I mean, if we thought rationally, we certainly 
wouldn't have had the same embargo we have had in Cuba for 50 
years, for example.
    So I worry that we say publicly we don't want to hurt the 
Iranian people, we don't want to drive them into the arms of 
the regime, but then we target items that have nothing to do 
with building nuclear capacity, but would provide a pinch on 
the people without hurting the regime. We all know the regime 
finds ways certainly when we see just example after example 
after example of ways that the black market works here, and our 
own Secretary of State has used the term ``leaky,'' these 
sanctions are leaky, and that is quite an understatement.
    Anyway, thank you for your testimony.
    Mr. Einhorn. If I could just respond to that. All sanctions 
regimes are leaky to some extent, but what we are seeing here 
is that the sanctions are becoming more and more comprehensive, 
and that is good. As far as dealing with the people of Iran is 
concerned, our intention is not to harm the people of Iran. Our 
intention is to get the leadership of Iran to reconsider. And 
that is why we have done things like ensure that organizations 
like the IRGC and IRISIL, the Iran shipping line, is 
specifically targeted. That will be an important signal to the 
elites of Iran.
    Chairman Towns. The gentleman's time has expired.
    I now recognize the gentleman from Maryland, Congressman 
Van Hollen, for 5 minutes.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    Thank all of you for your testimony today. I just want to 
followup on some of the questions that have already been asked. 
I think, obviously, there is consensus. To the extent we can 
broaden those countries that are participating in the 
sanctions, obviously, they are much more effective. The step 
the EU took recently was another positive measure.
    To what extent does the sanctions regime that we have here 
overlap with what the EU has done, and what specific steps are 
we taking now with the EU to make sure that we have uniform 
enforcement as much as possible?
    Mr. Einhorn. Mr. Glaser may want to add to this. We have 
the most comprehensive sanctions regime against Iran than any 
other country in the world. You realize that.
    Mr. Van Hollen. Yes.
    Mr. Einhorn. I think what the Europeans did this week 
really closed that gap quite significantly. There are still 
differences, but the gap was closed significantly, and I think 
it was probably a very rude shock to the leaders of Iran to see 
the strength of the steps they took.
    Mr. Van Hollen. Just to followup, there has been some 
concern expressed about the relationship with some of the banks 
in Germany, specifically, with respect to Iran. Could you 
comment on that, especially in light of the decision taken by 
the EU, how the EU decision will impact especially the question 
of German banks doing business with Iran?
    Mr. Glaser. Well, I think the EU decision, the EU Common 
Position is going to significantly impact any German banks or 
any European banks that are doing business with Iran. So any 
German banks that are doing business with any of the seven 
banks designated by the EU will have to stop. Any German or 
other European banks that do any sizable transaction with Iran 
will have to get preapproval for that transaction, and they 
have to wait 4 weeks for that preapproval. So it is really a 
huge step forward.
    That said, there are some German banks, there is one German 
bank that was discussed in the press, EIH, that does remain a 
concern for us, and that is something that we continue to 
discuss with the Europeans, and with Germany in particular. I 
think their business will inevitably decline based on the new 
EU measures, but it is something that is going to remain a 
subject of conversation between us and our allies in Germany.
    Mr. Van Hollen. Mr. Einhorn, you mentioned the fact that 
China had voted for the resolution of the United Nations. 
Obviously, they also worked very hard to weaken some aspects of 
the proposal we put forward, so I am pleased to hear you are 
going to be traveling there in the near future.
    How do you grade the prospects for getting the Chinese to 
really be serious about this effort in Iran? I think it is 
clear, based on their actions to try to dilute sanctions at the 
United Nations, that they are obviously not onboard. What goals 
do you have specifically for that trip? How would you measure 
success in your discussions with the Chinese?
    Mr. Einhorn. Two important criteria. One is that they 
enforce the letter of Resolution 1929 conscientiously, and that 
if there are Chinese entities that are in any way assisting, 
for example, the missile programs in Iran, that China take 
strong steps against those entities. That is one. Second, we 
want China to recognize its responsibility not to backfill when 
responsible governments show restraint and distance themselves 
from Iran. That will be very important.
    The Chinese will argue that they have important energy 
security needs, tremendous demands for energy; they need to do 
what is necessary to ensure energy security. In our view, they 
are overachieving in terms of their energy security needs. We 
think they have to kind of rebalance their priorities and 
recognize that, as a permanent member of the Security Council, 
it is their responsibility to prevent proliferation and to put 
pressure on Iran and persuade Iran not to pursue nuclear 
weapons.
    Mr. Van Hollen. Thank you.
    My last question relates to the standard that applies to 
granting a waiver of the sanctions. As I understand the 
legislation, the standard is that it will be vital to the 
national security interests of the United States and that the 
government with primary jurisdiction over the sanctions 
violator is closely cooperating with the United States in this 
effort.
    This is probably by way of a comment more than a question, 
but I think it is absolutely essential that we keep that 
standard as tight as possible. For example, I think it would be 
very difficult to argue today that the Chinese or the Russians 
were meeting the intent of that language with respect to 
cooperation, given their conduct.
    So I would hope that you send the right signal to others as 
to how you interpret that, because you don't want a flexible 
interpretation of the rule to send a green light to others that 
they are going to be able to get away with this. So I hope that 
discretion will be pursued in a way that maximizes a tight 
uniform sanctions regime.
    Thank you, Mr. Chairman.
    Chairman Towns. I thank the gentleman from Maryland.
    I now yield 5 minutes to the gentleman from Utah, 
Congressman Chaffetz.
    Mr. Chaffetz. Thank you.
    Thank you all for being here, I appreciate it. For the sake 
of clarity, in a rapid fashion, I am looking for like a ``yes'' 
or ``no'' here. I just want to make sure that each of your 
organizations are committed to the timetables laid out in 
legislation. You have the infrastructure, you have the 
resources, and that you are going to be able to make the 
timetables that are implemented in the legislation. Perhaps we 
can start with Mr. Einhorn.
    Mr. Einhorn. If you want a ``yes'' or ``no,'' yes.
    Mr. Chaffetz. Is there anything in your way to making sure 
that you get these done? Please continue down the line.
    Mr. Glaser. Yes.
    Mr. Neurauter. Yes.
    Mr. Christoff. We don't have anything to implement, but we 
assure continued oversight on the part of GAO to make sure they 
are implementing it.
    Mr. Chaffetz. Thank you. Thank you.
    Chairman Towns. So that is a ``yes,'' right?
    Mr. Chaffetz. That is a ``yes.'' That is an absolutely. 
That is good to hear. Mr. Einhorn, let's talk for a moment, if 
we could, about Turkey, given the recent situation. Can you 
assess the level of commitment that they have to helping and 
assisting in these efforts?
    Mr. Einhorn. We believe the government of Turkey shares our 
objective of preventing Iran from getting nuclear weapons. We 
appreciate the hard work that Turkey has put in in trying to 
persuade Iran to adopt a more reasonable position. Sometimes we 
differ with Turkey on tactics.
    For example, Turkey joined with Brazil and Iran in what was 
called the ``Tehran Declaration'' in May, and they supported 
what we considered to be an unacceptable version of a proposal 
we supported back in October on refueling the Tehran Research 
Reactor. We didn't appreciate the timing because it was on the 
eve of voting on the U.N. Security Council resolution, and 
perhaps some of the participants had in mind derailing that 
vote on a Security Council resolution. So sometimes we disagree 
with Turkey on tactics, but we believe their motivation is 
good. They want to solve this Iran nuclear issue just as we do.
    Mr. Chaffetz. Mr. Glaser, any sense or any assessment of 
using the Patriot Act along the way, if we need to use that 
authority?
    Mr. Glaser. We have a wide variety of authorities under the 
Patriot Act, under IEPPA. We consider all of those authorities. 
Any authority that we have that we think we can put to good use 
would be considered.
    Mr. Chaffetz. As the Treasury, and then I would like to go 
to State, if I could. My time will run short here. Just very 
rapidly because time is so short, what are your top three 
concerns about really fully implementing all these sanctions? 
What are the three things that you are worried about that are 
obstacles we need to overcome to actually fully implement? Yes, 
please.
    Mr. Glaser. To fully implement? I keep coming back. The 
challenge is to make these sanctions as broad as possible, and 
what I mean by that is vigorous global implementation. That is 
the big challenge. We now have the tools, we have the 
authorities really throughout the world. The challenge is 
global implementation. And when I say deep, I mean countries 
going, as appropriate and as necessary, beyond the scope of 
what----
    Mr. Chaffetz. So which three countries, then, would you be 
most worried about?
    Mr. Glaser. Well, I will tell you which three regions I 
think need to be focused on right now, and that is the Middle 
East, Asia, and South America. Europe has taken strong action; 
we have taken strong action in North America; Australia has 
taken strong action. And as Mr. Einhorn said, Bob and I are 
going to be traveling to Japan and South Korea next week; we 
are going to be in China later in the month. Asia is important. 
My boss, Stuart Levey, as I said before, is going to be in the 
UAE in the next couple of weeks. The Middle East is important. 
South America is important too.
    Mr. Chaffetz. Mr. Einhorn.
    Mr. Einhorn. I would agree with Danny's characterization. I 
would just say it is very important to maintain the momentum. 
Since June, when the Security Council resolution was adopted, 
there have been a series of actions, including U.S. Executive 
order designations. We talked about Australia, Canada, Europe, 
and so forth. We have to keep up the momentum.
    Part of this is psychological. Part is practical, on-the-
ground, what is happening economically, but part of it is 
psychological. We have to demonstrate to Iran's leaders that 
the situation is going to deteriorate, it is going to continue 
to deteriorate unless they change their behavior. So keeping 
the momentum up throughout this summer, into the fall, will be 
critical.
    Mr. Chaffetz. Thank you.
    Mrs. Maloney [presiding]. The gentleman's time has expired.
    Ms. Chu. Thank you, Madam Chair.
    The U.N. Sanctions Resolution 1929 was a positive step; 
however, the financial sanctions in the resolution left 
something to be desired. For example, only one new bank was 
added to the list of sanctioned entities. And even here in the 
United States, sanctions announced by the Treasury Department 
last month added only one bank to the list of those sanctioned.
    Is the Treasury Department aware of foreign financial 
institutions that continue to conduct business with sanctioned 
Iranian banks? And what steps is the Treasury Department taking 
to ensure corresponding relations between the United States and 
foreign banks are not being abused by Iran to gain access to 
U.S. financial markets?
    Mr. Glaser. Thank you for the question. I certainly agree 
that the financial component of this whole effort is key to its 
success. I actually was pleasantly surprised by how strong the 
1929 was on the financial side. I think we got some really, 
really important provisions in there that we have been looking 
for for a long time, especially with respect to correspondent 
banking. And you saw that the EU picked right up on that and 
themselves even went beyond the U.N. in terms of correspondent 
banks.
    So I think it is becoming really, just in the past month, 
increasingly difficult for Iran to access the international 
financial systems through its correspondent banking networks. 
And that has been reducing. Over the past 3 years or so we have 
been having a lot of success in banks moving out of the Iran 
business.
    Now, the question is, as you raise, what do we do with 
respect to the few remaining that are continuing to do this 
business. As we discussed earlier, Congress just gave us very, 
very important new authority on that, and the Treasury 
Department has 90 days to issue regulations that, when applied, 
would severely restrict or cutoff a third-party bank's 
corresponding relationship with the United States if it is 
doing business with a designated Iranian entity. And we have 
every intention of meeting that 90-day deadline of issuing 
those regulations, and we intend to implement the law that 
Congress gave us.
    Our hope, though, is that banks around the world, the few 
remaining, see the choice that they have to make, that they are 
going to make the economically intelligent decision as to what 
to do. That has been a part of our strategic dialog with the 
international financial sector for years now, and I think that 
is working. There are some banks, even after that, that aren't 
exposed to the United States that we would have less leverage 
on, and we are going to have to come up with creative ways of 
dealing with them as well. But this is something that we have 
been seized with for a long time, and it is really what we see 
as one of our main contributions to the effort, is to do 
precisely what you are suggesting.
    Ms. Chu. Actually, I am aware about the designation process 
taking too long to complete, and many companies and banks, 
including, for instance, subsidies of previously sanctioned 
entities, going unsanctioned, for example, IRISIL, Iran's state 
shipping company, and the process there, because after the U.S. 
initially sanctioned this company, they began to evade it by 
renaming ships and establishing front companies to take over 
ownership of the vessels.
    And last month, more than a year later, the Treasury 
Department finally updated its sanctions on IRISIL; yet, even 
this failed to identify multiple front companies that were 
identified by the Commerce Department as it relates to the 
transfer of this speed boat from a South African company to an 
Iranian company last year.
    So what is going on with actions against these numerous 
IRISIL front companies, some of which have already been 
identified by the Commerce Department?
    Mr. Glaser. You raise a very important point, and it is a 
challenge that we face, and we face it every day. Chairman 
Towns, in his opening remarks, said sanctions can't just be a 
``cat and mouse'' game, and I wrote it down when he said it 
because I thought it was an extremely important point.
    There are two components to our sanctions regime with 
respect to Iran, and with respect to a lot of different 
sanctions regimes we have, but certainly with Iran: The 
targeted side and the systemic side. And if they are not both 
working, especially the systemic side, then you are not going 
to get the results you are looking for.
    So, yes, there is a cat and mouse aspect to it, and that is 
what you are referring to, which is we take an action and then 
that causes a response, and we have to catch up to the 
response. And if that is the only way we do it, that is not 
going to be successful, because it is much easier to change a 
company's name than it is to go through a procedure that has 
due process and fairness in it, and take a formal government 
action that has an impact on people. So that is always going to 
be an issue.
    What that has to be combined with is strong systemic 
protections: obligations on banks and on other private sector 
entities to themselves be careful, to in themselves understand 
who they are dealing with, to themselves prevent themselves 
from being abused by Iranian entities, by Iranian banks, by 
IRISIL, and that is part of all this.
    Mrs. Maloney. Thank you.
    Mr. Luetkemeyer is recognized.
    Mr. Luetkemeyer. Thank you, Madam Chairman.
    Mr. Einhorn, just quickly, I have some concerns with regard 
to just the general activity over in the Middle East. It would 
seem as though, with the recent agreement with Syria that Iran 
has had, the recent testing of the missiles that now, I think, 
1,200 miles is what their reach is, that they have made 
tremendous progress with regards to developing and putting in 
place a plan not only to make, but also deliver, nuclear arms. 
Where are we at?
    Mr. Einhorn. Congressman, what you just cited is a source 
of concern to us. It is not just a question of Iran making 
progress in its centrifuge enrichment program; it is progress 
in means of delivering a possible nuclear weapon; and they have 
been making progress in their missile program, and that is a 
problem. The new Security Council resolution specifically 
prohibits Iran from any activities related to ballistic 
missiles that can carry nuclear weapons, and----
    Mr. Luetkemeyer. What is the enforcement mechanism?
    Mr. Einhorn [continuing]. That gives us leverage. When we 
believe there is a shipment to Iran from any country that could 
support their missile program, we will utilize the inspection 
provisions of that resolution to try to interdict it.
    Mr. Luetkemeyer. OK, there is another country that may be 
even more interested in what is going on over there than what 
we are, and that is Israel. Are we discussing the sanctions 
with them, more than just sending them copies of our newspapers 
every day? Do we have detailed briefings with the Israeli 
officials to where they are drawn in to these discussions, made 
a part of what is going on so that they are informed and can 
have some input? Because I am sure they have as good, or 
better, intelligence of what is going on as we have because of 
the dramatic impact it has on them.
    Mr. Einhorn. Absolutely, Congressman. We are in close touch 
with the Israelis. As a matter of fact, this afternoon we have 
a meeting with a senior Israeli team to talk about Iran and to 
talk about sanctions, and they are an important source of 
information. We cooperate on intelligence matters with lots of 
friendly countries around the world, but Israeli intelligence 
is particularly good.
    Mr. Luetkemeyer. Where are we going with our relationship 
with Israel? It seems it is kind of a cold relationship at this 
point with this administration. Are we starting to warm up to 
them a little bit? Are we starting to work with them a little 
bit more? Because I know they are not very happy, from what I 
understand, with what has been going on.
    Mr. Einhorn. Well, my impression is that Prime Minister 
Netanyahu's recent visit was very successful. We are 
strengthening the relationship all the time, and I think 
today's consultations on Iran is an example of how closely we 
can work with the State of Israel.
    Mr. Luetkemeyer. OK, through this process, is there some 
sort of retribution or some sort of sanction or some sort of 
pressure that we are going to be putting on Syria and other 
countries in the area, just immediate area, besides Russia and 
China, that are helping the Iranians?
    Mr. Einhorn. Syria is on our list of state sponsors of 
terrorism.
    Mr. Luetkemeyer. Right. They admit that they are 
terrorists, is that right?
    Mr. Einhorn. There are many, well, they are on our list.
    Mr. Luetkemeyer. OK.
    Mr. Einhorn. And there are many sanctions that apply to 
Syria for that and other reasons, including Syria is a big 
importer of missile technology, which is a problem also. So we 
have reached out to Syria. We are trying to explore whether 
there is the basis for some meaningful dialog, but we do so 
without any illusions about the nature of the regime and about 
some of its ambitions in the area of weapons of mass 
destruction.
    Mr. Luetkemeyer. OK.
    With that, Madam Chair, I yield the balance of my time to 
Mr. Burton.
    Mr. Burton. I just want to make a real brief comment. I 
know the four of you have a great responsibility because of the 
legislation we passed, and I know Mr. Flake and others have 
indicated that maybe, you know, these sanctions won't work. But 
I would just like to say that those who are aware of history 
realize that this may be one of the last chances we have to 
stop Iran from getting nuclear weapons.
    And I would like to remind you and everybody else that what 
happened back in the late 1930's led to 50-some million people 
being killed because we didn't do everything necessary to stop 
the Luftwaffe, Hitler and everything else. And I think Mr. 
Ahmadinejad is one that can be equated with possibly Hitler, 
and I think it is very important that we do everything possible 
to stop them with their nuclear program so we don't have to 
face that prospect.
    With that, I thank the gentleman for yielding.
    Mrs. Maloney. Thank you very much.
    Mr. Connolly.
    Mr. Connolly. Thank you, Madam Chairwoman. I am going to 
plead in advance with the panelists. Thank you for being here. 
You need to speak into the microphone like this; otherwise you 
cannot be heard. You sound muffled and I missed much of your 
testimony. So please. The acoustics are terrible here. We are 
going to fix that, though.
    The Washington Post, Mr. Einhorn, had a story last week 
about South Pars and how sanctions may actually be having the 
intended effect, although the Chinese and the Malaysians are 
trying to pick up some of the slack. Would you agree with that 
assessment? And are there other salient examples of where we 
can point concretely and say that is because of sanctions?
    Mr. Einhorn. I think it is accurate. I do think it is 
accurate. I think the Iranians are having some difficulty 
getting investment in some of the big projects, including South 
Pars. Danny Glaser talked about Khatam al-Anbiya withdrawing 
from that project. I mentioned in my testimony major oil 
companies that have pulled back from their interest in Iran. So 
I do believe that these sanctions are having the desired effect 
of discouraging investment in Iran's petroleum sector.
    Mr. Connolly. You mentioned, speaking of China, that the 
State Department has elevated this to the highest level and it 
is now a topic of conversation when we have diplomatic 
discussions. What is the nature of the representation and what 
is the nature of the response?
    Mr. Einhorn. Well, we invested a lot of diplomatic time and 
effort on the European Union's recent decision at every level 
of Government. A number of us traveled to Europe and spoke to 
Europeans. Danny Glaser's boss, Stuart Levey, played an 
important role in this. Secretary Clinton has been very active 
on the telephone and in her meetings. Vice President Biden, 
President Obama, all of them have put a lot of effort into 
making these sanctions work and generating pressure that can 
lead to a change in Iran's behavior.
    Mr. Connolly. Yes, but you are not giving us any 
reassurance that the Chinese care or are receptive to your 
message. In fact, there is some evidence they don't.
    Mr. Einhorn. I mentioned before that after China's yes 
vote, which was a good thing, China remains a matter of 
concern, and China is going to be the focus of very high level 
attention over the next weeks and month. But China needs to be 
an important part of this international effort to put pressure 
on Iran.
    Mr. Connolly. Well, Mr. Glaser, the March GAO report on 
enforcing restrictions recommended that the Department of 
Treasury should be ensuring that they are developing the 
capability to provide all other Federal agencies that are 
relevant, and Congress, with complete and timely information 
concerning all licenses issued for the export of goods to Iran. 
What progress have we achieved on that recommendation in the 
Treasury Department?
    Mr. Glaser. I believe that was a recommendation made to an 
office of the Treasury Department called the ``Office of 
Foreign Assets Control.''
    Mr. Connolly. Can I tell you I cannot hear you, Mr. Glaser?
    Mr. Glaser. I am sorry. I apologize, Mr. Congressman.
    That recommendation, I believe, was made to a portion of 
the Treasury Department called the Office of Foreign Assets 
Control, so I will have to take that question back to them, and 
we can provide you an answer.
    Mr. Connolly. Would you get back to us for the record, 
please? Thank you.
    Let me ask U.N. Security Resolution 1540 obligates U.N. 
member states to develop and enforce measures to prevent the 
proliferation of weapons of mass destruction to non-state 
actors. Presumably, that resolution has direct relevance to 
Iran, even though it is not called Iran sanctions, but it 
certainly has direct relevance. Have we been able to use that 
resolution in our diplomatic efforts to ensure compliance with 
Iran sanctions and/or to encourage others to sort of try to see 
this issue our way? Mr. Einhorn.
    Mr. Einhorn. Congressman, 1540 may be an indirect way of 
addressing the question of Iran. It has basically been seen as 
a vehicle for strengthening the capacity of lots of countries 
around the world to cope with the threat of terrorism, the 
threat from non-state actors. Iran is a state sponsor of 
terrorism; it has given support to a number of terrorist 
organizations. We need to increase the ability of countries to 
cope with that threat, whether coming from Iran or other 
terrorists.
    Mr. Connolly. Thank you. My time has expired.
    Mrs. Maloney. Thank you. The gentleman's time has expired.
    Mr. Connolly. My time has expired. Thank you, Madam 
Chairwoman.
    Mrs. Maloney. Mr. Issa.
    Mr. Issa. Thank you, Madam Chair.
    Mr. Christoff, in addition to the 41 companies and all the 
other research you did in your April report, you have also, I 
assume, observed one of the subjects that is talked about a 
lot, the gasoline that has to be imported into Iran. Is that 
not so?
    Mr. Christoff. Yes. In fact, Mr. Issa, we are planning on 
issuing a report next week, as soon as we get all comments from 
a variety of companies that we have identified in open sources 
as selling refined petroleum products, particularly gasoline, 
to Iran.
    Mr. Issa. And without asking you to get ahead of your own 
report, for all practical purposes, Iran is not suffering; they 
are getting that 145,000 or so barrels of gasoline and 
petroleum products they need, right?
    Mr. Christoff. Well, the spot market is such that it is a 
very fungible product, and you can get the product even though 
the costs might be an additional cost to get the product. You 
can still get the product.
    Mr. Issa. So bottom line is at least that part of the 
sanction not so good.
    Mr. Christoff. Well, it has just started.
    Mr. Issa. As long as they have money, they get the fuel.
    Mr. Christoff. Well, I think it has just started. I mean, 
these new sanctions were just imposed this week, in which the 
State Department would have to begin identifying companies and 
starting to enforce sanctions against those who in fact do sell 
refined petroleum products to Iran.
    Mr. Issa. But we leaned on Kazakhstan a long time ago, a 
country that could deliver the refined petroleum quicker, 
cheaper, easier, because they are in the closest proximity to 
Tehran, which is where the ultimate shortage is. The shortage 
is in the north, not the south. And it didn't help that they 
didn't supply it; they still got it over this period leading up 
to this week, is that right?
    Mr. Christoff. They need 140,000 barrels of gasoline every 
day. That is their domestic shortage. According to even intel 
sources, they are working to try to increase their refining 
capacity, but they are still going to be dependent upon 
imports.
    Mr. Issa. OK. Well, you know, Iraq was the same way, and 
they simply built a pipeline in addition to all the other 
leakage, shipped oil to Syria, Syria refined it, took a big cut 
and sent a certain amount back. And it wasn't until after we 
took Baghdad and bombed that pipeline that we actually stopped 
it.
    Mr. Einhorn, that takes me back, if you will. You have been 
on the ground and working in this one unique area since Nixon, 
is that true?
    Mr. Einhorn. That is right. Not in this specific area, but 
I began government service in 1972.
    Mr. Issa. And you have been, more or less, in 
nonproliferation and related subjects for much of that time.
    Mr. Einhorn. That is correct.
    Mr. Issa. So when you began there were five countries that 
had nukes, right, the Gang of Five?
    Mr. Einhorn. Roughly.
    Mr. Issa. Roughly?
    Mr. Einhorn. Roughly five.
    Mr. Issa. My recollection, as a younger man, it wasn't 
India, it wasn't Pakistan, it wasn't Israel, it wasn't North 
Korea, and it wasn't Iran; it was the United States, the Soviet 
Union, China, the U.K., and France. Pretty much right?
    Mr. Einhorn. Those were the acknowledged nuclear weapon 
states.
    Mr. Issa. Right. I realize that there is declared and 
undeclared. And I realize if Japan wanted a nuclear weapon, it 
could probably produce it in 90 days. I mean, there are people 
who have the capability, if they chose to.
    What I find amazing is I want sanctions to work. I want 
peaceful activities to work. I want this country that has 
resisted reform since the revolution 30 years ago, I want it to 
work. I wanted North Korea to respond. Now, you were clearly on 
the ground in the Clinton administration when we used a 
combination of sanctions and gifts to North Korea, and they 
gave us a promise and they lied to you. They got away with it. 
Now they have the bomb.
    Why in the world is it any different with Iran? Why is it 
that Iran, who has a close relationship with North Korea on 
this particular subject, why is it that we shouldn't believe 
they are just lying to you, cheating you, delaying you, and 
ultimately they are going to end up exactly like North Korea? 
Except the difference is North Korea is not killing people in 
Lebanon and in Israel every day. They are not exporting free 
and subsidizing terrorism. They can barely feed their own 
people.
    Why is it that I shouldn't believe that this is a much 
bigger threat than the failure, a decade ago, to deal with 
North Korea before they got a weapon? Because this is a country 
with money, money to buy that gasoline somehow, and everything 
else. Please.
    Mr. Einhorn. Clearly, Iran has not earned our trust. Quite 
the opposite.
    Mr. Issa. Hell, they haven't even given back our embassy.
    Mr. Einhorn. This is a government we do not trust. Its 
track record has been very poor in terms of meeting its 
obligations, fulfilling its commitments. So we remain skeptical 
about their behavior.
    But there is a difference between Iran and North Korea, and 
it is an important difference. North Korea's leaders don't seem 
to mind being isolated. In fact, they may believe that 
isolation is the only way their regime can survive.
    Iran has different priorities. Yes, they want to move their 
nuclear ambitions forward, but they always want to be seen as a 
respected member of the international community. They need 
commerce. They need trade. They need to engage with the world. 
We need to demonstrate to them that they can't have their cake 
and eat it too. They can't have their nuclear ambitions and 
have these good relations with the rest of the world.
    Mr. Issa. Thank you. My time has expired.
    Mr. Chairman, I would at least take this opportunity to say 
I agree with everything that Mr. Einhorn said, that they want 
to be respected. I would strongly suggest that as we get into 
looking at figure sanctions, we recognize that as long as the 
world allows them to have embassies and allows them to hold our 
embassy hostage, that we are in fact still allowing them to 
have normalized relationships with virtually every country on 
Earth and then hope that sanctions will work.
    I, for one, believe that we need to take another step and a 
step that is far greater than sanctions, before we do military, 
but I certainly believe we need to take another step. And I 
would hope that as we continue looking at this program, if we 
see it fail, you will join with me in trying to find additional 
steps to give pressure against Iran.
    I yield back, Mr. Chairman.
    Chairman Towns [presiding]. Thank you very much. And that 
is the reason why we are having this hearing, no question about 
it.
    I now yield 5 minutes to Congresswoman Marcy Kaptur from 
the great State of Ohio, in fact, my classmate. Thank you.
    Ms. Kaptur. That is right. Thank you, Mr. Chairman, very 
much. Glad to see you with the gavel.
    Thank you, gentlemen, for appearing. Mr. Glaser, I just 
wanted to ask you, to whom do you report at the U.S. Department 
of Treasury? Who is your superior?
    Mr. Glaser. My direct superior is Assistant Secretary 
Cohen, and he in turn reports to Under Secretary----
    Ms. Kaptur. Assistant Secretary who?
    Mr. Glaser. David Cohen. And he reports----
    Ms. Kaptur. David Cohen. What is his title?
    Mr. Glaser. Assistant Secretary for Terrorist Financing and 
Financial Crimes. And he reports to Under Secretary Levey.
    Ms. Kaptur. And he reports to who?
    Ms. Glaser. Under Secretary Stuart Levey, who is the Under 
Secretary for Terrorism and Financial Intelligence.
    Ms. Kaptur. Thank you for placing that on the record. Let 
me just state that I believe history will show that since World 
War II U.S. relations with Iran have been very 
counterproductive to our own interests, both in terms of the 
advancement of democratic ideals across that vast region, along 
with the lack of promotion of competitive markets for goods.
    Sadly, so much of that history, I think, will show that oil 
has been a great diversion for this country. I keep thinking to 
one of the commandments in my own faith: Thou shall not covet 
thy neighbor's goods.
    My question is how does one implement sanctions in a manner 
that supports U.S. democratic ideals and reform across an 
undemocratic and mercantilist Middle East? I think one can 
argue geostrategically the impact of current sanctions actually 
operates against U.S. long-term interests, because what we are 
seeing is a backfill of connectivity by us by China, by Russia. 
You have admitted in your own testimony about the United Arab 
Emirates. One can look at other countries. So it must be really 
frustrating for you to enforce a sieve.
    I also wanted to just place on the record, for history's 
sake, back in 1953, since World War II, really, our relations 
with Iran, we never seem to get it right. There was a coup back 
in the early 1950's when someone by the name of Mohammed 
Mosadec was installed. Well, he had actually taken office 
earlier in a democratic election. But then in 1953, by 
spontaneous combustion, he was removed and the Shah of Iran, 
when we were growing up, we remember him as children, became 
head of that country.
    But the reason the other guy was removed is he was actually 
trying to change, attempting to reform the monopoly control 
that one company had over the extraction of oil from Iran. That 
company was called the Anglo-Persian Oil Co., commonly known 
now as ``BP.''
    So I think it is important for us to remember a little bit 
of history here.
    And through the decades of the 1950's, 1960's, and 1970's, 
the Shah's rule became more and more repressive. I can remember 
the Savac, studying the Savac when I was in college, and trying 
to understand what that was all about.
    Then in 1979, some of us lived through the Iranian 
revolution, when the Shah was removed and U.S. hostages were 
taken, and the American people were just stunned by it. Terry 
Anderson, from my own State, an ABC reporter, was taken in that 
and ultimately released, thank God.
    But then, after all that happened, and I remember those 
hostages were returned on the day Ronald Reagan became 
President. Remember that? Some of the people here remember 
that.
    Then, for the next decade we enlisted Iraqi dictator Saddam 
Hussein to do some dirty bidding, and there was a terrible war 
between Iran and Iraq. Millions of people died.
    So there is a little backdrop to why the Iranians also, 
looking through whatever lens they are looking through, as they 
look at us and they look across that region, might feel 
vulnerable.
    I am not defending their government. I don't defend any 
government in that region. And I certainly don't defend the 
economic interests that try to exploit all of them.
    But in thinking about the future, if in fact we are to be a 
democratic Nation, one that also believes in competitive 
markets, the report from the GAO shows that, well guess who has 
their fingers in the till over there? Halliburton. If you look 
at the amount of money that they get in Government contracts, 
Halliburton, $27.1 billion. Well, who is a bigger investor in 
Halliburton? The former Vice President of our country, for 
heaven sake. And their fingers aren't clean.
    It seems like the public and private interests get all 
mixed up here, and then we try to use these pitiful sanctions, 
which look good on paper and look like we are really doing 
something. But they don't do anything to promote our 
geostrategic interest. They don't do anything to bring 
competitive markets. They don't do anything to promote 
democracy in that part of the world. And I feel sorry for our 
country. I feel sorry for the road that we are on here because 
I don't see that it is really hurting Iran in any way, and it 
is certainly, most importantly, not advancing the cause of 
democracy.
    So in terms of two-way trade, my question goes to the 
future generation. That is a literate country. There were 
hundreds of thousands of students demonstrating for democracy 
in that country, and there were some sanctions that apparently 
made it very difficult for them to be able to communicate with 
the West, with others, in their efforts to try to democratize 
inside that country.
    And my question is, is the administration, or has the 
administration taken action to allow hardware, software, and 
technology used to access the Internet to be legally exported 
to Iran? How do we incentivize future democratic reforms and 
many of the literate people in that country that can't connect 
to the rest of the world, who are part of the future, so they 
don't stub their toe and kill millions of more people, as the 
last generation has done for 50 years, in that extremely 
important but troubled region? What are we doing to promote 
connectivity between those who love democracy?
    Mr. Einhorn. That you, Congresswoman. We very much support 
your strong statement of support for human rights in Iran. It 
is very important to us.
    Ms. Kaptur. Thank you.
    Mr. Einhorn. It is also important that civil society in 
Iran be able to express themselves, that they have free and 
secure access to the Internet. The State Department has worked 
very closely with the Treasury Department to ensure that U.S. 
sanctions do not prevent access to tools that allow the Iranian 
people to freely access the internet.
    State did a waiver recently that enabled Treasury to 
publish a general license in the Federal Register in March that 
authorizes U.S. companies to make mass market personal 
communication software available inside Iran. It is very 
important that they have the tools to communicate with one 
another, and we are trying to make that possible. And any 
adjustments in the sanctions law that are necessary, we will 
seek to adopt.
    Ms. Kaptur. You know, I just wanted to say for the record 
finally, Mr. Chairman, I represent many people who have 
immigrated from that part of the world, and this Ahmadinejad, 
they always have him on TV, and he goes to the U.N. and really 
doesn't do a very good job for his own people. But the people 
who hold the real power in that country are many of the 
clerics, and it just seems to me that anything we can do to 
bridge walls is extraordinarily important.
    I don't share many of my colleagues' view that the answer 
to everything is military action against any troubled state. 
But I think that the power of literacy inside that country, 
unlike Afghanistan, is so important. Anything one can do to 
encourage connectivity and enhance those individuals within 
that country that are trying to meet the rest of the world in a 
peaceful way is worth the effort, and I would hope you would 
think hard about that in the important roles that you have. And 
also on the oil side to promote competitiveness.
    Chairman Towns. The gentlewoman's time has long expired.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Chairman Towns. I now recognize the gentleman from 
Illinois, Congressman Davis.
    Mr. Davis. Thank you very much, Mr. Chairman, and let me 
thank you for calling the hearing.
    Mr. Einhorn, let me ask you how does the State Department 
measure success in terms of what would be a successful 
implementation of sanctions against Iran? Could you share that 
with us?
    Mr. Einhorn. Ultimately, the measure of success is whether 
Iran changes its behavior. That is what we are looking for. But 
intermediate steps involve putting serious economic pressure on 
Iran so that it recomputes its calculation in costs and 
benefits, and realizes that the future is going to look bleaker 
and bleaker unless it alters its behavior and stops its 
defiance of the international community. That is what we are 
looking for.
    Mr. Davis. So one could reasonably say that the purpose of 
sanctions is to change behavior----
    Mr. Einhorn. Exactly.
    Mr. Davis [continuing]. Of whoever it is that is being 
sanctioned. Let me ask are there any items that are not 
covered? What are we trying to prevent Iran from doing?
    Mr. Einhorn. The combination of the law the Congress 
recently gave to us, as well as the recent Security Council 
resolution, as well as our own executive authorities, the 
combination of all those tools I think give us what we need to 
pursue an effective strategy of pressure against Iran.
    Mr. Davis. Are there any items that we would say it is 
quite all right if we were to interact with those items getting 
into the country?
    Mr. Einhorn. There are many items. For humanitarian 
purposes, to deal with medical problems, there are all kinds of 
items that are legitimate. We are not trying to interrupt 
legitimate trade, certainly not trade having to do with 
humanitarian, civilian kinds of uses. But we are primarily 
going after their programs to acquire weapons of mass 
destruction, advance conventional weapons, and other sensitive 
items. We are not interested in a total embargo of Iran; that 
is not what we are trying to do.
    Mr. Davis. So there is a humanitarian component to the 
sanctions, especially as it relates to medicine or medical 
technology or lifesaving instruments, or advances that may have 
been made in one country that have not necessarily been made in 
another country. We are saying that it is quite all right.
    Mr. Einhorn. That is right. We don't intend to block Iran's 
access to those.
    Mr. Davis. Let me ask if each of you perhaps would address 
this question. Our Government has awarded more than $107 
billion in contract payments, grants, and other benefits over 
the past decade to foreign and multinational American companies 
while they were doing business in Iran. Is there any way that 
one could suggest that this is somewhat conflicting in terms of 
the overall purpose of sanctions to try and change the behavior 
of another nation?
    Mr. Einhorn. This development, these interactions were what 
led to an important provision of the new comprehensive 
sanctions law. I think it was Mr. Neurauter who spoke to that 
and can describe to you what is involved. But the idea is to 
avoid such contractual arrangements between the U.S. Government 
and these other entities that have dealings with Iran, 
especially dealings that are sanctioned under our law.
    Mr. Christoff. Mr. Davis, if I could add to that. That 
connection is changing behavior, and I will give you the best 
example. Repsol, which is a Spanish conglomerate, had, based on 
our report, over $343 million in contracts with the U.S. 
Government. They also were investors in Iran's energy sector. 
They have since made the decision this week to pull out of this 
$10 billion South Pars project and no longer invest in Iran.
    Mr. Davis. So we would agree, though, that this whole 
business of sanctions does have a level of complexity that 
sometimes the average citizen, unless they take a good look, 
may not fully understand what is taking place in relationship 
to them and what they have actually accomplished and what they 
have actually meant?
    Mr. Christoff. Absolutely. And I would also note that one 
other decision that Repsol made was the divestment clauses in 
the new act. They were concerned about shareholders divesting 
in their firm as one of the reasons why they pulled out of the 
South Pars project.
    Mr. Davis. Thank you very much.
    And that too is one of the reasons, Mr. Chairman, that I 
appreciate your calling this hearing, to try and bring as much 
clarify to actions that are taken so that the only way we 
experience this democracy that my representative friend from 
Ohio, Ms. Kaptur, was talking about is that people be able to 
understand what it is that the Government is doing, what it is 
that the Government is trying to do, and what the intents are. 
So I thank you again for the hearing and I yield back the 
balance of my time.
    Chairman Towns. Thank you very much for your participation 
as well.
    I now yield to the gentleman from California, the ranking 
member, Congressman Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    Just to wrap up a little bit, Mr. Christoff, in the 
committee's report, I hope you have looked at it, Ms. Kaptur 
really sort of talked to this point when she said Halliburton, 
$27.1 billion. First of all, just for the record, my 
understanding is the Vice President, when he became Vice 
President, relinquished all stock in the company, most of 
which, all of which, was not by purchase, but by having been an 
executive there, and is not an investor.
    But notwithstanding her not understanding what an investor 
is, perhaps, Halliburton is $27.1 billion. That is how much 
they got for servicing the need for the U.S. Government. Do you 
know what they received, some subsidiary of Halliburton 
received for participation with Iran during that same period of 
time?
    Mr. Christoff. I don't know those details, sir.
    Mr. Issa. So, actually, how much money somebody got from 
the United States isn't particularly important at all. What is 
important is how important was Iran to these subsidiaries. And 
if I understand correctly, under prior law a subsidiary, wholly 
owned, not wholly owned, joint venture, controlled, 
uncontrolled, to be honest, they were allowed to do this. So 
everything that is here about these companies prior to just a 
short period ago, they were doing things that were perfectly 
routine, legal, and not prohibited by Executive order or any 
other law.
    Mr. Christoff. The new act has changed that. Subsidiaries 
are now affected, but previously they were not.
    Mr. Issa. So back to the sanctions. I have been very tough 
on Mr. Einhorn, but I want to go to you based on past 
performance. Compliance with the past laws by companies seems 
to be reasonably good, and the past service and sales and how 
everyone was circumventing, they were simply complying with the 
law and meeting their responsibility to their stockholders. 
Haven't we, with the last sanction regime, changed the message 
to them relative to the best interest of their stockholders?
    Mr. Christoff. You have definitely changed the message, I 
think particularly with the divestment clauses, because they 
are hearing opportunities for shareholders to speak with their 
voices and pull out of those companies that continue to invest 
in Iran.
    Mr. Issa. Mr. Glaser, I want to close with just a question 
to you. The U.S. financial system is a relatively open system. 
The chairman and I might disagree on whether or not, no, we 
might agree, but disagree with Treasury on whether or not we 
have given you all the tools of transparency that we would like 
you to have in the way of data bases and so on.
    But the U.S. companies, companies with a presence and are 
reporting in the United States, wouldn't it be fair to say that 
you get good transparency on them, and if they continue, 
directly or indirectly, to trade with Iran, you will be able to 
detect that and thus sanction them? In other words, do you have 
those tools?
    Mr. Glaser. Yes, I think that we know what is going on----
    Mr. Issa. OK. Would you, in closing, for me, our partners 
in Europe on this measure who have promised to do the same 
thing, do they have the same tools? And the final question, if 
you answer that they do, is: are they going to use them as 
aggressively as you will?
    Mr. Glaser. I have been at this for a few years now. I 
really do think Europe has come a long----
    Mr. Issa. That is why you get to be here before us. We ask 
the experts.
    Mr. Glaser. It is an honor. I think Europe has come a long 
way and, again, this has been a very surprising 6 weeks. The 
U.N. went farther than I personally thought they would. The EU 
went considerably farther than I would have predicted, if you 
had asked me 3 months ago how far will the EU go. In all 
sincerity, I think there is a real growing international 
consensus that something needs to be done and that countries 
need to take responsibility.
    Does that mean we are not going to have issues to work out 
with particular European countries? I was talking to Mr. Van 
Hollen about one of those. There is going to continue to be 
issues, but I do think Europe is serious about this and I think 
they have been a good partner.
    Mr. Issa. Thank you.
    Mr. Einhorn, the last word goes to you, as long as you 
include in it letting us know how our former colleague, Ms. 
Tauscher, is doing.
    Mr. Einhorn. You know Ellen Tauscher. She has a lot of 
spirit, a lot of fight, a lot of grit. She is going to have a 
rough patch, but she is going to come out of it fine. And I 
will send to her your best wishes.
    Mr. Issa. Thank you very much. Please do.
    Thank you. Yield back.
    Chairman Towns. Please associate me with that as well.
    Let me just close with you, Mr. Glaser, and I guess Mr. 
Einhorn, both. First of all, GAO has identified 41 foreign 
firms with commercial activity in Iran. Do you agree with that, 
41, the number?
    Mr. Glaser. This is really something that is outside of the 
Treasury Department's jurisdiction. We target, with our 
particular authorities, entities that are engaged in illicit 
activity, be it proliferation or terrorism. The Treasury 
Department is not keeping track of foreign companies that are 
doing business in Iran as a broad matter; that would be for the 
Commerce Department or others.
    Chairman Towns. Mr. Einhorn, do you agree with the numbers?
    Mr. Einhorn. I am sorry, could you repeat that, Mr. 
Chairman?
    Chairman Towns. GAO has identified 41 foreign firms with 
commercial activity in Iran's energy sector. First of all, do 
you agree with the number?
    Mr. Einhorn. We examined all of those cases very carefully 
and, as I mentioned before, we winnowed that number down to 
less than 10. These are a number of entities that are very 
problematic. I have to say that a number of them have been 
engaged in sanctionable activity. But as I also said before, we 
are reaching the conclusion of this process; it is out for 
interagency views, and Secretary Clinton will make her 
decisions on this in a short period ahead.
    Chairman Towns. What can you do about these companies, even 
the 10 that you----
    Mr. Einhorn. Well, it is important to recognize that a 
number of the entities in this small list have already stopped 
or are in the process of stopping their engagement in Iran's 
petroleum sector. So I think what we found is the law is 
working. The threat of penalties has encouraged these countries 
to get out of the business of dealing with Iran. So it is quite 
effective.
    Chairman Towns. Let me just close by asking is there 
anything more that we need to do on this side of the aisle, in 
terms of from a legislative standpoint, in order to make this 
effective?
    Mr. Einhorn. I think you have just given us a big and 
important tool to tackle this threat, and you did that only 
less than 4 weeks ago. We have to work hard within the 
administration to figure out how best to implement this law to 
maximum effect. So for the time being we have nothing else to 
request of you.
    Mr. Glaser. I agree with Mr. Einhorn. I think you just 
passed a very important new piece of legislation. We are in the 
process of implementing that and I think it is going to have a 
powerful impact.
    Mr. Neurauter. Mr. Chairman, we are proceeding to implement 
the rule required by the act, and we will do so.
    Mr. Christoff. I would encourage vigorous and continuous 
oversight on the part of the Congress to ensure not just that 
the old sanctions are being enforced, which many had not been, 
but the host of new sanctions that are on the plates of the 
executive branch.
    Chairman Towns. Thank you very, very much for actually----
    Mrs. Maloney. Would the gentleman yield?
    Chairman Towns. I would be delighted to yield.
    Mrs. Maloney. Thank you very much.
    I really would like to ask Mr. Neurauter and Mr. Christoff 
something that has come up throughout this hearing, and that is 
the report that throughout the last decade GSA spent roughly 
$170 billion of taxpayers' money contracting with 74 companies 
doing business in Iran at the exact same time we were trying to 
put pressure on Iran.
    And my question is, basically how did this happen? Did the 
fact that these companies were doing business with Iran ever 
come up when you were reviewing the contracts or signing 
contracts in GSA? Did anyone from anywhere in the Federal 
Government point out we shouldn't be giving part of our Federal 
procurement to companies that were really in direct violation 
of our stated foreign policy goals? Did anyone ever talk to 
you, Mr. Neurauter, about these contracts and that they should 
not be getting $170 billion in taxpayer money when we are 
trying to impose sanctions?
    Mr. Neurauter. The short answer is no, I have not been 
involved in these matters. I will be happy to look into this 
and get back to you for the record. I returned to GSA 2 years 
ago as the Director of the Office of Acquisition Integrity, 
with my duties as Suspension and Debarment Official. But before 
that I was at HUD as the senior procurement executive and was 
not aware of any such matters at HUD. But I will be happy to 
look further into this.
    Mrs. Maloney. If you could, and get back to us.
    Mr. Christoff, do you want to comment on it? How did this 
happen that we are handing out billions in Federal contracts to 
companies in direct violation of our stated policy goals, 
foreign policy and stated laws of the country?
    Mr. Christoff. Well, first I would state that, as we all 
know, it is the responsibility of the executive branch to 
investigate companies, determine what is credible evidence, and 
try to impose sanctions. The number that I think you are 
referring to is the New York Times article, where there was 
over $100 billion in contracts. When I looked at their list, 
many of those companies are companies that would not be 
sanctionable under what was then the laws of the land. 
Companies that were in the automobile industry, for example, 
would not have been----
    Mrs. Maloney. Would they be sanctionable now under this 
law?
    Mr. Christoff. Not necessarily.
    Mrs. Maloney. Why not?
    Mr. Christoff. Because it still doesn't cover items such as 
the automobile industry. And there were a lot of companies on 
that list that dealt in the automobile community.
    Mrs. Maloney. Well, maybe we should cover them with 
sanctions.
    I just want to mention, Mr. Glaser, that the Treasury 
Department has done a very good job, and I compliment you on 
the work you have done. As a member of the Financial Services 
Committee, my time is up and we don't have time to go further, 
we have another panel, but I have a series of questions, 
respectfully, I would like to place in writing to you so that 
we can get these answers, and I congratulate you on your work.
    Chairman Towns. Without objection, so ordered.
    Mrs. Maloney. Also the State Department for your 
international work to get compliance. Thank you very much.
    Chairman Towns. Thank you very much.
    Now, let me just say to the Members that within a few 
minutes we will have two votes on the floor, so what I would 
like to do is to adjourn until 1:30. We will reconvene at 1:30. 
I am sorry about that, but we have to vote around here. And if 
we don't vote, they talk about us. So this panel is actually 
dismissed and the committee will adjourn until 1:30 and we will 
come back.
    [Recess.]
    Chairman Towns. The committee will reconvene.
    I would like to welcome our second panel. As with the first 
panel, it is committee policy that all witnesses are sworn in, 
so please stand and raise your right hands as I administer the 
oath.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that they both 
answered in the affirmative.
    You may be seated.
    Mr. Avi Jorisch is the founder and president of the Red 
Call Intelligence Group. Welcome.
    And Mr. Mark Dubowitz is the executive director of the 
Foundation for Defense of Democracies.
    Your formal testimony is in the record, so if you could 
just summarize within 5 minutes, which would allow the 
committee members to raise questions with you, we would 
appreciate it.
    Why don't we start with you, Mr. Jorisch?

  STATEMENTS OF AVI JORISCH, PRESIDENT, RED CELL INTELLIGENCE 
 GROUP; AND MARK DUBOWITZ, EXECUTIVE DIRECTOR, FOUNDATION FOR 
                     DEFENSE OF DEMOCRACIES

                    STATEMENT OF AVI JORISCH

    Mr. Jorisch. Thank you. Chairman Towns, Ranking Member 
Issa, distinguished Members of Congress, thank you very much 
for your service to our country and for holding this very 
important hearing and giving me the opportunity to present some 
testimony to you.
    Today, the world's attention has turned to Iran's defiance 
of the international community in regards to its nuclear 
program, but there isn't a lot in terms of material in terms of 
the banking community and how we might use sanctions in order 
to really make the Iranians feel financial pain.
    Today, per the topic of this hearing, I would like to 
outline the implementation of sanctions against the Iranian 
regime specifically focusing on the banking community. First, I 
will go over an overview of the Iranian banking community, the 
international sanctions against the Iranian regime, which banks 
are still in the market, which our previous panel touched on 
just a little, and the Iranian banks around the world, and wrap 
up with a little bit of the legislation that was just enacted.
    If I could start with the first slide. That is the second 
slide.
    [Slide shown.]
    Mr. Jorisch. When I started looking at the Iranian banking 
community a few months ago, there was very little in terms of 
information as to actually which banks were actually in the 
Iranian market, so I started doing a tremendous amount of 
research looking at which banks are there, and what I found out 
is as follows. If you look on the screen--that is already the 
fourth slide. Could we go back to the first slide? There are 30 
Iranian banks in the market, and some of those banks have been 
sanctioned by the United Nations; some of those banks have been 
sanctioned by the United States.
    If you go to the second slide.
    [Slide shown.]
    Mr. Jorisch. We will just go over the international 
sanctions regime and the domestic sanctions regime. The United 
Nations has basically designated four Iranian banks: Sepah, 
Saderat, Melli, and the First East Export Bank of Malaysia. 
That is what the United Nations has done in terms of the four 
Security Council resolutions in the last few years. The United 
States has taken a step further.
    If we can go to the next slide.
    [Slide shown.]
    Mr. Jorisch. The United States has essentially designated 
another 13 banks. Now, I don't expect you to remember these 
banks, but essentially we have a total of 17 banks that have 
been designated by the U.S. Government for its proliferation of 
weapons of mass destruction.
    So that was the first kernel. What I started figuring out 
was I wanted to see, OK, now that I know which banks are 
actually in Iran and what banks have been sanctioned by the 
international community and by the United States, who are they 
actually doing business with.
    And there was very little in terms of information; what 
were their correspondent banks, which were the banks around the 
world that were actually helping them out. There was no name 
and shame; there was certainly no bank accounts in the open 
sphere. So I wanted to put that all together.
    So what I started to do was I spoke to every compliance 
officer I knew in terms of getting information about how we 
could figure out who was actually helping the Iranian banks 
conduct their business, and what I found was very interesting. 
I found some open research and resources that pointed to 
something called the correspondent banking relationship. In 
short, when a bank does not have a physical presence in a 
country, it tasks another bank and acts in its steed to 
actually conduct its business; and in this case I managed to 
chart out all of the Iranian banks and their relationships, and 
what I found out was fascinating.
    First, you see these 17 banks here.
    If you go to the next slide.
    [Slide shown.]
    Mr. Jorisch. There were banks around the world that were 
providing it with currencies. You will see here the dollar, the 
Euro, the pound, the yen, etc. But what was more interesting, 
not only was the currencies, but which banks were actually 
conducting this business.
    If you go to the next slide.
    [Slide shown.]
    Mr. Jorisch. You will see before you a complete list of 44 
banks around the world.
    Go to the next slide.
    [Slide shown.]
    Mr. Jorisch. Those 44 banks are providing Iran with 
correspondent banking services, and they are household names: 
ING, Bank Tokyo Mitsubishi, Commerce Bank, Deutsche Bank. And I 
was able to provide all the bank account numbers and the swift 
codes for these correspondent accounts. So, in other words, 
mapping out a financial map of these particular financial 
institutions.
    Then I wanted to figure out how to basically give leverage 
to Congress, so what I did was I mapped that back to the United 
States. So, in other words, so you have the Iranian banks in 
the center, then you have the banks around them that were 
supporting them, and then which banks in the United States 
supporting those banks.
    If you go to the next slide, it will probably clarify 
things. One more.
    [Slide shown.]
    Mr. Jorisch. So you will see in the center there are 30 
Iranian banks. Four have been designated by the United Nations, 
17 were designated by the United States. Then there are 44 
international banks that are servicing the designated entities, 
and then there are banks in the United States that are 
supporting those banks. The lever point is actually which U.S. 
banks are doing business with the international community who 
is doing business with designated entities. So there you have 
examples like JPMorgan, Wells, Bank of New York that are doing 
business with the Deutsche banks, the Commerce banks, the INGs, 
the Tokyo Mitsubishis that are doing business with the 
designated entities.
    I would be remiss if I didn't mention where Iran itself had 
branches around the world.
    If you go to the next slide.
    [Slide shown.]
    Mr. Jorisch. There are U.N. and U.S. designated banks that 
have offices all over the world, including Asia, Europe, South 
America.
    And if you go to the next slide.
    [Slide shown.]
    Mr. Jorisch. You will see there you have Iranian-designated 
banks operating in Afghanistan, Armenia, Hong Kong, Paris, 
Frankfurt, Hamburg, Athens, Baghdad, Rome, and a bunch of other 
well-known places. And these are designated banks by the United 
Nations that are operating in friendly countries.
    Let me wrap up by talking a little bit about the sanctions 
regime and CISADA, the Comprehensive Iran Sanctions and 
Divestment Act.
    Some of the Members of Congress talked about this waiver 
ability. I would point out that in the way that CISADA was 
actually written, this is an unbelievable bill. It is a 
sunlight bill. If the Government actually asks for a waiver, it 
has to actually come back to you and tell you why it is asking 
for that waiver. That is No. 1.
    No. 2, I would ask you to remember that what brought down 
the South African apartheid regime was actually banking 
sanctions, not anything else.
    Finally, this is basically a clean hands bill. U.S. banks 
now need to certify not only who their customers are, but who 
their customers' customers are; and this is a sea change. So, 
in other words, JPMorgan of Boni or Citibank are going to have 
to declare that not only they are not doing business with a 
designated entity, but none of their customers' customers, none 
of the banks that they are working with are dealing with 
designated entities.
    With the passing of CISADA, we have all the tools necessary 
to pursue and punish banks doing business with Iran. If we are 
truly going to stop Iran from pursuing nuclear weapons, it 
would be prudent for us to use all the arrows in our quiver.
    Thank you for your time, and I am open to any questions you 
might have.
    [The prepared statement of Mr. Jorisch follows:]

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    Chairman Towns. Thank you very much for your testimony.
    Mr. Dubowitz.

                   STATEMENT OF MARK DUBOWITZ

    Mr. Dubowitz. Thank you very much. Thank you, Chairman 
Towns and Ranking Member Issa, and distinguished members of the 
committee. And thank you, Mr. Jorisch, for his work on banking.
    President Obama has made it very clear that stopping Iran's 
nuclear weapons is a priority. His administration can 
potentially achieve this by striking at the Iranian energy 
sector. Let's be clear: the Iranian energy sector is the 
lifeblood of the Iranian regime. Oil export revenues constitute 
80 percent of export earnings, 76 percent of government 
revenues. Iran's natural gas reserves are second in the world 
only to Russia's.
    Energy wealth enables the Iranian regime to fund its 
proliferation and terrorism activities, as well as a vast 
system of repression. The threat of sanctions has persuaded 
many foreign companies to stop doing business with Iran, but 
many more remain. The regime increasingly relies on the Islamic 
Revolutionary Guard Corps to manage the energy industry, and 
this makes IRGC leaders and IRGC entities prime targets for 
sanctions. The U.S. Treasury has adopted this approach, as we 
heard this morning, with IRGC designations in 2007 and 2010 for 
proliferation in terrorist activities.
    Mr. Chairman, as we heard this morning, international 
energy sanctions are gaining significant support abroad. The 
new U.N. Security Council resolution establishes for the very 
first time the nexus between the Iranian energy sector and 
proliferation activities, and this is a very important 
development. In fact, this development provided political cover 
to the EU, Canada, and Australia to finally impose their own 
tough energy sanctions.
    In parallel, as we heard this morning, the new U.S. 
legislation expands the Iran Sanctions Act and it goes after 
almost all of the Iranian energy supply chain, almost all. And 
we can talk about what it doesn't address in Q&A.
    Now, critics, as we heard, dismiss sanctions as a feckless 
measure that will enrich Chinese and Russian opportunists at 
the expense of Americans and Europeans. I believe that energy 
sanctions are not a silver bullet. But they are silver 
shrapnel, and shrapnel can wound this regime as part of a 
comprehensive economic warfare strategy.
    The mere possibility of energy sanctions has had an impact. 
During Ahmadinejad's first 4 years in office, foreign direct 
investment plummeted by 64 percent, from $4.2 billion to $1.5 
billion. In fact, without an annual investment of $25 billion, 
Iran could become a net importer of oil.
    Now, the Iranians despise this regime not only for its 
human rights abuses, but for the disastrous state of the 
economy. Imagine what Syria sanctions, vigorously enforced, 
could do. This presents an opportunity to policymakers. We can 
leverage the economic malaise in Iran and the political 
frustration as expressed by the Green Movement, the Bazari 
merchant class, and disaffected clerics.
    Now, this is not to say that sanctions are going to have 
their desired impact. Iran has decades of experience 
circumventing sanctions. It is implementing countermeasures 
today. It is using fund companies and cutouts and smuggling, 
and hot spots for this activity include Dubai and Malaysia, 
Turkey, Hong Kong, and Singapore.
    Furthermore, if sanctions are not enforced, companies may 
assess that their interests are really not in jeopardy given 
Washington's poor historical record of sanctions enforcement, 
and we are going to face serious challenges to enforcement from 
China and Russia, but also Turkey and Iraq, Brazil, Venezuela, 
and perhaps even India.
    This administration now has more authority to counter the 
Iranian threat than any administration in U.S. history, and it 
should be commended for establishing broad international 
support for these sanctions. But let's be clear: we only have a 
very limited window before Iran realizes its nuclear ambitions.
    To this end, I present to you the following 
recommendations. The first is enforce U.S. law. The credibility 
of sanctions depends on the willingness of the United States to 
sanction violators. Nothing will focus minds like stiff 
penalties and the denial of Federal contracts. It is worth 
remembering that the U.S. Government imposed almost $1 billion 
worth of fines against three European financial institutions 
for violations of U.S. sanctions law. That sent a ripple of 
fear through the financial industry. We need to send the same 
ripples of fear throughout the energy sector.
    Also remember that this new law is not just about gasoline. 
In addition to banking sanctions, it also leverages the full 
scope of U.S. laws by sanctioning companies that provide 
technology, goods, and services to the Iranian oil and natural 
gas sectors. It also targets energy projects outside of Iran, 
where foreign companies are partnering with Iranian-controlled 
government entities in projects off the coast of Scotland and 
Croatia, in Azerbaijan and elsewhere.
    We need to encourage Europe to enforce its energy sanctions 
because, after all, this will be the ceiling for actions by 
other allies, particularly in Asia and the Gulf.
    We should harmonize our sanctions laws with the EU. We did 
this in a commission that successfully coordinated sanctions 
against Serbia, and those sanctions were very effective.
    We should expand Treasury's list of energy-related 
entities. The IRGC operates thousands of front organizations 
that contribute to Iran's energy sector. Targeted sanctions 
work only if there are sufficient targets.
    And, finally, we need to expose every foreign company that 
does business in Iran's energy sector. I believe Congress 
should establish a standing bipartisan advisory board on 
sanctions enforcement, a bipartisan congressional commission to 
collect open source and classified research, make 
recommendations, hold hearings to ensure that sanctions are 
enforced.
    For sanctions to work, they must cripple the Iranian energy 
sector. And if sanctions yield no compromise from Iran's 
leaders on its nuclear program, no one can argue that America 
and its allies did not try all peaceful options.
    On behalf of the Foundation for Defense of Democracies, I 
thank you for the opportunity.
    [The prepared statement of Mr. Dubowitz follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Chairman Towns. Thank you. Let me thank both of you for 
your testimony.
    Let me begin with you, Mr. Jorisch. Some of these banks are 
the biggest banks. Why have they been able to get away with 
this? Some that you had on that chart were some of the biggest. 
How do they get away with it?
    Mr. Jorisch. In general, banking is not a transparent 
business. When you have a bank account, not everyone knows 
about those bank accounts. Before this came out, before I put 
out this study, there was nothing on bank accounts or Iranian 
bank accounts or otherwise on the internet, on the ``E road.'' 
This is the first expose of their accounts all over the world.
    Chairman Towns. So that is the reason why they were getting 
away with it, you are saying?
    Mr. Jorisch. The Treasury Department is not in the habit of 
calling out, naming and shaming, international banks that are 
doing business with designated entities.
    Chairman Towns. Mr. Dubowitz, do you believe that our U.S. 
sanctions are strong enough, or should we do something else?
    Mr. Dubowitz. Well, I think U.S. sanctions are certainly 
strong, and I think if we vigorously enforce them and if we 
impose crippling sanctions against these companies, again, I 
think it will send a ripple of fear through the energy sector. 
Our friends in Treasury have done a superb job in persuading 
many financial institutions to stop doing business in Iran.
    But let's remember, as I said in my testimony, the U.S. 
Government and the district attorney of New York imposed $1 
billion worth of fines on three European banks between 2005 and 
2009, and that focused minds on the financial sector. We have 
never sanctioned any energy companies, and I believe that if we 
impose the equivalent of $1 billion worth of fines on the 
Turkish and Chinese and Malaysian and other companies that are 
continuing to do business in the gasoline trade and in the oil 
and natural gas sectors, that could have a profound effect.
    Chairman Towns. Do you believe that the United States and 
EU sanctions on Iran will effectively reduce the number of 
foreign firms conducting business in Iran? Do you think it will 
reduce the number?
    Mr. Dubowitz. I was in Brussels a couple of weeks ago, 
meeting with the key drafters of the U.S. sanctions order, and 
I think the Europeans have gone very far in the energy sector. 
What they didn't provide were sanctions against the supply of 
gasoline. And a number of European companies have been involved 
in that supply chain for many years, though reportedly they are 
out. They have cutoff or prohibited investment in technology 
transfer and technical assistance, and, again, I think this is 
sending a message to European energy firms that Iran is not 
open for business.
    But again, I am somewhat skeptical that our European 
friends are going to enforce those laws. The commercial 
relationship between the EU and Iran is enormous and growing.
    Chairman Towns. Mr. Jorisch, you have spent time both as a 
former Treasury official and as a private consultant tracking 
how Iran manages its resources within the international 
economy. Can you discuss why you believe effective sanctions 
enforcement against Iran's banking sector in particular is so 
important to halting Iran's nuclear weapons program?
    Mr. Jorisch. If you look historically, one of the things, 
again, as I mentioned in my testimony, that brought down the 
South African apartheid regime was banking sanctions, first. In 
addition, if Iran doesn't have access to the international 
market, it can't procure currency, it can't send wire 
transfers. If it doesn't have the hub of the banking sector, it 
can only rely on the informal ways of moving money.
    There are only four ways of moving money: there is the 
banking sector, the informal financial sector, cash, and 
commodities. Mr. Dubowitz talked about the commodities side of 
the house: gas, oil. But if you cutoff the banking sector, what 
does the regime have left? It is much more difficult for them 
to move money. This is really one of the lifebloods of the 
regime.
    If you are able to cutoff the banking community from Iran, 
it becomes much more difficult for them to move money, and that 
is the power that this last sanctions legislation actually 
passed. U.S. financial institutions will have to certify that 
they are not doing business with anyone who is doing business 
with a designated entity. That is a third-party sanction. If 
that really does go through, you will find that most banks will 
pull out of the market.
    Chairman Towns. On that note, I yield back and I call on 
the gentlewoman from New York, Congresswoman Carolyn Maloney.
    Mrs. Maloney. I would like to thank both gentlemen for 
their testimony and first to ask Mr. Jorisch the Central Bank 
is not covered under the sanctions. Iran's Central Bank is not 
covered, so what does that mean in terms of trying to put 
sanctions on them? And what is the role that clearinghouses are 
playing?
    Can you give specific examples of how the clearinghouses 
might be used to get around the sanctions? And, again, the 
exemption, am I correct that there is an exemption for the 
Central Bank of Iran from the sanctions? And what impact does 
that have on it?
    Mr. Jorisch. I will work backward. There is an exemption 
for the Central Bank. It hasn't been designated by the United 
States or the United Nations, and it is certainly a hole in the 
sanctions regime. If you don't designate every Iranian bank, 
effectively there is a hole in the sanctions regime. So that is 
firstly.
    In terms of clearinghouses, there is one huge scheme, 
called the Asian Clearing Union. It is based out of Tehran and 
it is a conglomerate of somewhere between 8 and 10 countries, 
the central banks of 8 and 10 countries. And they get together 
and they are essentially moving money through this 
clearinghouse, and Iran effectively is moving up to 10 percent 
of its imports and exports yearly. Its biggest trading partner 
in the Asian Clearing Union is India. It is a way for them to 
procure dollars and Euros and evade sanctions.
    I have written about this at length. This is one of the 
biggest holes outside of the formal financial sector, the 
banking community, and until the U.S. Government either 
designates or puts them on some kind of sanctions regime, they 
are going to be able to move money through this formalize 
informal financial sector.
    Mrs. Maloney. Well, Mr. Chairman, maybe we should close 
that loophole they are pointing out.
    Mr. Dubowitz, I would like to ask you about the 
international community. We heard in the prior session that we 
had from State Department that we have been successful this 
time in engaging the international community, with the 
exception of Turkey and China and Russia, and we are working on 
those countries; but in the past parts of the European Union 
did not really work with us on the sanctions. What has happened 
that they are now willing to be part of this effort? Could you 
give your interpretation of what is happening in the 
international community and what impact that will have on 
making them stronger this time?
    Mr. Dubowitz. Thank you for the question. First of all, I 
think the U.S. Government has done a remarkable job in building 
international support, but I think we should be careful about 
not exaggerating the level of international support. What 
essentially we have now is a Security Council Resolution, 1929, 
that lays the predicate for the possibility of further support. 
We have the Europeans, the Canadians, and the Australians who, 
so far, have formally passed their own energy sanctions.
    Within Europe there was a lot of debate within the 27 
member union over sanctions. You had the French very 
aggressive. In fact, the French were willing to include refined 
petroleum sanctions as part of the final sanctions package. But 
you have countries like Sweden and others who are pushing back 
for a variety of reasons.
    So there is still a lot of dissension and disagreement 
within the European Union. You don't see that in the final 
Executive order, in the final sanctions order, but you will see 
that in enforcement; and I think we should be very cautious 
about congratulating the Europeans until we see what they are 
going to do on the enforcement side.
    Are the Germans, who have the largest trade relationship 
with Iran in the EU, going to move forward on some of these 
remaining banks and on the technology companies and 
infrastructure players that play a critical role in supporting 
the Iranian energy sector? So I think the time for celebration 
will be when we see the Europeans also imposing their own stiff 
penalties and sanctions against their own firms or firms that 
are operating on European soil.
    Mr. Jorisch. I wonder if I could just followup on that for 
just a moment.
    Mrs. Maloney. Sure.
    Mr. Jorisch. I would like for you to recall the fact that 
there are designated Iranian banks sitting in London, Parish, 
Rome, Frankfurt, Hamburg. The new legislation barred any new 
business from taking place with these banks, but not 
preexisting business, and a lot of our European allies are 
congratulating themselves, when in fact they are allowing old 
contracts to go through and using these designated Iranian 
banks on their soil. They have not closed down these banks in 
Europe.
    Mrs. Maloney. And they are among our closest allies, would 
you not say, in Europe and Asia and the Middle East? And they 
have the physical branch operations from the Iranian banks. So 
do you think that we went far enough, or we should have covered 
also the existing businesses, Mr. Jorisch?
    Mr. Jorisch. The existing businesses? In other words, the 
existing banks?
    Mrs. Maloney. Yes.
    Mr. Jorisch. We essentially used the ability we had. We 
leveraged the U.S. financial system. We told these banks you 
can choose between us and you can choose between them. It was a 
clean hands bill. All these U.S. banks now need to certify that 
they are not doing business with anyone who is doing business 
with the designated entities. In other words, it forces these 
European, Asian, and South American banks to basically choose 
between us and them.
    In terms of the Iranian banks, there is very little 
leverage we have. There is very little leverage we have, other 
than going through the United Nations and the State Department.
    Mrs. Maloney. What about the correspondent banks? What role 
do they play in empowering financial services, expanding 
financial services for Iran?
    Mr. Jorisch. So that was the thrust of my testimony. I 
found 44 banks around the world that are providing designated 
Iranian entities with correspondent banking services. Again, 
when a bank doesn't have a physical presence in a country, it 
pays another bank to act as its agent.
    Those 44 banks are essentially acting as Iran's tentacles 
around the world, and a lot of those banks have a physical 
presence here in the States. Deutsche Bank, Commerce Bank, they 
have branches here and they are basically working with 
designated entities. Those 44 banks also maintain correspondent 
banking relationships with our own financial institutions; 
again, JPMorgan, Citibank, Boni. So, this latest round of 
sanctions, we are using the power we have because we are 
forcing our own financial institutions to certify that they are 
not doing business with anyone.
    Mrs. Maloney. Well, my time has expired, Mr. Chairman.
    Chairman Towns. The gentlewoman's time has expired.
    I now yield 5 minutes to the gentleman from California, the 
ranking member of the committee, Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    I am a big supporter of trying to use sanctions, trying to 
make it work, but I am going to be the devil's advocate a 
little bit here today for both of you. I did international 
banking, if you will, in the import-export business for years. 
Everybody has a correspondent bank. Hong Kong, Shanghai prides 
itself on having a correspondent relationship basically with 
everybody, as does JPMorgan and so on. As a matter of fact, 
that is why they call a lot of these guys financial center 
banks.
    Ultimately, isn't it true, Mr. Jorisch, no matter what we 
do, if they are able to put money into banks, which they can 
through their private entities that are essentially 
nongovernment, that has millions, if not billions, they can 
move it to enough banks that eventually they will always have a 
correspondent?
    In your opinion, based on your research, in order to 
actually make banking sanctions work, don't we actually have to 
create an audit trail of the money, the transactions, level of 
transparency on the actual money transactions, what they are 
for, who they go to, and follow them on a global basis? And 
anything less than that, aren't we really sticking our fingers 
in the kind of sieve that we generally put spaghetti in when we 
are draining it?
    Mr. Jorisch. The short answer is yes. There is no perfect 
system. You are never going to be able to lock out an entire 
country from the formal financial sector. Having that said, 
though, Stuart Levey, my former boss at the Treasury 
Department, always says our job is not to close down the 
regime; our job is to make it more difficult and financially 
painful for them to move our money, and that is what this does.
    Mr. Issa. Well, and to that level I would like to ask both 
of you, and, Mr. Dubowitz, perhaps you could start. I remember 
how we went after South Africa. They weren't doing a nuclear 
weapon. Their weapon was the tyranny over their majority. We 
did it with pure shame. We basically shut down diplomatic 
relations with South Africa on a global basis. We did have 
banking sanctions, but, to a great extent, what happened was we 
did not welcome their deposits, period. We were able to get 
more and more banks to recognize that if you took their 
deposits, you were taking the equivalent of blood money in 
diamonds today.
    Even though our sanctions are strong, even though I know 
Treasury is doing the best they can, I will start with Mr. 
Dubowitz, the next step that we have to look at, not just 
Government Oversight, but the Congress, isn't it to find those 
areas in which truly we can change how they are viewed and how 
they feel they are viewed?
    And I have been all over the world. I started on Foreign 
Affairs in this Congress. The fact is you find Iranians at the 
finest hotels. We normally don't stay at those hotels, but if I 
go to a meeting in those really good hotels you are going to 
see Iranians. So isn't that the next step, diplomatic 
sanctions, including not having Ambassadorial postings of 
Iranians in countries in Europe?
    Mr. Dubowitz. Well, Congressman Issa, that is exactly 
right. I think to take the big picture view of sanctions, 
sanctions are a way of putting the Iranians in the wrong and 
keeping them there. There has been a sea change in the 
narrative about Iran even in 12 months even in this August 
body. Twelve months ago we were talking about a grand bargain 
with Iran over common interests and common values; today we are 
talking about----
    Mr. Issa. I think that was down the road about 16 blocks.
    Mr. Dubowitz. Now we are talking about how crippling can 
sanctions be. Now, that is a significant change in the 
narrative in Washington. It is certainly a significant change 
in the narrative in Europe. When I was in Europe 12, 18 months 
ago, the talk about the Iranian regime and its legitimacy was 
certainly in the mouths of most diplomats and most politicians 
on both sides of the aisle.
    So I think these sanctions have played a very important 
strategic communications role in putting the Iranians in the 
wrong and keeping them. I think we can go further by, in fact, 
barring their diplomats, barring their embassies. I was born in 
South Africa; I have a sense of what was done actually in South 
Africa, and I think what was very important there was to target 
the legitimacy of the South African government, to show the 
evil nature of apartheid.
    Now, I want to make just one further comment, because my 
fear with sanctions, whether it is in the banking sector or in 
the energy sector, is that we spend the next 12 months playing 
a game of ``whac-A-Mole.'' That is the game in the carnival 
that we used to play as kids, where you hit one mole and 
another one pops up. I think if we spend the next 12 months 
chasing corresponding banking accounts and gasoline suppliers 
and technology providers, we are going to have our folks at the 
State Department inundated with work, but I don't think we are 
going to be targeting the real Achilles heel of the Iranian 
economy.
    Unlike South Africa, Iran is a one crop country. All the 
Iranians really do is produce energy. And we have to identify a 
very short list of major investors in the energy sector and 
major technology providers, of which there are only a few 
really big ones, and I can tell you most of them are German, 
who are providing critical technology to the Iranian natural 
gas sector. We should identify them and then penalize them.
    Mr. Issa. OK, my time has expired, and I agree with you; it 
was in your testimony.
    I am going to just do a yes or no question for both of you 
at the end. During this time, as we attempt to do that, should 
we urge the State Department to urge our allies around the 
world to recall Ambassadors and/or to discharge Iranian 
ambassadors as a way of showing, without hurting one Iranian 
citizen, a way of showing that this is not a country that is 
currently in favor for their actions?
    Mr. Jorisch. Yes.
    Mr. Dubowitz. Yes.
    Mr. Issa. Thank you both.
    Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much. Thank you for your 
questions.
    Let me just ask, is there anything that we need to do from 
a legislative standpoint, on this side of the aisle?
    Mr. Dubowitz. If I could start. I think that Congress can 
play a critical role in continuing a relentless and determined 
drive to ensure sanctions are enforced. As I mentioned in my 
testimony, I think it would be very valuable to set up a 
bipartisan commission on Iran sanctions enforcement and to make 
sure that the staff that is employed there has access to the 
best information, that they are relentless and determined in 
monitoring what is a very opaque and very complex energy sector 
and banking sector, and that they are finding the best 
information in order to ensure that we can name and shame the 
energy companies and the banks that are doing business with 
Iran, we can hold hearings, and we can hold the administration 
to account for its commitment to sanctions enforcement. I think 
that can be done legislatively, and I would suggest that be an 
important first step.
    Chairman Towns. You can be assured we will hold hearings.
    Mr. Jorisch. I wholeheartedly agree with Mr. Dubowitz. I 
think Congress ought to consider, again, just echoing Mark's 
words, a bipartisan body that oversees sanctions, that collects 
this information, brings it out to the public and holds the 
administration's feet to the fire on this. The implementation 
if where the rubber meets the road here. Writing legislation is 
great. Passing legislation is wonderful. If there is no 
implementation, you have nothing.
    Chairman Towns. Gentlewoman from New York, do you have any 
closing remarks?
    Mrs. Maloney. I would like to just followup with what Mr. 
Dubowitz said, that instead of playing Whac-a-Mole or Whack-A-
Ball, whatever it is called, we should be focusing on the 
energy sector, which is the key component. Could you elaborate 
a little bit on that? I know that the bill did not address 
refined petroleum trade. It did not penalize companies involved 
in this trade.
    Also, their energy needs help from foreign countries, 
really, for them to develop their energy business and, 
according to some estimates, about 60 percent of the technology 
Iran uses to exploit its natural gas resources comes from one 
European nation, Germany, the rest from other U.S. allies, 
Japan, South Korea, Europe.
    Last week, companies were free to provide these products 
and services to Iran and natural gas businesses. Now that has 
changed and Congress really gave the President the means now to 
sanction any company that provides technology, goods, or 
services valued at $20 million or more in any single year to 
the Iranian energy industry.
    What is your opinion of how committed the European Union is 
to stopping the transfer of this key European technology to 
Iran?
    Mr. Dubowitz. I was surprised by how tough the EU sanctions 
were. I would not have expected that 3 to 6 months ago. They 
have gone after very specifically the providers of technology 
and technical expertise, and they are essentially going after 
their own companies in writing that order, because they know 
very well that 60 percent of the key natural gas L&G technology 
is provided by Germany and France and Holland and other 
European countries. So they have that in mind.
    I find it fascinating that they focused on that. Mr. 
Jorisch is exactly right, they have only focused on new 
contracts, not existing contracts, which, for me, provides a 
massive loophole in which new deals can be characterized as 
existing deals. There is a whole array of things that a company 
can do to circumvent that restriction. So certainly the paper 
looks good; the words look good.
    It will be very interesting to see whether Europe sanctions 
the Linde Group, which is a German natural gas technology 
player. It is a massive German company that are providing key 
L&G technology for the Iranian natural gas sector. If they are 
not sanctioning the Linde Group or any other organization like 
that, then I don't think the Europeans are serious, and then 
Congress has the authority under this new sanctions law to go 
after the Linde Group and other technology providers, because 
you did something brilliant, you eliminated, in the Iran 
Sanctions Act, an exclusion under investment which, prior to 
this, companies providing technology, goods, and services were 
free to do so for the past 15 years. You closed that loophole 
and you should be commended for that.
    Mrs. Maloney. Thank you very much. I have additional 
questions, but I would like permission to place them in 
writing.
    Chairman Towns. Without objection.
    Mrs. Maloney. I really want to thank you, Chairman Towns, 
for putting this hearing together, and I thank your staff, who 
worked hard, and I thank my own staff for their hard work. This 
was not an easy hearing to put together and I know you 
persevered, and I want to publicly thank you and the 
professionalism of your staff. Thank you.
    Chairman Towns. Thank you very much. I appreciate your 
giving my staff praise, because there is no raise. [Laughter.]
    Mr. Jorisch. Or show me the money.
    Chairman Towns. I want to thank all the witnesses for their 
testimony, and I appreciate the participation of the Members 
who attended the hearing as well.
    If there is one thing I think we can all agree on, it is 
that we must do everything we can to prevent Iran from 
developing nuclear weapons. And we must cutoff Iranian support 
of terrorism.
    I believe the key to doing that is through the financial 
services system. If banks currently doing business with Iran 
can be persuaded to withdraw from the Iranian banking market, 
it will put very significant pressure on the current regime. 
Congress has now given the State Department and Treasury the 
power to do just that, and we fully expect they will carry out 
congressional intent. We will be watching, and so will the rest 
of the free world. They also will be watching.
    There is another important issue I would like to address. 
Some have argued that economic sanctions may have more of an 
adverse effect on the ordinary people of Iran, than on the 
current regime.
    I think we are all concerned about that. However, I think 
we need to remember that continued trade with Tehran primarily 
benefits the Islamic Revolutionary Guards Corps, which, despite 
its name, is a business enterprise that controls almost 70 
percent of the Iranian economy and the entire Iranian oil 
industry. It is important for the international community to 
deny resources to the regime which are used to suppress the 
pro-democracy movement, some of whom have been working to help 
lift the veil on Iranian nuclear programs.
    In closing, let me say to my colleagues and to others that 
there is very strong interest in this issue in Congress and I 
believe that my colleagues on both sides of the aisle will be 
interested in ensuring that these economic sanctions are 
implemented effectively and quickly.
    Ladies and gentlemen, this concludes this hearing. I thank 
the Members for attending.
    [Whereupon, at 2:51 p.m., the committee was adjourned.]
    [The prepared statements of Hon. Gerald E. Connolly and 
Hon. Mike Quigley, and additional information submitted for the 
hearing record follows:]

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