[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
       IRAN SANCTIONS: STRATEGY, IMPLEMENTATION, AND ENFORCEMENT

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



                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2012

                               __________

                           Serial No. 112-161

                               __________

        Printed for the use of the Committee on Foreign Affairs


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                       http://www.gpo.gov/fdsys/

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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey--
EDWARD R. ROYCE, California              deceased 3/6/12 deg.
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
RON PAUL, Texas                      ELIOT L. ENGEL, New York
MIKE PENCE, Indiana                  GREGORY W. MEEKS, New York
JOE WILSON, South Carolina           RUSS CARNAHAN, Missouri
CONNIE MACK, Florida                 ALBIO SIRES, New Jersey
JEFF FORTENBERRY, Nebraska           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       DENNIS CARDOZA, California
GUS M. BILIRAKIS, Florida            BEN CHANDLER, Kentucky
JEAN SCHMIDT, Ohio                   BRIAN HIGGINS, New York
BILL JOHNSON, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
DAVID RIVERA, Florida                CHRISTOPHER S. MURPHY, Connecticut
MIKE KELLY, Pennsylvania             FREDERICA WILSON, Florida
TIM GRIFFIN, Arkansas                KAREN BASS, California
TOM MARINO, Pennsylvania             WILLIAM KEATING, Massachusetts
JEFF DUNCAN, South Carolina          DAVID CICILLINE, Rhode Island
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
ROBERT TURNER, New York
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Mark D. Wallace, president and chief executive 
  officer, United Against Nuclear Iran (former United States 
  Representative to the United Nations for Management and Reform)    11
Mr. Mark Dubowitz, executive director, Foundation for Defense of 
  Democracies....................................................    20
Ray Takeyh, Ph.D., senior fellow for Middle Eastern Studies, 
  Council on Foreign Relations...................................    34

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Mark D. Wallace: Prepared statement................    13
Mr. Mark Dubowitz: Prepared statement............................    22
Ray Takeyh, Ph.D.: Prepared statement............................    36

                                APPENDIX

Hearing notice...................................................    66
Hearing minutes..................................................    67
The Honorable Ileana Ros-Lehtinen, a Representative in Congress 
  from the State of Florida, and chairman, Committee on Foreign 
  Affairs: Material submitted for the record.....................    69
The Honorable Allyson Schwartz, a Representative in Congress from 
  the Commonwealth of Pennsylvania: Prepared statement...........    72
The Honorable Christopher H. Smith, a Representative in Congress 
  from the State of New Jersey: Prepared statement...............    73
Written responses from Mr. Mark Dubowitz to questions submitted 
  for the record by the Honorable Connie Mack, a Representative 
  in Congress from the State of Florida..........................    74


       IRAN SANCTIONS: STRATEGY, IMPLEMENTATION, AND ENFORCEMENT

                              ----------                              


                         THURSDAY, MAY 17, 2012

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 o'clock a.m., 
in room 2172 Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the committee) presiding.
    Chairman Ros-Lehtinen. The committee will come to order. 
After recognizing myself and the ranking member, Mr. Berman, 
for 7 minutes each for our opening statements on today's 
hearing topic, I will recognize the chairman and ranking member 
of our Middle East and South Asia Subcommittee for 3 minutes 
each for their opening statements. I will then recognize any 
member for 1-minute opening statements. We will then hear from 
our witnesses. Thank you, gentlemen.
    And I would ask that you summarize your prepared statements 
into 5 minutes each before we move to the question and answers 
with members under our 5-minute rule.
    Without objection, the prepared statements of the witnesses 
will be made part of the record, and members may have 5 days to 
insert statements and questions for the record subject to the 
length limitation in the rules.
    I would like to point out that we are privileged and 
honored to have a distinguished group of Americans with us in 
the audience. They are the loved ones, the survivors from the 
terrible bombing of the Marine barracks in Beirut, Lebanon that 
occurred in October 1983 that resulted in 241 dead and we are 
working for justice for them. If you could stand up and let us 
applaud you. Thank you. Thank you, ladies and gentlemen, for 
joining us today.
    The Chair now recognizes herself for 7 minutes for an 
opening statement.
    Today's hearing is part of a broader oversight effort by 
the committee to examine U.S. policy options to address the 
Iranian threat. And this particular hearing will focus on U.S. 
policy and sanctions implementation and enforcement. Economic 
sanctions are inflicting damage on Iran's long-term oil 
production potential.
    Continuous reinvestment in upstream production is required 
to offset a natural decline. Sanctions on Iran's oil industry 
and its banking system are curtailing foreign partnerships that 
the Iranian oil industry has relied upon.
    With these trends in place, it is not unreasonable to 
contemplate the end of net oil export from Iran within a few 
years and its resulting effect on government finances, on 
foreign exchange earnings, and presumably the larger economy. 
But much more remains to be done.
    I am deeply concerned that the administration's foolish 
embrace of yet another round of negotiations will only embolden 
the regime. The administration has made already concession 
after concession in its negotiations with Iran only to come up 
empty handed.
    The Iranian approach seems to be what is mine is mine, and 
what is yours is negotiable. Unfortunately, the administration 
seems to be playing along.
    Last month the Los Angeles Times reported that U.S. 
officials are now willing to let Iran continue enriching 
uranium in the face of multiple U.N. Security Council 
resolutions demanding that Iran immediately halt uranium 
enrichment. Rather than embarking on this dangerous and 
foolhardy course, we must accelerate and expand our sanctions 
to compel the Iranians to verifiably and permanently abandon 
their dangerous policies.
    We know what must be done, and today we are here to explore 
what additional measures we must take in order to achieve our 
vital national security objectives.
    Ambassador Wallace, thank you for joining us today. I would 
greatly appreciate your views on what additional measures we 
can take to prevent insurance and reinsurance companies that 
operate in the U.S. from providing services to entities that 
facilitate Iran's ability to trade or develop its energy and 
infrastructure projects. Also, what specific disclosure 
requirements are currently required? Have they been 
implemented, and what additional measures can and should we 
pursue? What additional measures beyond sanctioning the 
National Iranian Tanker Corporation do you recommend taking to 
effectively sanction the Iranian energy sector, both crude oil 
and downstream petrochemical products?
    Additionally, we have previously discussed the idea of 
mandating that automakers receiving Federal Government 
contracts must certify with the U.S. Department of 
Transportation that they are not engaged with business in Iran, 
or engaged in the implementation of any agreement with Iranian 
entities. So, if you could elaborate on your estimates of the 
impact that this action would have on the coffers of the 
regime.
    And, Mr. Dubowitz, thank you also for joining us with your 
smashed shoulder and all. And I would greatly appreciate your 
thoughts on two specific issues. With respect to sanctions 
against Iranian shipping, you state in your testimony, 
``Sources reveal that China, in the past few weeks, has engaged 
in covert purchases of Iranian oil estimated to be about 1 
million barrels in excess of their committed purchased volumes 
under agreement between Chinese traders and the national 
Iranian Oil Company.'' You said, ``This may be one reason for 
the Iranian decision to turn off ship locating systems so that 
Western authorities cannot track those shipments.'' And lastly, 
you state, ``Iran may also be reluctant to expose the extent of 
their floating storage, which is a sign of the difficulty they 
may be facing in selling their oil.''
    Now, Iranian tankers have been turning off their onboard 
vessel tracking systems even though the International Maritime 
Organization requires that those systems stay on. Can 
multilateral actions be taken against the National Iranian 
Tanker Company to penalize Iran for its activities? And what 
specific role does the National Iranian Tanker Company play 
within the IRGC supply chain?
    And, additionally, you recommend that the United States 
pass measures to establish the U.S. as an Iranian oil-free zone 
to provide U.S. leverage in enforcing the EU oil embargo. What 
is the projected impact of this course of action on the 
regime's finances? And could you also comment on the possible 
impact of integrating prohibitions on the purchases of Iranian 
oil futures contracts into the Iranian Sanctions Act structure?
    And, Mr. Takeyh, you make the cogent observation in your 
written testimony that a multi-staged diplomatic process plays 
into the Ayatollah's inclination to simply muddle through, or 
to quote you, ``as he can trade some modest compromises for a 
measure of sanctions relief.'' You add that this helps the 
regime protect the essential aspects of its nuclear program 
while gaining some breathing room. If you could expand upon 
your statement, and what modest compromises do you believe the 
Iranians will attempt to trade for this actions relief? What 
are the essential aspects of the nuclear program, and what 
measures do you recommend that congress take to counter these 
efforts?
    Unfortunately, time is of the essence, and this year may 
mark our last chance to prevent Iran from crossing the nuclear 
threshold. History has taught us that failing to act, and 
relying on hope, when threatened by a deadly foe like Iran, 
usually ends in an avoidable tragedy.
    Iran's nuclear weapons program, its unconventional and 
ballistic missile development programs, and its political and 
military involvement across the Middle East and South Asia, and 
indeed in our own hemisphere, is a force to be reckoned with. 
We must take the necessary measures through sanctions 
development, implementation and enforcement that will finally 
address the threat posed by the Iranian regime.
    Again, I thank you gentlemen for appearing before the 
committee today. I look forward to your testimony.
    I now turn to my good friend, the ranking member, Mr. 
Berman of California.
    Mr. Berman. Well, thank you very much, Madam Chairman, for 
calling this timely hearing on Iran sanctions. In less than 1 
week, representatives of the five permanent members of the U.N. 
Security Council and Germany, the so called P5+1, will meet 
with Iranian negotiators in Baghdad in pursuit of a resolution 
to the ongoing nuclear problem.
    The administration has appropriately pursued a two-track 
approach, diplomacy and pressure. Those tracks are supposed to 
be mutually reinforcing, but most people agree that it is the 
pressure track that has brought Iran back to the table.
    The point of sanctions has always been an effort to change 
Iran's calculus in pursuing a nuclear weapons program. Without 
rigorous enforcement, sanctions have no value. Let us be clear, 
the Obama administration has done far more than any previous 
administration to implement U.S. sanctions and to build support 
for multilateral sanctions.
    For more than a decade we urged successive administrations 
to follow the law and implement sanctions against energy 
companies that invest in Iran, but to no avail. Now, with the 
implementation of CISADA, all of the major oil companies have 
ceased developing energy fields in Iran. The EU is about to 
implement a boycott on the purchase of Iranian crude, and 
Tehran is finally financially isolated, reduced in some cases 
to signing barter agreements in order to sell its oil.
    The administration has rallied the international community, 
and especially the European Union, to tighten its sanctions 
against Iran's nuclear weapons program in an unprecedented 
fashion.
    As we all know, congressional focus on sanctions has been 
crucial in this regard with this committee leading the way. 
That said, the administration has yet to use all the tools at 
its disposal. The sanctions have had an impact on Iran's 
economy, but they are still far from crippling. With oil prices 
so high, Iran is still expected to earn significant oil revenue 
this year.
    In addition, some nations have not been as helpful as they 
should be in terms of enforcing sanctions. Take China, for 
example. Chinese oil companies continue to buy Iranian oil. 
Chinese Oil Services Company is still helping Iran develop its 
oil fields. Chinese banks continue to finance sanctionable 
transactions with Iran, and Chinese shipyards are building oil 
tankers for Iran. It is time, in fact, it is long past time to 
impose sanctions on the entities involved in these activities.
    Last year this committee marked up and the House passed the 
Iran Threat Reduction Act which strengthens our sanctions 
regime in several ways. For example, it would ban foreign 
subsidiaries of American firms from engaging in commerce with 
Iran, just like their American parent companies. But if we are 
to persuade Iran to suspend uranium enrichment and end its 
quest for nuclear weapons, we must do more than pass 
legislation. That legislation must also be implemented and 
enforced.
    With regard to negotiations, the most immediate goal of the 
talks must be to turn back the nuclear clock to set back Iran's 
timetable for achieving nuclear weapons capability. Some have 
suggested the possibility of an interim agreement where Iran 
would agree to ship out its most highly enriched uranium and 
agree to close its underground bunker facility near Qom, Fordo, 
which is set up for production of high-grade enriched uranium 
and may be virtually impervious to conventional military 
attack.
    That would be a useful start, but I think it is important 
to make clear that such an agreement would not warrant the 
easing of sanctions. And most importantly, I believe we should 
not compromise on the fundamental goal demanded by the Security 
Council six separate times since 2006, that Iran fully suspend 
its uranium enrichment.
    In a New York Times article earlier this week, an Iranian 
advisor to Supreme Leader Khamenei gloats that the Iranian 
regime through sheer passage of time has won Western 
acquiescence to its uranium enrichment program. The headline of 
the article which accurately characterized the official's view 
was, ``Iran See Success in Stalling on Nuclear Issue.''
    The official posted that Iran has ``managed to bypass the 
redlines the West has created for us.'' Well, we need to make 
clear that Iran is not going to wear us down. We are going to 
insist on full and sustained suspension of enrichment. We are 
going to demand that Iran answer all of the outstanding 
questions about the history of its nuclear weapons program; 
questions asked repeatedly by the International Atomic Energy 
Agency, questions that Iran has been stonewalling for years. We 
are going to insist on far more intrusive inspections; 
otherwise, we will keep moving forward with stronger and 
tougher sanctions.
    I am eager to hear the witnesses' assessments as to how 
effective the current sanctions regime is, how effectively the 
sanctions have been implemented, and what other sanctions we in 
Congress should pursue. But most of all, I would like to hear 
their thoughts on whether and how the sanctions are achieving 
our primary goal, ending Iran's nuclear weapons program once 
and for all.
    I yield back, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Berman. 
Please yield 3 minutes to the chairman of the Subcommittee on 
the Middle East and South Asia, Mr. Chabot of Ohio.
    Mr. Chabot. Thank you, Madam Chairman, for calling this 
timely and important hearing. I look forward to hearing the 
testimony of the witnesses here today.
    I remain very skeptical about the administration's current 
policy which continues to be a combination of engagement and 
pressure. The theory, as I understand it, is that if we are 
able to put enough pressure on the Iranian regime, not the 
people but the regime, we may be able to alter its calculation, 
and either entice it or coerce it into negotiating away the 
nuclear program that it continues to pour resources into.
    We are, however, now over 3 years into this policy, and as 
far as I can tell, the regime is no closer to complying with 
its international obligations. Nevertheless, the administration 
continues to pursue this questionable policy, the next chapter 
of which will play out in 6 days at the next round of 
negotiations.
    I don't think I am alone when I say that I will not be 
holding my breath for a breakthrough, at least not a real one, 
but I am concerned that the administration is so desirous of 
progress that it may end up manufacturing through unwise 
concessions something it can parade around as success.
    Along these lines, I was deeply disturbed to read recently 
that according to one report the administration ``might agree 
to let Iran continue enriching uranium up to 5 percent 
purity.'' The Non-Proliferation Treaty may give its signatories 
the right to peaceful nuclear energy, but it does not give them 
the right to the full nuclear fuel cycle, including domestic 
enrichment.
    Allowing Iran to enrich on its own soil even with the 
appropriate safeguards would allow the regime to continue to 
stockpile low-enriched uranium and would bring it ever closer 
to a breakout capability. Just this morning I read a report 
which suggests that Iran is installing additional centrifuges 
at an underground facility.
    As one analyst recently noted, getting within weeks of 
acquiring a bomb by making nuclear fuel, especially when doing 
so is uneconomical and is now tactically required in order to 
produce nuclear power ought not to qualify as peaceful nuclear 
energy.
    As I have said before, it is my belief that Iran's nuclear 
program is a symptom of the disease rather than the disease 
itself. I want to be clear, Iran's illicit nuclear program is a 
paramount challenge to U.S. core national security interests 
and it must be addressed. But to speak of a nuclear program 
independently of the regime which pursues it is to put the cart 
before the horse. A nuclear program is not in and of itself 
what makes the regime nefarious, it is the perverse nature of 
the regime that makes the nuclear program so dangerous. And it 
is my belief that any regime that threatens to wipe Israel off 
the map or so wantonly shirks its international obligations 
cannot be allowed to enrich on its own soil.
    As we sit here today, Iran's centrifuges continue to spin 
and the regime inches closer to a nuclear weapons capability. 
That we would permit this is anathema to me, and I yield back.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Chabot. 
Honored to yield 3 minutes to the ranking member of the same 
subcommittee, Mr. Ackerman of New York.
    Mr. Ackerman. I think it important that we consider the 
context in which both the upcoming P5+1 negotiations and the 
sanctions are taking place.
    There has been bipartisan concern about this issue since 
the 1990s. Some of us here voted on a bipartisan basis for the 
first sanctions investment in Iran's petroleum sector, and we 
have been working together on this committee to strengthen 
those sanctions ever since.
    Bipartisan frustration regarding the implementation of 
those sanctions by the Clinton and Bush administrations 
culminated almost 2 years ago with the passage of the 
Comprehensive Iran Sanctions Accountability Divestment Act 
which significantly boosted pressure on Iran.
    But more than just supporting CISADA, the Obama 
administration broke with its predecessors which, 
unfortunately, viewed further U.S. sanctions an unwelcome 
impediment. In contrast, the Obama administration, wisely in my 
view, embraced sanctions as a critical element of a 
comprehensive strategy, and skillfully unified the 
international community as never before behind our policy of 
seeking to engage Iran while also cranking up serious pressure 
on the Ayatollah's regime to back down.
    The Obama administration has worked to make sanctions more 
effective by improving U.S. enforcement, enhancing 
international participation and successfully moving a Sanctions 
Resolution, one with further unilateral sanction supporting 
language through the United Nations Security Council.
    Previously, we had painless sanctions, feckless 
negotiations, and no real leverage. Iran was seen as a rising 
power in the Middle East and the United States was seen as 
failing in a morass of endless war in Iraq and Afghanistan.
    Today, the picture is nearly 180 degrees reversed and that 
is no accident. While our economy continues to add jobs, Iran's 
economy has been choked by sanctions that are only getting 
stronger, and the bottom has fallen out of their currency.
    Rather than being mired in Iraq, we have successfully 
disengaged militarily. We are reducing our liabilities in 
Afghanistan, far from being viewed as the vanguard of a new 
Middle East built upon the so called axis of resistance, Iran 
has made itself the enemy of the Arabs by aiding the Assad 
regime's slaughter and terror.
    Admittedly, I have low expectations for the upcoming 
negotiations, but only because I have such low expectations of 
Iran's leaders. Unfortunately, I think they would rather see 
their own country fail than accept any deal, no matter how 
reasonable. But even though I doubt Iran will negotiate in good 
faith, I believe we must continue as we have by strengthening, 
sharpening, and broadening sanctions, by improving 
international cooperation on their enforcement, and by insuring 
that we have a truly viable military option so that no matter 
what Iran absolutely does, not acquire a nuclear weapons 
capability. The bottom line is that, and the mullahs need to 
know it.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Ackerman.
    We will now move to the 1-minute statements by our members. 
Pleased to yield to Mr. Smith, the chairman of the Subcommittee 
on Africa, Global Health, and Human Rights.
    Mr. Smith. I thank my good friend, the distinguished chair.
    Madam Chair, a nuclear weapons capable Iran poses an 
unprecedented and absolutely unacceptable threat to Israel, its 
neighbors, the United States, Europe, the world. Some have 
naively suggested that the Mutually assured destruction Theory 
or MAD theory that mitigated the threat of nuclear annihilation 
with the Soviet Union is somehow applicable to a nuclear Iran. 
It isn't. Unlike Moscow's penchant for survival, the Iranian 
dictatorship savors, even welcomes individual and mass suicide 
as somehow noble and worthy of eternal paradise.
    I congratulate Chairman Ros-Lehtinen and the ranking member 
Howard Berman for working tirelessly to strengthen sanctions, 
especially the potentially most effective sanction of all, 
shutting down Iran's banking capabilities.
    In his testimony, Ambassador Mark Wallace says, ``First we 
must fully end Iran's access to international banking system.'' 
I couldn't agree more.
    Chairman Ros-Lehtinen. Thank you. Mr. Sherman, the ranking 
member on the Subcommittee on Terrorism, Nonproliferation, and 
Trade.
    Mr. Sherman. I agree with Mr. Chabot that non-nuclear 
states do not have the right to the full fuel cycle under the 
NPT, but with Iran, there is another reason; they are already a 
violator of the NPT and should not be allowed to enrich.
    It is said that this administration has done more than 
prior administrations. That is way too low a standard. It is 
like we used to have the record spinning at 33 revolutions for 
an LP, and now we have adjusted it up to that old 78. The 
centrifuges spin at 90,000 revolutions per minute, and we have 
to have sanctions that move just as fast.
    We need, and I hope to have co-sponsors in this committee 
of my bill to punish those banks in swift, that do not vote for 
the complete shutoff of all Iranian banks from the inter-bank 
communication system, and it is time for the administration to 
sanction all Iranian banks, not just the Central Bank. There is 
so much more we could do and so little time to do it. I yield 
back.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Rohrabacher is 
recognized, chairman of the Subcommittee on Oversight and 
Investigations.
    Mr. Rohrabacher. Thank you very much, Madam Chairman. Thank 
you for holding this hearing.
    It is time for us to admit that our strategy about Iran, a 
nuclear armed Iran, is not working. I mean, here we are. It 
just keeps getting worse and worse, closer and closer to the 
time when Iran, these mullah, the crazy mullah regime will have 
a nuclear weapon.
    We have focused actively on China, on our allies, on U.S. 
corporations, we have focused on economic sanctions, diplomatic 
pressures, negotiations with the mullahs themselves, but we 
left out the significant player who could make the difference, 
how about the Iranian people? This administration has been 
noticeably quiet when the first Arab Spring demonstrations 
happened where, in Tehran. We didn't even give them any 
support. We haven't supported any of those elements in Iran. We 
are willing to fight against the mullah regime. That would be 
the most successful strategy, but yet we have been talking 
about China trying to enlist our allies, doing everything but 
going to the people and forming an alliance with those people 
who could make a difference. Thank you very much, Madam 
Chairman.
    Chairman Ros-Lehtinen. Thank you. Mr. Sires of New Jersey 
is recognized.
    Mr. Sires. Madam Chair, I don't have a statement at this 
time.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Murphy of 
Connecticut.
    Mr. Murphy. Thank you, Madam Chair. During the 5 to 10 
years before President Obama took office, we didn't stand 
still, we went backwards. During that period of time year by 
year the balance of power tipped every year in favor of Iran. 
Why? Because we decided to empower Iran by fighting an 
unjustified war in Iraq that essentially elevated their 
presence in the region. By being distracted both in the war in 
Iraq, and by mismanaged war in Afghanistan we essentially 
pursued absolutely no policy of sanctions, no policy of multi-
lateralism. In fact, the Bush administration didn't enforce one 
single sanction against Iran during their time in office.
    So, the historical context for this hearing is important 
because over the past 3 years, the Obama administration has 
done something different. They have engaged the international 
community. They have put in place sanctions that have never 
been tougher, and they have pursued a policy backing it up to 
talk to the Iranians about something different, a way forward 
that is different. That is the historical context that this 
hearing takes place in today.
    Chairman Ros-Lehtinen. Thank you so much. Mr. Joe Wilson of 
South Carolina.
    Mr. Wilson. Thank you, Madam Chair. I am particularly 
appreciative of the survivors of the Beirut barracks bombing. I 
want to thank you for being here. What a tribute to your loved 
ones, persons on October 23rd, 1983, 241 U.S. Marines, sailors 
and soldiers were killed clearly by an Iranian attack. The 
American people need to remember this. Sadly, so many people 
have forgotten. But thank you for being here. The American 
people need to know that the resulting explosion was the 
largest non-nuclear explosion ever detonated on the face of the 
earth. It was a force of 15 to 21,000 pounds of TNT.
    The court ruling of 2009 made it clear that because of the 
Iranian connection with Hezbollah, that there was no question 
that the material and technical support was from the Iranian 
Government.
    Thank you for being here. Thank you for reminding the 
American people. We must not repeat this. I agree with 
Congressman Rohrabacher, we need to be encouraging the people 
of Iran to encourage change, and there has been a failure by 
this administration. Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Deutch of 
Florida.
    Mr. Deutch. Madam Chairman, I would like to thank you and 
Ranking Member Berman for your leadership and your commitment 
to preventing a nuclear Iran. And thanks for our witnesses whom 
I have had the pleasure of working with on this issue.
    In the last 3 years, the U.S. has gone from having 
essentially no impactful sanctions policy to the most robust 
targeted Iran sanctions program in the world, and we have 
amassed a broad international coalition of partners. We are 
finally seeing sanctions severely strangle the Iranian economy, 
but we can and we must do more.
    I encourage the administration to stay the course and 
proceed with the implementation of crude export sanctions at 
the end of next month. I, along with several of my colleagues 
on this committee have proposed additional legislation to 
strengthen sanctions even further, and I hope the Senate moves 
forward with its new package today.
    Madam Chairman, we cannot allow the Iranian regime to use 
negotiations simply to buy time while thousands of centrifuges 
continue to spin.
    I look forward to the testimony of our witnesses, and I 
yield back.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Turner of 
New York.
    Mr. Turner. Thank you, Madam Chair. If the purpose of the 
sanctions is to stop the Iranian nuclear weapons program, I 
would be anxious to hear what our witnesses have to say about 
the efficacy of this program, particularly in view of the 
timeline. By year end, we expect a weaponization program. Which 
do you think will work, sanctions or will the Iranians win on 
the time? I yield back, thank you.
    Chairman Ros-Lehtinen. Thank you. Mr. Meeks, the ranking 
member on the Subcommittee on Europe and Eurasia.
    Mr. Meeks. Thank you, Madam Chair, for convening this 
timely hearing on Iran sanctions.
    Let me just say that I strongly support and supportive of 
President Obama's efforts to establish what is unprecedented 
international sanctions against the regime of Iran. In order 
for sanctions to be successful, first you have to have a 
coalition of individuals. You know, you do certain things on a 
bilateral or unilateral basis, generally that means you can 
pass all the sanctions you want. It will not have the intended 
effect. The way to be successful is to make sure you do it on a 
multilateral effort.
    What the Obama administration has been doing that has been 
successful is now they have brought in a number of our European 
allies who I also want to congratulate, who have implemented 
wide-ranging sanctions despite even difficult economic 
situations that they are in. This is a real achievement, I 
think, for the Obama administration and for the rest of the 
world, as now everyone can be focused and united to make sure 
that Iran does not a nuclear weapon. This is not about 
containment, it is about making sure they do not obtain a 
nuclear weapon.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Marino of 
Pennsylvania.
    Mr. Marino. I have no statement.
    Chairman Ros-Lehtinen. Thank you. Mr. Bilirakis of Florida. 
Thank you. Mr. Connolly of Virginia.
    Mr. Connolly. Thank you, Madam Chairman. I think we need to 
be careful as Members of Congress that we don't talk ourselves 
out of a very strenuous and robust sanctions regime to bring 
Iran to the table and to resolve the issue of its nuclear 
capability.
    The fact of the matter is, and I respectfully disagree with 
my friend, Mr. Berman from California, and Mr. Rohrabacher from 
California. I don't think we have ever seen a sanctions regime 
as strict and as tightly controlled as we are seeing under the 
Obama administration with respect to Iran.
    There is mounting evidence it is working. It is working in 
cutting off its ability to supply oil to its customers. It is 
working in terms of the banking system and its access to 
credit. It is working in terms of mounting domestic pressure 
within Iran among consumers and among the people of Iran who 
are seeing the negative consequences of this folly. And I think 
the Obama administration deserves credit and a little more time 
to make it all come home. I thank the chair.
    Chairman Ros-Lehtinen. Thank you very much. And now the 
Chair is pleased to welcome our witnesses. We will start with 
Ambassador Mark Wallace, who is the chief executive officer, 
co-founder and former president of United Against Nuclear Iran. 
He is also the CEO of Tigris Financial Group.
    Ambassador Wallace previously served as our Ambassador to 
the U.N. in the field of management and reform. How did that 
work out? He also served as principal legal advisor to the 
Bureau of Immigration and Customs Enforcement, and the Bureau 
of Immigration and Citizenship Services in the Department of 
Homeland Security. Welcome, sir.
    Mr. Mark Dubowitz is the executive director of the 
Foundation for Defense of Democracies where he is the head of 
FDD's Iran Energy Project, and directs its Iran Human Rights 
Project. He is also a principal at the Iran Advisory Group. Mr. 
Dubowitz previously served in software management as director 
of International Business Development in Double Click. Thank 
you, sir.
    And lastly, we will hear from Ray Takeyh. He is a former--
he is a senior fellow for Middle Eastern Studies at the Council 
of Foreign Relations. Dr. Takeyh is also an adjunct professor 
at the Center for Peace and Security Studies at Georgetown.
    Before that, he was a professor at the National War 
College, and at the National Defense University, as well as a 
fellow at Yale, and the Washington Institute for Near East 
Policy. He recently contributed to the work of the special 
advisor for the Gulf and Southwest Asia at the Department of 
State. Welcome.
    I would like to kindly remind our witnesses to keep your 
testimony to no more than 5 minutes. And without objection, the 
witnesses' entire written statements will be inserted into the 
hearing record. And we will begin with you, Ambassador Wallace.

STATEMENT OF THE HONORABLE MARK D. WALLACE, PRESIDENT AND CHIEF 
 EXECUTIVE OFFICER, UNITED AGAINST NUCLEAR IRAN (FORMER UNITED 
STATES REPRESENTATIVE TO THE UNITED NATIONS FOR MANAGEMENT AND 
                            REFORM)

    Ambassador Wallace. Thank you, Madam Chairman. Madam Chair, 
Congressman Berman, distinguished members of the committee, it 
is an honor to have the opportunity to appear before you again 
today to discuss what is unquestionably the most serious 
national security challenge confronting the United States. 
Thank you for having me, and I would like to acknowledge the 
important work of my colleagues on the panel, Mark and Ray.
    I am proud that my colleagues from UANI are here today, 
David Ibsen and Lara Pham. They and their other UANI colleagues 
do the hard important work so well. I must acknowledge the UANI 
Advisory Board and the intimate role they play in our work, 
including prominent foreign policy experts such as Graham 
Allison, Les Felb and Fouad Ajami, and former government 
officials like former CIA Director, Jim Woolsey, former 
Homeland Security Advisory, Fran Townsend, former head of the 
Mossad Meir Dagan, former head of the German Intelligence 
Service, Dr. August Hanning, and the former head of the United 
Kingdom's MI6, Sir Richard Dearlove, among many others. I am 
lucky to have colleagues like UANI's president, Kristen 
Silverberg, and European partners in the London-based Institute 
for Strategic Dialogue.
    The international and transatlantic character of our 
organization is a testament to the consensus belief that a 
nuclear armed Iran is the preeminent global security challenge. 
The threat of a nuclear armed Iran is difficult to overstate. 
If Iran acquires nuclear weapons, the threat environment that 
the United States faces will be changed in dramatic, 
fundamental, and irrevocable ways.
    With bold action, we still have an opportunity to thwart 
Iran's nuclear ambitions. We must seek the most robust 
sanctions in history. And we must consider much more than 
tweaks to current sanctions. We have made real progress. The 
U.S. and EU passed financial sanctions against Iran's central 
bank and pressured SWIFT to bar Iranian bank access to the 
international banking system. And, of course, the very 
important decision by countries to either ban or significantly 
curtail oil imports from Iran has been a very key development.
    The consequences to Iran have been significant. Iran's 
rial, its currency, has been in free fall, a reliable indicator 
of the economic impact of sanctions.
    This committee has been at the forefront in championing 
sanctions, and I would like to discuss some concepts for 
consideration to achieve an economic blockade of Iran.
    Our proposed strategy focuses on four areas; namely, 
banking, insurance and reinsurance, disclosure and debarment, 
and shipping. We give it an acronym called BIDS, B-I-D-S.
    First, we must fully end Iran's access to the international 
banking system. All Iranian financial institutions and banks 
should be sanctioned, and there should be no exceptions to the 
areas of prohibited banking activity. Moreover, any institution 
that engages in sanction work-arounds, including participating 
in elaborate barter-type arrangements should be penalized and 
sanctioned.
    Second, we must increase pressure on Iran through the 
insurance sector. Insurance and reinsurance companies that 
operate in Iran should be identified and prohibited from doing 
business in the United States, and precluded from entering into 
insurance or reinsurance agreements with any entities in the 
United States.
    Third, companies that avail themselves of U.S. capital 
markets should be required to disclose the business that they 
conduct in Iran and with Iranian entities, not limited just to 
the energy sector or after some threshold amount. And if a 
company conducts business in Iran, any type of business, it 
should not be eligible to receive U.S. Government contracts.
    Finally, international cargo and crude shippers that 
service Iranian ports should be barred from docking in U.S. 
ports for 10 years. Vessels arriving in U.S. ports should 
certify that they have not docked at an Iranian port, or 
carried Iranian crude oil, or downstream petrochemical products 
in the previous 36 months. Some vessels have also worked to 
conceal their movements including by disabling their GPS 
tracking devices, and thus are actively facilitating the 
illegal practices of the Iranian regime. Such violations should 
result in permanent bans from U.S. ports.
    Some may say that the above measures are too hard, 
particularly on the Iranian people, while others will say that 
it is too late for economic pressure, and that the only option 
is a military one. But Iran's economy is controlled by the 
regime and the IRGC which profit at the expense of the Iranian 
people. This regime will never change course due to half-
measures. As for the other argument, I cannot under oath with 
certainty, state with certainty that sanctions and pressure 
will finally compel the Iranian regime to change course. But 
before we would take military action against Iran, we should be 
willing to test the most robust sanctions in history. Doing so 
will show the regime that we are serious, committed, and 
willing to do what is necessary to stop Iran's pursuit of a 
nuclear weapon, but we must act, and act now.
    Thank you for allowing my longer statement to be submitted 
for the record. It includes our detailed BIDS proposal that we 
hope may achieve an economic blockage of Iran, and it is an 
honor to be here today, particularly before the survivors of 
the 1983 attacks in Beirut, something that we all so frequently 
talked about as one of the reasons why we should oppose a 
nuclear armed Iran. But to have these people in this room, it 
is an honor for me to be here. Thank you, Madam Chairman.
    [The prepared statement of Ambassador Wallace follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Chairman Ros-Lehtinen. Thank you, Mr. Ambassador.
    Mr. Dubowitz.

STATEMENT OF MR. MARK DUBOWITZ, EXECUTIVE DIRECTOR, FOUNDATION 
                   FOR DEFENSE OF DEMOCRACIES

    Mr. Dubowitz. Thank you very much. Chairman Ros-Lehtinen, 
Ranking Member Berman, distinguished members of the committee, 
on behalf of FDD it is an honor to be here today, and an honor 
to be testifying with Mark and Ray.
    The topic of my testimony is sanctions relief as the Obama 
administration prepares for the P5+1 talks in Baghdad. Now, 
administration officials publicly and privately are making a 
tough case for relieving sanctions on Iran, but these officials 
have, nevertheless, made it clear that these talks are part of 
a process that will require confidence-building measures and 
reciprocal concessions.
    To be meaningful to Tehran, concessions will have to come 
in the form of sanctions relief which are threatening the 
regime's oil wealth, and perhaps even its survival in ways not 
seen since the Iran-Iraq War.
    Supreme Leader Ali Khamenei badly needs to relieve this 
economic pressure. He is seeking to buy his country enough hard 
currency from oil sales to withstand soaring inflation and a 
crumbling currency. He also seeks to use the P5+1 negotiations 
to buy more time to reach breakout capacity, which would enable 
him to build a nuclear weapon within a few months.
    Now, Iran sees the negotiations as an opportunity to force 
the international community to accept its enrichment 
activities. In the face of five UNSC resolutions and a U.S. 
commitment to stop Iran from crossing previously established 
red lines, Iran has simply moved the goal posts. Bushehr, Arak, 
Natanze and Fordo are a testament to the success of this 
Iranian strategy.
    Khamenei likely will continue the strategy of playing for 
time by dangling incremental nuclear concessions before the 
negotiators, such as the cessation of 20 percent uranium 
enrichment. This concession will be portrayed as an important 
confidence-building measure putting pressure on the 
administration and its partners for a similar gesture of 
goodwill in return.
    As eager, however, as President Obama is for a deal he 
cannot take the risk of offering too much relief for too few 
concessions. Once these sanctions start to unravel, the fear of 
U.S. penalties that held them together will become difficult to 
re-establish. The multi-lateral sanctions regime, the 
centerpiece of the President's Iran strategy, will be gone. In 
order to make concessions to Iran, the President or our allies 
may be tempted to offer sanctions relief in the shadows.
    In my written testimony, I detail some of the ways in which 
Iran could be offered sanctions relief without inviting public 
scrutiny. These are just a few examples of what should not be 
allowed. They include reducing by even a few percentage points 
what constitutes a significant reduction to the volume of 
petroleum purchased from Iran, as provided in 1245 of the NDAA. 
Doing so would provide Iran with additional hard currency. 
Allowing the 14 or so Iranian financial institutions to 
continue using SWIFT. Supporting Europe in relaxing the 
Maritime insurance sanctions that are so effective in slowing 
down Iranian oil shipments. Looking the other way as Europe 
allows sanctions busting of its oil embargo. Keeping open 
financial channels that allow the Iranians to access the global 
financial systems and repatriate its oil profits. Permitting 
sanctionable transactions to take place through barter trade to 
help Iran reverse the decline in its energy production. 
Delaying sanctions against critical elements of the oil supply 
chain like NIOC or NITC. Providing less rigorous enforcement of 
shipping sanctions that allow Iran to covertly sell more of its 
oil.
    Now, these are just a few of the ways that the U.S. or our 
allies could provide sanctions relief in the shadows. President 
Obama must not allow this. Instead, the recommended course is 
for the President to engage openly with the American people, 
with Congress, with this committee, and with key allies like 
Israel during the negotiating process with Iran.
    He needs to green light the passage of the Senate's 
sanctions bill before the Baghdad talks begin. He needs to 
support additional sanctions proposed by members of this 
committee, and by members of the Senate Banking Committee on an 
expanded energy and commercial embargo, broader insurance 
sanctions, and Iranian oil-free zone, expanded financial 
sanctions, and the lifting of CBI immunity to allow victims of 
Iranian terrorism to finally receive justice.
    He should provide detailed reports to this committee and to 
Congress on the type of sanctions relief being offered, and on 
the nature of the Iranian concessions that they are offering. 
And he has considerable flexibility under the National Interest 
Waiver in Section 1245 of the NDAA to provide sanctions relief 
in the open. But the President needs to be careful. Sanctions 
relief needs to be coordinated with the EU, and an EU 
suspension of sanctions is not likely to be easily and quickly 
reversed. Real sanctions relief should only be offered in 
response to meaningful Iranian concessions.
    Congress, and this committee, in particular, has played a 
critical role in the development and implementation of 
sanctions. Your next task is to ensure that sanctions relief, 
if it is to be provided at all is only provided in the open, 
not in the shadows, and only in exchange for meaningful, 
verifiable and irreversible Iranian nuclear concessions.
    Thank you very much for inviting me here today.
    [The prepared statement of Mr. Dubowitz follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Chairman Ros-Lehtinen. Thank you so much.
    Dr. Takeyh.

   STATEMENT OF RAY TAKEYH, PH.D., SENIOR FELLOW FOR MIDDLE 
         EASTERN STUDIES, COUNCIL ON FOREIGN RELATIONS

    Mr. Takeyh. Thank you very much for inviting me, Madam 
Chairman, Congressman Berman. I am also very privileged to be 
here with Ambassador Wallace and Mr. Dubowitz, who have done 
much to draw attention to this particular issue.
    As has been discussed, diplomacy has resumed its place in 
the Iranian drama. I would like to draw attention to some of 
the Iranian calculations as I understand them, because I think 
little is being paid to contradictions that are likely to 
complicate Tehran's path to a prospective settlement.
    The objectives of the United States and the Western powers 
are as seamless as they are obvious. We hope for confidence-
building measures yielding a durable arms control agreement. Al 
Khamenei's path, however, the Supreme Leader's path is beset by 
contradictions.
    For long, Iran's Supreme Leader perceived that he could 
advance his program at a tolerable cost to his economy. Today 
he stands at crossroads of conflicting ambitions. On the one 
hand, the Supreme Leader needs America as an enemy and a robust 
nuclear infrastructure to legitimize his rule. Yet, such 
convenient enmities further erode his economy and potentially 
threaten his hold on power. Whether he can untangle these 
contradictions will determine the success or failure of the 
latest diplomatic efforts.
    As a revolutionary, Al Khamenei has long pursued a 
confrontational foreign policy as a means of reinforcing the 
regime's ideological identity. What many observers often miss 
about the Islamic Republic is that its leaders may rationally 
opt for self-defeating policies abroad in order to buttress a 
certain ideological character at home. The theocratic state 
needs an American enemy, and it needs some degree of 
estrangement from the international community as a means of 
sanctioning its hegemony of power. In contemplating his moves, 
Supreme Leader has to calibrate how transacting an agreement 
with nefarious Westerners impact his need for such useful 
enemies.
    Nuclear empowerment has emerged as a core element of 
Islamic Republic's strategic conception. Iran's quest for 
nuclear capability is not really predicated on ideological 
assumptions. An enhanced nuclear capacity gives Iran ability to 
assume a more dominating role in the region that is beset by 
political transitions.
    Moreover, unfortunately, the history of proliferation 
suggests that nuclear weapon states ordinarily receive better 
treatment from the international community in terms of resumed 
contracts and diplomatic recognition, whether it is Pakistan, 
China, so on and so forth.
    The argument that a nuclear armed nation is too dangerous 
to remain isolated and must be reintegrated in the global 
system has proven compelling over time.
    Despite these frequent professions of autonomy and self-
sufficiency, Iran is profoundly dependent on global economic 
structures. After all, Iran subsists on revenues derived from 
an export commodity whose price and the means of transport are 
determined by actors beyond its control.
    For Iran to successfully sell its oil it requires access to 
global financial institutions, tankers that are insured by 
European firms largely, and customers that have alternative 
suppliers. Can a stage really reject global norms yet benefit 
from the prevailing mechanisms of international trade? And here 
lies Khamenei's dilemma as his revolutionary foreign policy and 
his quest for nuclear capability are increasingly clashing with 
the vulnerabilities of his state.
    Al Khamenei today faces a choice he would rather not make. 
He Supreme Leader would much prefer to persist with brandishing 
his anti-Western slogans, incrementally expanding his nuclear 
apparatus, and somehow managing Iran's economy. Protracted 
diplomacy may actually serve his cause and his inclination to 
muddle through where he can attempt to offer some compromises 
for a measure of sanctions relief. In such a format, he can 
protect essential aspects of the nuclear program.
    Despite the limitations of the diplomatic process, there is 
still much the West can do. My colleagues have highlighted some 
of these issues. I think after decades of sanctions and 
pressure, the international community is finally placing the 
Supreme Leader in a position where he can no longer afford both 
his enmities and his economy.
    The Western powers would be wise to stress that sanctions 
will not be lifted until there is a fundamental different 
Iranian approach to the issue of proliferation. As such, the 
European boycott of the Iranian oil scheduled to take place in 
July should be implemented irrespective of offers that Iran is 
likely to dangle between now and then, and the same can be said 
about the central bank sanctions that are designed to take 
effect.
    It must be said that it is entirely possible that the 
Supreme Leader will opt to preside over a country that has 
greater nuclear capability and a permanently degraded economy. 
He may opt for that choice. Still, the objective of the Ally 
Diplomacy should be to compel him to make a choice and deprive 
him of his uncanny ability to continuously square his many 
circles. Thank you very much.
    [The prepared statement of Mr. Takeyh follows:]
    
    
    
    
    
    
    
    
    
    
    
    
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    Chairman Ros-Lehtinen. Thank you for excellent testimony 
the three of you. Thank you.
    When you talk about the Supreme Leader, as we know, in July 
2011 Treasury sanctioned and designated six al-Qaeda terrorists 
and reported that they are working for a network that would be 
headquarters in Iran operating under an agreement between al-
Qaeda and the Iranian regime. Do you think that the 
administration should sanction senior Iranian political 
leadership folks, including Ahmadinejad and the Supreme Leader? 
He has the authority under Executive Order 13224 because they 
are providing material support to al-Qaeda?
    And let me ask you the additional question. Now, a lot of 
individuals in the international community are under the 
impression that the United States has done everything we can to 
fully sanction the Iranian regime. And, as we know, and we 
discussed right here, nothing could be further than the truth. 
And you have pointed out in your testimony we must fully end 
Iran's access to international banking system, increase 
pressure on Iran through the insurance sector, require 
companies that avail themselves of U.S. capital market to 
disclose the business that they conduct in Iran, and with the 
Iranian regime, bar international cargo and crude shippers that 
serve Iranian ports from docking in U.S. ports for 10 years. 
There is so much more that needs to be done, in addition to 
sanctioning the Supreme Leaders, tell me what you think will 
come out of this upcoming negotiations on May 23rd in Baghdad. 
What has been accomplished with previous negotiations? What 
could be accomplished with this, and why is there that sense 
incorrect that we have done all the sanctions that could 
possibly be had, and that is why there is nothing else to do 
but to negotiate for some settlement. If you could comment on 
any of those. We will start with Ambassador Wallace.
    Ambassador Wallace. Thank you, Madam Chairman. It is a very 
important question, and a good question.
    This committee has really led in the area of sanctions and 
dragged, frankly, much of the rest of the sanctions community 
along with it over the years. And it is a problem we have been 
dealing with since 1978-79, and we have seen really bad 
behavior from Iranian regime. And we haven't dealt with Iran 
effectively through successive administrations.
    We called for something very clear, United Against Nuclear 
Iran, and I am hoping to convince you all that it is possible. 
We have to have an economic blockade of that government.
    As Ray testified very accurately, this is an economy that 
is very dependent upon outside forces. We can do that, and our 
focus has been on banking, insurance, disclosure and debarment, 
and shipping, and importantly, oil. And if we say no more 
banking, no more insurance, deny any shipping opportunity, and 
force all Iranian businesses to disclose and continue to pursue 
the oil embargo, you will see that economy continue to be 
stressed.
    When this committee did such important work on SWIFT, my 
colleagues at the table, as well, we tracked the rial, the 
Iranian currency. And when you looked at the precipitous drop 
of the rial at the time of the sanctioning of SWIFT, and the 
discussion even of sanctioning of SWIFT it was an incredible 
and precipitous drop.
    If we were able to cut them off fully and completely from 
the banking industry, deny their oil exports in a fundamental 
way, continue to do so, and their ability to ship, have an 
impact on their automotive industry. We have a plan to sanction 
their automotive industry. It is a dirty little secret, but it 
is the 13th largest automotive producer in the world. It is the 
fastest growing in the Middle East. It is the largest part of 
their economy other than oil. We have to do more to sanction 
these areas of the economy.
    Chairman Ros-Lehtinen. Thank you, Ambassador Wallace. And I 
will let the other gentleman go.
    Mr. Dubowitz. I think the most effective sanction that is 
available that is out there is the sanction that decreases the 
global price of oil, because the Iranian budget today is set at 
a price per barrel at $85. So, while I absolutely agree with my 
colleague here that we should seek the most robust sanctions, 
we have to also be cognizant of the fact that anything we do 
that spooks oil markets and drives up the price of oil will 
only enrich Al Khamenei, only buy him more time, will only 
embolden him. So, we should be very careful about threading the 
needle when it comes to oil market sanctions, and financial 
sanctions.
    I would argue that with spare capacity still very tight in 
the market, the best thing we can do is turn Iranian oil into a 
toxic asset, into a distressed asset, and in doing so force the 
Iranians to offer price discounts on every barrel.
    Chairman Ros-Lehtinen. Thank you. And I apologize, maybe 
somebody will get to you, Dr. Takeyh. I am out of time. Thank 
you, sir. Mr. Berman is recognized. Thank you.
    Mr. Berman. Dr. Takeyh, you spoke of an ideological regime 
in your written testimony. But ideological regimes, I mean, I 
think of the Soviet Union in 1939 cut deals to insure survival. 
Do you think that there is a real chance that the economic 
pressures, the damage to the economy, the growing unrest, the 
factionalization within the regime offers some prospect of, if 
we stay the course and pursue this, getting them to shift their 
calculus?
    Mr. Takeyh. As you mentioned, Congressman Berman, this is 
intensely an ideological regime. It is kind of animated by 
certain ideological spirit.
    I think that what could compel the Supreme Leader and a 
narrow circle of advisors to change their calculus would be if 
they fear they are going to lose power, if they feel all the 
walls are closing in and they have no option but to engage in 
some sort of diplomacy in order to relieve that particular 
status. So, it would have to be strenuous enough to threaten 
the regime's hold on power.
    We think of economic sanctions as one of the tools in the 
toolbox. There are other things I think we can do. For 
instance, Iran--we have to work harder to make sure they remain 
regionally isolated and largely isolated from the international 
community. I think as has been mentioned by members of this 
committee, there are some we can do to support forces of 
domestic dissent. And there is a relationship between domestic 
dissent and economic debilitation. So, it has to be a multi-
pronged process to compel this particular regime to agree to 
some sort of an agreement. It would have to be quite a 
strenuous policy.
    Mr. Berman. All right. Mr. Dubowitz, you made an 
interesting point as we talk about an additional litany of 
sanctions. There are also sanctions in place that have not yet 
been--there is legal authority in place to impose sanctions 
that have not yet been imposed, even if there were to be no 
additional sanctions beyond what existed CISADA and the central 
bank sanctions. What would you suggest the administration do 
here? And put into that that they haven't yet done with the 
existing authority they have now.
    Mr. Dubowitz. Well, Congressman Berman, I think that that 
is really the key. You know, we talk a lot about new sanctions, 
and we all like to develop or help develop new legislation, but 
the key for sanctions is enforcement.
    Mr. Berman. We are not paid on a commission basis.
    Mr. Dubowitz. Exactly.
    Mr. Berman. But I get your point.
    Mr. Dubowitz. There already is existing authority under 
U.S. law. The President has the power to really crack down on 
the Iranian economy, on the Iranian oil sector. We should be 
designating the National Iranian Oil Company and all its 
subsidiaries. We should be designating the National Iranian 
Tanker Company and make it very difficult for the Iranians to 
ship. We should be imposing a much broader insurance embargo on 
Iran, and we should be kicking off banks from SWIFT, on the one 
hand. But on the other hand, what we need to do is be very 
careful about threading the needle because there are sanctions 
that make us feel good, and there are sanctions that do good. 
And any sanction that actually creates the perception that 
there is going to be a physical supply disruption of Iranian 
oil too quickly is going to spook oil markets and drive up the 
price, and in doing so, neuter all the sanctions that we are 
actually trying to impose.
    Mr. Berman. Your organization put out a paper which 
affected my thinking, which was you don't have to achieve the 
absolute boycott of Iranian petroleum worldwide to have massive 
impacts on the Iranian economy. And if other countries, oil-
producing countries help make up the difference, less impact on 
price, greater impact on Iran.
    Mr. Dubowitz. Well, that is exactly right. I mean, I think 
the goal here is to get the Iranians to sell their oil at a 
discount. The goal is to cut Iranian supply up to the point at 
which the Saudis and others can replace it, and effectively 
turn Iranian oil into, as I said, a toxic asset.
    I think one of the most effective sanctions that we have 
actually put in place is a sanction that didn't get much 
attention. It was actually implemented by the administration in 
convincing Norr Islamic Bank out of Dubai to stop repatriating 
oil profits back to Iran. You know, you can sell all the oil 
you want, but if you are getting Rupees and Yuan in a barter 
trade, and if you are getting all of these dollars in Euros 
that you can't repatriate, all of that is useless. So, I think 
that the goal should not be on an oil embargo; the goal should 
be in focusing on cutting hard currency oil revenues from Iran, 
which can be done in a variety of precise ways that don't 
ultimately and inadvertently enrich the regime.
    Chairman Ros-Lehtinen. Thank you very much. Thank you, Mr. 
Berman. Mr. Smith is recognized.
    Mr. Smith. Thank you very much, Madam Chair.
    Let me first, note and thank for their service those who 
are survivors from the terrible bombing in Beirut. I would note 
that Paul Innocenzi who was from my district, I remember being 
at his funeral. He was one of the victims who died in that 
terrible, terrible act of terrorism, and we all remember him. 
And thank you again for your service.
    Let me ask a couple of questions. First, I notice again, 
Ambassador Wallace, you make the point that this regime will 
never change course due to half-measures. And I would note, 
Mark Dubowitz, you point out something I think many of us are 
concerned about, and that is the idea of sanctions relief in 
the shadows. And I really thank you for bringing that, and 
giving some very specific possibilities that would evade press, 
and maybe even congressional scrutiny the way it shouldn't.
    I do believe the President should have some flexibility but 
I am very worried, and I think we all are, that in the time 
frame there may be an effort to postpone sanctions, maybe 
wittingly or unwittingly, thinking it is going to do the issue 
better, but you have got to wonder.
    And I think your first point, the standard--relaxing the 
standard of what constitutes a significant reduction to the 
volume of petroleum purchased from Iran as provided under 
Section 1245 of the NDAA, and you did point out again in your 
statement--I think this is very important, that the 
administration has refused to specify how much of a cut 
qualifies as significant. And I think you might want to expand 
on that, and perhaps our other witnesses, I would appreciate 
it.
    Secondly, Youcef Nadarkhani has, as you know, posted a very 
important statement. He apparently is getting 9 years for 
simply believing in Christianity and being a pastor. I think, 
and I would hope the Iranians would sit up and take notice, 
maybe they don't care. But some of us have raised this issue 
directly to Iranian leaders. We believe in religious freedom, 
and that includes Muslims' freedom to establish mosques, to 
practice their faith in an unfettered way, and the mistreatment 
of this pastor is emblematic, I would suggest, and I think you 
would agree, of an intolerance that brings dishonor to Iran. 
So, our belief would be that 9-year sentence is absolutely 
unwarranted. Obviously, the death sentence was an absolute 
outrage, but this is not good, as well. Perhaps, if you could 
speak to that issue of the sanctions relief in the shadows 
especially as it relates to the upcoming conversation with the 
Iranians.
    Mr. Dubowitz. Thank you, Congressman Smith. I mean, I guess 
my concern with sanctions is so much of it happens in the 
shadows with respect to implementation. So, we can pass all the 
new sanctions we want and issue press releases, and be proud of 
what we have done, but in the shadows at a level of detail and 
granularity that is often not visible, the Iranians could be 
circumventing sanctions and getting the sanctions relief that 
they most desperately need, which is hard currency from oil 
earnings.
    Now, on the significant reduction threshold, one way to 
give the Iranians hard currency is to lower the standard. Now, 
as you pointed out, the administration has refused to adhere to 
a specific number, despite requests from Congress that that 
number be at least 18 percent. And it is entirely possible that 
come June 28th, that the standard would be lowered by 3-5 
percentage points, really would mean $3-5 billion of extra hard 
currency in Iranian coffers. And I think it is critical that 
Congress play its oversight role in holding the administration 
accountable for what really constitutes a significant 
reduction, and that we don't give concessions to the Iranians, 
as I said, in the shadows in ways that I think will help them 
survive all of the other sanctions that we put in place.
    Ambassador Wallace. Just as to one point. Unfortunately, 
the global economic slowdown is giving us a bit of a gift. You 
see China cooling problems still in Europe and oil prices being 
somewhat deflated. We agree on so many things. I think we have 
a slight disagreement. I am less concerned about the rising 
price of oil to benefit the Iranians. The market is already 
adjusting for it, and I think the market would explode if Iran 
got a nuclear weapon, or God forbid there was a military 
strike.
    I do see a heightened sense of supply in the market. We 
have seen commitments from oil producers to make up the 
difference in Iran. I think what we have to do is make as 
airtight as possible boycott on Iranian oil. And to the extent 
that Iran is selling oil to, in fact, third countries, they 
have to discount is so dramatically, if we impose these other 
restrictions that they won't be getting the benefit of a rising 
oil price.
    Mr. Takeyh. I will just say briefly on your question of 
human rights, which has significantly deteriorated in Iran 
since the disputed election of 2009 with show trials, 
imprisonment of dissidents and summary executions. I think most 
of our sanctions effort has been focused on proliferation. I 
think we should highlight also how Iran treats its own 
citizens, is a factor in its reintegration into the global 
economy.
    The United Nations does have a Human Rights representative, 
and we have to ask him to support that particular effort. But 
the entire human rights issue and repression of the Iranian 
citizenry has dramatically escalated and intensified, not just 
the case that you mentioned, but an entire spectrum of issues.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Ackerman, 
the ranking member on the Subcommittee Middle East.
    Mr. Ackerman. Thank you. I have just been making little 
marks as to the word ``goal,'' and so far the goal has been 
nine different things from affecting the price of oil to 
talking directly over the heads of the mullahs to the Iranian 
people, to everything that you could think of. If you have been 
listening to our opening statements, our goal is to affect a 
fictitious race between President Obama and President Bush, and 
who gets credit for what. And I think that what we are 
forgetting is regardless of what we are all doing here, is that 
the real goal that we think we are discussing is stopping Iran 
from getting a nuclear bomb. And all of these other things are 
ways to get them to do that, and ways to affect their thinking 
and, ultimately, their behavior.
    The discussion that I have been trying to figure out or the 
two options, and I don't know that it is an either/or, and that 
is what I want to ask you, is whether we exclusively continue 
to apply the choke hold that all on this committee, or almost--
I think all on this committee have agreed to over several 
administrations, and to apply the type of economic pressure 
continuously, unilaterally if we have to, internationally as we 
must, to get them into a position where they have no option, 
but to weigh the merits of whether it is advantageous to have a 
bomb or to have a country. And that is the way to do it, and 
only that way, and ascribe that to the goal of one President or 
another, or to employ just having discussions that one side 
would like to portray, the other side is saying that you just 
want to talk to these people who you can't talk to, and get 
them to agree, which they never will. Or should we have both?
    It seems to me one side would portray it that if you are 
having one of these extreme fighting or boxing matches, or 
whatever, and you are sitting on your opponent's chest and 
pummeling him about the head, if you say to him you give up? 
The other side accuses you of having a dialogue. Can you get 
them to a place without having a dialogue, and just having the 
economic sanctions, or do you need some intelligent application 
of both?
    Mr. Takeyh. I would say the two-track policy that offers 
dialogue as well as pressure track. I do think that has 
benefitted us in the international community in the sense that 
the impasse in U.S.-Iran relations is no longer blamed on the 
United States.
    Mr. Ackerman. And the international community is important 
because we want to seem to be popular, or because they are 
needed in order to accomplish----
    Mr. Takeyh. Well, I think a successful sanctions regime 
need to be multilateralized, because all the things that have 
been talked about, the insurance issue that has been talked 
about. These are largely European companies, so the United 
States has largely estranged itself from the Iranian economy 
for the past 20 years, so if we are going to have measurable 
sanctions really we have to have allied coalitions.
    Now, I do worry about our ability to maintain this 
international coalition with the reassertion of President 
Putin, with the changes that are taking place in France where 
President Sarkozy was really the steel behind this issue. So, 
as we go forward I think it may be more challenging for us to 
hold this coalition together.
    Mr. Dubowitz. Congressman Ackerman, I would say two things. 
First, on the sanctions front, it is not really an either/or. 
We need a robust multilateral sanctions regime. We need 
unilateral U.S. sanctions. It is only unilateral U.S. sanctions 
and the penalties that have actually helped create a 
multilateral sanctions regime. So, I think like many bipolar 
debates in Washington, it is both rather than either/or.
    On the question of what the goal is, I think the goal is 
regime change in Iran. I don't think this regime can be trusted 
to adhere to any agreement, no matter how tight, no matter how 
much accountability we impose on them. This regime is dedicated 
to having a nuclear weapon, and they will find workarounds in 
any way they can. The goal has to be to change the regime to 
support the Iranian people, and I think one of the ways we can 
do that----
    Mr. Ackerman. How do you do that? I saw a lot of nodding of 
heads on your side of the table when people on my side of the 
table said we have to talk to the Iranian people. I mean, if we 
are having a difference of opinion with Iran and they want to 
get around our administration, how do they talk to the American 
people? Can they convince Joe Six-Pack in America to go along 
with it? How do you talk to the Iranian people?
    Mr. Dubowitz. Well, I think some of the practical things we 
can do----
    Mr. Ackerman. Sign an agreement with who?
    Mr. Dubowitz. Well, I think number one, we should designate 
Al Khamenei and the top Iranian leadership for Human Rights 
abuses. I think that sends a message to the Iranian people.
    Mr. Ackerman. I will talk to Time Magazine.
    Mr. Dubowitz. I'm sorry?
    Mr. Ackerman. I will talk to Time Magazine end of the year.
    Mr. Dubowitz. I think we should also declare, for example, 
the entire Iranian technology and telecom sector is a zone of 
electronic repression. I mean, one of the things we see now----
    Chairman Ros-Lehtinen. Thank you.
    Mr. Dubowitz [continuing]. Is tremendous Human Rights 
abuses. Let us put an end to that.
    Chairman Ros-Lehtinen. Thank you very much. Mr. 
Rohrabacher, the chairman of the Subcommittee on Oversight and 
Investigations.
    Mr. Rohrabacher. Thank you very much, Madam Chairman. And 
let me just say that this has been a valuable hearing for me. 
If nothing else, one point that has opened my eyes to a 
fundamental truth in how we are trying to drum in policy. And 
as Dr. Takeyh's observation that in the long run if the 
Iranians hold out they know they can expect better treatment 
because they are now a nuclear armed country. And we have a 
history of playing up to and trying to then placate countries 
that have nuclear weapons. So, it would seem to me that the 
strategy of basically trying to make it hurt right now isn't 
going to work if they know there is going to be benefit for 
holding out in the long run; not just the ending of the 
sanctions, but actually better treatment in the long run.
    Let me just for our friends who have come here who are the 
survivors of the Marine families, let me note, I worked in the 
White House during that time period. I take that whole issue 
very, very seriously.
    The Iranians and the Iranian support for Hezbollah did not 
cause the death of your loved ones. What caused the death of 
your loved ones was a State Department that insisted on a 
mission that should have never been taken. And we handed to the 
Marines a mission that they couldn't fulfill, and then they 
were ordered not to have bullets in their guns. I don't know if 
you--how many people here are aware that the Marines did not 
have bullets in their guns by order of the Commanding Officer 
as demanded by the State Department.
    I worked for Ronald Reagan. I was his Special Assistant, 
and he frequently admitted that sending the Marines into 
Lebanon was his worst decision of his presidency, and how much 
he regretted it. And afterwards he was told by his advisors, 
again the foreign policy gurus, that we should send in 20,000 
more Marines in order to show these guys they can't kill 
Marines and get away with it. And he made the best decision of 
his presidency when he said no, we are not going to send in 
more Marines. We are going to get our butts out of there, and 
we did; otherwise, we would have been in quagmire for the rest 
of the administration. And what happened after that debacle? 
Ronald Reagan turned to a policy and a strategy that worked. It 
was called the Reagan Doctrine. And the Reagan Doctrine had us 
supporting the enemies of our enemy and letting the enemies of 
our enemy do the fighting. It was a strategy that worked then, 
and it ended up destroying the Soviet Union without a military 
confrontation between American troops and the loss of so many 
lives that that would have taken. Instead, we helped the people 
in Poland, Lech Walesa, in Afghanistan, in Nicaragua. That is 
how we ended the Cold War.
    Now, we should try to take a look and maybe there is a 
message for us in this, a message for what works, a strategy 
based on sanctions is not going to bring about the end we want, 
but let us take a look at Iran. There are Kurds, there are 
Turkmen, that are Azaris, there are Baluchs, there are Arab 
speaking Azaris, as well as young Persians, all of whom can be 
mobilized against the mullah regime, and we have done nothing 
to mobilize them against the mullah regime. Instead, we sit 
here talking about strategies, economic strategies which, 
again, the testimony today suggests will be ineffective because 
in the long run they will benefit by holding out.
    Let us go to our roots. Let us go to where America is the 
supporter of people who are struggling for freedom, and 
liberty, and justice, and the people of the world will unite 
with us and overthrow these people who threaten the stability, 
and peace, and freedom of humankind as the fanatical mullah 
regime in Iran does.
    That is just a thought. And, by the way, this 
administration, again, who is quiet, quiet about the 
demonstrations by those people in Iran, they are the same ones 
who are now insisting that we keep a terrorist designation for 
the MEK so that we can then eventually, the Iranians mullahs 
know we are labeling their opponents as bad guys, as 
terrorists. This is not a strategy that will work, and I would 
hope that--I have had my say, and I have got 15 seconds. I am 
sorry I have used up my time, but that is my time. Thank you.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Deutch of 
Florida is recognized.
    Mr. Deutch. I thank the chairman. Before asking my 
questions, I don't know if my friend was simply trying to use 
the reference as some sort of rhetorical flourish or not, but I 
take--I think it is wrong and does a disservice to, and is on a 
whole host of levels offensive to suggest that the State 
Department is responsible for the bombing of the Marine 
barracks and not Hezbollah, and Iran, and Syria. And I hope the 
gentleman will please clarify that that wasn't actually the 
intent.
    Mr. Rohrabacher. When we send our troops into battle, those 
people who send troops into battle for a no-win battle are 
responsible----
    Mr. Deutch. Reclaiming my time.
    Mr. Rohrabacher [continuing]. For those lives.
    Mr. Deutch. Reclaiming my time, Madam Chairman. Reclaiming 
my time. Thank you.
    Now, if I could focus first on the issue of proliferation 
and what is going to happen between now and July 1st, July 2nd. 
And if I could just ask you to address, number one, if--as 
these negotiations are getting ready to start again, what will 
come next, June 28th, July 1st, what will happen under this, if 
the Senate were to take up the sanctions bill and pass it 
today, we were to have something to the President's desk to be 
signed quickly. What is the most biting piece of sanctions that 
will come from those three first? Let me ask that question of 
whoever would like to comment.
    Mr. Dubowitz. Well, I think the dates are very important. 
On June 28th, the President, under 1245 of the NDAA, has to 
make a determination about whether countries should be granted 
exceptions to the sanctions law based on whether they have 
satisfied the significant reduction threshold. Are they 
significantly reducing their purchases of Iranian oil? And I 
think it is critical that on that date that we hold these 
countries to account. We have granted exceptions to Japan and 
Europe right now, but what is key is India, China, Turkey, and 
other countries. So, it is important that we see what that 
determination looks like, and that significant reduction really 
means significant.
    July 1st is the date that the European Oil Embargo is 
supposed to kick in. I think what we want to look at is, as Ray 
said, we want to make sure July 1st is when it actually 
happens, and that we don't actually concede that as sanctions 
relief in Baghdad and delay the imposition of that oil embargo. 
But an oil embargo is only as good as enforcement, and we have 
to be careful that 100 percent embargo doesn't turn into a 50 
percent embargo by allowing Iranian oil to be disguised as non-
Iranian oil and sold to Europe.
    And finally, the Senate bill--I think the most important 
provision in that Senate bill is actually send a powerful 
message that the Iranian energy sector is a no-go zone because 
of the link between energy revenues and proliferation. So, I 
would hope that at the Conference Committee that bill would be 
strengthened with that in mind.
    Mr. Deutch. Can the--Ambassador Wallace, when you spoke of 
extending sanctions to the entire Iranian economy, and if you 
could focus on natural gas and the sale of natural gas, and 
why--actually, this is for any of the three of you, why it is 
important to focus on the sale of natural gas, and while there 
is legislation that has been introduced that I am working on 
that is trying to expand this, is that something that can be 
done by Executive Order? Can CISADA, for example, be expanded 
to cover natural gas sales by Executive Order?
    Ambassador Wallace. Thank you. Sitting here, I haven't 
chimed in. I do note, we underestimate the impact that our 
economy has on the world. The lesson--maybe we didn't learn any 
lessons in the 2008 financial crisis, but one of the lessons is 
that what happens in America affects the entire world. And if 
we impose a true economic blockage with bright lines it will 
have a dramatic impact. And Mark very accurately talks about 
these shadowy things that you can do on the margins of these 
very complicated sanctions proposals.
    I think bright lines of having bans on these certain 
sectors are the way to go. If you have a very bright line, 
transparent blockade in certain sectors, it is very much harder 
to break that blockade.
    In terms of natural gas, I think the focus is obviously on 
petrochemicals, which the downstream petrochemical companies 
have really dramatically expanded their sales in Iran. We 
designated the National Petrochemical Company in Iran, but all 
the quasi-state and other state-related authorities have not 
been designated. We need to do that, and stop the growing 
petrochemical sector in Iran, which has been a huge source of 
revenue.
    Chairman Ros-Lehtinen. Thank you very much. Thank you, Mr. 
Deutch. Mr. Chabot is recognized, the chairman of the 
Subcommittee on Middle East.
    Mr. Chabot. Thank you, Madam Chair. Before I ask my 
question, the gentlemen from California has asked that I yield 
to him, and I yield 15 seconds to the gentleman.
    Mr. Rohrabacher. To clarify my position, President Reagan 
was responsible for the death of the Marines in Lebanon. He was 
the one who gave the order. He accepted that responsibility. We 
in political life owe a great deal to our defenders, and we owe 
them our very best judgment, but we are responsible for those 
judgments of where we send our troops. Thank you very much.
    Mr. Chabot. Reclaiming my time. A question I would like to 
focus on, Iranian enrichment. As I mentioned in my opening 
statement, I am deeply disturbed to hear that the 
administration is even considering offering the regime in 
Tehran the ability to enrich domestically, even with so called 
safeguards and supervisions. Doing so would allow Iran to 
stockpile low-level enriched uranium making it significantly 
easier for the regime to break out if it were to decide to do 
so. And offering this, it seems to me, could have ramifications 
not just for the Iranian nuclear program, but for the entire 
non-proliferation regime.
    I would be interested if any of you gentlemen would like to 
share your thoughts specifically what it would mean for Iran's 
ability to actually advance toward a nuclear weapons capability 
this idea that the administration may be considering. Anyone in 
particular would like to answer that?
    Mr. Dubowitz. Well, I just want to point out, I think it 
has been misrepresented in the media, that no country is 
actually entitled to domestic enrichment under the NPT. You are 
entitled to nuclear fuel, so the notion that we have to give 
the Iranians domestic enrichment because it is the fair thing 
to do is actually inaccurate. I think the Iranians if they have 
domestic enrichment, and if they even have the capacity, they 
don't need nuclear weapons to create enormous difficulties, and 
enormous risks for the international community. If Khamenei is 
at capacity, he can do anything he wants. He can threaten the 
region. He can threaten the United States and Israel. I think 
it is key to insure that he doesn't get to capacity, which is 
why I would again reiterate, I think the only deal that is 
worth having is a deal with a new government.
    Mr. Chabot. Doctor?
    Mr. Takeyh. Sure, I will just say a few things. The Iranian 
nuclear program as we understand and see it today is an illicit 
program in the sense that it, to use a Catholic phrase, it was 
born in sin, in a sense that Iran has always been in violation 
of its arms control obligations in violation of the NPT. And 
there are a series of international agreements that it has to 
abide by.
    Most of the discussion recently has been about the NPT, but 
there are about six U.N. Security Council Resolutions, as well, 
that impose demands on Iran beyond the NPT. They call for 
suspension of all its activities, a real suspension. They call 
for Iran to come to terms with its previous weaponization, and 
acknowledge those. And all these things have to happen before 
Iran comes back to conformity with the NPT. And once it comes 
back to the NPT, as Mark was suggesting, there are varying 
interpretations of it.
    There is no explicit right to enrich in the nuclear non-
proliferation treaty. There is right to have access to nuclear 
fuel, and most countries that actually use nuclear fuel don't 
actually enrich indigenously. You know, that purchase it from 
abroad and so on. So, once Iran comes back to the NPT, that is 
a conversation we can have, but it is not there yet. It doesn't 
conform with the NPT; it doesn't conform with the U.N. Security 
Council Resolution. And today there are contentious 
negotiations between Iran and the IAEA about access to military 
facilities, such as Porchine and so forth.
    Mr. Chabot. Thank you. I have only got a little over 1 
minute left. Let me ask something if I could in a different 
direction real quickly. We oftentimes discuss this dynamics of 
sanctions, and with Iran in particular, the sanctions we want 
to affect the regime, and not necessarily the people of Iran. 
But in this particular case, the argument is that the regime 
really doesn't care too much how the effect is on the people 
because they make out fine. It is kind of the same thing with 
North Korea on food. They give it to the military, and the 
people suffer. Would one of you gentlemen talk about that 
dynamic and what actually happens in Iran, Mr. Ambassador?
    Ambassador Wallace. I think the leadership of Iran, as I 
think everyone has testified here today, is very fractured and 
is diffuse, but the regime has done a better job of almost any 
very dictatorial-like regime of permeating its economy with 
thugs of the regime that control its key businesses. So, when 
we are actually taking steps to pressure that economy, you are 
not seeing any of the major businesses that are operating in 
Iran that don't have--that aren't either owned by IRGC or 
controlled tacitly or explicitly by the IRGC. And to the extent 
that you can undermine confidence of their thugs, you will make 
a real impact, potentially, on the regime. So, I think it is 
very important to hit these key businesses and their economy.
    Mr. Chabot. Thank you. My time has expired, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Sherman, 
the ranking member on the Subcommittee on Terrorism.
    Mr. Sherman. Thank you. Mr. Dubowitz, thank you for the 
work of FDD. We are going after their energy sector to some 
degree, their banking sector, but they do have cash reserves. 
China is willing to buy their oil. China can sell them many 
products, but what China cannot sell is the spare parts for 
everything in Iran, whether it be the airplanes that the Shah 
bought from the U.S. producers, where GE is seeking a license 
to repair them, or inspect them, whether it be any elevator in 
any building in Iran where the equipment was imported from 
Europe.
    Now, our closest allies say that they want to maintain what 
they call legitimate trade. Under American law the only 
legitimate trade is food and medicine. If Iran can't buy 
machines, and more importantly, spare parts, that would have a 
more immediate effect than taking away their export markets 
because they have a cash reserve, so even if we cut off all 
their exports they would have the cash.
    What measures and secondary sanctions can we adopt here in 
Congress to convince our European and Asian friends to withhold 
these non-lethal exports, particularly spare parts?
    Mr. Dubowitz. Well, thank you, Congressman Sherman. This is 
where I do agree that we should have an embargo. We should have 
an import embargo on Iran. And, as you mentioned, there are an 
array of goods that we should deny the Iranians, with the 
exception of humanitarian goods and services.
    Mr. Sherman. You are saying--you mean an export embargo 
where we don't export to Iran?
    Mr. Dubowitz. Right.
    Mr. Sherman. I think we already have that, don't we?
    Mr. Dubowitz. Well, I am talking about a multilateral 
embargo.
    Mr. Sherman. We, the big we.
    Mr. Dubowitz. We, the big.
    Mr. Sherman. All the good countries.
    Mr. Dubowitz. And I think what would be very useful, and it 
is in the House bill right now, and it is in the Senate package 
is to accelerate the designation of IRGC entities that are 
active in Iran's broader commercial sector. As Mark mentioned, 
the IRGC controls much of the Iranian economy.
    We have gone after the financial sector, increasingly gone 
after the energy sector. But, there is a broader commercial 
sector. And the ability to actually designate and accelerate 
the designation of the IRGC companies that control Iran's 
broader commercial sector, and then impose secondary sanctions 
on any company, any international company doing business with 
those IRGC companies would go a long way to establishing from 
an Iranian perspective an import embargo.
    Mr. Sherman. What if we were to go further and say no 
company in the world could get a Federal or state contract if 
they sold anything to Iran other than food or medicine?
    Mr. Dubowitz. Exactly right. We should be putting these 
companies to a fundamental choice between doing business in 
Iran and doing business in the United States. If you are doing 
business in Iran, you are doing business with the Revolutionary 
Guards, and that is bad for your reputation. There will be 
serious financial penalties. And in doing so, you are 
supporting terrorism, proliferation, and human rights abuses.
    Mr. Sherman. Ambassador Wallace, have we actually imposed 
sanctions on any company that had any political clout in either 
the United States or any of our friendly governments? As I 
understand it, we have sanctioned some very small Chinese 
traders who don't do business in the United States, are now 
prohibited from doing what they never thought of doing. And we 
have sanctioned one Swiss corporation that was full owned by 
the Iranians. Have we actually had the guts to impose the Iran 
Sanctions Act?
    Ambassador Wallace. It is a very good question, 
Congressman. And you, of course, are aware that success of 
administrations have not adequately enforced probably what was 
good law from the state of the Iranian revolution in terms of 
sanctions. But don't underestimate something, Congressman. When 
you speak and ask me a question like that, and call on all 
businesses around the world to stop selling goods into Iran for 
fear of not being able to do business in the United States, 
that is a sanction. You just sanctioned that government, 
because when I go out and I challenge businesses around the 
world and I say we are going to make public the business that 
you do in Iran, and you are not going to be able to do business 
in the United States, you know what they do? They pull out of 
Iran, because they want to do business with the biggest economy 
in the world, so don't underestimate the power I think of these 
statements. But you are very right, sir, successive 
administrations have failed.
    Mr. Sherman. We will keep repeating them but we need to do 
more than just talk. We need legislation. What would be the 
reaction--I mean, I think our administration has gone as far as 
it can in persuading foreign governments that are our friends 
to do what they are willing to do. What would be the reaction 
if we sanction, say Siemens, in a way that the German 
Government didn't like?
    Chairman Ros-Lehtinen. And I will persuade you to not 
answer that right now.
    Mr. Sherman. Then please answer that for the record.
    Chairman Ros-Lehtinen. Thank you. Mr. Kelly is recognized, 
our vice chair on the Subcommittee on Asia and the Pacific.
    Mr. Kelly. Thank you, ma'am. And thank you for being here 
today. I have actually had the opportunity to travel with our 
chairwoman to the Mideast right after the first of the year, 
and in all the countries we visited they talked about being in 
the same neighborhood with Iran, and the dangers of Iran 
actually developing nuclear weapons. And when we asked them so, 
what can we do to help? They kept coming back with the United 
States needs to be in a stronger position. It is nice to have 
coalitions but only if somebody is going to be the lead in the 
coalition.
    And I was reading the Op Ed in the Wall Street Journal 
today. We are kind of on some kind of a crash course eventually 
with Iran. And I know we have been working on sanctions for 
many decades now, and trying to come up with something that is 
going to keep Iran at bay.
    Ambassador Wallace, I mean, how strong is this coalition? 
And how--I know we keep talking about strong sanctions, and I 
know you answered Congressman Berman saying when we tell people 
you are not going to be able to do business with us, so we can 
walk softly and carry a big stick, but the other idea is the 
only way a big stick works is every once in a while if you 
swing it and hit somebody. So, tell me how would we approach 
this?
    And all three, I need you to weigh in because I think the 
disconnection here is we think the longer we stay at the table 
and the longer we talk that somehow we are going to arrive at 
an answer. I don't think that works. I think that in this part 
of the world kindness is interpreted as weakness, and the 
longer we talk the more it gives them opportunities to get 
ready to do something more drastic. So, if you could all just 
kind of weigh in on that for me.
    Ambassador Wallace. I think we all have it wrong. I think 
that we have to--multilateral sanctions are very, very 
important, and that is where we should give our diplomats and 
the President discretion to come up with some sort of U.N. 
framework or the like. There should be no discretion. This is 
the dominant economy in the world right now. Do not 
underestimate the power of our ability to do things on a 
unilateral basis that will have an incredible effect.
    This committee has always dragged administrations and 
governments to tougher sanctions. If you impose an economic 
blockade here in the United States and deny the ability of 
other countries and businesses to do business here in the 
United States if they do business in Iran, you will be sending 
a huge and powerful message.
    Don't underestimate it. If you require companies that come 
to the U.S. capital markets, that is nearly everyone. 
Certainly, there are some small companies out there that don't 
avail themselves of the U.S. capital markets. To disclose their 
business, if they do it in Iran, they will stop doing that 
business. The reputational risk is too great, but we can't 
underestimate the benefit of having a bright line economic 
blockage and using the power of our economy to impose that 
blockade.
    Mr. Dubowitz. Congressman, let me give you a specific 
example of what Mark is talking about. With respect to 
financial sanctions, the U.S. administration has not sanctioned 
any international financial institution for violations under 
CISADA. And despite the fact that there are numerous banks in 
places like Russia, Azerbaijan, South Korea, Dubai that act as 
Iran's extraterritorial bankers, under current House bills and 
the Senate legislation it would require international financial 
institutions that have corresponding banking relationships in 
the United States that are doing business with Iran to disclose 
the nature and extent of their Iranian business.
    If that was passed and enforced, we would know what those 
banks are doing with Iran. And, in doing so, we should take the 
step of sanctioning those banks under CISADA and cutting them 
off from the U.S. financial market. I think that would send 
shockwaves through the financial community and send a signal 
that the United States is serious about sanctions enforcement.
    Mr. Takeyh. I would agree with you, Congressman, that the 
diplomatic process that yields no tangible benefits cannot 
persist and it cannot persist forever. There is going to be 
some discussions in the next meeting maybe in Baghdad or the 
one following it about doing something about Iran's 20 percent 
enriched stockpile, and perhaps a session of further 20 percent 
enrichment and closure of Fordo as an interim step.
    I wouldn't necessarily suggest that interim measures are a 
bad thing. I don't think they are a substitute for a deal. I 
don't think they are a substitute for arms control agreement 
that is real, but in some way they do arrest Iran's nuclear 
trajectory which has been going unabated for a long time.
    So, if this process can yield that, and then we can 
continue to build upon it, I am not quite sure if it is 
effortless. Now, we may not be able to get that through this 
particular process, and that will clarify itself that the 
diplomatic process that we have embarked upon is deficient, and 
we think about other measures of approaching it.
    One of the problems with this particular issue has been 
that the way it is framed is that diplomacy versus war. And if 
you frame it that way, then the inclination by international 
community and many international actors to persist with 
diplomacy is quite great. And we have to kind of offer some of 
the things that have been said, that there is an alternative. 
If this diplomacy is stalled or breaks down we go back, have 
additional course of steps, and maybe we can put Iran in a 
position where it once again makes compromises.
    I don't think the situation is the question that we often 
is what would Iran accept? The relevant question is, will Iran 
accept what its predicament suggests? The question is how do we 
put Iran in a position where it accepts an arms control 
agreement that would be U.S. satisfactory?
    Mr. Kelly. Okay. So, just real quickly, how close to 
midnight are we?
    Mr. Takeyh. The physics of this largely eludes me, having 
failed physics twice, well, same class twice, so I don't know 
if that counts as twice.
    I think we probably have more time than we think. I think 
the nuclear program of Iran is still embryonic. It is still 
having some technical problems. We are not at the point when 
they are ready to detonate, but we are--they are incrementally 
getting closer to that. But I think we can build more time into 
this effort as it goes on.
    Mr. Kelly. Thank you.
    Chairman Ros-Lehtinen. Thank you so much.
    Mr. Kelly. My time has expired. Thank you.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Meeks, ranking 
member on the Subcommittee on Europe.
    Mr. Meeks. Thank you, Madam Chair.
    I am having all kinds of questions in my head. First, from 
my viewpoint, I agree that our economic power is tremendous. I 
agree that the whole idea is to have regime change. I equate it 
to, and my hopes are that we can do this without bombing. When 
I look at the Soviet Union and how it no longer exists as we 
knew it, says that there can be pressure that can be applied to 
force economies to disintegrate, and thereby compel the regime 
change.
    I don't see how we do that just unilaterally. I think that 
we have to do it multilaterally, and that is why it is 
important to have our partners, and I think that particularly 
right now our European partners playing a major role as opposed 
to them leaving windows of opportunities for the Iranian 
Government to skirt around. They need to be intricately a part 
of what we are doing.
    So, I know that our European allies have implemented not 
only the United Nations sanctions toward Iran, but they have 
gone toward the whole EU sanctions. My question then is, first, 
let me try to figure out, how do you evaluate the EU's efforts? 
I know we have been focused on ours. I want to know how you 
evaluate the EU's efforts in bringing sanctions, applying 
sanctions to Iran so that we know that we do--we have a real 
teammate in working collectively together to accomplish the end 
of what we want to accomplish. How would you evaluate the EU?
    Ambassador Wallace. I think the EU has been very, very 
important, and it has taken some very, very important steps. 
Just three quickly. Obviously, the oil--ban on oil purchases 
has been of monumental importance. Its role in SWIFT has been 
very, very important, so I think that the EU's actions in some 
ways have led.
    I think what my testimony previously, Congressman, was I 
think that the United States can take even a more robust stance 
in also leading and cutting off, and establishing this blockade 
that I talked about. But I think it is very important between 
now and the negotiations and the implementation of the EU ban 
that we encourage our European allies to not walk back those 
very important steps that they have taken.
    Mr. Dubowitz. I completely agree with Mark. I think that 
the key when it comes to Europe has really been France. And I 
think that the real X factor in the negotiations in Baghdad and 
beyond will be what happens under a Hollande government. I 
mean, under Sarkozy, for those of us who have dealt with 
Europeans, have been to Europe, we have always been amazed at 
how tough the French have been on sanctions. I think they have 
dragged many of their European partners with them. The question 
will be, will Hollande continue France's tough non-
proliferation stance and enforce these sanctions, or will the 
Hollande government become like too many of its European 
counterparts willing to go along, but not willing to lead?
    Mr. Takeyh. I do agree that the European sanctions have 
been quite instrumental and significant. And much of the 
Iranian diplomatic effort right now will be focused on trying 
to address the Europeans. Perhaps not the entire EU oil 
embargo, but the insurance-reinsurance provision that is 
actually supposed to go into effect on July 1st. And that may 
actually happen.
    Right now, there are negotiations taking place between the 
Europeans and the Asian markets, the Japanese, the South 
Koreans, and others who have been complaining----
    Mr. Meeks. What about the non-EU nations like Georgia, 
Armenia, Azerbaijan, Turkey?
    Mr. Takeyh. The main Iranian trading partner used to be EU. 
I mean, that is gone now in terms of level of economic 
arrangement it has. Otherwise, it is with countries like India, 
China, Japan, South Korea, and so forth, those are its other 
main trading partners now as it is focused toward the Asian 
markets. But I do think one of the reasons why the insurance-
reinsurance of cargo shipping may actually lapse is not so much 
because of Iranian-European negotiations, but because of the 
Asian markets that are now appealing, the Japanese and others.
    And even beyond that, I think you can see--Mark can talk 
about this notion of sovereign guarantees, where there is a 
bill in Japanese Parliament, and so forth. So, I think even 
without insurance, the Iranian oil cargo may move as countries 
move to sovereign guarantees.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Bilirakis, 
my Florida colleague.
    Mr. Bilirakis. Thank you, Madam Chairman. I appreciate it 
very much. And thank you for your testimony.
    Well, human rights have been systematically violated by the 
Iranian regime, and there seems to be no sign that the 
situation is improving. I know we touched on this, but I want 
you to elaborate if you can for the entire panel. Women, 
ethics, religious minorities such as Kurds, Bahai, Christians 
and Jews, political protestors, journalists, human rights, 
lawyers and others have been repressed and persecuted.
    In 2010, the Comprehensive Iran Sanctions Accountability 
and Divestment Act included a provision that for the first time 
imposed sanctions against Iranian officials responsible for the 
country's human rights abusers. This provision has been used in 
at least 15 cases to my knowledge, targeting many of those who 
perpetrate human rights violations against the Green Movement.
    Additionally, in July 2011, the U.S. and Britain imposed 
visa restrictions on more than 50 Iranian officials for their 
roles in political repression in Iran. Can you speak to the 
effectiveness of these targeted sanctions? I know you touched 
upon it, but if you can elaborate, I would appreciate it very 
much. Have we seen a change in Iran's approach to human rights 
due to this? And I probably know the answer, but I want to hear 
from you. Can we tailor this newest round of sanctions to more 
effectively pressure Iran to comply with the human rights 
obligations? For the entire panel, please.
    Ambassador Wallace. Obviously, I am sure it is probably the 
consensus of this group, I don't want to testify for my 
colleagues, but Iran's human rights situation is deplorable, 
and it has not improved. And if anything, Iran--when the 
Persian Spring, if you will, was the first of what you saw in 
the Middle East, started in 2009, and then what has happened 
around the Arab world, Iran has shown that it is willing to be 
more brutal and more repressive against its own people in order 
to retain its power than really almost any other government, 
perhaps Syria. But you have a very restive minority population, 
42 percent minority there, so it is a tenuous hold, 
particularly as this economic pressure has been put in place.
    We ran a campaign, United Against Nuclear Iran, we ran a 
campaign on human rights abuses where we highlighted 
international crane manufacturers. One of the great methods of 
horrible repression is Iran would stage gruesome public 
executions of hanging dissidents, homosexuals from cranes in 
public squares. And these were international crane 
manufacturers. And we succeeded in using those human rights 
violation abuses to highlight what we think are some economic 
measures that we can take in order to continue to isolate that 
regime for those very same human rights abuses.
    Mr. Dubowitz. I would just say quickly that I do think 
human rights sanctions work. I don't think the Iranian regime 
is like the North Korean regime. I think many top level Iranian 
officials like to travel to Europe. They like to ski in Gstaad. 
They like to shop at Harrods in London.
    I think the difficulty has been that we haven't--we have 
slapped on travel bans and asset freezes, and then we've 
relaxed them when these same Iranian officials become the 
Foreign Minister or the Defense Minister and travel to an IAEA 
meeting in Vienna, or an OPEC meeting, or a U.N. meeting. So, 
those travel bans are great in theory, but in practice they are 
not being enforced.
    I think the human rights sanctions are important, but I 
would argue that we need to go that next step. We need to 
sanction Al Khamenei. He is the greatest human rights abuser in 
Iran. It doesn't mean we still can't negotiate with this 
regime. But, let us send a message to the Iranian people that 
we agree with 75 percent of them, that Al Khamenei is a 
torturer, and a murderer, and should be called to account by 
the United States of America.
    Mr. Takeyh. This is a point that requires no reinforcement, 
but I think it should be reinforced anyway. The human rights 
situation in Iran is abysmal. You mentioned ethnic minorities, 
women, I think it is Iranian citizens of whatever their gender 
and ethnicity are being subject to harassment, repression, 
arbitrary judicial tribunals, show trials, just an entire 
spectrum of issues where Iran has emerged as one of the most 
repressive states in the Middle East, and that is saying 
something given the lofty standards of that particular region.
    I think one of the limitations of our dialogue with Iran, 
and it is a limitation of the 5+1 process is that it focuses on 
proliferation, and proliferation transgressions. So, the issue 
of human rights never gets aired at those particular meetings. 
I am not quite sure if we can successfully--if you should 
exclude it. I think we should bring it up to the Iranian 
officials any time we have encounters with them, that the 
international community is concerned not just because of their 
violations of their international obligations under the NPT, 
but also their international obligations in a variety of human 
rights standards.
    Iran is a signatory to various U.N. human rights documents, 
international human rights documents. It is a violation of 
Iran's international obligation to behave domestically in the 
way it has, and that is something that should be highlighted.
    Mr. Bilirakis. Thank you, Madam Chair. I yield back.
    Chairman Ros-Lehtinen. Thank you very much. Mr. Griffin is 
recognized. He is the Subcommittee on Europe and Eurasia vice 
chair.
    Mr. Griffin. Thank you, Madam Chairman.
    Ambassador Wallace, I would like to--it is good to see you 
here. Thanks for testifying today. I would like to dig a little 
deeper on the issue of auto manufacturing in Iran. And I 
apologize for any duplication there may have been when I was--
that I might have missed. But I would like for you to name 
names in terms of the success that you as a group, and we 
collectively have had in getting some of the auto manufacturers 
to suspend. And I would like for you to talk about the actors 
that are still engaged in production or commerce with Iran, and 
what we can do to turn up the heat. Obviously, we can name 
names, and we should. But could you elaborate a little more on 
that, because it seems to me a lot of the commerce with Iran is 
in the auto production area.
    Ambassador Wallace. Thank you. It is good to see you, as 
well.
    It is not well known, but the Persian automobile sectors 
are the 13th largest in the world. And as Mark testified 
previously, we have to do better at preventing inflows of 
products and goods, spare parts, Congressman Sherman asked 
questions about this previously. And there are major auto 
manufacturing facilities and employment in Iran. This is a huge 
sector of their economy. Fifty percent of the country's GDP is 
in the industrial sector, and 20 percent of it is their 
automobile manufacturing. This is a sizeable part of their 
economy.
    We have had some successes in having automobile 
manufacturers leave the Iranian market, the likes of Karsan, 
Hyundai, and Porsche, but there are some real gaping holes. 
Peugot right now is a major actor in Iran, major manufacturer 
inside Iran in direct partnership with the IRGC. You cannot 
manufacture an automobile in Iran without it being manufactured 
by an IRGC company.
    We all own parts of Peugot because own GM, and this 
committee has the ability to contact the United States Treasury 
Department, which is its major shareholder, and say to GM why 
are you--if you are partnering with Peugot, impress upon Peugot 
that it cannot be the partner of the United States of America 
and also manufacture automobiles in Iran, and sell parts into 
Iran. They have supposedly slowed down their imports of the 
Peugot build kits, but we have to make that a permanent ban.
    Another example is Nissan, a major manufacturer. Actually, 
I have a picture of the Ahmadinejad I guess Pope mobile or 
Dictator mobile which is a Nissan vehicle where he is riding in 
a Nissan vehicle. Well, obviously, Nissan sells cars in the 
United States, and I don't have anything personally against 
Nissan, but Nissan is a major provider of vehicles to state 
governments, governments around the country.
    I would suggest, and I would respectfully request this 
committee to write a letter to our friend, Mayor Bloomberg, in 
New York. New York City just awarded a multi-billion dollar 
contract to Nissan to build the most iconic American vehicle, 
one of the most iconic American vehicles, the New York City 
taxicab to Nissan. If they are going to build our New York City 
taxicabs, they shouldn't be manufacturing cars with the IRGC in 
Iran. And we should be able to use the power of New York's 
pocketbook to impress upon Nissan to stop manufacturing 
automobiles in Iran.
    This is an important part of their sector, and follows on 
what Mr. Sherman said, my colleagues on the panel have said, 
and we can put a real dent in this part of the economy.
    Mr. Griffin. I would be really interested in sitting down 
and talking with you. I would be happy to help with a letter, 
talk about legislation. I have some notes here that Mercedes is 
also continuing to do business in Iran. I drive a Ford pickup, 
so I hope there is no issue there. I am sure there is not. We 
love Ford. By the way, they didn't take any bailout funds.
    So, I also have some notes that some of the companies have 
suspended auto trade production. Does that mean they still have 
resources there? What exactly does--suspended doesn't mean--it 
doesn't sound like they pulled completely out, Audi, General 
Motors, Toyota. Do you have any information on that?
    Ambassador Wallace. Yes, absolutely. We are concerned by 
the suspension language because there is such a large presence 
in Iran of this automobile manufacturing. Peugot we think is 
the best example. It is the biggest manufacturer in Iran, and 
they have ``suspended'' sending in Peugot build kits into Iran 
for 5 months because of the GM partnership. That should be a 
permanent ban.
    Mr. Griffin. It looks like I am out of time but, Madam 
Chair, I would just say that if the Federal Government owns 
part of General Motors, and General Motors is doing business 
with Peugot, and Peugot is in Iran, that is an outrage, and we 
need to do something about it. Thank you.
    Chairman Ros-Lehtinen. Thank you so much. Thank you. Mr. 
Burton is recognized, the chairman on the Subcommittee on 
Europe and Eurasia.
    Mr. Burton. I love to listen to these discussions. We are 
going to put pressure on Iran, and they are going to change. 
And I start thinking about things that people don't talk about 
in the history books any more. Lord Chamberlain, he was going 
to negotiate with Adolf Hitler. Hitler violated the Treaty of 
Versailles. Instead of having 100,000 troops, they had 
millions. And while the allies were sinking their ships and 
destroying their jeeps and their airplanes, because if we 
didn't have weapons there wouldn't be any more war. Hitler was 
building up. And Chamberlain goes to Munich and shakes hands 
with Hitler. Comes back, peace in our time, and 50-60 million 
people died.
    There comes a point when you have to talk to these guys in 
terms that they understand. You have got to say to them look, 
if you keep this crap up, you are going to die. Now, everybody 
wants to stay out of war. I hate war. I was shaving the other 
day and I heard the commentator talking about this young man. I 
came out and looked at the TV set and there was a good looking 
young man with his wife and his child, and they announced that 
he had both arms and legs blown off in Afghanistan with an IED. 
And I thought why in the hell did that happen?
    With the technology we have, you can fly over without a 
pilot, have a hellfire missile on and put it right down 
somebody's chimney. We don't have to send a whole bunch of 
troops in. Through the technology we have, we can get anybody, 
anybody, but like we did in World War I, we are sitting around 
talking for hours, and days, and months, and years, saying oh, 
my gosh, you guys better stop making this nuclear weapons or we 
are going to sanction you.
    Mr. Wallace, you talked about sanctions. We passed a 
sanctions bill, but it had in it a waiver for the President. 
So, we pass a waiver so he can do whatever he wants. And you 
know, you have mentioned there were a bunch of waivers, so we 
keep negotiating, and negotiating, and negotiating.
    In Korea in 1994, we negotiated with the North Koreans. We 
don't want them, we will not allow them to have nuclear 
weapons, so we gave them the ability to get cold water nuclear 
reactors. They got nuclear weapons. Didn't work, didn't work. 
At that time, if we would said, listen, you keep this crap up 
and you are in big trouble, buddy, it would have worked, but we 
messed around and messed around. Now they have nuclear weapons. 
And we are doing the same thing with Iran.
    These guys aren't going to stop. There is always going to 
be a way to get money and the things that they need. It ain't 
going to stop, and we are heading toward a war over there. At 
some point Israel, and I know Bibi Netanyahu, he is not going 
to risk another holocaust. If they keep this stuff up, they are 
going to attack, and it doesn't need to happen.
    It seems like to me we could send a message to Ahmadinejad 
and the mullahs and say look, we know where you are. We know 
where you live, and we have got the technology to put one right 
down your chimney. And if they knew we meant it, I think you 
would probably have a change in attitude. But, no, we keep on 
saying if we put this pressure on, and put that pressure on and 
negotiate, it isn't going to work. It will not work.
    I have been here 30 years, and I have heard it all. And I 
am really disappointed that we continue down this path. One 
thing that we say we ought to do to our kids is teach them 
history. Well, we don't teach them history any more. If 
everybody would study history they would know that you reach a 
point when you can't negotiate with tyrants. When you have to 
stand up and say look, you stop this stuff because you are 
endangering humanity. We are talking about nuclear weapons now, 
can kill--right here. We could kill 50 million people with just 
a couple of bombs, so it is a lot worse than it was in World 
War II. So, we have to learn from history. And the history is 
you tell tyrants enough, while you still have time.
    We had the time in Korea, but now we don't. They have got 
nuclear weapons, and they are working on delivery systems, so 
we have to do something now because they have the ability to 
kill a bunch of people.
    Iran is not yet in that position, so what we need to do is 
we need to say very strongly look, we have put sanctions on 
you. We have done all this stuff, now we are tired of it. And 
the President or whoever the next President is, if we still 
have time, needs to say very clearly we are not going to mess 
with you. You keep this up, and you are going to go to 
Valhalla, or wherever it is. We are going to put one down your 
chimney. We have the ability to do it. You could be 2,000 miles 
away with a computer and you can fire a hellfire missile down 
somebody's--in somebody's car as they move along a road, or 
down their chimney.
    It is time that we do something to stop this nonsense 
instead of talking about it, and killing everybody with paper. 
I yield back.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Burton. 
Always good to hear your strong voice, clarity. Thank you very 
much, sir. Don't get frustrated. Mr. Duncan of South Carolina. 
You are the guy that's going to clean it up here.
    Mr. Duncan. Thank you, Madam Chairman.
    Chairman Ros-Lehtinen. You are the last batter up. You have 
got to hit a home run.
    Mr. Duncan. I am going to bat clean up here, so I 
appreciate the committee, appreciate the witnesses staying here 
as long as you have.
    I can't say it any more eloquently or strongly as Mr. 
Burton did. And I want to echo his words. I think we should 
heed the words of Winston Churchill when he discussed the 
feeding of a crocodile hoping that he will eat you last. That 
is exactly what it seems like we are doing with these policies 
of sanctions, and they seem to be policies of appeasement.
    And it is clear with the rhetoric, the posturing, and the 
actions of Iran exactly what they are doing. They are just 
buying time. They are buying time so they can do exactly what 
they want to do, and that is acquire a nuclear weapon and be a 
threat to the world, and the region, and the United States, the 
great Satan, the little Satan, and all of the things because 
that is in their rhetoric. I am not making this up personally, 
this what they have said.
    The free world doesn't want to see Iran get a nuclear 
weapon. And it has been clear on that, the free world has been 
clear on that with its rhetoric, but not necessarily with 
actions that match the rhetoric. So, I guess the question for 
Mr. Dubowitz, you state in your testimony that Khamenei is 
seeking to buy his country enough hard currency from oil sales 
to withstand the soaring inflation, now estimated to be as high 
as 40 percent per year, a crumbling currency. At one point this 
year it was down about 50 percent, I think.
    So, with all these sanctions, what is the breaking point? 
What do you see as the breaking point that is going to make 
Iran allow inspectors to come in, will remove their nuclear 
capability, will stop pursuing these paths of destruction?
    Mr. Dubowitz. Well, thank you, Congressman. I would say 
this, that there is no evidence to date that any sanction or 
sanctions in their entirety have changed the risk-reward 
calculus of Khamenei with respect to building a nuclear weapon. 
I think to change that risk-reward calculus, as Ray has written 
so eloquently, we have to put him to a fundamental choice 
between a bomb and the survival of his regime. And we haven't 
put him to that fundamental choice. And I think part of the 
reason we haven't put him to that choice, as echoed by 
Congressman Burton, is that the Iranians don't believe there is 
a credible military threat. I mean, we haven't actually laid 
out a serious military option. You know, there are choke holds 
within the Iranian proliferation supply chain, particularly 
where you fabricate centrifuges, that if we were to put a 
missile down that chimney, we could do serious damage to the 
Iranian nuclear program and set them back by years.
    And I think we have failed to communicate that sufficiently 
to Khamenei. I think he needs to be put to that fundamental 
choice. He hasn't yet. And, as you said, he has played rope-a-
dope, and has successfully moved the goal post, not to mix 
sports metaphors, but----
    Mr. Duncan. I agree with you. And, you know, there are two 
Presidents on these issues that I tend to subscribe to, one is 
Teddy Roosevelt. I didn't agree with everything with Teddy 
Roosevelt, but he did say he is going to speak softly and carry 
a big stick. He truly meant that the big stick works, and that 
you are very clear, when you speak softly to someone about your 
intentions and it is not idle threats at that point. It is 
taken very seriously. You look a person in the eye and you 
speak softly, but you tell them what you are going to do if 
they don't straighten up. That is how my dad talked to me, and 
he meant it.
    Ronald Reagan, the reason the Iranians let the hostages go 
when Ronald Reagan was sworn into office is because they knew 
he meant what he said on the campaign trail, as it was 
approaching January 20th and being sworn in, they knew he meant 
it. And I don't believe that Khamenei or Ahmadinejad, or the 
Iranians as a whole truly believe what the free world is 
saying, that we don't want them to acquire a nuclear weapon. 
So, I agree with you, and I appreciate your testimony.
    Madam Chairman, I don't have anything else. I think it has 
all been said, so with that I will yield back.
    Chairman Ros-Lehtinen. Thank you so much, and I thank the 
witnesses, excellent testimony. I hope that we can move on 
stronger sanctions. I hope that the Senate wakes up. I fear 
these negotiations May 23rd in Baghdad just a lot of hot air, 
and a lot of concessions. We have got to get tougher.
    Thank you, gentlemen, and the hearing is adjourned. Thank 
you, Mr. Berman.
    [Whereupon, at 12:11:36 p.m., the committee was adjourned.]
                                     

                                     

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Material submitted for the record by the Honorable Ileana Ros-Lehtinen, 
 a Representative in Congress from the State of Florida, and chairman, 
                      Committee on Foreign Affairs







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Prepared Statement of the Honorable Allyson Schwartz, a Representative 
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