[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                       PREVENTING A NUCLEAR IRAN

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 15, 2013

                               __________

                           Serial No. 113-34

                               __________

        Printed for the use of the Committee on Foreign Affairs





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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida                ALAN S. LOWENTHAL, California
TREY RADEL, Florida                  GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director














                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Wendy R. Sherman, Under Secretary for Political 
  Affairs, U.S. Department of State..............................     5
The Honorable David S. Cohen, Under Secretary for Terrorism and 
  Financial Intelligence, U.S. Department of the Treasury........    19

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Wendy R. Sherman: Prepared statement...............     8
The Honorable David S. Cohen: Prepared statement.................    21

                                APPENDIX

Hearing notice...................................................    68
Hearing minutes..................................................    69
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    71
The Honorable Eliot L. Engel, a Representative in Congress from 
  the State of New York: Material submitted for the record.......    73
Written responses from the Honorable Wendy R. Sherman to 
  questions submitted for the record by the Honorable Dana 
  Rohrabacher, a Representative in Congress from the State of 
  California.....................................................    74
Written responses from the Honorable David S. Cohen and the 
  Honorable Wendy R. Sherman to questions submitted for the 
  record by the Honorable Adam Kinzinger, a Representative in 
  Congress from the State of Illinois............................    75
Written responses from the Honorable Wendy R. Sherman and the 
  Honorable David S. Cohen to questions submitted for the record 
  by the Honorable Mark Meadows, a Representative in Congress 
  from the State of North Carolina...............................    78

 
                       PREVENTING A NUCLEAR IRAN

                              ----------                              


                        WEDNESDAY, MAY 15, 2013

                       House of Representatives,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 1:19 p.m., in 
room 2172, Rayburn House Office Building, Hon. Ed Royce 
(chairman of the committee) presiding.
    Chairman Royce. This committee will come to order. Today we 
are here to discuss Iran's growing nuclear threat as well as 
U.S. and allied efforts to stop it. For this committee there is 
no higher priority.
    The committee last heard from Under Secretary Sherman and 
Under Secretary Cohen in October 2011. We welcome them back. 
Since that time, thanks to the bipartisan work of this 
committee, several sanctions aimed at Tehran's financial 
lifeline have been implemented, many of them over the 
objections of the administration. But Iran has seen its oil 
revenue drop by 40 percent. Official inflation has climbed to 
30 percent, with unofficial estimates being twice as high. So 
well done, but not enough.
    In the year and a half since our witnesses last appeared, 
the International Atomic Energy Agency tells us that the total 
installed centrifuges at the facilities at Natanz and Fordow 
have increased from 8,500 to more than 15,700. That is an 85 
percent increase since the last hearing. Some of these 
centrifuges are more advanced, perhaps five times as powerful 
as earlier models. A key facility is buried deep under the 
mountain.
    Iran continues to stonewall the IAEA on its development of 
nuclear explosive devices. It does not take a physicist to 
comprehend Iran's intentions, developing a nuclear arsenal.
    I am convinced that Iran will continue on this path until 
the sanctions bite so bad that the regime must relent or face 
upheaval. That is where we need to get.
    Meanwhile, Iran works to undermine governments in the 
region and around the globe. Iran's support is keeping the 
brutal Assad regime afloat. It has resupplied Hezbollah with at 
least 25,000 new rockets, and I saw the impact of some of those 
rockets in Haifa in 2006 when they were raining down on the 
city, targeting the trauma hospital, targeting civilian sectors 
of that city.
    In recent years there have been Iranian-sponsored attacks 
on plots in Bulgaria, India, Thailand, Georgia, Azerbaijan, 
Cyprus, Kenya, and one here in Washington, DC, as well, and I 
would hate to see an Iran emboldened by nuclear weapons.
    There are also real concerns about Iran's interaction with 
North Korea, because earlier this year the committee heard 
testimony that Iran and North Korea had signed a scientific 
cooperation agreement, the same type of agreement that North 
Korea had signed with Syria before building their reactor, the 
reactor that was destroyed by Israel.
    But it is not just the sharing of missile and nuclear 
technology that has us concerned. It is the sharing of a 
diplomatic playbook. Even the head of the United Nations has 
recognized that Iran, like North Korea, will use talks as a 
cover to build a bomb.
    From day one the Obama administration has reached out to 
the Iranian regime. Unfortunately, that hand has been met with 
more centrifuges, more missiles, and more stonewalling. We 
don't yet seem to realize that this regime, which beats and 
imprisons its own people, is determined to keep its nuclear 
program.
    So I am convinced, as are 325 of my colleagues, that only 
when the Iranian leadership truly feels a choice between 
maintaining power and the bomb does our diplomacy have a chance 
to succeed. That is why Ranking Member Engel and I have 
introduced H.R. 850, The Nuclear Iran Prevention Act, to 
continue to turn up the economic and political heat on the 
regime. We look forward to moving this legislation out of 
committee next week.
    It is cliche to say the clock is ticking. I just hope we 
are able to act before the clock stops ticking.
    I will now turn to Ranking Member Engel for his opening 
remarks.
    Mr. Engel. Mr. Chairman, thank you for calling this very 
timely hearing on our strategy to deny Iran a nuclear weapons 
capability. I know both our witnesses, and I am impressed by 
their work and their credentials, so I would like to thank both 
of you for appearing today and for your hard work on this very, 
very important issue.
    I believe that ending the Iranian nuclear weapons program 
is the greatest national security challenge facing our Nation. 
A nuclear-armed Iran or one with a perceived nuclear weapons 
capability would gravely undermine the foundations of the 
nuclear nonproliferation regime and the peace, security and 
stability of the entire Middle East. And since the Iranian 
leadership has threatened to destroy the State of Israel, the 
dangers from this nuclear scheme are of the highest order.
    Over the last several years this committee has been at the 
forefront of efforts to enact the strongest sanctions ever 
levied against Iran's nuclear program. I continue to hope that 
we can achieve a peaceful resolution of the Iranian nuclear 
crisis, and these sanctions are a critical and indispensable 
element of our two-track diplomatic strategy, pressure and 
negotiations.
    Secretary Sherman, in early April you represented the 
United States at the latest round of P5+1 negotiations with 
Iran in Almaty, Kazakhstan. At that meeting Iran rejected yet 
another offer from the P5+1 in which some international 
sanctions would reportedly be lifted in return for Iran 
suspending some of its most sensitive uranium-enrichment work. 
And once again we walked away from negotiations virtually 
empty-handed.
    Let us face it, it wasn't our willingness to talk that 
brought Iran to the negotiating table. The Iranian regime will 
only respond to pressure. And I don't think they will ever 
negotiate in good faith unless we continue to ratchet up the 
pressure, and we will do that when the committee marks up the 
bipartisan Nuclear Iran Prevention Act next Wednesday. I am 
pleased and honored to work on that with our chairman, Chairman 
Royce, and we do it with one mind. There is no difference 
between the two of us on this very important issue of Iran and 
nuclear weapons.
    We must act with a sense of urgency. While the regime 
feigns sincerity on negotiations for the international press, 
they continue to move full speed ahead with their nuclear 
weapons program. According to the IAEA, Iran is installing 
advanced centrifuges faster than expected, dramatically 
increasing the pace of uranium enrichment. There has been no 
progress on the IAEA's effort to resolve outstanding questions 
about the nuclear program's military dimensions, and Iran has 
still not allowed IAEA inspectors access to Parchin, where the 
regime is almost certainly concealing illicit nuclear 
activities from the international community.
    So, with another failed round of negotiations in our rear-
view mirror, and with this information from the IAEA in mind, I 
look forward to hearing from our witnesses on what exactly is 
the administration's strategy to end Iran's nuclear weapons 
program. I would also like to hear our witnesses discuss what 
tools they have at their disposal to increase pressure on the 
Iranian regime, but have yet to utilize.
    Finally, my most sensitive question: I am convinced that 
President Obama is serious when he says Iran will not develop a 
nuclear weapon on his watch, but I believe that Congress must 
know the following: When will the administration be forced to 
abandon the diplomatic option? Secretary Kerry says we cannot 
let the talks become an interminable process. At what point 
should they be terminated if no progress is made?
    I want to make something clear to Iran: Your nuclear 
weapons program is not necessary, nor will it succeed. The 
United States will not allow this to happen. Congress will 
continue to insist on a full and sustained suspension of 
enrichments. On this we have bipartisan and strong support. We 
will demand clarity on the military dimensions of Iran's 
nuclear program, and we will insist that the IAEA have complete 
access to do its job.
    If rapid progress is not made in all of these areas, we 
will continue to press forward with even stronger sanctions. 
Again, that is what the chairman and I are trying to do, and we 
have over 300 cosponsors to our bill.
    I am eager to hear how our witnesses assess the 
effectiveness of our current sanctions, and, most importantly, 
I look forward to hearing about the administration's strategy 
to end Iran's nuclear weapons program once and for all.
    Thank you, Mr. Chairman.
    Chairman Royce. Thank you, Mr. Engel.
    We will now go to Ms. Ros-Lehtinen, chairman of the Middle 
East subcommittee, for 1 minute, and followed by Mr. Deutch, 
ranking member of that subcommittee.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Chairman, and 
thank you for the witnesses as well.
    Iran continues to pose one of the greatest threats not only 
to U.S. national security, but also to global peace and 
security. Tehran continues to provide financial, material and 
logistical support for terrorist groups like Hezbollah, who 
undermine our interest in Syria. It remains an ally of Assad, 
the murderous thug in Syria, arming the regime, and sending its 
own Quds Force soldiers to fight alongside Assad's troops.
    Negotiations have been useless. Iran refuses to honor its 
international obligations related to its ballistic missile and 
nuclear programs, and yet we continue down this road. Iranian 
authorities deny access to those investigating the terrible 
human rights violations that are rampant in the country.
    We have got to learn from the mistakes of the past so that 
we don't keep making them, and I am interested in hearing from 
Mr. Cohen about the actions that his agency has taken to 
discourage Iran from using Venezuela and other areas to 
circumvent U.S. sanctions.
    Thank you, Mr. Chairman.
    Chairman Royce. Thank you, Ms. Ros-Lehtinen.
    Mr. Deutch.
    Mr. Deutch. Thank you, Mr. Chairman. Thanks to you and 
Ranking Member Engel for calling this hearing today.
    Secretaries Sherman and Cohen, we greatly appreciate your 
being here with us today, though it seems, frankly, that we 
have been here before discussing the efficacy of U.S. sanctions 
and the status of Iran's quest for nuclear weapons.
    I want to commend each of you for the work that you have 
done and the undeniable effect that sanctions have had on 
Iran's economy. Iran is virtually isolated from the 
international financial markets. Its oil exports have been 
halved. But where are we now?
    The only bar for success, the ultimate judge of success of 
sanctions is Iran ending its nuclear weapons program, and thus 
far we are no closer to stopping Iran's brutal human rights 
abuses, its support for Assad's heinous crimes in Syria, or 
preventing Iran's sponsorship of terror around the world.
    This unfortunately leaves many to wonder how our policy of 
sanctions and diplomacy ultimately can work. There are 
discussions that diplomacy with Iran must be on hold until 
after Iran's elections in June. Well, what happens for the next 
6 weeks, and how long can we afford to wait as Iran continues 
to install centrifuges increase its enriched uranium stockpile?
    I look forward to your insights into the coming weeks and 
months and the discussion we will have today. Thanks for being 
here.
    Thank you, Mr. Chairman.
    Chairman Royce. Thank you, Mr. Deutch.
    We will now go to Mr. Sherman, ranking member of the 
Terrorism, Nonproliferation, and Trade Subcommittee.
    Mr. Sherman of California. Since the late 1990s, I have 
been calling for the toughest sanctions on Iran. Various 
administrations have disagreed. Often this House has passed 
tough bills, only to see them die or get watered down in the 
Senate. The administration has sanctioned 23 Iranian banks, but 
has failed to sanction the rest.
    Those who say soft sanctions will cause Iran to abandon its 
nuclear program cannot explain the first decade of this century 
during which we had soft sanctions and fast centrifuges. This 
committee will be taking up the Nuclear Iran Prevention Act, 
which I have joined with many others in introducing, especially 
our chairman and ranking member, and we need to make that bill 
as tough as possible, and let us go into conference with the 
Senate with the strongest possible bill.
    Let us say that in order to have a contract with the U.S. 
Government, you must certify on behalf of all of the corporate 
group that you sell nothing to Iran except agricultural and 
medical products, and let us include in whatever bill we send 
to the floor and the Senate the strongest possible sanctions.
    Thank you, Mr. Chairman and Ranking Member.
    Chairman Royce. Thank you, Mr. Sherman.
    This afternoon we are joined by senior representatives from 
the State and Treasury Departments. Under Secretary Sherman has 
held numerous positions at the State Department, including 
Counselor for the Department and Assistant Secretary for 
Legislative Affairs.
    Under Secretary Cohen's career at the Treasury Department 
has been focused on fighting money laundering and financing of 
terrorism. Prior to his Senate confirmation in 2011, he served 
as Assistant Secretary for Terrorist Financing.
    Welcome again to both of you. Without objection, the 
witnesses' full prepared statements will be made part of the 
record. Members are going to have 5 legislative days to submit 
statements or questions or any extraneous materials for the 
record.
    We again would ask that you summarize your statements to 5 
minutes, and we will begin with Ambassador Sherman.

 STATEMENT OF THE HONORABLE WENDY R. SHERMAN, UNDER SECRETARY 
        FOR POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE

    Ambassador Sherman. Thank you very much, Mr. Chairman, 
Ranking Member Engel, and Members of Congress and of this 
committee. Good afternoon, and thank you for the invitation to 
testify about one of our top foreign policy and national 
security priorities, Iran.
    Iran's leaders want the world to think of their country as 
a legitimate power and a regional leader, yet the costly and 
destructive decisions the regime is making day after day 
undermine Iran as a credible player on the world stage. What is 
more, Iran's policies, from its nuclear weapons ambitions to 
its destabilizing regional activities to its abysmal record on 
human rights create a range of challenges to the United States 
and to every country committed to peace and stability.
    The Obama administration takes every single one of these 
challenges seriously. We know that our success depends on 
effective collaboration here in Washington and with our allies 
and partners around the world.
    We are pursuing a number of avenues to deal with Iran: 
Resolutions and other actions at the United States, the Human 
Rights Council, the IAEA and other multilateral organizations; 
wide-ranging and deep sanctions, ensuring we have the 
appropriate force posture; leveraging bilateral relationships 
to raise a red flag when Iran seeks to open a new Embassy, and 
engaging the Iranian people through virtual diplomacy. Every 
day every bureau in the Department of State and virtually every 
department in the U.S. Government has their eye and their 
actions on Iran.
    We are making clear that Iran's international legitimacy 
and the end of their isolation depends on the choice Iran's 
leaders are facing right now: Change course or continue to pay 
the cost of intransigence. Indeed, we meet here today on the 
day that High Representative Ashton is having dinner with Dr. 
Jalili of Iran, now a Presidential candidate, to push hard on 
the basis on which negotiations might go forward. We meet on 
the day that the IAEA is meeting with Iran in Vienna to press 
again in advance of the June Board of Governors meeting. And we 
meet on a day when the U.N. General Assembly is debating Syria 
and Iran's role in it.
    I would like to discuss a few details about the 
administration's policy toward Iran. I will begin with the 
nuclear program. From the start of this administration, 
President Obama has been clear the United States will not allow 
a nuclear-armed Iran. He has also been clear that Iran's 
leaders have a choice: Live up to their international 
obligations, or continue down the path toward isolation.
    As Iran's leaders have continued to defy international 
consensus, we have put in place a dual-track policy of 
ratcheting up pressure in the form of sanctions and other 
measures while pursuing a diplomatic solution.
    The sanctions, as many of you have said, have hit the 
Iranian economy hard. Iran's crude exports have plummeted, 
costing $3 billion to $5 billion per month to Iran. The rial 
has depreciated more than 50 percent over the past few months, 
and official inflation is at 32.2 percent, although informal 
estimates are significantly higher. Even with sanctions in 
place, we are making sure that humanitarian trade continues so 
that the Iranian people aren't facing impossible hardship.
    At the same time, we and our P5+1 partners are pushing for 
a diplomatic solution. We have offered Iran the opportunity to 
reduce tensions and move toward a negotiated solution. 
Unfortunately, so far the Iranians have fallen far short with 
their response. As I mentioned, a meeting is happening probably 
as we are meeting to see whether Iran is really ready to put 
substance on the table.
    We are clear-eyed in our approach to the P5+1 talks and 
seek concrete results. After all, while the window for 
negotiation is still open, it will not remain so forever. We 
will give diplomacy every chance to succeed because it is the 
only way to maintain international support for whatever options 
we must take, but it cannot go on forever, and ultimately the 
onus is on Iran.
    Beyond Iran's nuclear ambitions, we are also concerned 
about their destabilizing influence across the entire Middle 
East and beyond, support to the Assad regime and sustaining the 
campaign of violence against the Syrian people. Their aid to 
terrorist organizations is threatening our ally, Israel, and 
innocent civilians worldwide. That is why we are deepening our 
military partnerships across the region, particularly with 
Israel in the gulf, to defend against attacks from the very 
groups supported by Iran's leaders.
    I know I am running out of time, so I am going to talk 
fast--faster.
    I want to reiterate our commitment to seeing the safe 
return of Robert Levinson, Saeed Abedini and Amir Hekmati, 
American citizens missing or detained in Iran. Today and every 
day in this country families are wondering where their loved 
ones are, whether they are safe, and when they might come home. 
We are not going to back down until those Americans are home 
safe and sound.
    We are, of course, deeply concerned about the campaign of 
repression Iran's rulers are waging against their own people: 
Abuse of those who speak out against their government and 
harassment of their families; students, lawyers, journalists 
and bloggers facing endless intimidation, discrimination and 
incarceration.
    Over 5,000 years Persian civilization has given the world 
innovations in culture, art, medicine and government, but today 
that historic greatness has been set far, far back. Iranians 
are owed the rights, freedom and dignity that we cherish here 
as the bedrocks of our Nation and all people around the world 
deserve.
    I will finish by saying that we are closely watching the 
upcoming election. Four years ago the Iranian people spoke out 
for human rights, basic dignity and greater opportunity. The 
regime responded by shooting demonstrators in the streets and 
frightening families in their homes. And today Iran's Guardian 
Council, unelected and unaccountable, is sorting through 
Presidential contenders, eliminating hundreds of candidates. We 
take no sides in the election, but we know that the desires and 
aspirations of the Iranian people must start with free, fair 
and transparent elections.
    We are clear-eyed about the challenges that lie ahead 
dealing with the Iranian regime. Congress and this 
administration have stood side by side in dealing with this 
threat to our security and to global security. I am confident 
we can continue to work together on this critical concern.
    Thank you.
    Chairman Royce. Thank you, Ambassador Sherman.
    [The prepared statement of Ambassador Sherman follows:]


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    Chairman Royce. Mr. Cohen.

STATEMENT OF THE HONORABLE DAVID S. COHEN, UNDER SECRETARY FOR 
 TERRORISM AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE 
                            TREASURY

    Mr. Cohen. Chairman Royce, Ranking Member Engel, 
distinguished members of the committee, thank you for the 
opportunity to testify today.
    No issue is of greater concern or urgency than preventing 
Iran from obtaining a nuclear weapon. As Under Secretary 
Sherman said, that is why from our first days in office this 
administration has pursued a dual-track strategy that offers 
Iran the opportunity for diplomatic engagements, while at the 
same time making abundantly clear that if Iran continues to 
refuse to comply with its international obligations, we, along 
with our partners in the international community, will apply 
increasingly powerful sanctions on Iran. That is exactly what 
we have done, and that is what we are committed to continuing 
to do, in close collaboration with Congress, so long as Iran 
refuses to engage meaningfully with respect to its nuclear 
program.
    In my written testimony I describe in detail the expanding 
scope, intensity and impact of U.S. sanctions on Iran and how 
these new authorities, coupled with robust implementation and 
enforcement, have had a very significant impact on Iran. I 
would like to highlight just a few points.
    First, and most importantly, creating this powerful 
sanctions regime has been and must continue to be a joint 
effort between the Congress and the administration. Through the 
enactment and energetic implementation of key pieces of 
legislation, including CISADA and the NDAA, we have isolated 
Iran from the international financial system and driven down 
Iran's oil exports by some 50 percent, depriving Iran of a 
critical source of revenue.
    In addition, to enhance the sanctions pressure on Iran, 
over the past year the President has adopted five Executive 
Orders that extend and strengthen the legislative sanctions 
framework, including orders that block the property of the 
entire Government of Iran, including its central bank, that 
make dealings with the National Iranian Oil Company and its 
trading arm, NICO, subject to sanctions, and that enhance the 
NDAA by authorizing sanctions on foreign banks that facilitate 
the acquisition from any party of Iranian petroleum, petroleum 
products or petrochemicals.
    A few months ago the Iran Threat Reduction Act went into 
effect, which effectively locks up Iran's oil revenues in the 
few countries that still buy Iranian oil by requiring that that 
revenue can only be used to pay for bilateral trade or for 
humanitarian imports. As of February 6 of this year, Iran's 
dwindling oil revenue cannot be repatriated to Iran, 
transferred to a third country, or used to facilitate third-
country nonhumanitarian trade.
    Second, we have aggressively implemented and enforced the 
entire sanctions framework. Since the beginning of 2012, we 
have imposed sanctions on 22 individuals and 54 entities, and 
added almost 200 aircraft and ships to the sanctions list. We 
have imposed sanctions on banks, businesses, government 
entities and individuals involved in Iran's WMD proliferation 
activities, its support for international terrorism, and its 
support for the brutal Assad regime.
    We have also targeted Iran's increasingly desperate efforts 
to evade our sanctions, and just this morning we imposed 
sanctions on an exchange house and a trading firm in the UAE 
for providing services to designated Iranian banks, taking 
direct aim at a growing mechanism of sanctions evasion, nonbank 
financial institutions.
    Third, we see clear evidence that these efforts are having 
an impact. As I noted, Iran's crude oil and condensate exports 
have dropped by roughly 50 percent between January 2012 and 
early 2013, costing Iran between $3 billion and $5 billion a 
month. In 2012, Iran's GDP fell by some 5-8 percent, the 
largest drop since 1988, the final year of the Iran-Iraq war, 
and the first contraction in 20 years. The value of Iran's 
currency, the rial, has plummeted, losing over two-thirds of 
its value in the last 2 years.
    And we also see the impact of our sanctions in less 
tangible, yet more significant ways. During the negotiating 
sessions in Almaty, Kazakhstan, the Iranian side sought 
sanctions relief in exchange for concessions on their nuclear 
program. They would not have done so had the impact of 
sanctions not affected their calculus.
    Finally, we are committed to doing more. We will work to 
increase Iran's economic and financial isolation through the 
implementation, as of July 1, of the Iran Freedom and 
Counterproliferation Act of 2012. We will work to target 
additional sources of Iranian revenue, including from the 
petrochemical sector. With our colleagues at State, we will 
maintain our robust outreach efforts to foreign governments and 
the private sector to explain our sanctions, to warn them of 
the risks of doing business with Iran, and to encourage them to 
take complementary steps. We will continue aggressively to 
target Iran's proliferation networks, support for terrorism, 
sanctions evasion, abuse of human rights and complicit 
financial institutions. And we will continue to work closely 
with Congress in each and every one of these endeavors because 
we know that we share a common objective, ensuring that Iran 
does not obtain a nuclear weapon.
    Thank you.
    Chairman Royce. Thank you, Mr. Cohen.
    [The prepared statement of Mr. Cohen follows:]


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                              ----------                              

    Chairman Royce. I will make a quick announcement here. 
Members, following this committee hearing, Ambassador Sherman 
and Mr. Cohen will make themselves available to answer 
questions requiring a classified setting. We will do that in 
the SCIF. Everyone is encouraged to attend. We will go now to 
questions.
    I am encouraged by the fact, actually in both testimonies 
of Ambassador Sherman and yours, Mr. Cohen, that you express a 
willingness to work with the committee to continue to give the 
administration more options to pressure the Iranian regime. 
However, turning to the P5+1 negotiations that you referenced 
in your written testimony, I know that many committee members 
were concerned to read in the press that we had been offering 
to ease precious metal sanctions. And as you put it, Mr. Cohen, 
in your testimony, Iran is desperate for sanctions relief. So 
now is the time, we feel, to step up the pressure. And on that 
note you testified that we will actively investigate any sale 
of gold to the Iranian regime.
    With its currency now in free fall, the Iranians 
desperately need to acquire gold, and as you note, you have an 
Executive Order that would allow you to target those who would 
provide gold to the regime. As of July 1, the law will allow 
you to go after those providing gold to anyone inside Iran.
    There have been reports that there has been a pickup in 
gold sales, and that is the question I want to ask of you. Who 
specifically have you sanctioned for gold or related 
transactions with the Government of Iran, and given that the 
transfer of any precious metals or gold to Iran will be in 
violation of U.S. law after the 1st of July, what is the Obama 
administration going to do before July 1 to prohibit transfer 
of gold to Iran?
    Mr. Cohen. Mr. Chairman, we are obviously aware of those 
reports, and we are tracking very closely the sale of gold to 
Iran, because, as you note, as of last July the Executive Order 
adopted by the President makes sanctionable the sale of gold to 
the Government of Iran.
    We have been very clear with our counterparts around the 
world and with the private-sector actors that this provision is 
one that we take very seriously and that we intend to enforce, 
and I can assure you that we are looking very, very carefully 
at any evidence that anyone outside of Iran is selling gold to 
the Government of Iran.
    If I could have just one more moment, I think there is some 
important information on this topic that I want to share with 
you in the closed session afterwards that I think bears on your 
question.
    Chairman Royce. Okay. We will look forward to that.
    There is a new report that estimates that between July 
2012, when the Executive Order was signed, and last month, Iran 
received over $6 billion in gold. Now, that is about 10 percent 
of Iran's total $60 billion oil exports for 2012. So for the 
first quarter of this year, gold exports to Iran amounted to 
$1.33 billion.
    The other question I would just ask you is what action is 
the Obama administration prepared to take against Turkey's 
state-owned bank, Halkbank, whose continued business dealings 
with Iranians through gold fly in the face of international 
sanctions?
    Mr. Cohen. Mr. Chairman, this administration, I think, has 
demonstrated that it will apply our sanctions without fear or 
favor. We have applied sanctions to persons and entities in 
countries that are our allies, in countries that are not so 
much our allies. We pursue the facts, we pursue the evidence, 
and we will continue to do so.
    With respect to the gold provision in the legislation that 
goes into effect on July 1, we have also been out around the 
world making certain that anybody who is engaged currently in 
the sale of gold to Iran, to the private citizens in Iran, 
understand that as of July 1 any sale of gold to Iran, whether 
to the government or to private citizens, is sanctionable under 
the new provision that goes into effect as of July 1. We have 
been clear that that July 1 date is a real date, and that after 
July 1 any sale of gold to Iran is something that we will 
pursue vigorously.
    Chairman Royce. Let me go to Ambassador Sherman for a 
question.
    Last month's talks in Kazakhstan did not seem to achieve 
any progress toward curbing the ambitions in Iran toward their 
weapons, and in response Secretary Kerry said the talks cannot 
be allowed to become a process of delay. We have heard similar 
statements over the last 5 years, yet, of course, we continue 
to talk, and Iran continues to enrich.
    I was going to ask you about press reports that have 
indicated that the P5+1 offered to ease some level of sanctions 
on Iran if it demonstrated seriousness. In order for Iran to 
receive relief from the U.S. sanctions, what actions, then, are 
we demanding of Tehran, and is it still the position of the 
U.S. that Iran must suspend all nuclear activity as required by 
several U.N. Security Council resolutions? I don't think we are 
relenting on that. Let us hear from you.
    Ambassador Sherman. Thank you very much, Mr. Chairman.
    Indeed, the ultimate goal of any negotiation is that Iran 
come into full compliance with U.N. Security Council 
resolutions, as you suggest. So that is the goal. What we have 
put on the table, and did so a couple of meetings ago with Iran 
in Baghdad, was a proposal that is a confidence-building 
measure to address their over 5 percent enriched uranium 
efforts, their stockpiles in Fordow, in return for very, I must 
say, small but with some meaningful actions in the sanctions 
regime, as well as to assist in a couple of other efforts 
around nuclear cooperation, in part to follow through on the 
safeguards that are necessary.
    We did this because we want to get some time to negotiate a 
comprehensive agreement to come into full compliance, and that 
takes time, as you know, Mr. Chairman, because you understand 
this problem quite well. Stopping their nuclear program and all 
the components of it is a very highly technical matter. And so 
everything that we do takes a lot of implementation, a lot of 
monitoring and verification to ensure that there is compliance.
    When we were at Almaty this last time, it was much better 
in process terms in that there were quite substantive 
discussions, all on the nuclear program, all on the elements of 
the nuclear program we have been discussing, and quite a bit of 
direct back-and-forth with each one of us, including with me. 
And as Secretary Cohen indicated, for the first time Iran 
evidenced their concern about sanctions and the need for 
sanctions relief to come into compliance. So it is a measure of 
the importance of sanctions, no doubt about it.
    But the P5+1, we are entirely united. We thought that what 
Iran offered in response to our confidence-building measure was 
far too little. As one of my colleagues put it, we are on 100-
kilometer--this was a European--a 100-kilometer effort. Our 
confidence-building measure maybe is 20, 25 kilometers along 
the way, and we thought our package was balanced with 25 
kilometers in return. To be generous, Iran put 5 kilometers on 
the table and wanted 75 to 100 kilometers in return, and that 
is not going to happen.
    Even though some of my colleagues in the P5+1 obviously 
have a variety of views, we stood united. We told Iran we could 
not schedule another meeting until they went back and talked to 
their government and were ready to put more substance on the 
table. Then we would consider meeting again. And, indeed, that 
is the message that the High Representative is delivering at 
dinner tonight, to see what the Iranians are coming to the 
table with and whether it is worth pursuing a meeting.
    The one last thing I want to say is we must ensure that we 
do everything we possibly can to show that diplomacy has or has 
not worked, because whatever actions we ultimately may have to 
take will require international support. So we must show that 
we have taken every last opportunity at a peaceful solution.
    Chairman Royce. Thank you, Ambassador Sherman.
    We will go to Mr. Engel of New York.
    Mr. Engel. Thank you, Mr. Chairman.
    I want to piggyback on a couple of the chairman's 
questions.
    Can you confirm whether Turkey continues to send gold to 
Iran in exchange for natural gas?
    Mr. Cohen. Congressman, there is no question that there is 
gold going from Turkey to Iran. In large measure what we see is 
Iranian citizens purchasing gold as a way to protect themselves 
from the declining value of the rial. So in some respects this 
gold trade that we see that is increasing is a reflection of 
the success of our sanctions in driving down the value of the 
rial.
    With respect to whether Turkey is paying Iran for its gas 
imports in gold, we can go into this in greater detail in the 
closed session, but I think the short answer to that is we do 
not see that occurring.
    Mr. Engel. Wouldn't you agree--I mean, I would think that 
such an arrangement is a violation of U.S. law. Wouldn't you 
agree?
    Mr. Cohen. I think it would be.
    Mr. Engel. Thank you.
    We talk about Iran, Ambassador Sherman, you mentioned that 
they weren't really putting much on the table, and that was the 
message that Lady Ashton is going to be conveying today at that 
talk. At what point, though, do we say, enough? You know, I 
know it is a difficult question, obviously, because there are a 
million nuances, but when will the administration no longer 
consider diplomacy to be an option? At some point I think 
obviously we need to make a judgment on that.
    Ambassador Sherman. Sure, and we make those judgments on a 
constant basis every time we sit down to talk with the 
Iranians.
    Congressman, what I would say is that the President has 
said that he believes there is still time for diplomacy, as 
does Secretary Kerry. In fact, our close ally, Israel, the 
Prime Minister of Israel has said there is still time for 
diplomacy.
    But we all know that the clock is ticking, and in our 
classified session we can talk about more the various clocks 
that are ticking and at what point we will even increase our 
concern beyond what it is today. But I don't think the time has 
run out yet for diplomacy, and as I indicated to the chairman, 
we have to give it every effort. The world needs to know we 
have tried in every way to reach a peaceful solution.
    Mr. Engel. Thank you.
    I want to ask a question about Russia. How cooperative is 
Russia regarding Iran sanctions and other aspects of the Iran 
issue? Have our disagreements with Russia over Syria affected 
our ability to cooperate with them vis-a-vis Iran? Let me ask 
you that question, and then I have a follow-up question.
    Ambassador Sherman. Sure.
    We actually have a very, very good working relationship 
with Russia when it comes to Iran. They are obviously producers 
of oil, so oil has not been an issue with Russia. They are, in 
fact, enforcing the U.N. Security Council resolutions and have 
not come into conflict with us on our unilateral sanctions.
    Sergey Ryabkov, who is my counterpart in Russia, is quite a 
terrific professional. He represents his country's interests 
vigorously, but works in a very united fashion with the P5+1 in 
a very professional manner.
    Mr. Engel. I am concerned with Russia's support for Assad 
in Syria. In your view, why is Russia backing Assad so strongly 
even at the cost of their reputation in the Middle East and 
fanning the flames of Islamic extremism? Is it primarily to 
show themselves to be an alternative to the U.S.? Because 
recent reports have shown that Assad is gaining, and my fear is 
that we could end up with an Assad regime, just without Bashar 
Assad at the helm.
    I believe that the falling of Assad would be a blow to 
Iran, because Assad is obviously Iran's proxy, weapons going 
from Iran through Syria into Lebanon, weapons that Israel just 
took out, but that has been a constant. So what is Russia 
doing? Is it primarily showing themselves to be an alternative 
to the United States?
    Ambassador Sherman. Well, I think, Congressman, Russia has 
many both geostrategic and commercial interests in Syria, and 
Syria has been its anchor in the Middle East, and so it has a 
lot invested.
    I don't believe, as Secretary Kerry has noted after his 
meeting with President Putin and Secretary Lavrov, that Russia 
is necessarily tied to any one individual in Syria, but rather 
wants to protect its interests in Syria. I think that it is a 
positive thing that the United States and Russia, under the 
auspices of the U.N. and working with partners and allies 
around the world, are moving to organize a Geneva II to have 
the opposition sit down with representatives of the regime to 
get to a transitional government with full executive powers by 
mutual consent. And by that very definition, it will not 
include Assad, because the opposition would never consent to 
Assad being part of that transitional government.
    So we think this is a positive thing. There is no cease-
fire attached to this. The actions on the ground will continue. 
I think that both General Idres and the Syrian opposition 
coalition are trying to organize and strengthen their efforts. 
There are many players in the world that are helping them to do 
that. We are with nonlethal means. So I think that we are on a 
path working with Russia to get to a better place and to end 
the violence that has cost at least 82,000 lives, millions of 
refugees and internally displaced people, and horrific attacks.
    Mr. Engel. Let me just say in conclusion, I really believe 
that we have a vital national security interest in ending the 
strategic relationship between Iran and Syria and severing 
Hezbollah's lifeline to Tehran, and I hope we all continue to 
work toward that goal.
    Ambassador Sherman. I quite agree.
    Mr. Engel. Thank you.
    Thank you, Mr. Chairman.
    Chairman Royce. We go now to Ileana Ros-Lehtinen of 
Florida.
    Ms. Ros-Lehtinen. Thank you very much, Mr. Chairman.
    As you know, for years this committee has led the Congress 
in efforts to stop Tehran's nuclear progress. We have enacted 
several rounds of sanctions, legislation that has worked to 
stun the regime, exacting pain on Iran's economy.
    Under Secretary Cohen, I would like to commend and applaud 
the Office of Terrorism and Financial Intelligence for its work 
in enforcing and improving sanctions on the Iranian regime. 
Last week Treasury designated an Iranian financial institution, 
the Iranian Venezuelan Bi-National Bank, using authorities 
aimed at freezing the assets of proliferators of weapons of 
mass destruction and their supporters. Keep it up. Thank you.
    For years I have been concerned about Iran's increased 
efforts in the Western Hemisphere, especially the strong 
footprint that it continues to have in Venezuela. Several 
Presidential candidates in Iran right now have arrest notices 
issued by Interpol because of their participation in the 
bombing of the AMIA Jewish Community Center in Argentina. What 
further actions can your Department take to discourage Iran 
from using Venezuela, and from getting into other countries to 
circumvent U.S. sanctions? What is your assessment of Iran's 
activities in the Western Hemisphere?
    We have got to continue to ensure that companies or 
financial institutions that are violating U.S. sanctions are 
not overlooked, are held accountable, but I have been more than 
dismayed by the lack of urgency from the administration on this 
threat to our national security, and the security of our ally, 
the democratic Jewish State of Israel, that is in jeopardy.
    Without learning from the mistakes that we have made with 
the North Korean nuclear program and the Six-Party Talks, the 
administration still believes that Iran can be disarmed with 
diplomacy. It views Iran's nuclear program through rose-tinted 
glasses, refusing to see what is self-evident to all: 
Diplomatic overtures have not and will not ever work with Iran.
    Ambassador Sherman, when you testified before this 
committee in October 2011, you said correctly, sanctions are 
most effective when they are severe and when they are enforced. 
Yet 2 years later the administration continues its engagement 
policy. Do you believe that engagement with Iran will yield 
positive results? What concessions has the administration 
offered to keep negotiations on the table, if any?
    And the latest round of P5+1 negotiations with Iran have 
ended in failure yet again, as you pointed out. The only thing 
that has changed is Iran being closer to nuclear weapons 
capability. It is like Charlie Brown and the football. When 
will the administration learn that Lucy will still pull that 
football away?
    I agree that sanctions must be fully and vigorously 
enforced. Why then does State continue to not fully implement 
certain sanctions? Why do you provide waivers on others, like 
repeatedly providing 20 sanction waivers to countries buying 
Iranian crude oil?
    Also this week the administration announced that the U.S. 
will not participate at the ambassadorial level in the upcoming 
conference on disarmament upon hearing that Iran is set to 
chair this session, but stopped short of saying that we will 
withdraw completely, and so we miss yet another opportunity to 
bring about change at the U.N. Iran chairing the disarmament 
conference is like allowing the inmates to run the prison. We 
should make it clear to the U.N. that it must immediately 
remove Iran from chairing this conference, bar it from 
attending, or lose U.S. support and funding. Will we ever do 
that?
    I will start with you, Mr. Cohen, 1 minute.
    Mr. Cohen. Well, first, Congresswoman, let me say thank you 
very much for your kind words. I know that for the hundreds of 
dedicated career civil servants who work in the Treasury 
Department, what you have to say is very much appreciated, and 
I appreciate your words.
    With respect to the actions that we take in Venezuela, and 
the Western Hemisphere more generally, as you note, we 
designated the Iranian Venezuelan Bi-National Bank last week. 
We have in the past designated IRGC-related entities that are 
involved in the construction industry in Venezuela.
    We are very much focused on any efforts by Iran to expand 
its footprint in South America and Central America. Whether it 
is through the IRGC, through their intelligence services, 
through their efforts to export oil, whatever it may be, this 
is something we are tracking extremely closely and are poised 
to respond.
    Ms. Ros-Lehtinen. Thank you very much. My time is up. Thank 
you, Ambassador.
    Chairman Royce. We will go now to Mr. Sherman of 
California.
    Mr. Sherman of California. First let me say that there is 
no contradiction among those of us who believe in maximum 
sanctions and continued negotiations. In 1918, we negotiated 
with the Kaiser's Germany while not only sanctioning, but also 
waging all-out war.
    The sanctions we have now are clearly insufficient, but 
they are stronger than the ones we had 3 years ago, which begs 
the question why weren't we doing 10 years ago, 15 years ago 
what we are doing today, certainly after 2002 when we were 
aware of the Iranian nuclear program? The reason for that is 
that there have been advocates in the last three 
administrations of soft sanctions, of ``be nice to them, and 
they will be reasonable to us.''
    And I don't know what our policy is now. I know that more 
sanctions are going to require methodology and technical work. 
We have to think of new ones. You have to get them applied. But 
we first face the policy issue. Do we want strong sanctions, or 
do we want ``pedal to the metal, absolute everything we can 
do'' sanctions? I heard from Mr. Cohen about increasing 
sanctions. Gee, shouldn't we have them at the pedal-to-the-
metal level now? And I wonder whether there is still support in 
the foreign policy agencies for being less than totally tough 
on Iran, or is it our policy to be absolute pedal to the metal, 
to sanction and pressure the Iranian Government and economy in 
every way we possibly can as we develop new methodologies?
    Are we being softer than maximum in an effort to curry 
favor with Iran? Ambassador Sherman?
    Ambassador Sherman. Congressman Sherman, we are absolutely 
pedal to the metal, because it is a dual-track policy----
    Mr. Sherman of California. Thank you. I don't know whether 
Mr. Cohen has a response as well.
    Ambassador Sherman. I just want to, if I may, sir, add one 
thing to that. We have to be pedal to the metal, but make sure 
that the pain is felt on Iran first and foremost. So we have to 
do it in a way that makes sure that as we work with our friends 
and allies around the world, they are not getting more pain 
than Iran is. And I know you are working carefully with us to 
do so.
    Mr. Sherman of California. Okay. Let us see about pedal to 
the metal.
    Mr. Cohen, we have got the Bank Kunlun of China, which has 
been sanctioned, but it doesn't do any business with the United 
States, so the sanction is meaningless. Its parent corporation 
is the China National Petroleum Corp., which does do business 
with the United States and has not been sanctioned. Are we in 
effect telling all of international business, you can do all 
the business you want with Iran, as Kunlun Bank has, just do it 
in a separate subsidiary so your parent corporation can do 
business in America, and you will have a separate subsidiary to 
do business with Iran?
    Are we going to sanction China National Petroleum Corp., or 
are we just going to say, you can do business with Iran; just 
set up a separate subsidiary?
    Mr. Cohen. Congressman, the sanction against Bank of Kunlun 
has had real effect. As you know, Kunlun did not have any 
corresponding accounts with the United States, but it did have 
a number of corresponding accounts with other banks around the 
world.
    Mr. Sherman of California. Mr. Cohen, if I can reclaim my 
time, it is obvious that the sanctions could be much tougher 
and much more significant. You can say there was some slight 
effect on Bank of Kunlun, but why have we not sanctioned the 
China National Petroleum Corp., which would obviously have a 
much bigger impact than the little bit of impact that may or 
may not have occurred with regard to Kunlun?
    Mr. Cohen. The conduct at issue that led to the sanction of 
the Bank of Kunlun was transactions by a financial institution 
with designated Iranians banks. We applied sanctions to the 
Bank of Kunlun, and then we went to every one of Kunlun's 
correspondents around the world and----
    Mr. Sherman of California. Mr. Cohen, you are not answering 
the question. Why haven't we sanctioned China National 
Petroleum Corp., the parent corporation?
    Mr. Cohen. Well, the technical answer, Congressman, is that 
the authority to sanction Bank of Kunlun is an authority to 
sanction a financial institution. That is the authority we 
have.
    Mr. Sherman of California. So are you going to be 
advocating in our next bill that we give you any authority you 
might need? Is the administration in favor of giving you the 
tools to sanction the China National Petroleum Corp.?
    Mr. Cohen. I think the answer, Congressman, is what 
Ambassador Sherman----
    Mr. Sherman of California. Let me sneak in one more 
question, and that is why haven't we sanctioned all Iranian 
banks? You have done 23. Why haven't you done the rest?
    Mr. Cohen. We have sanctioned 28 Iranian financial 
institutions. We have sanctioned those institutions where we 
have evidence that they have either supported Iran's nuclear 
program or supported its international terrorist activity. 
Every single one of the banks for which we have evidence, we 
have applied that.
    Mr. Sherman of California. Excuse me. All these banks are 
operating under the regulation and control of the Iranian 
Government, which is a terrorist organization. You should 
sanction all the banks immediately. If you are going to have to 
wait for a smoking gun on every Iranian bank, all they have to 
do is create three or four more, and they can continue to do 
business. Every bank that responds--if you are going to say you 
are pedal to the metal, you got to do all Iranian banks, not 
just say, well, they created a new one, and we don't have a 
smoking gun for that one yet.
    I believe my time has expired.
    Chairman Royce. We go now to Mr. Smith of New Jersey.
    Mr. Smith. Thank you, Mr. Chairman.
    Thank you, Ambassador Sherman, for raising the issue of the 
Levinson, Abedini, and Hekmati cases, which are very, very 
important.
    A few weeks ago Naghmeh Abedini testified before a Lantos 
Commission hearing that Frank Wolf chaired and said that she 
had asked the State Department for help, and she said they told 
her, nobody can do anything for you. All of us welcomed with 
gladness and gratitude when Secretary Kerry made a very strong 
statement on behalf of Saeed Abedini, an American pastor who is 
now in prison. I wonder if you could update us as to exactly 
how he is doing and what has been done to try to effectuate his 
release.
    Ambassador Sherman. Thank you.
    We remain very concerned about Mr. Abedini. He was 
spearheading, as some of your colleagues may not know, the 
construction of an orphanage in 2009 when the Revolutionary 
Guard detained him and threw him into prison. And it really is 
an incredible outrage. And as you noted, on March 22, Secretary 
Kerry issued a statement expressing his concern over reports 
that Mr. Abedini had suffered physical and psychological abuse 
in prison; that Iran had continued to refuse consular access by 
Swiss authorities, who is our protecting power in Iran; and 
calling for his immediate release.
    We condemn, and I will again here today, Iran's continued 
violation of the universal right of the freedom of religion, 
and call on the Iranian authorities to respect Mr. Abedini's 
human rights and release him. I quite understand why his family 
feels that not enough has been done. As a wife, as a mother, if 
one of my children or my husband were in a prison, I would 
never think there was enough until they were home safe and 
sound with me.
    Mr. Smith. Thank you. I appreciate that very much.
    In December, Secretary Clinton renewed an exemption to our 
Iran sanctions that targeted Chinese financial transactions 
with the Central Bank of Iran, citing significant reduction of 
Beijing's purchases of Iranian oil over the prior 6 months. But 
the publicly available data suggests that no such reduction had 
taken place.
    I would ask you, has it? Will you provide the committee 
with the data that supports the Department's exemption 
decisions? And my understanding is we are talking about between 
1-1.4 million barrels in totality that are being exported a 
day. If you could respond to that?
    Ambassador Sherman. Indeed, China reduced its oil imports 
from around by 21 percent in 2012 compared to the previous 
year, and I think, as part of his written testimony, Under 
Secretary Cohen offered a chart to show the downturn in oil 
imports overall from out of Iran, exported out of Iran.
    In terms of the next exception that China would be eligible 
for, which comes up in June, we are looking at the data. The 
data always lags behind. We are waiting for April data, 
obviously. It will probably be the last month we will get to 
see. And we will look at that data and make a decision about 
how to proceed. As you know, China is the largest importer of 
Iranian oil. Is larger--probably is the largest importer of oil 
in the world, given its growing development----
    Mr. Smith. Can I ask you on that--only because I only have 
so many minutes. Isn't the export of Iranian oil to China its 
lifeline? You know, when you talk about ratcheting up the kinds 
of sanctions, will it really cause the change?
    Ambassador Sherman. Indeed. And we press China constantly, 
and it is significantly reduced because it doesn't want to bear 
the risk of importing Iranian oil, but its needs are growing 
and huge. I will say one thing that is very important: Because 
of the volume, as you point out, is so large, any reduction by 
China would be as a percentage equal to volume reduction twice 
that of a reduction by India, three times a reduction of South 
Korea, four times a reduction of----
    Mr. Smith. But is there a concern that if we really were 
dead serious and were not looking to provide an exemption and 
didn't play into the idea of reductions versus elimination, 
that China would not adhere to the sanctions? Is that a 
concern?
    Ambassador Sherman. Well, China, like many countries in the 
world, even friends and allies and partners, doesn't appreciate 
what they see as unilateral sanctions. But they are trying to 
diversify their oil supply, they are trying to reduce their 
risk. Their energy needs, as you can imagine and as you know 
well, are enormous.
    Mr. Smith. Very quickly, because I am running out of time. 
As we all know, Chairman Emeritus Ros-Lehtinen wrote the Iran 
Threat Reduction and Syria Human Rights Act of 2012, a very 
comprehensive and significantly strengthening law; it 
strengthens Iran Sanctions Act and other relevant laws. I could 
ask you questions about various sections of it because there is 
so much to it. But part of it directs the President to impose 
five or more sanctions with regards to vessels. And it also 
authorizes the President to ban ships from entering a port in 
the U.S. for up to 2 years if they violate it. Where are we on 
implementing that part of the sanctions?
    Ambassador Sherman. We are looking at those. In every one 
of these cases, and it is true for all of the sanctions, we 
have to have evidentiary documentation that will stand up in 
court. And so we are working to do this. And I should note that 
Secretary Clinton, before she left, and this has been enforced 
and strengthened even further by Secretary Kerry, named a 
sanctions coordinator in the State Department because she felt 
we were not focused enough on the enforcement that we needed to 
and didn't have a strong enough partner for Undersecretary 
Cohen, and Ambassador Dan Fried is that coordinator.
    Mr. Smith. Is it proactive or reactive or a combination of 
both?
    Ambassador Sherman. It is proactive.
    Mr. Smith. Thank you.
    Chairman Royce. Go now to Mr. Deutch of Florida.
    Mr. Deutch. Thank you, Mr. Chairman.
    First, as I stated in my opening remarks, I do want to 
commend you both again for the extraordinary job that you have 
done on sanctions enforcement.
    And Ambassador Sherman, I want to thank you for noting in 
your testimony that finding my constituent Robert Levinson 
remains a priority for the department. It is incredibly 
encouraging for me and I know for his family to hear you say 
that. And I appreciate it. And I urge you to continue doing all 
that you are committed to doing.
    You said that in your testimony that you are looking for 
signs that Iran is serious about talks. And I want to ask you 
what those signs are. But I want to walk through how we have 
gotten to this point first. Since the 2009 elections in Iran, 
there have been nine political-level meetings between the P5+1, 
plus a 15-month break between 2011, 2012. That number doesn't 
include technical-level meetings or meetings like today's 
between Lady Ashton or the where the U.S. isn't present.
    At the end of the 2010 Geneva talks, State Department 
spokesman said that he hoped it would be the start of something 
serious. In 2011, in Istanbul, a Western diplomat was quoted as 
saying, ``The meeting was about finding out if Iran was serious 
about negotiating and that hasn't been answered yet.''
    Fast forward to April of last year, after talks in 
Istanbul, when Catherine Ashton called them ``the start of a 
sustained process of serious dialogue.'' And by June of last 
year, after talks in Moscow, Secretary Clinton said that 
``there are gaps on each side; the choice was Iran's to close 
those gaps.'' In your testimony, you said that after the April 
talks in Almaty that you didn't feel another round of meetings 
of P5+1 was necessarily warranted. So some have suggested that 
Iran won't be serious about negotiating until after its 
elections. Couple of questions. Are we willing to wait until 
the end of the summer for another round of talks? And, how can 
we tell if they are serious? Is there a difference between 
sustained political dialogue and negotiations? Is talking for 
the sake of talking getting us any closer to Iran giving up its 
nuclear program? If you could try to respond to those, I would 
appreciate it.
    Ambassador Sherman. All very good questions, Congressman. 
In terms of the election, we assess--and we can talk about this 
further in the closed session--that there is one decision maker 
when it comes to Iran's nuclear program, and that is the 
Supreme Leader. And he will remain the Supreme Leader after the 
June 14 Presidential election. So, in absolute terms, the 
election will make no difference. The election may make some 
difference, however, to the extent that, depending upon who is 
elected and what their economic--domestic, economic situation 
looks like, may put pressure on the attention, the time and the 
focus and the efforts by the Supreme Leader to hold onto the 
regime. We don't know what the outcome will be, so we don't 
know what impact it will have on his nuclear decision-making.
    As I said, or implied, we do not believe the Supreme Leader 
has yet made the strategic decision to make the deal that needs 
to be made with the international community about Iran's 
nuclear ambitions. What will make him make that change? I 
believe it will be a combination of very severe, very well 
enforced international sanctions led by the U.S. and the 
European Union, but internationally enforced. And it will come 
about because the Supreme Leader will decide that the risk to 
his survival is too great and that he wants to show his people 
that their economy will improve.
    Mr. Deutch. So let me ask you. Let me just put something on 
the table that has not been discussed. Every discussion that we 
have about stopping Iran's nuclear weapons program says that we 
have to have the toughest possible sanctions coupled with a 
credible military threat. Every discussion. And I acknowledge 
that we have worked hard to do both.
    The question is, the credible military threat, if it is 
credible, means that the possibility of military action, with 
all that that entails, between where we are now and the use of 
military force, it seems there is also the most extreme form of 
economic power that we could wield, which would be a full-scale 
international embargo with the necessary carve outs for 
humanitarian aid. That is never discussed. Yet we seem okay to 
talk about the military option. Is that something that should 
be on table for the Supreme Leader to understand that we are 
serious about this?
    Ambassador Sherman. We have all, in fact, discussed this, 
and I know you have discussed it up on Capitol Hill. And we 
have discussed it with some of our allies and partners. It is a 
very complex undertaking because it requires the international 
community. There are some legal issues involved with taking 
such action. I think that we are going as far as we possibly 
can go in working with Congress. We will see what other sectors 
we can, in fact, sanction and endorse and to move forward with. 
And I think we can ratchet up the pressure probably without 
confronting some of the difficulties and achieving what we have 
discussed, and that is whether that is a viable option.
    I think the other thing we have to do is look at whether 
there is any other way that Iran could find itself out of the 
quagmire it has created for itself. And the President has long 
said that if Iran ever, ever meets its international 
obligations, as President Bush said as well, they have a right 
to a peaceful civilian nuclear program under the NPT. And of 
course, there would have to be additional safeguards and 
monitoring. And if, in fact, the Supreme Leader means what he 
says by the fatwa that Iran does not--shouldn't have a nuclear 
weapon because it is not allowed by his declaration by the 
fatwa, then they have a way to show that is the case.
    Mr. Deutch. Ambassador, I would just simply suggest that 
all of the difficulties that may come with analyzing how to 
impose the maximum level of sanctions pale in comparison to the 
difficulties the international community would face if Iran 
became a nuclear power. That is just something that I would 
remind you of.
    I yield back. Thank you Mr. Chairman.
    Chairman Royce. We will go now to Mr. Rohrabacher of 
California.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    And I want to thank our witnesses for coming here. I will 
have to say that several of the issues that I planned to ask 
about have been covered.
    I want to congratulate some of my friends, even on the 
other side of the aisle. Mr. Sherman certainly looked at an 
issue that I was concerned about and continue to be concerned 
about.
    Let me see if I get this right. At this point, China is 
not--has not been given a waiver in its relationship to buy oil 
from Iran? Is that correct? So China----
    Ambassador Sherman. It is not a waiver; it is an exception. 
Because the idea of the NDAA and of the oil sanctions is that 
if a country significantly reduces their importation of Iranian 
oil, they get an exception from other sanctions that could be 
imposed upon them if they weren't making those significant 
reductions. So China will be up for another 180-day exception 
if they have continued their reductions on the beginning of 
June.
    Mr. Rohrabacher. And how much oil has been reduced, 
consumption, China?
    Mr. Sherman. We do not know yet because the data is not all 
in for the month of April, which will be the last month we will 
be able to look at before----
    Mr. Rohrabacher. What has given you the reason for--yes.
    Ambassador Sherman. For the first 180 days, they did do a 
significant reduction of 21 percent. That was based on a great 
deal of information, including publicly available data.
    Mr. Rohrabacher. So you are convinced and we are convinced 
that the Chinese have significantly decreased their consumption 
of Iranian oil. Is that correct?
    Ambassador Sherman. They have. And their total volume of 
the need of oil has gone up. So whatever importation they are 
doing is a smaller percentage of their total as well.
    Mr. Rohrabacher. No. They decreased their actual 
consumption.
    Mr. Sherman. Yes. They have. And we will see whether they 
have in the second 180 days as well.
    Mr. Rohrabacher. I am not talking about some complicated 
formula here. Their consumption of Iranian oil has decreased. 
Is that correct?
    Ambassador Sherman. Yes.
    Mr. Rohrabacher. Okay. Thank you very much.
    I have been concerned that this administration from day one 
has not been as tough on the regime in other ways, other than 
these sanctions, which are debatably tough one way or the 
other.
    But, for example, in support of those people who opposed 
the regime, it appears to me that we have sent the wrong 
message if we want to encourage those who oppose the regime. 
And, for example, you see some people out here in these yellow 
coats. I think that they represent the MEK. They recently have 
been pushed into a camp in Iraq, which I am sure you are aware 
of. And that camp was recently attacked. Do you think that the 
mullah regime in Iran has played any role in trying to initiate 
these types of attacks on the MEK, which I might add is an 
exiled group that is unarmed?
    Ambassador Sherman. Congressman, I am very, very concerned 
about the people in Camp Liberty.
    Mr. Rohrabacher. Right.
    Ambassador Sherman. And we are concerned about the threat 
to their lives.
    Mr. Rohrabacher. And do you think the Iranian Government 
has played a role in initiating these attacks?
    Ambassador Sherman. We can talk about that in the 
classified session.
    But what I will say, Congressman, is there are 
opportunities for the people of Camp Liberty to resettle. There 
have been offers made by countries like Albania to take many of 
them. And, to be very frank, Congressman, the leadership of the 
MEK, both in Camp Liberty and in Paris, has kept the people of 
Camp Liberty from knowing what their options are. And I so care 
about their lives and the threat to their lives in the camp 
that I hope that the leadership of the MEK will allow them to 
know their options.
    Mr. Rohrabacher. My time is going up. And it is interesting 
that you spent your time that you just allocated attacking the 
victim instead of the person who--instead of the people 
launching rockets into an unarmed group of exiles, you spent 
your time attacking the exiled leader.
    Ambassador Sherman. No. I am actually--I actually want to 
protect that from that.
    Mr. Rohrabacher. I have got 23 seconds left. And I am sorry 
that is the way we have to do it here.
    I would give you an extra 10 minutes if I could.
    But let me just note--what I just said is in keeping and 
consistent with the fact that after the Green Revolution, which 
you have noted was a response, these demonstrations in response 
to a corrupt election, and a brutalization of those people who 
managed to speak up, that we did not impose great hardship on 
that regime. I didn't hear us step forward at that time.
    They were chanting in the streets, ``Which side are you on, 
Mr. Obama?'' They didn't know which side the United States was 
on. And if we are going to have the people of that country 
eliminate this threat to the entire world, which is their 
responsibility and our responsibility to help, we have got to 
show more strength than that. We have got to be doing more than 
attacking the victim or ignoring the victim.
    And the last thing, we don't even have our broadcasting to 
Iran in Azeri and Beluch, languages that could resonate with 
the people who oppose that regime.
    There is a lot more we could be doing, Madam Ambassador. I 
appreciate the good job that you are trying to do, and we will 
cooperate with you.
    Ambassador Sherman. Thank you.
    Chairman Royce. We go now to Mr. Cicilline of Rhode Island.
    Mr. Cicilline. Thank you, Mr. Chairman.
    And thank you to our witnesses.
    I think it should be clear that everyone on this committee, 
and I think everyone in Congress who has given this thought, 
recognizes that a nuclear Iran is a threat to the peace and 
stability of the region and, frankly, peace and stability of 
the world.
    And I appreciate the seriousness of the sanctions effort 
that both of you have exhibited and the excellent work that you 
have done and the bipartisan approach that Congress has taken 
to this issue.
    And I would like to ask you both, first and foremost, to 
follow up on Congressman Deutch's question, you know, as we 
ratchet up sanctions, which, of course, we need to do, while we 
are engaging in activities, so is Iran. And so I wonder if some 
of the recommendations that some have made about, for example, 
a complete ban on international lending, with the International 
Monetary Fund withdrawing all holdings in Iran's Central Bank 
and suspending Iran's membership in that body, whether 
sanctions, which would include virtually all trade with Iran, 
with the exceptions of food and medical products, whether or 
not we should be at least actively pursuing those and talking 
about that kind of set of sanctions, whether that would 
significantly increase our leverage. Because I recognize we 
want to continue to hope that diplomatic efforts will work, but 
for those who are looking at this from outside, it may appear 
that we just ratchet up a little, and it is going to be too 
late because we get--so I would love to hear your thoughts on 
whether or not an approach that would look at more 
comprehensive and a complete kind of isolation of Iran ought to 
be the goal, knowing that is complicated to achieve but would 
take some time but for Iran, Iranian leadership to see it as a 
real threat.
    Then the second question--I will ask both questions and 
then ask you to answer them--relates really to Afghanistan. 
There has been some evidence presented that Iranian currency 
traders are using Afghanistan to acquire U.S. currency, 
particularly wealthy Iranians. And that the Iran-owned bank in 
Afghanistan, Arian Bank I believe is the name, is being used to 
facilitate this. And, in fact, the Special Inspector General 
for Afghanistan Reconstruction reported in late January 2013 
that Afghan security forces might be using some U.S. funding 
for the purchase of fuel from Iran. That would, obviously, I 
think, be very disturbing to learn. So I would like to know 
what the status of that is and how we might be prevent that 
from happening.
    And thank you again for being here.
    Mr. Cohen. Congressman, your first question about how to 
ratchet up sanctions is a very good one. And I am going to try 
to answer it succinctly. Because I think there are two 
different threads that need to come together here.
    On the complete ban idea, I think it is very important to 
recognize that our financial sanctions, the way that we have 
locked down Iranian revenue, the way we have cut off access of 
Iranian banks to the international financial system, is broad 
based. It is--it affects the Iranian economy across all sectors 
and has a very significant impact, some of which we have 
already detailed.
    I think it is critically important that we continue to 
pursue broad-based financial sanctions in that fashion.
    The second thread, though, is targeting particular 
commercial transactions, in particular, sectors of activity in 
Iran. So the new law that is about to come into effect on July 
1, IFCA, targets the energy sector, the shipping sector, the 
shipbuilding sector. As we look at ways to ratchet up sanctions 
on commercial activity, looking at it as a sectoral approach on 
commercial activity makes sense. I think together a sectoral 
approach with the broad-based financial sanctions work in 
tandem in a way that really does create a tremendous amount of 
pressure on the Iranian leadership. Obviously, we are very much 
engaged with----
    Mr. Cicilline. Is there any reason we shouldn't do all 
those sectors now, rather than building one after the other?
    Mr. Cohen. The question, Congressman, is efficacy. And as 
we move and look at different sectors, it is important that we 
target the ones that have a real impact on the Iranians, that 
we can maximize that impact without, frankly, spending a lot of 
ammunition shooting at things that have little, little good to 
be--little impact.
    On the--the question of the Arian Bank/fuel issue, if I 
could, I think it is probably better to talk about that in the 
classified session.
    Mr. Cicilline. Thank you.
    Chairman Royce. We will go to Mr. Brooks of Alabama.
    Mr. Brooks. Thank you, Mr. Chairman. I turn to some of the 
written statements that the witnesses have provided us. And, 
first, I will read from Ambassador Sherman's remarks:

        ``A nuclear-armed Iran would pose a threat to the 
        region, to the world, and to the future of the global 
        nuclear proliferation regime. A nuclear weapon would 
        put the world's most dangerous weapons into the hands 
        of leaders who speak openly about wiping one of our 
        closest allies, the state of Israel, off the map. As 
        President Obama has stated unequivocally, we will not 
        allow Iran to obtain a nuclear weapon, and there should 
        be no doubt that United States all elements of American 
        power to achieve that objective.''

    Ambassador Sherman, I want to explore what you mean by the 
phrase ``we will not allow,'' I repeat, ``not allow Iran to 
obtain a nuclear weapon, and there should be no doubt, no doubt 
that the United States will use''--will use--``all elements of 
American power''--again, I'll repeat that--``all elements of 
American power to achieve that objective.'' That is very strong 
language. When you state ``all elements of American power,'' 
are any of America's military capabilities off the table?
    Ambassador Sherman. Congressman, I think the President has 
been very clear that all options are under consideration. I 
think that everyone in the world would prefer there be a 
peaceful resolution to this situation. But no one should have 
any doubt about where the President of the United States stands 
on this. He will not allow Iran to have a nuclear weapon. He 
has stood side by side with many of our partners and allies 
around the world, including Israeli Prime Minister Netanyahu, 
and said as much. So there is no pulling back from that stance, 
at all.
    Mr. Brooks. So when you say ``all elements,'' you mean all 
elements.
    Ambassador Sherman. I do.
    Mr. Brooks. That being the case, then, is it fair to say 
that President Obama is prepared to use, if necessary, 
America's nuclear arsenal to stop Iran from building nuclear 
weapons?
    Ambassador Sherman. I think it is probably most useful not 
for me to elaborate point by point on a situation that we have 
not yet faced. We have many elements of American military 
power, and we are able to achieve results in many, many ways.
    Mr. Brooks. Let me go to a second one, although I 
anticipate you will give a similar response. Then, President 
Obama is prepared to launch, if necessary, an Iraq- or 
Afghanistan-style ground invasion in Iran to stop Iran from 
developing nuclear weapons.
    Ambassador Sherman. Again, you are quite right, 
Congressman, we have many ways to fight Iran's efforts to gain 
a nuclear weapon. And they are wide-ranging, and they are along 
a very long continuum. And we will look at whatever we need to 
do to ensure that Iran does not obtain a nuclear weapon.
    Mr. Brooks. Just so that there is no ambiguity about my 
perception, when you use the phrase of ``all elements of 
American power,'' to me, that means, if necessary, America's 
nuclear arsenal or, if necessary, an invasion of Iran ala 
Afghanistan, Iraq style. So I am not sure if that is what you 
intended. But that kind of language means that to me, and that 
is what I was trying to clarify.
    Not long ago, I met with Israeli Prime Minister Benjamin 
Netanyahu in Jerusalem. He said unequivocally that Iran will 
not, will not get nuclear weapons. My question is, if Israel 
attacks Iran to destroy Iran's nuclear weapons program, will 
America back Israel up with direct military assistance in order 
to ensure, first, that Israel is successful in destroying 
Iran's nuclear weapons program and, second, to help ensure that 
Israel is able to protect itself from counterattacks?
    Ambassador Sherman. I think you have heard the President of 
the United States say, you have heard Secretary Kerry say, and 
I will say that we stand shoulder to shoulder with Israel. And 
Israel's security is important to us as our own security. And I 
think that you have seen in our support and Congress' generous 
support Iron Dome, that commitment. In the recently agreed-to 
new set of weapons sales to Israel that----
    Mr. Brooks. Okay. If I could interject, because I only have 
15 seconds left. I understand that Israel is important. But my 
question is, will we back them up militarily?
    Ambassador Sherman. We have a relationship with Israel to 
ensure their security.
    Mr. Brooks. Thank you, ma'am.
    Chairman Royce. Ms. Lois Frankel from Florida.
    Ms. Frankel. Thank you very much.
    And thank you to the panel.
    And, first of all, I want to join with both colleagues 
commended your activities and the sanctions, economic sanctions 
in Iran. And I thank you for that.
    As many of my colleagues have already stated, Iran is the 
largest state-sponsor of terror, lending support to Hezbollah, 
Hamas, and other anti-Western militant groups. Iran's extremist 
regime is also a gross violator of basic human rights that 
consistently suppresses political dissent through intimidation, 
imprisonment, and torture.
    And the international community is right to be greatly 
concerned by the possibility of this, what we hear is a 
radical, oppressive regime, acquiring the world's most 
dangerous weapon. I am not going to ask--there have been a lot 
of good questions today. I think a lot of people don't 
understand, not necessarily in this room, but that Iran's drive 
for nuclear weapons is a threat not only to the United States 
and Israel but to the entire global community. And the question 
I have is this: Could you tell us in your opinion what you 
think the effect of Iran getting the nuclear weapon would have 
on the proliferation of nuclear weapons in the Middle East and 
any other place in the world, if you could be specific? And how 
would it, for example, affect negotiations with a country like 
North Korea?
    Ambassador Sherman. Congresswoman, I think you make a very 
important point, which is that we obviously don't want Iran to 
have a nuclear weapon because of what it might do with a 
nuclear weapon and how it would use to it project its power in 
the region and in the world and the kind of world that Iran 
would want it to be and the insecurity and instability that it 
would wreak havoc, not only in the Middle East, but much 
further, I believe. But also what it would mean in terms of 
additional proliferation. So that one could imagine that Saudi 
Arabia, Japan, even South Korea, Brazil, South Africa, many 
countries that had foresworn nuclear weapons might decide for 
their own security as deterrents that they needed to have a 
nuclear weapon. And I think none of us would want to imagine a 
world where there were more nuclear weapons powers as against 
fewer of them. Indeed, the United States and Russia, which have 
the greatest arsenal of nuclear weapons, have been on a 
trajectory to reduce the number of nuclear weapons we have. And 
as the President said in his Prague speech, it may not happen 
in his lifetime, but he looks forward to the day when there 
aren't any nuclear weapons left.
    It is ironic, Congresswoman, that we had the last Almaty 
session, the last two sessions in Almaty, Kazakhstan. Because 
Kazakhstan, in fact, in the early 1990s, after the fall of the 
Soviet Union, gave up its nuclear weapons because it thought 
that it didn't bring them greater security, it brought them 
more insecurity. And that is indeed the fact for Iran as well. 
They should see it in what is happening to them now. They are 
getting economic insecurity, if not fundamental insecurity, 
because of their nuclear weapons ambitions.
    Mr. Cohen. I would add only that I completely agree with 
Undersecretary Sherman.
    Ms. Frankel. Thank you, Mr. Chairman. I would waive the 
rest of my time.
    Chairman Royce. Thank you, Mrs. Frankel.
    We will go now to Mr. Cotton, who took first place, fastest 
time, for this morning's charity event benefiting the Wounded 
Warriors. And I will mention in addition the Cottontail 
Rabbits, which included bipartisan staff from this committee, 
also won top prize as fastest team.
    Mr. Cotton.
    Mr. Cotton. Thank you, Mr. Chairman. As always, we work in 
a bipartisan fashion on this committee.
    Ms. Ambassador, are there IAEA inspectors at the uranium 
mines in Saghand and Gachin?
    Ambassador Sherman. No, not presently. My experts tell me.
    Mr. Cotton. Do we know why that is the case, given the IAEA 
inspector's presence at the other parts of Iran's nuclear 
supply chain?
    Ambassador Sherman. The young man who is behind me, Richard 
Nephew, is a technical expert in this regard, as is Dr. Jim 
Timbie, who is with me. And the Safeguards Agreement of the 
IAEA only requires the presence at the most sensitive 
facilities, where we do have quite an extensive inspection 
regime. But, indeed, one of the things that we want from Iran 
through the process with the IAEA is additional safeguards and 
initial monitoring.
    So we certainly understand your point. And, indeed, as I 
mentioned in my testimony, the IAEA is meeting with Iran today 
trying to move on a structured approach where they would agree 
on, in fact, what could then be inspected by Iran--by the IAEA. 
They have not been able to get that structured approach, 
protocol agreed to. And there will be a Board of Governors 
meeting of the IAEA meeting at the end of June, and my 
suspicion is there will be great disappointment in Iran's 
responsiveness.
    Mr. Cotton. My point being that those start the supply 
chain. And it is possible that there are conversion facilities, 
like the one at Isfahan, or enrichment facilities, like the 
ones at Natanz and Fordow, of which we are not aware. Is that 
your understanding my point?
    Ambassador Sherman. I do understand your point. And what I 
would suggest is that perhaps you--hope your schedule will 
allow you to join the classified session.
    Mr. Cotton. Thank you.
    Next question. We talk frequently about sanctions. Then 
that leads to talk to acts of war. On most occasions, we are 
talking about an offensive act of war, such as an air strike or 
a strike with naval gunfire. There are also defensive acts of 
war under international law, such as a naval blockade. Do you 
have any assessment on the impact of Iran's economy as a whole 
or the nuclear program in particular, the effects of a 
hypothetical naval blockade?
    Ambassador Sherman. I do not. But happy to discuss it 
further in the classified session.
    Mr. Cotton. Do you have any assessments of the scope and 
number of scientists working on Iran's nuclear program.
    Ambassador Sherman. Again, I would save that for the 
classified session.
    Mr. Cotton. I have seen reports of cooperation, scientific 
cooperation agreements between North Korea and Iran. Those 
reports suggest something along the lines of the 2002 
cooperation agreement that North Korea had with Syria that led 
ultimately to the destruction of the nuclear site in Syria, 
2007. What is the scope of that potential agreement in your 
assessment?
    Ambassador Sherman. Again, we can talk further about the 
detail of any of this in the classified session.
    What I will say and it follows up on what Congresswoman 
Frankel asked as well, we do know that the DPRK watches what 
happens to Iran, and Iran watches what happens to the DPRK. And 
we know historically about times where, either directly or 
through other conduits, there has been cooperation among 
countries. Everyone is very well aware of the history with 
Pakistan, for instance, and A.Q. Khan in a network of 
proliferation. So it is very important, and we think very 
carefully about where there may be interactions that affect one 
or the other of these situations. But happy to discuss it 
further in a classified session.
    Mr. Cotton. Shifting slightly somewhat. The President in 
the past called Syria's use of chemical weapons a potential red 
line or game changer. Given our reaction now that our 
intelligence services, as well as those of allied Western 
governments have confirmed the use, at least on a limited 
scale, of chemical weapons in Syria, do you see potential for 
Iran's Government being emboldened to believe that perhaps our 
words are not as strong as we would suggest?
    Ambassador Sherman. I actually don't think that is 
happening at this time. But you are welcome to get the IC's 
assessment when we do meet in classified session. What I would 
say is the intelligence community, as we published, has agreed 
with varying levels of confidence that chemical weapons were 
used in small amounts in at least two instances in Syria. But 
having high confidence in the intelligence community, for which 
I have great admiration, is not in fact all that one needs to 
take some of the actions that many people have contemplated. 
And the President wants to be very prudent about the steps he 
takes, as he should be.
    We have unfortunate experience in our history where we have 
taken action and it turned out that the intelligence assessment 
was either misinterpreted or not accurate. So I think he is not 
being very thoughtful about how he is proceeding here. But, 
rest assured, we are gathering additional data and making 
additional judgments.
    Mr. Cotton. Thank you.
    Mr. Cohen, my regrets, but thank you for your service.
    Mr. Cohen. Thank you, Congressman.
    Chairman Royce. Let's go to Mr. Keating of Massachusetts.
    Mr. Keating. Thank you, Mr. Chairman.
    Secretary Cohen, thank you for the time you have taken 
today in your testimony. I would like to follow up on an issue 
that has been raised before the Departments of State, Commerce 
and Treasury by the members of this committee, as well as by 
members of the Permanent Select Committee on Intelligence 
regarding reports that two Chinese companies, Huawei and ZTE, 
have exported millions of dollars worth of sensitive 
technologies used to restrict and censor freedom of speech 
within Iran.
    In a report issued earlier this year, the U.S. China 
Economic Security Review Commission referenced the Reuters 
investigation in which it said that ZTE provided Iran with over 
$130 million in communication surveillance equipment as well as 
some U.S. IT products and subsequently agreed to transfer 
additional embargoed U.S. communication system. Under Section 
106 of the Comprehensive Iran Sanctions Accountability and 
Divestment Act, U.S. Government agencies are banned from 
procuring goods and services from a company that exports 
technology to Iran that is used to disrupt, monitor, restrict 
Iranian nationals' freedom of speech.
    Can you provide us with an update as to whether or not the 
Department of Treasury has found that these companies should be 
subject to the procurement ban under CISADA? Can you elaborate 
further on Section 106 and how it can be used to better ensure 
freedom of speech in Iran? And are there examples of the 
effective use of this?
    Mr. Cohen. Congressman, I am aware of the inquiry as to ZTE 
and Huawei. In part, I think we should follow up on this in the 
closed session. But I can say that this is an issue that we 
have looked at very carefully. We are committed here at 
Treasury as well as the State Department to implementing--and 
Congress also has a role in implementing Section 106 of 
CISADA--in implementing of provision when we find evidence of a 
violation and taking steps to--that are spelled out in the 
statute.
    More broadly, we have in place number of authorities that 
address the use of information technology by the Iranian regime 
to abuse the human rights of its citizens, to affect their 
ability to communicate, to monitor their activities. We have 
applied sanctions under what is known as the Gravity Executive 
Order, which is focused on the abuse of information technology, 
on close to a dozen entities. And we are looking very carefully 
at what is coming up with the elections in Iran in the next 
several weeks to see whether the Iranian Government uses its 
control over the information networks in Iran in a way that 
would lend themselves to additional actions under those 
authorities. So to say we can follow up on this more in the 
classified session, but this is an issue, the ability of 
Iranian people to communicate with one another, to do so in a 
free manner, that is very important to us.
    Mr. Keating. Yes. I look forward to that, and thank you for 
that. I look forward to the briefing. Because I think that it 
is not just a human rights issue, which is extremely important, 
it also undercuts I think the effectiveness of the sanctions, 
too. When groups can't communicate fully and openly about their 
perception of the results of the sanctions. And one of the 
purposes of that is to share that kind of feeling among the 
citizens there and hopefully have that bring pressure on a more 
democratic approach and one that certainly will move them away 
from nuclear procurement. So I look forward to that.
    With that, I yield back, Mr. Chairman.
    Chairman Royce. Thank the gentleman.
    We will now need to go to 3 minutes for the remaining 
members, but we will go Mr. Meadows.
    Mr. Meadows. Thank you, Mr. Chairman.
    And I thank you for not highlighting my time from this 
morning's run, as I am sure I will be using more Bengay than 
Mr. Cotton.
    I want to go ahead and follow up a little bit on the P5+1 
negotiations. And some analysts, Ambassador Sherman, have 
indicated that as Iran walks away from these negotiations, the 
deals typically get sweeter. Would you agree with that 
assessment? Or I will let you clarify that.
    Ambassador Sherman. Thank you for asking the question. No. 
When we were--originally put the Baghdad proposal on the table, 
as I said, it dealt with three elements as a first confidence-
building measure, the enrichment of over 5 percent uranium, the 
stockpiles of that, and Fordow. There are many ways to skin 
each of those cats. And so in our efforts to try to move the 
negotiation, we made a couple of small but really insignificant 
changes to what we were requiring.
    I would also say, not to take your time, and I hope the 
chair will allow you an extra minute. I just wanted to tell you 
and the rest of the committee my colleague handed me a note 
that after meeting with Iran in Vienna today, Mr. Nackaerts of 
the IAEA said, ``We could not finalize the structured approach 
document that has been under negotiation for a year and a 
half,'' and acknowledged, ``our best he was have not been 
successful so far.'' No date for a further meeting was set. And 
so this means that the Director General Amano will go to 
issuing a report at the end of this month, and there will be a 
Board of Governors' meeting in early June to decide what, if 
anything, further can be done.
    Mr. Meadows. Thank you for that message.
    And so let me switch a little bit to Europe and Iran. 
Europe has been a valuable partner in working with us in terms 
of sanctions, you know, billions of dollars worth of oil, you 
know, and truly dried up, so to speak. However, it seems like 
the European Union appears to still be handling transactions in 
Euros, which essentially allows for the bypassing of some of 
these sanctions. What are we doing to try to persuade the EU 
from stopping this practice?
    Mr. Cohen. Congressman, you are exactly right. The European 
Union has been a tremendous partner in our efforts to apply 
sanctions on Iran, and what they have done has made a dramatic 
difference in the force and power of our sanctions. With 
respect to euro transactions, we are very actively engaged with 
the Europeans to ensure that there is no ability for Iran to 
clear Euros through Europe in a way that would not be caught by 
the existing European sanctions, the existing European 
framework that very significantly restricts the ability of Iran 
to transact. I think we are making good progress, and I would 
say--I see my time is up. Just one final point. The ability of 
Iran to move Euros through Europe depends on, in the first 
instance, some country, some financial institution violating 
our sanctions. Particularly the sanctions that went into effect 
on February 6. So regardless of whether the Europeans have a 
protection put in place, we have a protection put in place to 
prevent Iran from getting access to those Euros. And we intend 
to ensure that that does not get violated.
    Mr. Meadows. I can see my time has expired. I appreciate 
the chairman's indulgence, and I will submit the rest of the 
questions for the record.
    Chairman Royce. Very good. Thank you, Mr. Meadows.
    We go now to Mr. Schneider of Massachusetts.
    Mr. Schneider. Illinois.
    Chairman Royce. Illinois. Thank you.
    Mr. Schneider. Thank you, Mr. Chairman.
    I thank both of you for your time here, your testimony, and 
your service. I have read quite a bit lately about how Iranians 
are adapting, trying to find ways, not just around the 
sanctions but ways to live within the sanctions, diversifying 
their economy, moving away from the dependence, overdependence 
on the energy sector. I would be curious, Mr. Cohen, you talked 
about--to me, it is a sense of increasing the intensity, the 
force and power of the sanctions, as well as the frequency or 
closing the time between ratchets as we increase that 
intensity.
    What efforts are there to eliminate the ability of the 
Iranians to adapt their economy so the sanctions take less 
bite? What opportunity is there to crease the pace as we go 
forward?
    Mr. Cohen. Well, Congressman, I think it is a very good 
question. Because there is reporting that you see in the press 
about, you know, Ahmadinejad, in particular, saying, and the 
Supreme Leader saying we need to move away from an oil economy, 
we need to, you know, transform the Iranian economy and not be 
so dependent on oil revenue. Frankly, if they are ever able to 
do that, it is not going to be anywhere close to the near term. 
They are hugely dependent, hugely dependent on their ability to 
sell oil. And there are a small number of additional revenue 
sources in the Iranian economy. But I think two-thirds of their 
earnings come from, historically, have come from their oil 
sales, two-thirds or three-quarters. So what we are doing in 
targeting in particular oil sales, targeting their ability to 
get access to the revenue from the oil sales, is not something 
the Iranian economy--the Iranians are going to be able to adapt 
themselves away from in anything in the near term.
    And in second part of your question is the pace, intensity 
of the sanctions. We are committed to working with this 
committee, working with Congress to put into place additional 
measures. The administration itself is actively engaged in 
looking at ways that we can take action to apply additional 
sanctions. We are enforcing the sanctions in a very vigorous 
way. So we are, if anything, picking up the pace of both our 
enforcement efforts as well as the creation of new authorities.
    Mr. Schneider. Let me take you in a slightly different 
direction, and that is with Iranian supply of Syria transiting 
weapons through Iraq. It is a grave concern. Today we saw that 
there were rockets falling on the Israeli side of Mount Hermon. 
This is an issue of, like you said, of great concern. What 
actions are we taking? What can we do to reduce or eliminate 
the ability of Iran to transfer weapons through Iraq?
    Ambassador Sherman. We will discuss this further and in 
more detail in the classified session. But what I can say, 
Congressman, is Secretary Kerry has had very direct 
conversation with Prime Minister Maliki, as have others. And as 
a result of those talks, we are seeing more inspections of 
planes that are flying over Iraq, headed toward Syria. Or 
potentially headed toward Syria. We have seen a change in 
behavior. Is it sufficient yet? In my view, not quite 
sufficient yet. But we are putting on very serious talks with 
the Iraqis about what they must do. And, in fact, what other 
countries must do. And we have had instances, which we can talk 
about in that session, where countries have been aware of 
transiting, have interdicted, and stopped both weapons and 
goods that are going to Syria as well as a lot of successful 
interdictions in terms of abating sanctions toward Iran.
    Mr. Schneider. Great. Thank you. And I will look forward to 
speaking in the next session.
    Chairman Royce. Mr. Radel from Florida.
    Mr. Radel. Thank you, Mr. Chair.
    One thing I love about this committee is the spirit of 
bipartisanship that we have here. We are beyond R or D or party 
lines. We work together for what is best for the United States.
    That said, we had Secretary Kerry here not too long ago, 
who said something I think we can all agree on. When it comes 
to the talks that we have had over and over, he says, the talks 
``cannot be allowed to become a process of delay which in and 
of itself creates a greater danger.''
    Let me take a step back here for a second. When we look at 
North Korea, for example, we have seen decade after decade, 
talk after talk. Now a change of regimes from father to son. 
And yet we are still threatened by this dictatorship of North 
Korea. The only American contact I think we have had is Dennis 
Rodman, showing up there to play some basketball. Look, I love 
Rodman as much as the next guy, having lived in Chicago in the 
1990s. But I don't think that he is fit to be an Ambassador or 
Representative of the United States.
    When we go back to Iran, when do we say enough is enough?
    Ambassador Sherman, I would ask you, do we have any kind of 
clear-cut definition when we say that this is just stalling, 
and we are done with talks?
    Ambassador Sherman. Congressman, it is--I wish it were a 
simple equation. And--but it is not. Because we have to 
constantly calculate where Iran is in their nuclear program, 
which we can discuss in detail in the classified session. We 
have to consider where our international partners are, because 
we have to exhaust every possibility for diplomacy for a 
peaceful solution. Because if we are to take other action, we 
must have international support to do so.
    So this is not a simple equation. I wish it were direct, 
linear, clear; I wish I could tell you today what the moment 
will be. The President has said, the Secretary has said there 
is still more time. Prime Minister Netanyahu has said that as 
well. But that time is not definite, and we are in constant 
assessments, not only within our own Government, with other 
governments, including with Israel, on those assessments of 
where we are on the various clocks to make those choices.
    Mr. Radel. Agreed. And it is undoubtedly reassuring to hear 
that from the Prime Minister Netanyahu in Israel. We would all 
like a peaceful solution to this at the end of the day. I thank 
you for your service.
    Just real quick. Is there anything that, in terms of 
looking and suspending nuclear activity, is there any clear-cut 
answer to--are we asking for them to suspend it all? For the 
record, could you state where we stand on that?
    Mr. Sherman. For the record, we have said that the end of 
this story is full compliance with U.N. Security Council 
sanctions and all of their obligations under the NPT.
    Mr. Radel. Great. And I look forward to our conversation 
later. Thank you both, Mr. Chair.
    Ms. Ros-Lehtinen [presiding]. Thank you very much.
    Congresswoman Meng of New York is recognized.
    Ms. Meng. Thank you, Mr. Chairman.
    Thank you, Mr. Ranking member.
    And thank you, too, Ambassador Sherman and Mr. Cohen for 
being here today.
    In 2009, it appeared that the Iranian people or a large 
percentage of them truly rose up against are the regime. Iran 
is a young country that is increasingly disaffected with its 
regime. We are now upon another Iranian election, one without a 
relatively liberal candidate. Can anything be done to, again, 
galvanize and support the pro-democratic forces, and what is 
your assessment of the Iranian public sentiment on the eve of 
their Presidential elections?
    Ambassador Sherman. Congresswoman, I wish I could tell you 
that all of the voices of those who may not like where their 
government is today are speaking up or feel that they can speak 
up. But that is not the case. There is tremendous repression in 
Iran. And the destructive actions that were taken in 2009 have 
had a lasting impact. The Green Movement, as it was then, which 
was actually most focused on undermining--getting rid of voter 
fraud as the election approached, really does not exist as an 
organized entity. There are, of course, other voices in Iran. 
But they are often thrown in jail or their families are 
harassed or their businesses are closed. The State Department, 
along with other partners in the U.S. Government, are doing 
everything we can to ensure that people can talk with each 
other, that they have avenues for speech. We have a Virtual 
Embassy Tehran, which is a Web site. And we do everything we 
can to make sure that that isn't jammed and people have access 
to it. We have Farsi speakers who communicate, and we will 
certainly take Congressman Rohrabacher's suggestions about 
additional languages into account. But we are trying to do 
everything we can to support the space, not for us to take 
sides--it is up for the Iranian people to decide who they want 
as their leadership--but to make sure transparent, free, and 
fair election. And it appears we are very far from that today.
    Ms. Meng. Thank you.
    I yield back my time.
    Ms. Ros-Lehtinen. Thank you very much.
    And now we go to Mr. Messer of Indiana.
    Mr. Messer. Thank you. I thank the chair and the ranking 
member.
    I certainly want to say thank you to Ambassador Sherman and 
Mr. Cohen.
    I was encouraged by your testimony about the impact of 
sanctions on the Iranian economy. Clearly, it is having a big 
impact on their currency. But, of course, the goal of the 
sanctions is not to just simply cripple the Iranian economy, 
the goal of the sanctions is to change their behavior as to the 
nuclear enrichment program. And I am not trying to throw this 
out as a trick question, I just would ask for your assessment, 
what impact or any impact have we seen on these sanctions as 
their--to their behavior in the nuclear enrichment program.
    Ambassador Sherman. I would say a couple of things. First 
of all, Iran knows that they pay a cost for their continuing 
intransigence. And that was not always true. You all have said 
it yourselves, for many years, that was not true. But now there 
is an international regime unlike any other. So every day they 
pay a cost, and that cost only increases and ramps up. There is 
only more cost to be held.
    Secondly, as Undersecretary Cohen mentioned in his 
testimony, in the last round, at Almaty 2, as we call it, Iran 
really put the need for sanctions relief on the table. In the 
past, there had been quite a bit of happy talk along the lines 
of what Congressman Schneider mentioned, which is, you know, 
Iran saying, oh, you helped us diversify our economy. This is 
great. We are doing greater scientific technology. It has made 
us create new things. This time, all of that was gone. It was 
all about, ``we need sanctions relief, and let's talk about how 
little we can do to get it.''
    Mr. Messer. So, I don't want to put words in your mouth, 
but I am hearing you say we see some diplomatic movement.
    Ambassador Sherman. Yes.
    Mr. Messer. We are aware of no efforts that have changed as 
far as their efforts to obtain a nuclear bomb.
    Ambassador Sherman. No. I think I said earlier, my own 
assessment--and we can talk in the classified about the 
intelligence community's assessment--is that the Supreme Leader 
has not made the strategic decision to really give his people 
what they need, which is security and prosperity, rather than 
face the continued cost----
    Mr. Messer. Just to follow up in my limited time, kind of 
following up on the comments by Representative Meng, do we have 
any indication that public sentiment in Iran--do they blame the 
West for their economic troubles, or are they beginning to 
understand it is their own leadership's fault?
    Ambassador Sherman. Again, we can ask the intel community. 
But the public polling data that I have seen shows a mixed bag. 
I think that Iranian people are frustrated with the economic 
mismanagement of Iran, which is, quite frankly, also a major 
factor here. But there is, obviously, a great deal of 
nationalism in Iran as well.
    Ms. Ros-Lehtinen. Thank you very much.
    Dr. Bera is recognized.
    Mr. Bera. Thank you, Madam Chairwoman, Ranking Member.
    Thank you Ambassador and Mr. Cohen.
    I think we have touched on a number of issues, and both 
Democrats, Republicans, House, Senate, administration clearly 
understand that a nuclear-armed Iran is not a possibility. We 
clearly understand where that red line is. And we will do what 
is necessary to prevent that.
    Do we believe that the Iranian leadership understands where 
the red line is and understands what we are saying?
    Ambassador Sherman. One of the things I learned a long time 
ago as a diplomat is it is always hard to know exactly what the 
other side is thinking, because their history, their culture is 
different than ours.
    And I often sit on the opposite side of the table with Dr. 
Jalili and his delegation. And it is hard work for us to talk 
with each other as opposed to past each other. I think they 
understand the United States is the last remaining--military 
super power in this world and the last remaining super power in 
this world. And that we mean business. I think they are clear 
that we will do whatever is necessary to keep them from having 
a nuclear weapon. But at the same time, this is a culture of 
resistance that is based much in its history. So I wish I knew 
with exactitude the answer to that question.
    Mr. Bera. Now, let's assume we are successful in preventing 
Iran from developing and obtaining their own nuclear 
technology. We on this committee have talked about North Korea, 
and we have touched on it. Is there any evidence that there is 
conversation between North Korea and Iran or any technology 
transfer that is going on?
    Ambassador Sherman. As I said a few moments ago, I am not 
sure you were here yet, Congressman, I think we should talk 
about this further in the classified session. There have been 
historic networks largely led by A.Q. Kahn out of Pakistan that 
have had an impact on all of the nefarious actions of countries 
around the world in terms of proliferation, but I think further 
discussion we should hold for a classified discussion.
    Mr. Bera. Great. I look forward to that discussion and I 
yield back.
    Chairman Royce [presiding]. I now recognize Mr. Weber.
    Mr. Weber. Thank you.
    Madam Ambassador, you said in your exchange with 
Congressman Brooks that there was no pulling back from that 
stance. How about going forward? Are you prepared--or let me 
back up.
    You read a statement from today that said we have been at 
the negotiating table for a year and a half. Do you believe we 
have another year and a half timeframe before they get nuclear 
weapon capability?
    Ambassador Sherman. What the President said, Congressman, 
is from the time Iran makes a decision to go for a nuclear 
weapon----
    Mr. Weber. I am asking you, and I am short of time, forgive 
me, do you believe that from today----
    Ambassador Sherman. I think we don't know the answer to 
that. There are many factors----
    Mr. Weber. I think that is naive. We don't have a year and 
a half. We just don't have a year and a half. Let me make that 
point.
    In response to the other Congressman who said, We need the 
pedal to the metal, will you go back to the Secretary of State 
and will you say, Mr. Secretary, I recommend that we give the 
Israelis the bunker-busting bomb, that we give them the 
technology now, not to wait, because it is your recommendation 
that we don't have a year and a half? And I agree with the 
tenor of what many of our colleagues are saying, is that we 
have had a lot of talk for a long time, and I think it is 
getting down to the ninth inning. Don't you agree?
    Ambassador Sherman. I will certainly let the Secretary know 
your recommendation, Congressman.
    Mr. Weber. Okay, that sounds like a good diplomatic answer.
    A very specific question. There is a $30 million 
administration request for funding of the Near East Regional 
Democracy Fund, a fund which is geared specifically toward 
helping support democratic reform in Iran. Isn't it true, or 
why is it that that funding has gone almost exclusively toward 
Internet circumvention and technology updates? Why not to boots 
on the ground? Why not to the opposition reformists or 
democratic activists that are operating on the ground?
    Ambassador Sherman. Well, in fact, what we are trying to do 
is what we can do, which is to help people to create the open 
space for the kind of organizing that you are discussing. And 
in those who have talked with us about what the needs are, this 
is very high on the list.
    Mr. Weber. Well, thank you. And I really do expect for you 
to go back to Secretary Kerry and to tell him that we don't 
have a lot of time left. And he knows that, and I suspect we 
will talk more about it in the SCIF, but I hope we come up with 
concrete ideas to take countries like China and quit giving 
them exceptions, whatever you want to call them, and to make 
sure that they understand that we are fully committed to all of 
the sanctions. And if they are not complying with those, then 
they need to feel some of the weight of that as well.
    And I yield back a whopping 13 seconds.
    Chairman Royce. We now stand adjourned.
    I want to thank Ambassador Sherman and Mr. Cohen for their 
testimony. They have agreed to make themselves available to go 
into closed session, so we will do that immediately and ask 
members, you are all encouraged to attend. Thank you. We stand 
adjourned.
    [Whereupon, at 3:19 p.m., the committee was adjourned.]
                                     

                                     

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