[Senate Hearing 113-266]
[From the U.S. Government Publishing Office]
S. Hrg. 113-266
ASSESSING THE P5+1 INTERIM NUCLEAR
AGREEMENT WITH IRAN: ADMINISTRATION PERSPECTIVES
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE PROSPECTS FOR REACHING A LONG-TERM
COMPREHENSIVE SOLUTION DESIGNED TO BRING AN END TO IRAN'S ILLICIT
NUCLEAR ACTIVITIES
__________
DECEMBER 12, 2013
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
TIM JOHNSON, South Dakota, Chairman
JACK REED, Rhode Island MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee
SHERROD BROWN, Ohio DAVID VITTER, Louisiana
JON TESTER, Montana MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon MARK KIRK, Illinois
KAY HAGAN, North Carolina JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota
Charles Yi, Staff Director
Gregg Richard, Republican Staff Director
Laura Swanson, Deputy Staff Director
Colin McGinnis, Policy Director
Patrick Grant, Counsel
Riker Vermilye, Legislative Assistant
Greg Dean, Republican Chief Counsel
John O'Hara, Republican Senior Investigative Counsel
Dawn Ratliff, Chief Clerk
Taylor Reed, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
(ii)
C O N T E N T S
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THURSDAY, DECEMBER 12, 2013
Page
Opening statement of Chairman Johnson............................ 1
Opening statements, comments, or prepared statements of:
Senator Crapo................................................ 2
Senator Tester
Prepared statement....................................... 27
WITNESSES
Wendy Sherman, Under Secretary for Political Affairs, Department
of State....................................................... 4
Prepared statement........................................... 27
Responses to written questions of:
Senator Tester........................................... 36
Senator Toomey........................................... 38
David Cohen, Under Secretary for Terrorism and Financial
Intelligence, Department of the Treasury....................... 7
Prepared statement........................................... 30
(iii)
ASSESSING THE P5+1 INTERIM NUCLEAR AGREEMENT WITH IRAN: ADMINISTRATION
PERSPECTIVES
----------
THURSDAY, DECEMBER 12, 2013
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:06 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Tim Johnson, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN TIM JOHNSON
Chairman Johnson. I call this hearing to order.
Yesterday all Senators had a chance to hear directly from
Secretaries Lew and Kerry and senior intelligence officials on
the first step nuclear agreement reached in Geneva between the
P5+1 and Iran. Today we will delve into the agreement in
greater detail, assess prospects for a final agreement, and
explore the likely effects of congressional action on new
sanctions legislation at this time, to which the President and
his Secretary of State strongly object.
I have talked with various Members of the Committee about
these issues and ensured that all Members have had
opportunities to be briefed repeatedly by Secretaries Kerry and
Lew, and the intelligence community, on the ongoing Geneva
negotiations.
Let me be clear. I support strong sanctions and authored
many of the U.S. sanctions currently in place. I have
negotiated a new bipartisan sanctions bill with my Ranking
Member that could be finalized and moved quickly if Iran fails
to comply with the terms of the first step agreement in Geneva
or if negotiations collapse. Sanctions have been an effective
tool of coercive diplomacy, crippling Iran's economy, sharply
curtailing its oil revenues, and helping to persuade the
Iranian people to vote for new leadership.
It now appears that some of Iran's leaders have recognized
that the only way to relieve the economic pressure and lessen
Iran's international isolation is to reach agreement with the
West to halt its illicit nuclear activities. Time will tell if
that is true--but only if Congress is willing to provide some
time.
Some have argued that acting on a bill now, as long as it
does not become effective in 6 months, gives the Administration
additional leverage in negotiations. The President disagrees,
arguing that congressional action on new sanctions would be
taken as a sign of bad faith by our P5+1 partners and by Iran,
and could erode or even unravel the sanctions regime.
The history of our relationship with Iran is littered with
missed opportunities on both sides. I want to assess the formal
analysis the Committee is to receive today from the Director of
National Intelligence on the effects on negotiations and on our
P5+1 partners of congressional action on new sanctions, but I
agree that the Administration's request for a diplomatic pause
is reasonable. A new round of U.S. sanctions now could rupture
the unity of the international coalition against Iran's nuclear
program. Existing sanctions will continue to bite, and to bite
hard. Commentators from left to right and all of my colleagues
involved in this effort have acknowledged this; it is not a
matter of controversy.
Now that Iran has come to the table and entered into this
first step agreement, I believe this may well be the last best
chance to resolve this crisis by diplomacy, and so the
President is absolutely right to fully test Iran's leaders. And
I will be vigilant to ensure that the Joint Action Plan is
strictly enforced. I have requested, along with Chairmen Levin
and Feinstein, regular briefings on compliance from the
intelligence community. In the meantime, we should not do
anything counterproductive that might shatter Western unity on
this issue. We should make sure that if the talks fail, it was
Iran that caused their failure. We should not give Iran, the
P5+1 countries, or other Nations a pretext to lay
responsibility for their collapse on us. Ultimately, while some
of us might differ on tactics, it is clear we all share the
same goal: to ensure that Iran does not achieve a nuclear
weapon, and to do that diplomatically if possible, while
recognizing that other alternatives remain on the table.
I now turn to Ranking Member Crapo for his opening
statement.
STATEMENT OF SENATOR MIKE CRAPO
Senator Crapo. Thank you, Mr. Chairman. I appreciate your
comments and agree with you that although there may be some
differences on tactics, we all have the same common goal in
mind. And on this issue, as well as so many others in this
Committee, I appreciate your friendship and our working
relationship as we work together on sanctions legislation.
This hearing provides us an opportunity to consider the
Administration's perspective on negotiations, and perhaps it
may better understand ours as well. Congressional sanctions
designed in a completely bipartisan fashion have successfully
worked to bring Iran to the negotiating table. We must maintain
that leverage going forward.
The impact of sanctions on Iran's economy is dramatic. In
just the last 2 years, Iran's oil exports have dropped by about
60 percent, to roughly 1 million barrels a day. Its gross
domestic product shrunk by 6 percent while inflation shot up to
45 percent, and to even higher levels on certain products. And
unemployment currently hovers around the 35-percent mark.
Iran faced a stark choice earlier this year: continue to
live under dire economic circumstances that would only worsen,
or dismantle its entire nuclear program in an effort to regain
control over its economy.
In recent weeks, our witnesses returned from Geneva to
present us with an agreed-upon Joint Plan of Action among the
P5+1 and Iran. As the ink lay drying on the agreement, voices
in Congress and from among certain allies and friends could
immediately be heard, raising objections and expressions of
support alike. Most troubling is the reticence and concern our
good friend Israel has with the deal.
For my part, I was very disappointed to learn that the
release of Idaho's own Pastor Saeed Abedini and other Americans
unjustly held by the regime were not made part of the deal. I
could not imagine a better confidence-building measure on
Iran's part than for the regime to reflect some degree of
humanity and principled justice by releasing these brave
Americans. As the Administration embarks toward a final
agreement, every effort must be made to bring Pastor Abedini
and his fellow Americans home where they belong.
I have several concerns with the plan of action. Language
in the plan is vague on how the freeze, rollback, and sanction
relief work together. I also have concerns about the enrichment
and verification provisions. I worry that both the current plan
and final agreement will permit Iran to maintain its enrichment
program rather than direct it to join some 19 other Nations who
purchase all of their nuclear fuel from traditional suppliers.
I also worry that the plan does not seem to curtail Iran's
development of advanced ballistic missiles, which, again, is
troubling in conjunction with its enrichment program. This is a
Nation that will require the strictest monitoring and most
aggressive diplomacy on terrorism and human rights violations
for decades to come. There can be no question about what we
expect of Tehran. Iran cannot be allowed even the possibility
of nuclear weaponization in the context of its history of other
destabilizing activities.
The eventual lifting of nuclear-related sanctions in a
final deal also raises a number of questions. First, which
sanctions are to be defined specifically as nuclear related?
Second, how will those sanctions be separated from a complex
web of sanctions intended to address Iran's sponsorship of
terrorists, human rights violations, and certain kinds of
advanced ballistic missiles? This lack of clarity may hamstring
future U.S. policy options necessary to address Iran's
destabilizing activities.
I hope that today's witnesses can better clarify what
precisely the mutual understanding is with Iran. Sanctions
clearly worked to bring Iran to the negotiating table. I remain
convinced that we must maintain that leverage moving forward.
The United States must continue to vigorously enforce the
existing core sanctions architecture and develop a sanctions
plan of action in the event that negotiations do not produce
the results that we all want.
Should diplomacy fail in its mission to effectively control
the apparent extent of the Iranian nuclear program, whether 6
months or a year down the road, there is simply no time
available to waste then on creating bills or Executive orders.
The United States must maintain existing multilateral sanctions
pressure, and Congress and the Administration each need to
prepare now for the possibility that an effective, final,
comprehensive agreement may not be reached.
Thank you, Mr. Chairman.
Chairman Johnson. Thank you, Senator Crapo.
To allow for sufficient time for questions, we are limiting
opening statements to the Chair and Ranking Member. All
Senators are welcome to submit an opening statement for the
record.
Now I would like to introduce our witnesses. The Honorable
Wendy Sherman is the Under Secretary for Political Affairs at
the U.S. Department of State, and the Honorable David Cohen is
the Under Secretary for Terrorism and Financial Intelligence at
the U.S. Department of Treasury.
Under Secretary Sherman, please begin your testimony.
STATEMENT OF WENDY SHERMAN, UNDER SECRETARY FOR POLITICAL
AFFAIRS, DEPARTMENT OF STATE
Ms. Sherman. Thank you very much, and good morning, Mr.
Chairman, Ranking Member Crapo, distinguished Members of the
Committee. Thank you very much for inviting me and Under
Secretary Cohen to discuss the details of the Joint Plan of
Action agreed to by our P5+1 partners and Iran. I also want to
especially thank you, Chairman Johnson, for your leadership on
this issue over the past weeks and months and this Committee's
support through many months and years in bringing Iran to the
table through unprecedented sanctions.
Our collaboration on sanctions is what has brought Iran to
the table. However, it is important to underscore that what we
do from this point forward is just as critical, if not more so,
in terms of testing Iran's intentions. In that regard, I look
forward to continued consultations over the coming weeks and
months, and I am available to any Member of this Committee at
any time for a conversation.
Today I want to give you the facts about the Joint Plan of
Action so you can judge its merits for yourself.
The Iranian nuclear program is one of the most serious
threats to U.S. national security and to our interests in the
Middle East. Thanks to the sanctions and a firm and united
position from the P5+1, we have reached an understanding that
is the most significant step to curb Iran's nuclear program in
nearly a decade. Put plainly, this understanding is profoundly
in America's national security interest, and it does make our
regional partners safer and more secure.
The agreement establishes a sequenced 6-month framework
designed to block near-term Iranian pathways to a nuclear
weapon while creating space for us through a diplomatic process
to reach a long-term comprehensive solution, which is what we
all want. As the President has said repeatedly, we will ensure
and he will ensure that Iran never obtains a nuclear weapon.
The understanding ensures the development of Iran's nuclear
program will halt and the program will be rolled back as we
negotiate that comprehensive solution. Indeed, upon
implementation in the coming weeks, the agreement immediately
halts progress of the Iranian nuclear program, rolls back key
elements of that program, and introduces unprecedented
monitoring in Tehran's nuclear activities. Taken together,
these measures will prevent Iran from progressing toward a
nuclear weapon over the next 6 months and increase our ability
to detect any move toward an Iranian nuclear breakout or
diversion of materials to a covert program.
Let me now walk you briefly through the key elements of
this first step in detail.
First, Iran has committed to halt meaningful progress of
its enrichment program. Under the terms of this agreement, Iran
cannot increase its enrichment capacity. It cannot build new
enrichment facilities. Iran cannot install more centrifuges of
any type, operate more centrifuges, or replace existing
centrifuges with more advanced types. Iran must limit
centrifuge production to only those needed to replace damaged
machines, meaning Iran cannot expand its stockpile of
centrifuges. And Iran's stockpile of 3.5 percent enriched
uranium must be the same at the end of the 6-month period as it
is at the beginning.
Second, during this initial phase, Iran will roll back key
aspects of its program. Specifically, Iran must cease all
enrichment over 5 percent. Iran must remove certain equipment
that is used to more efficiently enrich uranium over 5 percent,
and Iran must neutralize its entire 20-percent stockpile,
diluting it to a lower level of enriched uranium or converting
it to oxide for fuel for the Tehran Research Reactor.
Third, Iran cannot advance work on the plutonium track.
Iran cannot commission the heavy water reactor under
construction at Arak. Iran cannot transfer fuel or heavy water
to the reactor site. Iran cannot test additional fuel or
produce more fuel for the reactor. Iran cannot install
remaining components for the reactor, and Iran cannot construct
a facility for reprocessing spent fuel. That is critical
because, without reprocessing, Iran cannot separate plutonium
from the spent fuel and, therefore, cannot obtain any plutonium
for use in a nuclear weapon.
In sum, even in this initial phase, this first step, this
plan halts each of the three potential pathways to a weapon
that has long concerned us and our closest allies. It
eliminates Iran's stockpile of 20-percent enriched uranium. It
stops installation of centrifuges, especially Iran's most
advanced centrifuge design, and prevents accumulation of more
3.5 percent enriched uranium. And it ensures that the Arak
reactor cannot be brought online.
Some have said we should be skeptical that Iran will live
up to these commitments. Quite frankly, we completely agree.
That is why the foundation of the agreement is not built on
trust but on verification. The verification mechanisms are
unprecedented and comprehensive. Iran must permit daily access
by the International Atomic Energy Agency inspectors to the
facilities at Natanz and Fordow. They must permit more frequent
inspections at the Arak reactor. Iran must allow access to
centrifuge assembly workshops, including rotor production
workshops and storage facilities.
Iran must allow access to uranium mines and mills and
provide design information for the Arak heavy water reactor.
Significantly, these monitoring measures will provide
additional warning of breakout and add significant new checks
against the diversion of equipment for any potential covert
enrichment program. It will also help us to verify that Iran
is, in fact, living up to the commitments outlined in detail
under the agreement.
In exchange for these concrete actions by Iran, as Under
Secretary Cohen will explain in detail, the P5+1 will provide
limited, temporary, and reversible relief while maintaining the
core architecture of our sanctions regime, including key oil
and banking sanctions. Sanctions pressure, moreover, will
continue to increase over the 6 months of this initial phase,
and we will continue our vigorous enforcement of existing
sanctions.
Moreover, the U.S. trade embargo remains in place. U.N.
Security Council sanctions remain in place. All sanctions
related to Iran's military program, State sponsorship of
terrorism, and human rights abuses and censorship remain in
place.
And if Iran fails to meet its commitments, we are prepared
to ramp up sanctions, and we will have then the international
consensus that is essential for any increased pressure to work.
As the President has said, as the Chairman outlined, now is
not, we believe, the time to introduce new sanctions because
doing so could risk derailing the promising first step outlined
above, alienate our allies, and risk unraveling the coalition
that enabled effective sanctions enforcement.
Finally, in assessing the agreement on its merits, it is
important to compare where we will be under its provisions
compared to where we would be without it.
Without this plan, Iran's program would continue to
advance: Iran would spin thousands of additional centrifuges;
install and spin next-generation centrifuges that compress
breakout times; advance its plutonium program by producing fuel
for the Arak reactor and install remaining components; it could
grow its stockpile of 20-percent enriched uranium--all without
the powerful tools of intrusive and unprecedented inspections
to help detect breakout.
With this understanding, the Joint Plan of Action, as I
have explained, we halt the progress of Iran's nuclear program,
roll it back in key respects, block the most likely pathways to
weaponization--all while creating space over the next 6 months
to pursue the comprehensive solution we all want.
Finally, let me conclude by making one thing clear. Our
policy with regard to Iran has not changed. We will stop Iran
from acquiring a nuclear weapon. We will support our friends
and partners in the region and counter Iran's destabilizing
activities around the world. And we will continue to support
the fundamental rights of all Iranians. We are working hard,
for example, to ensure the U.N. General Assembly condemns
Iran's human rights practices this month. Our sanctions on Iran
as a State sponsor of terrorism remain in place. Our sanctions
on human rights abusers will continue. And we will also remain
committed, Mr. Crapo and all other Senators, to reuniting Saeed
Abedini, Amir Hekmati, and Robert Levinson with their families.
As Secretary Kerry has said, 1 day is too long to be in
captivity, and 1 day for any American citizen is more than any
American, including this American, wants to see anyone endure.
So I look forward to consulting closely with Congress, and
I welcome this opportunity to discuss these important issues
with you. After Secretary Cohen, I am happy to take your
questions.
Chairman Johnson. Thank you.
Under Secretary Cohen, please begin your testimony.
STATEMENT OF DAVID COHEN, UNDER SECRETARY FOR TERRORISM AND
FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY
Mr. Cohen. Thank you, Chairman Johnson, Ranking Member
Crapo, and distinguished Members of the Committee. I appreciate
the opportunity to appear with Under Secretary Sherman today to
discuss the impact of our sanctions on Iran, the limited,
temporary, and reversible relief offered in the Joint Plan of
Action, and the mounting sanctions pressure that Iran will face
while the parties seek a comprehensive and long-term resolution
to the international community's concerns over Iran's nuclear
program.
This Committee is well aware of the impact that our
sanctions--in particular our oil, financial, and banking
sanctions--have had on Iran, so I will highlight just a few
data points that I think are particularly relevant.
Iran today is in a deep recession. As Senator Crapo
mentioned, last year its economy contracted by more than 5
percent, and we expect Iran's economy to contract again this
year. Its inflation rate was around 50 percent last year. Its
currency has lost about 60 percent of its value in the last few
years.
Iran has about $100 billion in foreign exchange reserves
that is mostly or entirely inaccessible or restricted. And it
has lost roughly $80 billion in the last 2 years from oil that
it has been unable to sell because of sanctions.
This is the picture of powerful sanctions pressure, and
this sanctions pressure has begun to bear fruit. It brought
Iran to the negotiating table in Geneva and helped our team
obtain key terms in the Joint Plan that halt and in several
important respects roll back Iran's nuclear program, while also
allowing increased transparency and monitoring. We were able to
achieve these terms at very little cost. In fact, the relief
package in the Joint Plan is economically insignificant to
Iran.
The package in the Joint Plan has several elements.
First, we will grant Iran limited access in installments
over the 6-month tenure of the Joint Plan to $4.2 billion of
its own funds currently locked up in bank accounts outside of
Iran.
Second, during the 6 months of the Joint Plan, we will hold
Iran's exports of crude oil flat rather than requiring further
significant reductions by the six countries currently importing
oil from Iran.
Third, we will suspend--not remove, suspend--U.S. sanctions
on Iran's petrochemical exports, its automobile sector, and its
trade in gold. All together, this could be worth up to about
$1.5 billion to Iran.
Last, we will help facilitate humanitarian transactions,
which are already permitted under U.S. law.
I want to emphasize that in this relief not a single dollar
of U.S. taxpayer money will be transferred to Iran. The relief
is comprised mostly of allowing Iran access to its own money
denied by sanctions.
In light of the Iranian economy's deep distress, the
approximately $6 to $7 billion value of the relief package,
which would be realized over the half-year of the first step,
simply will not move the needle on the Iranian economy. It is
important to emphasize, moreover, that the Joint Plan does not
affect the overwhelming majority of our sanctions on Iran. Most
importantly, the core architecture of our oil, financial, and
banking sanctions remain firmly in place. I want to highlight
several important aspects of that architecture.
First, the revenue Iran earns from its oil sales during the
duration of the Joint Plan will remain subject to the financial
sanctions which have so effectively locked up those revenues
overseas. With the exception of the $4.2 billion that is part
of the relief package, Iran will be unable to transfer or
repatriate any additional oil revenues it earns during the 6-
month duration of the Joint Plan.
Our banking sanctions and the EU's banking sanctions remain
in place, continuing the near total isolation of Iran's
financial sector. All U.N. and EU designations, as well as our
sanctions on the more than 600 individuals and entities tied to
the Government of Iran, its WMD programs, and its energy,
shipping, and shipbuilding sectors remain in place. This
includes our sanctions targeting Iran's support for terrorism.
And our longstanding U.S. trade embargo, which precludes Iran
from engaging in business with U.S. companies and U.S.
subsidiaries overseas, remains in place.
And as the Joint Plan is implemented and our negotiators
continue to work toward a long-term solution, we will continue
to take action to maintain sanctions pressure on Iran, to
thwart Iran's efforts to evade sanctions, and to ensure that
financial and commercial entities worldwide adhere to
restrictions on dealing with Iran.
Just this morning, Treasury and State announced the
designations of more than a dozen companies and individuals
around the global for evading sanctions and providing support
to Iran's nuclear program. The targets of today's actions were
involved in a variety of sanctionable activities, from illicit
fund transfer to ship-to-ship oil transfers.
No one should doubt our resolve to continue to hold
accountable those involved in illicit conduct, and we will also
continue to strictly enforce Iran's sanctions, including by
imposing strict penalties on those who violate them.
Today's designations as well as our recent enforcement
actions emphasize that Iran is still off limits. Make no
mistake. Foreign banks and businesses still face a choice. They
can do business with Iran, or they can do business with the
U.S.--just not both.
We know there may be some who believe now might be a good
time to test our resolve. I want to be clear. We are watching
closely, and we are prepared to take action against anyone
anywhere who violates our attempts to violate our sanctions.
I look forward to continuing this important work with
Congress and this Committee in particular as we pursue our
shared objective to ensure that Iran does not obtain a nuclear
weapon.
Chairman Johnson. Thank you all for your testimony.
As we begin questions, I will ask the clerk to put 5
minutes on the clock for each Member.
Ms. Sherman, we know Iran's foreign minister recently said,
``The entire deal is dead if Congress adopts new sanctions now,
even with a delayed trigger.'' But one of the most important
factors in making sanctions effective against Iran has been the
cooperation of our international partners.
What do you expect would be the effect of a new round of
sanctions now on our allies and other P5+1 countries? And what
have they said to us recently about this?
Ms. Sherman. Thank you, Mr. Chairman. Although I hear as
well what Foreign Minister Zarif said, my real interest and the
Administration's real interest in the Congress not pursuing new
sanctions at this time has to do with our P5+1 partners and
with our international partners around the world who have been
enforcing sanctions.
The reason sanctions have been effective is not just
because you have taken the superb action you have and the
President has moved Executive orders, and it is not only the
terrific work that David and his colleagues have done on
enforcement, it is because countries around the world have
actually followed through on what, quite frankly, are
unilateral sanctions on our part as well as the U.N. Security
Council sanctions and the EU sanctions. And they have done that
because we have said to them, if you, in fact, enforce the
sanctions we have imposed, A, you will be able to continue
doing business with the United States, the largest and most
important economy in the world; but you will, more importantly,
put pressure on Iran to change its strategic calculus and come
to the negotiating table. And we are committed to negotiations
as a first and best resort to resolve the concerns around their
nuclear program. And so countries around the world did that.
Now that we have this first step agreed to and are about to
begin negotiations on the comprehensive agreement that we all
want, if we indeed say, ``Well, we did not really mean it, we
are going to now impose additional sanctions that you all will
have to live with around the world,'' our partners are likely
to say, ``Well, wait a minute here. You are changing the rules.
We agreed to harm our own economies in service to diplomacy,
and you are not giving diplomacy a chance.''
So our greatest concern here is if this Committee--and I
know this Committee is for diplomacy, then we must test that
diplomacy, and the way to do that is to see through the
compliance of this first step and to negotiate that
comprehensive agreement. Congress always has the prerogative to
act. It can act very quickly. I know that, particularly when it
comes to sanctions on Iran. And that is why the Administration
is asking the Congress to keep its powder dry for this moment
so we can keep our partners on board to enforce all of our
sanctions that remain, since the vast majority do, so we can
give diplomacy a chance, so our P5+1 partners stay united,
which has been key to our diplomacy with Iran.
Chairman Johnson. A question for both of you. I am
concerned that if Congress were to enact new sanctions now, not
only could we hand a potential PR victory to Iran, it could
also lead to other countries who are cooperating with us to
peel away from their commitment to sanctions. How difficult
would it be to reinstate sanctions if major countries decided
to do that? And what effect would a breakdown in negotiations
attributable to premature congressional action have on our
broader diplomatic efforts and our standing in the world? Ms.
Sherman, let us start with you.
Ms. Sherman. On your first point, there is no question,
Senator, that we do not want Iran to be in a position to say
that the U.S. is the cause of the agreement not going forward.
As I said, my greater concern is with our international
partners and the P5+1, but there is no doubt that what you say
is indeed the case, that Iran could use this as a propaganda
point from their point of view. It does not mean we would
accept it, of course, but, nonetheless, I am sure that they
would, as Foreign Minister Zarif has already attempted to do.
Chairman Johnson. Mr. Cohen.
Mr. Cohen. Mr. Chairman, I think there would be a real risk
to the effectiveness of our international sanctions regime if
Congress were to pursue new sanctions legislation now, and it
would be difficult, I think, if that regime frayed, to put it
back together.
Now, I am the last person to downplay the strength of our
national sanctions. I think from our legislation to the
Executive orders to the actions that we have taken, like the
ones we took today, that has had real impact, and real impact
around the world. But the overwhelming pressure on Iran today
is due in part to what we have done and in part to what our
international partners have done with us--some because they
must, but many because they want to, because they are with us
in this effort, as Under Secretary Sherman described, of
pursuing a dual-track strategy of offering a diplomatic
resolution while threatening increasing sanctions pressure as
the alternative.
And I am concerned that if we lose that international
coalition, the effectiveness of our sanctions going forward
will be weakened, and our ability to pull it back together, if
our partners around the world think that we are not serious
about pursuing a diplomatic resolution, will be difficult.
Chairman Johnson. Thank you. Senator Crapo.
Senator Crapo. Thank you, Mr. Chairman.
Ambassador Sherman, before we get into the plan itself, I
want to talk with you about Saeed Abedini. I appreciate your
comments this morning and the discussions we have had
previously about the plight that Idaho's Pastor Abedini, who
has been imprisoned for his Christian beliefs in Iran, is
dealing with. And as you have discussed today also, we have
other Americans who are being held wrongly in Iran in an unjust
legal system.
As you know, I have discussed this personally with
Secretary Clinton and with Secretary Kerry and have received
their assurances that this matter will be given the highest
priority, that they will not be forgotten, and that everything
will be done that we possibly can do to obtain their release
and return them to their families and to freedom here in the
United States. And, again, I appreciate your comments today
about it.
One of the questions I have is that in the run-up to the
October talks, the United States released a convicted Iranian
proliferator from a California prison, but had no relief for
these detained Americans. And, in fact, during that time Pastor
Abedini was transferred to one of the worst prisons in Iran,
just prior to the bringing home of the Joint Plan.
Can you tell me why we are not negotiating with regard to
joint releases or why we have not made progress in the context
of the release of our own citizens when we are releasing
Iranian prisoners who are known proliferators?
Ms. Sherman. Thank you very much, Senator Crapo. As I said,
it is very hard to talk about these three Americans because it
is heartbreaking and I have met with some of the families and I
know what their lives are every day. So nothing I say is going
to give them the comfort they need until Saeed Abedini, Amir
Hekmati, and Robert Levinson are home. So I say that as a
preface because I know it to be true.
We vigorously pursue every avenue. Some of those avenues
are best pursued in private to have a chance of success. The
Secretary raised these cases directly with the Iranian foreign
minister during their meeting at the U.N. General Assembly.
President Obama raised all three Americans in his phone call
with President Rouhani. On this last round in Geneva, I had a
separate conversation with the deputy foreign minister
responsible for this, going over each of these cases and trying
to find out whether there might be some avenues for getting
their release. And as I said, if there are, we will pursue them
in every way possible.
I also had breakfast with the Swiss State secretary who is
our protecting power in Tehran, who has gone repeatedly and
asked constantly for consular visits and went over some of the
possibilities and some ideas that the Swiss had. We will pursue
every idea that is brought to us.
I know there is this notion about allegations of a prisoner
exchange deal. They are, quite frankly, simply untrue. At this
point we have asked for humanitarian release. We did not
specifically talk about these three Americans in the context of
the nuclear negotiation because, quite frankly, we do not want
them to become pawns in the negotiation. We do not want Iran to
up the ante either on the nuclear side or the American citizen
side by mixing them up in this. Iran should free these three
Americans because it is the right thing to do, it is the
humanitarian thing to do. It should not be a deal regarding
their nuclear program which they must deal with on its own
terms. Their freedom should not be tied to the success or the
failure of these negotiations.
The three Iranians that you mentioned that had been
released are not in any way related to the joint action, and
the report that the two issues are connected is simply not
true. These are folks who have gone through our judicial system
and all of the judicial processes that we have.
Senator Crapo. Well, thank you. I do appreciate the efforts
that you have undertaken, although we have some differences on
whether some opportunities could have been pressed further. But
can you give me, again, your reassurance that our State
Department and our country will take every advantage at every
stage and in every forum to assure the release as soon as
possible for these citizens?
Ms. Sherman. I absolutely guarantee it, and you have my
personal commitment to do so.
Senator Crapo. All right. Thank you. I see my time has run
out, so I will wait for the next round for the Joint Plan
questions. Thank you.
Chairman Johnson. Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman, and thank
you, Secretary Sherman and Secretary Cohen.
Secretary Cohen, you made the point that just this morning
additional enforcement actions were taking place, and it seems
to me that it is absolutely critical that very vigorous--in
fact, even more accelerated enforcement take place on those
existing sanctions. Without that, you could, either unwittingly
or wittingly, signal that there is going to be an erosion of
sanctions, slowly but inevitably, and that would be disastrous
in many different respects. So can you give us assurances that
you will, in fact, ramp up the enforcement and contact us if
you need additional legislative enforcement, if penalties have
to be increased? Because I think we really have to make sure
that they get the idea that they are not going to get a pass
here. This is not just a subtle sort of way to ease and erode
these sanctions.
Mr. Cohen. Senator, I completely agree with you, and I
think the actions we took this morning, these designations of
more than a dozen persons and entities, is the first step to
really reaffirm and demonstrate our very strong intent to
continue to enforce our sanctions very, very vigorously. The
President said this when he announced the Joint Plan 2 weeks
ago, that we would continue vigorous enforcement of our
sanctions. We are going to do so.
The vast bulk of our sanctions architecture remains in
place. The critical sanctions, on oil, on banking, on financial
activity, remain in place. Sanctions on anyone who thinks, you
know, to try to develop Iran's energy sector remain in place.
We are going to very vigorously continue to enforce these
sanctions, because I completely agree with you. One very
important aspect of our effort going forward is ensuring that
the pressure continues to mount on Iran, that they understand
that the only way that they can get relief from the pressure on
their economy is by negotiating over their nuclear program.
That is the purpose of our sanctions, that has been the purpose
of our sanctions from the beginning, is to create the leverage
for the negotiations. And we are going to do everything
possible to ensure that that sanctions pressure continues and
mounts during this period.
Senator Reed. In that vein, there are discussions in the
press of the Iranians reaching out to international oil
companies to start looking at their long-term future.
Obviously, since they have been deprived of critical equipment
and infrastructure improvements, they are going to have to get
investments to increase their capacity.
Are we actively dissuading these companies from doing this?
Because it would seem to be sending a very, sort of,
complicated message. We are saying these sanctions are really
tough, but you can talk about them, you know, when the day is
over.
Mr. Cohen. Very actively dissuading international oil
companies and others who think that now may be a time to test
the waters in Iran. Secretary Lew has over the last several
weeks met with over a hundred business and bank CEOs to make
the point that our sanctions remain in place. We have been
meeting with foreign Governments, foreign banks, foreign
businesses around the world through our embassies and through
teams from here going out. I am traveling next week to
reinforce this point. We are doing everything possible to make
sure that no one misunderstands that our sanctions remain in
place and that we intend to enforce them, and that anybody who
tests us will be taking a very, very serious risk.
Senator Reed. Will you on a regular basis notify the Senate
of countries or companies that are not complying strictly, or
whose compliance is suspect? You might not have sufficient
evidence for some type of enforcement action, but it would be
extremely helpful if the information was public of which
countries were standing with us and which were not.
Mr. Cohen. I commit to being available to this Committee at
any time and communicating with this Committee on these issues.
I think it is enormously important that we all work together on
this issue.
Senator Reed. I have got very little time left, and,
Secretary Sherman, this might be too big a topic, but in the
issue of the preliminary agreement, there were suggestions
about their military programs, particularly around Parchin. Can
you very quickly give us a sense of where we are with that?
Ms. Sherman. Actually, there are three places in the
agreement that speak to the possible military dimensions of
Iran's program. In the first paragraph, it talks about having
the comprehensive agreement address all remaining concerns.
That is a reference to their possible military dimensions. It
talks about the need to address past and present practices,
which is the IAEA terminology for possible military dimensions,
including Parchin. The agreement also says that the U.N.
Security Council resolutions must be addressed before a
comprehensive agreement is agreed to, and the U.N. Security
Council resolution specifically addressed their ballistic
missile capability.
So we have had very direct conversations with Iran about
all of these. They understand completely the meaning of the
words in this agreement, and we intend to support the IAEA in
its efforts to deal with possible military dimensions,
including Parchin.
Senator Reed. Thank you, Madam Secretary.
Thank you, Mr. Chairman.
Chairman Johnson. Senator Corker.
Senator Corker. Thank you, Mr. Chairman, and I thank each
of you for your testimony and your work.
I think all of us want to see a diplomatic solution to Iran
and have been encouraged by the fact that the Administration
has been dealing with them in this way.
I think what has shocked folks has been the text of the
interim agreement, and I think it calls many of us to want to
become involved. Your own former nuclear czar has said that,
based on the way this interim agreement was negotiated, what he
actually sees is a series of rolling agreements that go on for
a long, long time. And I think what Congress--the reason
Congress has been wishing to weigh in is to try to make sure
that we get to an end state that is appropriate and we do so
over a very short amount of time, which to me seems to be a
very reasonable place for Congress to want to be.
I would like to ask you this. When does the clock, Wendy,
actually start? Very succinctly, if you do not mind.
Ms. Sherman. Sure. Senator, our experts are in Vienna this
week working with the P5+1, the IAEA, and Iran to determine
that start date and to make sure that the sequence happens in
the order in which we all believe it should, which is----
Senator Corker. So we have negotiated a 6-month agreement a
month ago.
Ms. Sherman. Yes.
Senator Corker. But we do not know when the actual start
date is.
Ms. Sherman. It will happen in the next few weeks. I do not
want to set a date today because they are finalizing the
discussion.
Senator Corker. Senator Levin in a meeting at the White
House suggested that, to keep us from being in a series of
rolling agreements, we ensure that this interim agreement has
an end date in 6 months. Of course, that 6 months has not
begun. But instead of that, you guys agreed to a 6-month deal.
And I am just--again, you can understand why folks on our side
would be concerned, because we understand sort of the elements
of the program.
Let me ask you this: Arak--I know that it cannot be
commissioned, but it is my understanding based on the document
that work can continue on elements of this plutonium facility.
Is that correct?
Ms. Sherman. None of the issues that would make Arak
function as a nuclear reactor can move forward.
Senator Corker. I understand.
Ms. Sherman. None.
Senator Corker. But there is still construction that is----
Ms. Sherman. They could build a road. They could put up a
wall. That is correct.
Senator Corker. Let me ask you this: A country that is
interested in peaceful activities only with a plutonium
facility of its size that has no commercial purpose, does it
not raise a little bit of an antenna that they are continuing
to do those things? I mean, people generally act in their own
self-interest. Why would an economically starved country blow
money on a plutonium facility that has no commercial interest
if their intentions are good?
Ms. Sherman. Senator, we agree with you. There is no reason
I can see that a 40-megawatt heavy water reactor has a peaceful
purpose that I know of, and we have been very clear with Iran
that this will have to be addressed in full in any
comprehensive agreement.
Senator Corker. Let me ask you this: The U.N. Security
Council resolution that I think--I know this Administration
negotiated one element, an agreement actually in 2010. Why
within the four corners of this agreement are we already
agreeing to things tacitly that are in opposition to the U.N.
Security Council agreement? I think that is what has everybody
alarmed, that we have tacitly agreed to the fact that Iran will
be enriching down the road. And I think you know we negotiate
all kinds of one-two-three agreements around the world. We try
to get to a gold standard. Here we have a rogue Nation--a rogue
Nation--that is wreaking havoc, that is using a portion of our
sanctions proceeds that we are alleviating right now to kill
people in Syria, and you know that. They are using a portion of
this to funnel is to Hizballah to kill people in Syria.
I guess I do not understand why you would already agree on
the front end to them not having the gold standard, if you
will, as it relates to enrichment. We do not let Vietnam and
other countries that have been better actors do that. Why have
we done that? And I think, again, that raises alarms that--you
know, a lot of people think that Secretary Kerry is so anxious
to make a deal for lots of legacy reasons that he is willing to
overlook some of the details that are so important. Why have we
done this?
Ms. Sherman. Let me say several things, Senator. First of
all, we have not conceded anything. The comprehensive
agreement, nothing is agreed to until----
Senator Corker. Let me, if I could, you do not think that
in a preamble where we talk about--you do not think--well, let
me just put it this way: Do the officials in Iran think that we
have agreed to allowing them to enrich? I mean, every press
statement they have made says that. How could there be such a
big misunderstanding over such an important issue?
Ms. Sherman. Right. What I was about to say, Senator, is
nothing is agreed to in a final agreement until everything is
agreed to. What we have said to Iran and what this says is
that, yes, we will talk with them about the potential for a
very limited enrichment program, matched to practical needs,
with staggering constraints, monitoring, and verification, if--
if--they agree to everything else that we want agreed to. That
is totally consistent with the U.N. Security Council
resolution, which does not talk about stopping enrichment. It
talks about suspending enrichment and saying that once the IAEA
and others confirm that Iran has met all its responsibilities
and obligations, it could be treated like any other NPT State.
So it is not about ending. It is about suspending enrichment.
That said, Senator, I completely agree with you, we all do,
that there are many questions here about what Iran is up to.
That is why the Secretary of State, the President of the United
States in his address at the Saban Forum, as well as the
Secretaries, said we are quite skeptical whether we will get to
the comprehensive agreement that we all wish to see. But we
must test Iran because that is how we keep the international
community together; that is how, if we have to choose other
options, we will have the international community with us to do
so.
Senator Corker. Mr. Chairman, I just want to make one quick
statement in closing. I do think that we are stepping away from
base U.N. Security Council agreements, and I think what
Congress wants to see happen is that not occur. And I think
that is why you have seen such a reaction. I realize we are
sort of going through a rope-a-dope here in the Senate and that
we are not actually going to do anything. I understand that
that is sort of baked in, the blockage, and I know we are
participating in a little bit of a rope-a-dope today. But I
just want to say to David Cohen, I was just in the region, and
I concur with Senator Reed. Once you begin loosening sanctions
and people begin to see that Iran is now going to become not a
rogue country but part of the international community--I mean,
we are basically ceding much of Middle Eastern activities to
them. We have been now for about a year. Once they see that
there is a rush, as Senator Reed mentioned, to do business with
them--and I think that is why we are all concerned, that we did
an interim deal that has no sacrifice on their part whatsoever.
None. They are still spinning 19,000 centrifuges every single
day. And they are not going to violate this agreement. It is an
outstanding agreement for them, because in 6 months they are
going to be a normal international entity. I do not see any way
you hold the sanctions. But, again, obviously we are
disappointed, but hopeful that somehow you can put the genie
back in the bottle and end up with some type of agreement that
averts warfare, because all of us do want to see this succeed.
We just do not know how we get there with an interim deal
framed the way this one is. But thank you.
Chairman Johnson. All Members are now required to report to
the Senate floor for two votes.
Senator Menendez has a Committee hearing, a markup, quite
soon, and will the Senator----
Senator Menendez. Mr. Chairman, I understand there are 15
minutes on this vote, so my 5 minutes would be more than
enough.
Chairman Johnson. OK.
Senator Menendez. Thank you, Mr. Chairman.
You know, I have been pursuing Iran since 1996 when I
learned as a member of the House Foreign Affairs Committee that
the United States was sending voluntary contributions to the
IAEA in addition to our membership dues, whose voluntary
contributions were going for what? To create operational
capacity at the Bushehr nuclear facility. That was not in the
national interest and security of the United States, and I led
an effort to stop that.
Now, I have been continuing to pursue Iran for 17 years
when it was not in the spotlight, and what I have seen is Iran
deceive, delay, and over various administrations march forward
to the point that it seems that we are now ready to accept some
form of an enrichment program in Iran. And so some of us are
very skeptical not because of wide-eyed skepticism but of
reality of what is the history so far.
And I have to say, part of my challenge in trying to listen
to the Administration is some of the same statements I have
heard in the past. I was looking at a transcript of the Senate
Foreign Relations Committee on December 1, 1991, and many of
the arguments I heard then against the pursuit of any sanctions
regime are the ones I am hearing now. Let me quote from the
transcript.
``Secretary Cohen. The concern we have with this
amendment''--which was the Menendez-Kirk amendment--``is that
we think it risks two things we want to avoid. One is that it
risks fracturing the international coalition that has been
built up over the last several years to bring pressure on Iran,
and we would rather consider voluntary action against the
Central Bank of Iran rather than the threat of coercion that is
contained in your amendment.''
You went on to say, ``We think that, to be clear, our
judgment is that the best course to pursue at this time is not
to apply a mechanism that puts at risk the largest financial
institutions, the central bank of some of our closest allies.''
And you went on to say, ``Our position is that the right
course is not to adopt this amendment.''
Now, you know, that is basically what I heard then. That
amendment went on to pass 100-0, and it is one of the things
that you all, the Administration, heralds today as the essence
of what has gotten Iran to the negotiating table. So you will
forgive me if I, having heard many of the same arguments--we
will break our international coalition, we will not have
partners--that has been the arguments as of 2 years ago, and it
is the arguments today.
I also look at the question of what is really this interim
agreement or plan of action all about, and what we hear is
versus what the Iranians say. The Iranians say in published
reports--Iran said that, according to the agreement, the text
of the agreement, Iran said it would not make any further
advances of its activities--it did not say its nuclear core. It
said any further advances of its activities at the Arak
reactor. And then Zarif told the parliament in translated
comments that it means no nuclear fuel will be produced, but
construction will continue there.
Now, you say a road or a wall. The reality is if you can
continue to construct all the elements except for the nuclear
core, that is a fundamental difference. And it is not
insignificant. Especially if our view is that Arak really is
not to be allowed, at the end of the day, why would we allow
them to even move to any form of construction which puts a
greater and greater investment on their part to achieve their
ultimate goal?
Then we see today that the Iranians are launching a rocket
next week, and though this was supposedly made as their space
program, it is well known that this is just a cover for a
military ballistic weapons program. I think that is a
provocative action in the midst of such negotiations, should be
interpreted as a sign of bad faith, and only reaffirms in our
mind why we need to proceed with some efforts here.
So I am beginning increasingly--I know I have been a
proponent of pursuing additional sanctions prospectively at a
timeframe beyond the scope of the intended 6-month period that
we think is an insurance policy, but I am beginning to think,
based upon all of this, that maybe what the Senate needs to do
is to find the end game, and at least what it finds as
acceptable as the final status, because I am getting nervous
about what I perceive will be acceptable to us as the final
status versus what, in fact, I think the--when I say ``to us,''
meaning the Administration--versus what the Congress might view
as acceptable. It may be defining that through a resolution,
maybe a course of action that would affect the ultimate outcome
here, which is obviously the most important one.
So I just want to put on the record my skepticism based on
the history that we have had here, one for 17 years, the other
maybe more recent, that I have heard many of these arguments,
and they are the arguments nonetheless that have had the Senate
act and have actually helped the Administration achieve some of
its goals.
Chairman Johnson. We will resume the hearing immediately
following the votes. This hearing is in recess.
[Recess.]
Chairman Johnson. I will give you an opportunity to respond
to the remarks by Senator Menendez. Ms. Sherman and Mr. Cohen,
would you like to respond?
Ms. Sherman. If I may, Mr. Chairman, let Under Secretary go
first, and then I will go second. Thank you.
Ms. Cohen. And thank you, Mr. Chairman, and I know that
Senator Menendez is not here, and so I would make the offer to
Senator Menendez that I am happy to follow up with him
directly. But what I would say is that I do not think anyone
can deny the importance of the international coalition of
countries that we have been able to put together and hold
together. It has magnified enormously the strength of our
sanctions, and we have been able to do that over the years
working with Congress in a way that ensures that the
legislation that is enacted strengthens rather than threatens
that international coalition.
After the testimony that Senator Menendez referenced, we
met with Senator Menendez and others and expressed our concern
with the provision that would impose sanctions on the Central
Bank of Iran that was directed at Iran's ability to export its
oil, and we worked with Senator Menendez and others and very
much appreciate his working with us to modify the provision
that gave us the greatest concern in a way that when it was
ultimately enacted, it was enormously effective. This is the
significant reduction provision that has over the course of the
past 2 years resulted in Iran's ability to export its oil being
significantly impaired. It was exporting 2.5 million barrels
per day of oil at the beginning of 2012. It is now down to
about a million barrels per day.
We were able to implement that provision in a way that
brought along our partners rather than leading them to fight us
as we were trying to drive down Iran's oil revenues. So I
appreciate Senator Menendez's work with the Administration in
crafting that legislation in a way that was enormously
effective.
Today we have this very strong international coalition. The
risk of legislating right now is that it weakens that
coalition. Now, I cannot sit here and say that it will blow
apart the coalition, but I do not think anyone can deny that
there is a risk that if we legislate now, the coalition will
weaken. If it weakens, the effectiveness of our sanctions
weaken. And the concerns that Senator Corker and Senator Reed
expressed about the interests of the business community, the
international business community going into Iran become more
real. And if our sanctions weaken, the leverage that our
negotiators have is diminished, and our ability to reach the
long-term agreement that is what we are all trying to achieve
becomes more difficult.
So I would just say that, given the absolute certainty that
Congress can legislate if the Iranians do not fulfill their
obligations under the Joint Plan or are unable to reach a long-
term agreement, as well as the certainty that the
Administration will work with this Congress, with this
Committee, with Senator Menendez, and others on legislation
that could be enacted at the appropriate time, it just seems to
me that it is not a risk worth taking right now.
Ms. Sherman. Thank you, Mr. Chairman. Let me just add, I
totally understand Senator Menendez's and all Senators'
skepticism about Iran. Iran does not do good things around the
world for the most part. We are concerned about what they have
done regarding missing Americans. We are very concerned about
their destabilizing activities, about their terror, about their
human rights abuses, their censorship. We are very skeptical
about whether we can reach a comprehensive agreement that fully
addresses all of the international community's concerns about
their nuclear program. But we are equally convinced that we
must test and try to see whether, in fact, we can resolve this
peacefully, because that is what the American people want, that
is what the U.S. Congress wants, that is what the Senate wants,
and that is the right thing to do.
We are at a somewhat different place than we have been in
the lead-up to this moment where sanctions have been so
staggeringly effective. We now have a Joint Plan of Action. We
now have an understanding with Iran of actions it is to take in
order to get very limited, targeted, and reversible sanctions
relief, and to enter into a comprehensive negotiation for a
comprehensive agreement.
Because we are at this different place, we should react and
respond somewhat differently, which is to say we should test
that agreement. And one of the provisions of the agreement is
that the European Union, the U.N. Security Council, and the
United States not impose new nuclear sanctions during the 6-
month period while we negotiate that comprehensive agreement.
It seems to us that it is worth complying with the provisions
of that understanding, testing Iran, and then coming to the
Congress, to this Committee and the Senate, as Under Secretary
Cohen has said, to take action if and when needed.
Thank you.
Chairman Johnson. Senator Tester.
Senator Tester. Yes, thank you, Mr. Chairman.
Very quickly, and if you could be as concise as possible, I
have got a bunch I would like to get through. Mr. Cohen,
following up on what Senator Reed had said, more than a dozen--
were these American companies that sanctions were put on?
Mr. Cohen. The actions today were not against American
companies, but within--yesterday we applied sanctions--applied
an enforcement action in the settlements with World Bank of
Scotland, and about 2 weeks ago, there was an action that was
settled with an American company called----
Senator Tester. OK. And just to be clear, is this public
information?
Mr. Cohen. Absolutely.
Senator Tester. OK. And could you tell me, do any of these
businesses do business with the U.S. Government?
Mr. Cohen. I do not know. I would be very surprised if any
did. But we will check into that.
Senator Tester. OK. I just think that, you know, if we are
going to do something, they ought not be doing business with
us, the U.S.
Mr. Cohen. I completely agree. I think it is very unlikely
this company----
Senator Tester. OK. To Wendy, I happened to be over in Iran
when--in Israel, I am sorry, when this agreement was announced.
Prime Minister Netanyahu was not happy, as you well know. In
your estimation, though, it seemed like everybody in the Middle
East was not happy with it--not just Israel but everybody. Why?
Ms. Sherman. Senator, I understand everyone in the region's
anxiety because it is our anxiety, and that is that Iran is a
destabilizing influence in the region. They obviously are
financing Lebanese Hizballah. They are sending their own
military advisers into Syria. They are financing actions in
Yemen. They are not good actors in the region, and so there is
a concern among people in the region that this nuclear
agreement or this understanding is going to lead to us
normalizing our relationship with Iran. That is so many years
off.
Senator Tester. Yes. The hope is for that, but we are a
ways off.
Ms. Sherman. A long way off. A long way off.
Senator Tester. OK. In relation to the IAEA inspectors, are
they there on a daily basis or a weekly basis or----
Ms. Sherman. Right now, the IAEA inspectors go to Fordow
and Natanz I believe on a weekly basis, and this agreement now
will require them to go daily.
Senator Tester. OK. Do they have access to everything they
need to see?
Ms. Sherman. They do have and now will have additional
access to things they need to see.
Senator Tester. And do these inspections have to be
preannounced?
Ms. Sherman. They will have--because they are there every
day, Iran will now know that they will be there every day.
Senator Tester. OK. You had talked about the Iranian policy
in regards to Hizballah and Hamas and, to be quite honest with
you, pretty much the funding for a lot of the terrorism that
happens in not only the Middle East but the world. Part of my
concern is you have got Iran that is acting very improperly
over on one side, and then a hope that on this side they are
going to act separate from the rest of their foreign policy.
What gives you any sort of confidence that that even could
happen?
Ms. Sherman. Well, it is not about confidence. It is not
about trust. It is about verification in the first instance.
Second, quite frankly, the MFA and Foreign Minister Zarif
have responsibility for the nuclear negotiation. The IRGC Quds
Force has the leadership on their activities that destabilize
so much of the region in parts of the world. So President
Rouhani has been given license by the Supreme Leader to then
give license to Foreign Minister Zarif to try to address the
concerns of the international community about the nuclear
program. The reason for that is because of the horrific
economic situation that Under Secretary Cohen outlined.
Senator Tester. You know, one of the things that was kind
of ironic to me--and I was not aware of what Ranking Member
Crapo was talking about with folks being held hostage. One of
the things that would seem--where is the good will that comes
out of Iran? I mean, we have seen good will come out of this
country. We always see good will come out of this country.
Where is the good will--because these guys have been the ones
that have been blowing up the world, not us.
Ms. Sherman. Senator, I wish I could tell you that I
thought that there was a lot of good actions coming our way.
There was an American who was briefly held and then let go by
Iran. They saw that as a good will gesture. They saw their
letting go of our hikers as a good will gesture. But, quite
frankly, there is a long way to go before we see the good will
that you are referring to.
Senator Tester. OK. Last question. Iran sits on the fourth
largest oil reserves in the world, second largest natural gas
reserves. Why should Iran even be interested in nuclear power?
Ms. Sherman. This is an excellent question. It is one we
have asked them repeatedly, and it is why this Joint Plan of
Action says we want to understand what their practical needs
are because, quite frankly, it is not clear to us why they need
19,000 centrifuges, why they need a stockpile of 3.5 percent
enriched material, why they need the Arak nuclear reactor. And
so that is what we are going to have to work through to get to
a comprehensive agreement.
Senator Tester. Just in closing, I would just say I wish
you the best. I think that there is not a soul at this table
that does not want to see these negotiations work. On the other
hand, we do not want to see Iran become more powerful either.
Ms. Sherman. We quite agree. Thank you.
Senator Tester. Thank you, Mr. Chairman.
Chairman Johnson. Senator Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman.
You know, I thought I came to a hearing on sanctions, and
what we are really having is a hearing on the legitimacy of the
proposed agreement, which presents really kind of three
categories of my kind of analysis.
Number one, the Congress obviously plays a very large role
in providing policy advice and certainly participating, and I
think there is a lot of people, certainly in this room, who
have expressed dissatisfaction with the agreement,
dissatisfaction with whether we have mutuality of goals,
whether we have kind of speaking with one voice, which is
critically important if we are going to be successful.
And so I understand and share your concern about the
international community and your international sanctions. I
share your concern about whether we can continue to test the
waters, so to speak, in little interim steps. But I also share
the concern of very many members we have heard today about not
having mutuality about the end goal, about not really
appreciating and understanding what--and, you know, we can all
say we do not want them to have the capability, but the bottom
line is the devil is in the details in any negotiation.
And so I would really advise and caution the
Administration--certainly both of you, through the Syria
discussion you have been very forthcoming. I think you probably
have an office somewhere in the United States Capitol you have
been up here so much. But I just really believe that there
needs to be better listening to the concerns that have been
expressed here today.
I want to cover something that has not really been covered
yet, which is the internal conditions in Iran for the
development of this agreement. There is a lot of discussion--
just as you are going through this process here internally,
there is a lot of discussion about the internal politics of
Iran and whether, in fact, there is a mature enough diplomatic
situation in Iran to actually deliver anything that we might
hope for as we pursue peace in the region.
And so I would like comments from both of you about how you
see the internal politics and how you see this--how fragile is
this agreement in Iran?
Ms. Sherman. Well, thank you very much, Senator. First of
all, I take to heart your imprimatur to us to listen better and
to understand the concerns here of the U.S. Senate, and we will
work and endeavor to do so.
Second, as regards the internal politics, I would urge you,
if you have not had a classified briefing with our national
intelligence manager for Iran, to avail yourself of that. I
think you have heard some of it because you will get some
insights into what is going on. But in this unclassified
setting, let me say my own understanding----
Senator Heitkamp. And I think I have a pretty good idea,
but I also think it is really important for the American public
to understand at least some characteristics of who we are
negotiating with.
Ms. Sherman. Thank you. The Supreme Leader is the only one
who really holds the nuclear file, makes the final decisions
about whether Iran will reach a comprehensive agreement to
forgo much of what it has created in return for the economic
relief it seeks. The Supreme Leader has, however, given to
President Rouhani, who was elected to get that economic relief
and was quite clearly not the Supreme Leader's first choice to
be president of Iran, but was acceptable and is himself a
conservative cleric. No one should misunderstand or believe
that President Rouhani is not anything but a very conservative
cleric. He is about preserving the regime, not changing it, not
changing the Supreme Leader. So none of this is about regime
change for him, nor is U.S. policy headed and about regime
change. It is about addressing the concerns about Iran's
nuclear program.
So Rouhani was given a license by the Supreme Leader to go
and try and see what he could do to get economic relief, with
some red lines in place, including making sure that Iran could
keep some of its capability. Indeed, then Rouhani passed off to
Foreign Minister Zarif, who knows the United States very well,
having lived here and studied here and worked for Iran here for
nearly 30 years, to see whether, in fact, he could move the
negotiation forward. So it is in that setting that we have
begun to really make some progress because they want this
economic relief.
Additionally, I have to add that they do have differences
among their country. There are hard-liners who are much more
conservative than the conservative cleric president of Iran,
President Rouhani, who do not think that they should be talking
with the United States, or anyone else for that matter, about
their nuclear program.
There are some people who are more reform-minded, but there
is a general belief among the Iranian people that they have a
right to enrich. The United States does not believe any country
has a right to enrich. But the Iranian people do, and they have
a great deal of pride and a culture of resistance to change and
do not particularly want to adopt all that the United States
stands for, so they very much hold on to their own tenets.
Under Secretary Cohen may want to add something from an
economic point of view.
Mr. Cohen. If I could just very briefly, Mr. Chairman,
Senator Heitkamp, just picking up on what Under Secretary
Sherman said about the election of Rouhani, it was, I think,
generally understood as an expression by the Iranian people of
a desire for relief from the economic conditions that they are
currently facing. Among the skewed list of candidates, he was
the one who was sort of most likely to try to bring about
improved economic conditions through engagement with the West,
understanding full well that the only way that he can get
improved economic conditions in Iran is to get the sanctions
lifted, and the only way to get the sanctions lifted is to
address concerns with their nuclear program.
This initial first step Joint Plan of Action will not
improve the economic conditions in Iran, but it was greeted
with excitement among the people of Iran, because I think they
saw this as showing the potential, the prospect for economic
improvement down the road. Frankly, I think this next 6 months,
as the Iranian people see through this Joint Plan of Action
that there is the potential if their Government negotiates in a
serious fashion about the nuclear program to get real sanctions
relief, can create additional internal pressure of the kind
that we saw that led to the election of Rouhani, additional
pressure to push their Government to do what is necessary to
address the concerns.
Chairman Johnson. Senator Warren.
Senator Warren. Thank you, Mr. Chairman. Thank you for
being here.
So America and its allies are committed to preventing Iran
from obtaining nuclear weapons, and we are committed to
protecting our allies throughout the region, including Israel.
This dual-track policy that we are on now--imposing tough
sanctions on Iran while engaging them diplomatically--I think
reflects this commitment, and that approach has clearly brought
Iran to the negotiating table, produced an interim deal that is
a promising first step toward achieving our goals in the
region.
Of course, the interim deal does not give us everything
that we want. That is the nature of a negotiation. Each side
has to give a little. But it is certainly no giveaway to Iran.
They made critical concessions. The core existing sanctions on
their oil and banking sectors remain fully in force. And all
the sanctions relief in the deal provide--are time limited and
fully reversible. More importantly, it seems to me the interim
deal is a necessary step in reaching a final deal.
So I would like your view on that, Under Secretary Sherman.
Could the U.S. plausibly hope to get a final agreement that
prevents an Iranian nuclear weapons program without an interim
deal of this kind?
Ms. Sherman. Thank you very much, Senator. You know, I
think Secretary Kerry has said, I have said, and the President
of the United States has said we wish we could have gotten a
comprehensive agreement in the first stage. There is no doubt
we would all be happier to have a comprehensive agreement, but
it simply was not available. It was not possible.
And so what we thought was critical was to get this first
step and stop the advance of their nuclear program, to put time
on the clock to negotiate that comprehensive agreement--not too
much time on the clock because we did not want them to play
games, but enough time to really see if we could get that
negotiation underway and fulfilled.
So, in our view, we needed this first step to put that time
on the clock. We understand that our very strong ally,
partner--Israel--tactically believes we should have waited for
a comprehensive agreement, that we should have kept sanctioning
and hope that Iran would capitulate. But our concern with that
is, because it is a culture of resistance, as we were just
discussing, that it would take a very long time. And although
it might ultimately happen, though it might not, all that while
they would be advancing their nuclear program. And since the
time for breakout was already short, it would become shorter
and shorter, leaving us with very difficult options and
diplomacy fading away.
Senator Warren. Good. And if I can just follow up just a
little bit here, to be clear, Under Secretary Cohen, the value
of the temporary sanctions relief, I take it from all you have
said, is minuscule in comparison to Iran's economy, even in its
greatly weakened state. Is that correct?
Mr. Cohen. Yes, Senator Warren. The total value of this
deal is in the $6 to $7 billion range; that is about 1 percent
of Iran's GDP. It does not come close to closing the budget
deficit that Iran faces, which is in the $35 billion range. It
does not come close to providing the funds necessary for Iran's
foreign exchange needs, which run about $60 to $70 billion a
year.
So as I said, it is economically insignificant to Iran, and
it is insignificant in particular because of what remains in
place: the banking sanctions, the oil sanctions, the financial
sanctions, the fact that their ports are largely cutoff. You
know, this relief will not improve the economic situation in
Iran in any significant way.
Senator Warren. And then one last question that I want to
ask about this. President Rouhani was elected in part because,
unlike his predecessor, he was interested in negotiating with
the international community. But he still has to contend with a
significant number of hard-liners who oppose negotiations. So,
Under Secretary Sherman, if Congress passes additional
sanctions now, even sanctions that do not kick in unless the
negotiators fail to reach final agreement in 6 months, would
that make it more difficult or easier for President Rouhani to
make a final deal?
Ms. Sherman. I think there is no doubt that if, in fact,
sanctions were passed, the hard-liners would say, ``See, you
cannot deal with the United States. You cannot deal with the
P5+1. There is no good faith.'' And although that might indeed
tank the agreement, as I have said, our greater concern is
keeping the P5+1 and the international coalition together for
the enforcement of the sanctions that remain on the books,
which are vast.
Senator Warren. Thank you.
Thank you, Mr. Chairman.
Chairman Johnson. Ms. Sherman and Mr. Cohen, can you
explain specifically how the U.S. will ensure that Iran
complies with the terms of the first step agreement? And can
you describe the different verification and monitoring roles
played by the State Department, the intelligence community, and
the IAEA? Ms. Sherman, let us start with you.
Ms. Sherman. Sure. First of all, the IAEA will be working
with us. We are a member of the Board of Governors of the IAEA,
and so we are part of the regular meetings. They will help do
the verification of the agreement--in fact, will lead the
verification of the agreement; as I have stated, daily access
to Fordow and Natanz, more frequent access to Arak, managed
access to uranium mines and mills, to centrifuge production,
getting the plans of the Arak reactor. So in many ways, they
will provide the compliance oversight for this.
In addition, of course, through our own means as a
Government, both national intelligence means as well as
diplomatic means, we will be monitoring the compliance, and we
will, of course, be available to this Committee and to the U.S.
Congress for ongoing briefings, consultations, and hearings to
keep you apprised of compliance.
Chairman Johnson. Mr. Cohen.
Mr. Cohen. Yes, Mr. Chairman, with respect to compliance, I
would just make one point. The relief that is afforded to Iran
in this package does not begin until Iran begins to comply with
its obligations under the agreement. So none of the relief in
the petrochemical sanctions or the auto sanctions, any of that,
begins until we see the Iranians complying with their
commitments under this agreement. And, moreover, the financial
aspect, this $4.2 billion that Iran will be allowed access to,
that is doled out in installments over the 6-month duration of
this deal. And so the Iranians will need to continue to comply
with their obligations under this first step in order to get
access to those funds.
Chairman Johnson. Senator Crapo.
Senator Crapo. Thank you, Mr. Chairman.
Ambassador Sherman, the United States and the other members
of the P5+1 are apparently bound in the agreement to the
principle of no new nuclear-related sanctions. Can you or have
you specifically defined what that means? What are ``nuclear-
related sanctions''?
Ms. Sherman. Well, there are both practices and legal
definitions that accrue with that, Senator, and I would be glad
to get you a briefing from a team at State about how we will
sort of work through those issues. But it is quite clear sort
of in the nomenclature of how we proceed what are considered
nuclear related versus what would be terror related or human
rights abuses or censorship or military sales related.
Senator Crapo. This just generates another series of
questions for me, and let me pose it this way: Given that there
are different kinds of sanctions and the agreement focuses on
nuclear-related sanctions, assuming we can specify exactly what
that is and distinguish between the different sanctions, does
that mean that Congress would be free to pass other sanctions
measures while we are considering the plan?
Ms. Sherman. We have said to Iran that we will continue to
enforce all of our existing sanctions, and we have said that
this agreement pertains only to new nuclear-related sanctions
in terms of what we, the European Union, and the U.N. Security
Council will forgo.
Senator Crapo. And you are confident that can be delineated
as----
Ms. Sherman. Yes. And, indeed, right now there are
considerations by the Human Rights Council about a resolution
on human rights abuses in Iran. We fully support that. So on an
ongoing basis, in all of the international fora where we have
ongoing concerns about counterterrorism, human rights,
censorship, we will be active as we always have been.
Senator Crapo. All right. Let me ask it in another context.
Should we proceed and should Iran succeed in proving that it
can run a purely civilian program and move forward with the
resolution of the issue as you have discussed is our objective
and as we all hope will be achieved, would the United States
then be able to use all of the tools in its toolbox--and what I
am referring to here is something such as petroleum sanctions--
to address the destabilizing nature of other aspects of Iran's
conduct such as its State sponsorship of terrorism or its
advanced ballistic missile production or its human rights
abuses?
Ms. Sherman. I think, Senator, we would have to look at
what the specific language was attacking what specific problem,
so I think the best I can do today, without specific language
sitting in front of me and in front of our lawyers, is to say
to you that the only commitment we have made in this agreement
is no new nuclear-related sanctions, is the only commitment we
have made.
Senator Crapo. All right. I would like to pursue that a
little further with you following the hearing to see how we
distinguish between the two and what kind of limitations would
be on the United States as we move forward in that context.
Just another couple quick questions, and these questions
relate to the U.N. Security Council resolutions and the U.S.-
UAE Civilian Nuclear Cooperation Agreement. Can we assume or
can you confirm to us that those resolutions and agreements
would be required to be complied with by Iran as we move
forward in any final negotiations?
Ms. Sherman. Indeed, the Joint Plan of Action says that all
U.N. Security Council resolutions must be addressed before a
final agreement is agreed to.
Senator Crapo. All right. Thank you, Mr. Chairman. I have
no further questions at this point.
Chairman Johnson. Stopping Iran's illicit nuclear
activities is vital to our national security and that of our
allies, including Israel. If no final deal is reached, Iran
fails to comply with the first step agreement, this Committee
will act swiftly to impose a new round of sanctions. In the
meantime, I agree with today's witnesses that a pause on new
sanctions legislation is justified to see if such a deal is
possible.
I would like to thank the witnesses for their testimony,
and this hearing is adjourned.
[Whereupon, at 12:16 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
PREPARED STATEMENT OF SENATOR JON TESTER
Thank you Chairman Johnson and Ranking Member Crapo for convening
this important hearing. I would also like to thank Ms. Sherman and Mr.
Cohen, and Secretary Kerry, for their tireless diplomatic efforts. All
of us here are deeply committed to preventing Iran from acquiring a
nuclear weapon.
Your hard work is a critical first step in this endeavor.
I was in Jerusalem when this agreement was announced on November
24th. That evening, I met with Israeli Prime Minister Netanyahu. For
me, visiting Israel during this critical time highlighted the gravity
of the issue before us.
As Secretary Kerry said in the House yesterday, ``there's no more
important issue in American foreign policy.'' I could not agree more.
That's why we have to get this right.
While I fully support diplomatic efforts to prevent Iran from
getting a nuclear weapon, I remain deeply skeptical of Iran's
leadership and their intentions. Simply put, the Iranian regime still
poses a threat to American interests, our allies, and to the stability
of the region.
I look forward to hearing from each of you about the details of the
agreement reached in Geneva, and the prospects of reaching a long-term
comprehensive solution as we move forward.
Again, I thank Chairman Johnson and Ranking Member Crapo for
calling this hearing, and I look forward to the testimony of the
witnesses.
______
PREPARED STATEMENT OF WENDY SHERMAN
Under Secretary for Political Affairs, Department of State
December 12, 2013
Good morning, Chairman Johnson, Ranking Member Crapo, distinguished
Members of the Committee. Thank you for inviting me to discuss the
details of the Joint Plan of Action (JPA) concluded with Iran and our
P5+1 partners on November 24 in Geneva.
Let me begin by noting that the diplomatic opportunity before us is
a direct result of the cooperation between Congress and the
Administration to put in place and implement a comprehensive and
unprecedented sanctions regime designed to press Iran to address
international concerns with its nuclear program.
Our collaboration on sanctions is what brought Iran to the table.
However, it is important to underscore that what we do from this point
forward is just as critical, if not more so, in terms of testing Iran's
intentions. In that regard, I look forward to our consultations over
the important weeks and months ahead.
Today, I want to give you the facts about what was agreed to in
Geneva, so you can judge the merits of the JPA for yourself.
Iran Commitments
We have long recognized that the Iranian nuclear program
constitutes one of the most serious threats to U.S. national security
and our interests in the Middle East. Thanks to the sanctions pressure,
and a firm and united position from the P5+1 (China, France, Russia,
UK, U.S., and Germany, in coordination with the EU), we have reached an
understanding that constitutes the most significant effort to halt the
advance of Iran's nuclear program in nearly a decade. As a consequence,
the JPA agreed to in Geneva is profoundly in America's national
security interest, and makes our regional partners safer and more
secure.
The JPA is sequenced, with a 6-month period designed explicitly to
block near-term Iranian pathways to a nuclear weapon, while creating
space for a long-term comprehensive solution. The goal of that
comprehensive solution is to resolve the international community's
concerns with Iran's nuclear program. What this initial plan does is
help ensure that Iran's nuclear program cannot advance while
negotiations towards that solution proceed.
Upon implementation in the coming weeks, this initial step will
immediately: halt progress of the Iranian nuclear program; roll it back
in key respects; and introduce unprecedented monitoring into Iran's
nuclear activities. Taken together, these measures will prevent Iran
from enhancing its ability to create a nuclear weapon and increase the
confidence in our ability to detect any move towards nuclear break-out
or diversion of material towards a covert program.
The details demonstrate why this is the case. First, as stated,
Iran must halt the progress of its enrichment program. This means,
under the express terms of the JPA, that Iran cannot increase its
enrichment capacity. Iran's stockpile of 3.5 percent enriched uranium
hexafluoride (UF6) cannot grow--it will be the same amount or less at
the end of the 6-month period as it is as the beginning. Iran cannot
build new enrichment facilities for the production of enriched uranium.
Iran cannot install additional centrifuges of any type in their
production facilities, operate more centrifuges, nor replace existing
centrifuges with more advanced types. Moreover, Iran must limit
centrifuge production to those needed to replace damaged machines; thus
Iran cannot expand its stockpile of centrifuges.
Second, during this initial phase, Iran will roll back or
neutralize key aspects of its program. Iran must cease all enrichment
over 5 percent. The piping at Fordow and Natanz that is used to more
efficiently enrich uranium over 5 percent must be dismantled. Iran must
neutralize its entire 20-percent stockpile of enriched uranium
hexafluoride by diluting it to a lower level of enriched uranium
hexafluoride or converting it to oxide for fuel for the Tehran Research
Reactor.
Finally, Iran cannot advance work on the plutonium track. At Arak,
Iran cannot commission the heavy water reactor under construction nor
transfer fuel or heavy water to the reactor site. Iran cannot test
additional fuel or produce more fuel for the reactor nor install
remaining components for the reactor. Iran cannot construct a facility
for reprocessing spent fuel. Without reprocessing, Iran cannot separate
plutonium from spent fuel and therefore cannot obtain any plutonium for
use in a nuclear weapon. As such, this first step freezes the timeline
for beginning operations at the Arak reactor and halts progress on any
plutonium pathway to a weapon.
Significantly, the monitoring measures outlined in the JPA will
provide much more timely warning of a breakout at Iran's declared
enrichment facilities and add new checks against the diversion of
equipment for any potential covert enrichment program. Some have
rightfully asked why we should trust Iran to live up to these
commitments. As Secretary Kerry has said, the JPA is not based on
trust, it is based on verification--and the verification mechanisms set
forth in the JPA are unprecedented.
Under its express terms, Iran must permit daily access by
International Atomic Energy Agency (IAEA) inspectors to the facilities
at Natanz and Fordow and allow more frequent access to the Arak
reactor. Iran must allow IAEA inspectors access to sites related to
centrifuge assembly and production of centrifuge rotors (both key
aspects of the program). Iran must allow IAEA inspectors access to
uranium mines and mills. Iran must provide design information for the
Arak heavy water reactor. These monitoring mechanisms will provide
additional warning of breakout or diversion of equipment all along the
nuclear fuel cycle and would not be in place without the understanding
reached in Geneva.
In summary, even in its initial phase, the JPA stops any advances
in each of the potential pathways to a weapon that has long concerned
us and our closest allies. It eliminates Iran's stockpile of 20-percent
enriched uranium hexafluoride. It stops installation of additional
centrifuges at production facilities, especially Iran's most advanced
centrifuge design, together with freezing further accumulation of 3.5-
percent enriched uranium hexafluoride. And it ensures that the Arak
reactor cannot be brought on line while we negotiate a comprehensive
solution.
P5+1 Commitments
In return for these concrete actions by Iran and as Iran takes the
required steps, the P5+1 will provide limited, temporary, and
reversible relief while maintaining the core architecture of our
sanctions regime--including key oil and banking sanctions. And we will
vigorously enforce these and all other existing sanctions.
We estimate that this limited relief will provide approximately $6-
7 billion in revenue.
First, we will hold steady Iran's exports of crude oil at levels
that are down over 60 percent since 2011. This means that Iran will
continue to lose $4-5 billion per month while the JPA is in effect
compared to 2011. Let me be clear, however. We will not allow Iran's
exports to increase and we will continue collaboration with our
international partners to ensure that they understand that any
increases in Iranian oil purchases--or any new purchases of Iranian
oil--remain subject to sanctions.
Second, we are prepared to allow Iran to access $4.2 billion in its
restricted assets, not in a lump sum, but in monthly allocations that
keep up with verified Iranian progress on its nuclear commitments.
Remember, Iran will continue to lose $4-5 billion a month due to our
oil sanctions compared to 2011, so this access to funds is less than 1
month of those losses. And this is a fraction of Iran's total needs for
imports or its budget shortfall.
Third, the P5+1 agreed to suspend certain sanctions on gold and
precious metals, Iran's auto sector and on Iran's petrochemical
exports. The suspension of the sanctions on gold and precious metals
will not allow Iran to use restricted assets to purchase gold and
precious metals, rather it allows Iranians to import and export gold
and precious metals. The suspension of the sanctions on the auto
industry will allow Iran to obtain support and services from third
countries for the assembly and manufacturing of light and heavy
vehicles. The suspension of sanctions on petrochemical exports means
Iran will be able to sell petrochemicals and retain the revenues from
these sales. We estimate that Iran will earn approximately $1.5 billion
in revenue from the temporary suspension of these sanctions.
We will also license the supply and installation of spare parts for
the safety of flight for airplanes to occur in Iran. We will also
license safety inspections and related services to occur in Iran.
Notably, this will not apply to any airline subject to sanctions under
our counterterrorism authorities.
In addition, solely for the financing of humanitarian transactions
and tuition assistance for Iranians studying abroad, we will facilitate
access to Iran's overseas accounts for these specific transactions.
Even before the JPA, we never intended to deprive the Iranian people of
humanitarian goods, like food and medicine. In fact, Congress has
explicitly exempted these transactions from sanctions.
There have been some that have incorrectly represented the limited
relief as being far more. So, let me reiterate. The total relief
envisioned in the JPA amounts to between $6-7 billion--nowhere near the
$20 or $40 billion that some have reported. The total relief for Iran
envisioned in the JPA would be a modest fraction of the approximately
$100 billion in foreign exchange holdings that are inaccessible or
restricted because of our ongoing sanctions pressure. This sanctions
pressure, moreover, will continue to increase over the 6 months of this
initial phase through the continued enforcement of our sanctions.
Continued Enforcement of Sanctions
It is important to understand that the overwhelming majority of our
sanctions remain in place and we will continue to vigorously enforce
those sanctions to ensure that Iran receives only the limited relief
that we agreed to. This will include aggressive enforcement of
sanctions under the Comprehensive Iran Sanctions Accountability and
Divestment Act of 2010 (CISADA), the Iran Sanctions Act, the Iran
Threat Reduction and Syria Human Rights Act of 2012, and the Iran
Freedom and Counter-Proliferation Act of 2012. This means that
sanctions will continue to apply to broad swaths of Iran's economy
including its energy, financial, shipping, and shipbuilding sectors. By
rigorous monitoring we will also prevent abuse of the relief that is
part of the JPA. Were we to see increased purchases of oil or sanctions
evasion, we are prepared to act swiftly to sanction the offenders.
Moreover, the U.S. trade embargo remains in place and U.N. Security
Council's sanctions remain in place. All sanctions related to Iran's
military program, State sponsorship of terrorism, and human rights
abuses and censorship remain in place. Our vigilance will continue.
What is also important to understand is that we remain in control.
If Iran fails to live up to its commitments as agreed to in Geneva, we
would be prepared to work with Congress to ramp up sanctions. In that
situation, we would be well-positioned to maximize the impact of any
new sanctions because we would likely have the support of the
international community, which is essential for any increased pressure
to work
In comparison, moving forward on new sanctions now would derail the
promising and yet-to-be-tested first step outlined above, alienate us
from our allies, and risk unraveling the international cohesion that
has proven so essential to ensuring our sanctions have the intended
effect.
The Way Ahead
In assessing this deal on the merits, we must compare where we
would be without it.
Without the JPA, Iran's program would continue to advance: Iran
could spin thousands of additional centrifuges; install and spin next-
generation centrifuges that reduce its breakout times; advance on the
plutonium track by fueling and commissioning the Arak heavy water
reactor and install remaining components ; and grow its stockpile of
20-percent enriched uranium hexafluoride. It could do all of that,
moreover, without the new inspections that are part of this deal and
give us new tools to help detect breakout.
With the JPA, we halt the program in its tracks, roll it back in
key respects, and put time on the clock to negotiate a long-term,
comprehensive solution with strict limits and verifiable assurances
that Iran's nuclear program is solely for peaceful purposes.
In a perfect world, we could get to such a comprehensive solution
right away. But the reality is that in the absence of the JPA, we would
have had an Iranian nuclear program that could double its enrichment
capacity, grow its stockpile of enriched uranium, and make progress on
starting up the Arak reactor.
We are now moving forward to prepare for implementation. This week,
our experts are in Vienna discussing with their P5+1 counterparts,
Iran, and the IAEA, the mechanisms and timeframes for beginning
implementation and setting a start date. These are technical and
complex discussions, and it is critical that we do them well and
right--working to protect our national security interests at every step
along the way.
At the same time, the JPA and its implementation is only a first
step. There are still many issues related to Iran's nuclear program
that must be addressed, and in the process, Iran must work with the
IAEA to resolve all past and present issues of concern. That is why our
ultimate aim is a comprehensive agreement that fully addresses all of
our longstanding concerns.
Conclusion
Finally, let me be clear about one thing: Our policy with regard to
Iran has not changed. The President has been clear that he will not
allow Iran to acquire nuclear weapon. While his strong preference is
for a diplomatic solution, he is prepared to use all elements of
American power to prevent that outcome.
Our commitment to working with our partners, in the region and
elsewhere, to hold Iran accountable for all its actions also remains
firm. These negotiations will solely focus on Iran's nuclear program.
So we will continue to counter Iran's destabilizing activities in the
region. We will continue to hold Iran accountable for its support for
terrorism. Iran remains listed as a State Sponsor of Terror and our
sanctions for their support of terror remain in place.
Our sanctions on Iran's human rights abusers will also continue and
so will our support for the fundamental rights of all Iranians. Last
week, National Security Advisor Rice reiterated our support for the UN
Special Rapporteur on Human Rights and called on Iran to allow him to
visit Iran. We will continue to speak forcefully for the oppressed
inside Iran, including through our support, later this month, for a
resolution before the UN General Assembly condemning Iran's human
rights practices.
We call on Iran to release Saeed Abedini and Amir Hekmati and
support our efforts to bring Robert Levinson home. As Secretary Kerry
has said, one day is too long to be in captivity, and one day for any
American citizen is more than any American wants to see somebody
endure. Mr. Abedini, Mr. Hekmati, and Mr. Levinson have been gone too
long and we will continue to do everything we can, using quiet
diplomacy.
And we will prevent Iran from obtaining a nuclear weapon. That is
what these negotiations are all about. We have been encouraged that
nearly 70 countries have expressed support for the understandings
reached in Geneva, including statements of support from our partners in
the Gulf Cooperation Council, with whom we remain closely engaged. The
sentiment from our partners has been clear: give this process a chance.
If Iran lives up to its commitments then the world will become a safer
place. If it does not, then we retain all options to ensure that Iran
can never obtain a nuclear weapon. The coming months will be a test of
Iranian intentions, and of the possibility for a peaceful resolution to
this crisis.
Throughout, and as always, we look forward to working closely with
the Congress to ensure that U.S. national security interests are
protected and advanced.
Thank you.
______
PREPARED STATEMENT OF DAVID COHEN
Under Secretary for Terrorism and Financial Intelligence, Department of
the Treasury
December 12, 2013
Introduction
Chairman Johnson, Ranking Member Crapo, and distinguished Members
of the Committee: Thank you for the opportunity to appear before you
today to discuss the Department of the Treasury's ongoing efforts,
along with our colleagues throughout the Administration, to isolate and
pressure the Iranian economy; the temporary, limited and reversible
relief offered Iran in the Joint Plan of Action (JPA); and the mounting
sanctions pressure that Iran will face while the parties seek a
comprehensive and long-term resolution to the international community's
concerns over Iran's nuclear program. Our continued collaboration with
Congress and this Committee in particular, is critical to our success
in addressing this pressing national security issue.
The Impact of Sanctions
From the outset of the Obama administration, we have pursued a
dual-track strategy that pairs an offer to Iran to reclaim its place
among the community of Nations with increasingly powerful and
sophisticated sanctions if it continues to refuse to satisfy its
international obligations with respect to its nuclear program.
As this Committee is well aware, for several years Iran resisted
and refused multiple opportunities to engage in a meaningful fashion.
And so, as we made clear from the outset, the Administration, working
alongside our international partners, has imposed on Iran the most
comprehensive, powerful, and effective set of sanctions in history.
Today, Iran stands isolated from the international banking and
financial system with slashed oil revenues, a withering energy
production infrastructure, and a significantly diminished economy.
The enormous pressure presently applied on the Iranian economy did
not come about overnight. We have worked hand-in-hand with Congress--
including with this Committee--to construct a complex and comprehensive
set of sanctions that focuses on those supporting Iran's nuclear and
ballistic missile programs and, more broadly, Iran's key sources of
economic strength. We maximized the impact and efficacy of our
sanctions' framework through robust engagement and outreach to foreign
Governments and the private sector. And we have aggressively enforced
these sanctions by targeting illicit actors and their networks both
inside and outside Iran.
While sanctions have proved to be a very potent tool, we have not
imposed sanctions for sanctions' sake. One of the key purposes of
sanctions always has been to induce a shift in the policy calculus of
the Iranian Government and to build the necessary leverage for serious
negotiations about Iran's nuclear program.
Our dual-track strategy has begun to bear fruit. Sanctions pressure
brought Iran to the negotiating table in Geneva and provided our
negotiators with bargaining power to secure important limitations on
Iran's nuclear program in the JPA. These limitations are the first
meaningful limits Iran has accepted on its nuclear program in nearly a
decade. But the deal is only a first step.
The limitations on Iran's nuclear program under the JPA create the
time and space to test whether Iran is prepared to negotiate a
comprehensive, solution that would give us assurance that Iran is not
producing a nuclear weapon. Over the next 6 months, while we test this
proposition, we will continue to apply intense pressure on Iran's
economy by aggressively enforcing the vast majority of our sanctions
that will remain in place. Unless Iran takes concrete and verifiable
steps to prove that its nuclear program is exclusively peaceful, it
will face increasing sanctions pressure and deeper isolation.
Limited, Temporary, and Reversible Relief
My colleague, Under Secretary Sherman, provides a detailed
description in her testimony of the various commitments made by Iran in
the JPA to halt, and in several important respects roll back, its
nuclear program, while also allowing increased transparency and
monitoring.
In short, Iran has committed to neutralize its entire stockpile of
near 20-percent enriched uranium; cap its stockpile of 3.5-percent low-
enriched uranium; halt all enrichment of uranium above 5 percent; limit
its production and installation of centrifuges; and not make any
further advances in its activities at the IR-40 Heavy Water Reactor
near Arak. Tehran further committed to open its nuclear facilities to
increased IAEA inspector access to give the world confidence that it is
meeting its commitments under the JPA and is taking the required steps
to halt its weapons program. And it committed to this in exchange for
limited, temporary, and reversible relief.
Let me explain what I mean by ``limited, temporary, and reversible
relief.''
The relief offered Iran is limited in several important respects.
First, under the JPA, we will allow Iran access to a set amount of its
own money--$4.2 billion in installments over the 6-month course of the
JPA--in a carefully controlled manner. Second, we will suspend some
sanctions to allow Iran to engage in specified additional commercial
activity--petrochemical exports, imports for its automobile industry,
and gold trade--that altogether have at best marginal economic value to
Iran. And third, the vast bulk of our sanctions, including the core
oil, financial, and banking sanctions that have had such a dramatic
impact on Iran's economy, remain in place and will continue to exert
pressure on Iran's decision makers over the next 6 months.
The relief offered Iran in the JPA is also temporary in that it
expires at the end of 6 months. At the end of 6 months, no additional
funds will be made available to the Iranians, and the suspended
sanctions will snap back into place. Because the JPA is renewable only
``by mutual consent,'' at the 6-month mark we could then consider
whether, and to what extent, to provide additional relief to the
Iranians in light of the circumstances. But if we decide not to provide
additional relief, the relief described in the JPA expires at the end
of 6 months.
And the relief in the JPA is reversible. If Iran fails to fulfill
its commitments under the JPA, or refuses to enter into a
comprehensive, long-term solution, we can stop the gradual release of
funds, reimpose the suspended sanctions, and impose new and enhanced
types of sanctions.
The Relief Package
The relief package described in the JPA is composed of several
discreet elements, as follows:
Access to Restricted Funds
The majority of the relief will come from granting Iran access, in
installments over the 6-month tenure of the JPA, to $4.2 billion of its
own funds currently held in bank accounts outside of Iran--funds to
which Iran has limited access and which right now can only be used for
bilateral trade or humanitarian purchases. Let me underscore this
point. These funds already belong to Iran, but under the international
sanctions framework cannot be moved to third countries (except to
facilitate humanitarian trade) nor repatriated to Iran. Not a single
dollar of U.S. taxpayer money will be provided to Iran.
Temporary Pause in Reduction of Iran's Crude Oil Sales
We have agreed to hold Iran's exports of crude oil flat for a
period of 6 months rather than requiring further significant reductions
in the amount of Iranian oil purchased by oil-importing countries. To
be clear, this will not allow Iran to increase its oil exports. To the
contrary, Iran will be held to its currently depressed levels, down 60
percent from what it was selling in early 2012. This provision,
moreover, will apply only to Iran's six current crude oil purchasers--
Japan, Republic of Korea, China, Taiwan, India, and Turkey. They will
not be allowed to increase their purchases and no other country will be
allowed to begin importing Iranian oil.
Temporary Suspension of Petrochemical Sanctions
U.S. sanctions on Iran's petrochemical exports will be temporarily
suspended as part of this first step deal. We estimate that this will
allow Iran to generate a maximum of $1 billion in new revenue over the
next 6 months, but only if Iran is able to produce additional
petrochemicals for export (some of its petrochemical plants have been
retrofitted to boost gasoline production capacity for the domestic
market) and only if Iran is able to find additional petrochemical
customers--who typically prefer stable, long-term supply contracts--
willing to sign contracts with Iranian exporters knowing that the
sanctions are suspended under the JPA for only 6 months.
Temporary Suspension of Sanctions on Iran's Auto Industry
We will also temporarily suspend U.S. sanctions on exports by third
countries to Iran's automobile industry. We estimate that this could
provide Iran some $500 million in revenue, assuming Iran can resume
prior levels of production and revitalize its car exports. Iran's
automobile industry, however, is riddled with structural problems and
was in steep decline even before our auto sanctions were put in place.
Moreover, if Iran hopes to revive its auto sector, it would need to
spend some of its limited foreign currency to pay for car kits from
abroad.
Temporary Suspension of Gold Sanctions
Sanctions on Iran's ability to buy and sell gold will also be
temporarily suspended. However, we expect that this provision will be
of limited value to Iran because the only funds Iran can use to buy
gold are its limited unrestricted hard-currency reserves. Because of
the sanctions architecture that remains in place, Iran will be
permitted to use neither its restrained foreign reserves nor its own
currency, the rial, to buy gold. As a consequence, any gold Iran
purchases would be offset by the hard currency it would spend to buy
it, resulting in negligible economic benefits.
Limited Access to Funds for Tuition Purposes
Under strict guidelines, we will allow Iran to transfer $400
million of restricted Iranian funds to defray tuition costs for Iranian
students studying outside of Iran, and will ensure that these funds are
used for their intended purpose.
License Safety-Related Repairs and Inspection for Certain Airlines in
Iran
We will license the supply and installation of spare parts for
safety of flight, as well as safety-related inspections and repairs for
certain Iranian aircraft, to occur in Iran. Previously, we had licensed
these activities for Iranian aircraft only outside of Iran. Notably,
Mahan Air, an Iranian airline that has been designated by Treasury for
providing financial, material and technological support to Iran's
Islamic Revolutionary Guard Corps-Qods Force and Lebanese Hizballah,
will not be permitted to benefit from these repairs, nor would any
other entity subject to sanctions under our counterterrorism
authorities.
Financial Channel To Facilitate Humanitarian Trade
Finally, we will assist in establishing a financial channel to
facilitate humanitarian trade in food, agricultural commodities,
medicines, medical devices for Iran's domestic needs, and to pay for
the medical expenses of Iranian citizens incurred abroad. This will not
provide Iran access to any new source of funds, because humanitarian
trade with Iran is not targeted under existing sanctions authorities
and because we intend that funds for medical expenses will come from
Iran's limited stores of unrestricted hard currency. Humanitarian
transactions have been explicitly exempted from sanctions by Congress
and U.S. law places limits on the President's ability to regulate such
trade.
The Relief Package in Context
The total value of the relief package--approximately $6 billion to
$7 billion--will not materially improve the condition of the Iranian
economy. Indeed, at the end of the 6-month period, we expect that Iran
will be even deeper in the hole economically than it is today due to
the continuing and mounting impact of the sanctions we have in place
and that we will continue to energetically enforce.
Indeed, the limited relief offered Iran in the JPA is dwarfed by
the depths of Iran's economic distress. Our oil, financial and banking
sanctions, in particular, have driven Iran into a deep recession. Since
2011, oil sanctions imposed by the EU and the U.S. have forced Iran's
oil exports to decline from about 2.5 million barrels per day at the
end of 2011 to about 1 million barrels per day today--costing Iran
roughly $80 billion in lost sales. In that same period, Iran's
currency, the rial, has lost around 60 percent of its value against the
dollar. Approximately $100 billion of Iran's foreign exchange holdings
are restricted or inaccessible due to our financial and banking
sanctions. Over the last year, inflation in Iran has been about 40
percent. All told, last year Iran's economy contracted by more than 5
percent, and we expect Iran's economy to contract again this year. By
contrast, according to the IMF, the economies of Iran's neighboring oil
exporting competitors expanded last year by an average of over 5
percent and are expected to grow by an average of almost 4 percent this
year.
These macroeconomic indicators reflect the impact of sanctions on,
and the deep structural problems with, Iran's economy, none of which
will be solved by the limited relief agreed to in Geneva. Indeed, over
the 6-month duration of the JPA, our oil sanctions alone will cost Iran
an additional $30 billion (i.e., 4-5 billion per month) in lost
revenue, which far surpasses the total sum of the relief package. Even
taking into consideration the modest relief package, these staggering
figures represent a bleak reality for Iran's economy, which we expect
will continue to deteriorate over the next 6 months.
The International Sanctions Regime Remains Robust
We and our international partners will continue to impose
increasing pressure on Iran's economy through the implementation and
enforcement of sanctions, the overwhelming majority of which are not
affected at all by the JPA. This includes the core architecture of our
oil, financial, and banking sanctions, which remain firmly in place.
Throughout the duration of this first-step deal, we will continue
to enforce sanctions to ensure that Iran's oil sales are held down at
their current, greatly depressed levels. Moreover, our financial
sanctions remain fully in place, in particular the sanctions imposed by
section 504 of the Iran Threat Reduction and Syria Human Rights Act of
2012, which became effective on February 6, 2013, and that ``locks up''
Iran's oil revenue in the few jurisdictions that still import oil from
Iran.
As a result, with the exception of the $4.2 billion in funds that
we will allow Iran to access in stages over the next 6 months, the
revenue that Iran earns from its oil sales during the 6-month duration
of the JPA will remain subject to our financial sanctions. Those
sanctions prevent Iran from using those funds for any purpose other
than paying for goods from the oil importing country or humanitarian
transactions. And any financial institution that facilitates a payment
to Iran for oil imports beyond what is provided for in the JPA risks
being cut off from the United States financial markets. In other words,
over the next 6 months Iran cannot sell any more oil than its current
levels, and any additional oil revenue it does earn (other than the
limited funds to be made available under the JPA) will be locked-up and
unavailable for transfer or repatriation.
In addition, the key banking sanctions imposed by the U.S. and the
EU, which have resulted in the near-total isolation of Iran's financial
sector, remain fully intact. That means that under Section 104 of the
Comprehensive Iran Sanctions Accountability and Divestment Act of 2010,
any foreign bank that engages in a significant transaction with Iran's
designated banks risks losing its correspondent account access to the
U.S. And it also means that all the banks designated by the EU will
remain cut off from specialized financial messaging services, denying
them access to critical networks connecting the rest of the
international financial sector. Taken together, these sanctions--which
remain fully in force--will ensure the continued isolation of Iran from
the global banking system, and will continue to make it extraordinarily
difficult to do business with Iran.
We also are focusing on enforcing additional elements of the U.S.
sanctions program that deprive Iran of other sources of revenue. For
example, sanctions will continue to constrict Iran's energy sector. Not
a single prohibition or sanction on investment in Iran's energy sector
will be suspended--for U.S. or international companies. All of the
United States' sanctions on long-term investments in Iran's energy
sector will remain in effect, as will the related sanctions on
providing technical goods and services to the energy sector. This will
ensure that Iran's oil and gas infrastructure remains severely impaired
and increasingly obsolete.
Furthermore, all UN and EU designations, as well as our targeted
sanctions on the more than 600 individuals and entities tied to the
Government of Iran, its nuclear and ballistic missile programs, and its
energy, shipping, and shipbuilding sectors, remain in effect. Among
other things, these sanctions mean that selling Iran cargo ships and
tankers, providing insurance services or support for most Iranian
shipping activities, providing flagging and classification services to
Iranian ships, and helping Iran build port terminals or other
facilities remain sanctionable activities.
In addition, sanctions remain in place against Tidewater Middle
East Company, an IRGC-owned port operating company that manages the
main container terminal at Bandar Abbas--which has been responsible for
some 90 percent of Iranian container traffic and has operations at six
other Iranian ports. These sanctions will continue to deter the export
of products to Iran as well as the import of products from Iran.
This first-step deal also does not affect the longstanding U.S.
trade embargo, meaning that Iran will continue to be shut out of the
world's largest and most vibrant economy and precluded from engaging in
business with U.S. companies and U.S. subsidiaries overseas.
Finally, it remains the case that Iran is the leading State sponsor
of terrorism in the world today. Nothing in the JPA affects our
continued efforts to contest and combat Iran's support of terrorism,
its abhorrent human rights practices, or its destabilizing activities
in Syria. All of our sanctions programs aimed at undermining this
loathsome Iranian conduct remain active and energetic.
Vigorous Enforcement of Existing Sanctions
As President Obama said when he announced the JPA on November 23,
``the broader architecture of sanctions will remain in place and we
will continue to enforce them vigorously.'' This vigorous enforcement
will be accomplished through the continued dedicated, resolute and
creative work of professionals in our intelligence community, in the
Treasury and State Departments, and across the Administration. We
understand well the important role that sanctions pressure on the
Iranian economy played in the lead-up to the JPA, and how important
maintaining that pressure will be over the next 6 months as we explore
the possibility of a long-term, comprehensive solution.
As I have just discussed, the vast majority of our sanctions remain
in place, which we will continue to vigorously enforce, even as
implement the JPA. We are determined to continue--in the days, weeks,
and months ahead--to respond to Iran's evasion efforts, wherever they
may occur, and to continue to aggressively enforce our sanctions.
For example, just yesterday, Treasury reached a $33 million
settlement with the Royal Bank of Scotland plc for, among other things,
apparent violations of U.S. sanctions on Iran and other sanctioned
parties, including removing material references to U.S.-sanctioned
locations or persons from payment messages sent to U.S. financial
institutions. A few weeks ago we announced Treasury's largest
settlement outside of the banking industry for violations of U.S.
sanctions on Iran. As part of a combined $100 million settlement with
several Federal Government partners, Weatherford International, Ltd.
agreed to pay $91 million to settle its potential liability for
extensive oilfield services provided in Iran from 2003 to 2007.
We believe our actions have put the international business
community on notice: Iran is still off limits, including designated
Iranian banks and businesses. Foreign banks and businesses still have
to make a choice--they can do business with Iran, or they can do
business with the U.S.--not both. I can assure this that we will
continue to take action against those who evade, or attempt to evade,
our manifold sanctions on Iran.
New designations and enforcement actions, moreover, are only one
part of our strategy to ensure that the international business and
banking community understands that now is not the time to expand
activity in Iran. We have already begun a global campaign to ensure
that foreign Governments and the international private sector
understand that the relief in the JPA is limited and targeted and that
we and our partners are committed to ensuring that the pressure brought
to bear on the Iranian economy remains robust. This campaign will
continue in the weeks and months ahead, so that no one makes the
mistake of believing that Iran is now open for business. It is not.
I have a clear message for every Government, bank, business, or
broker that thinks now might be a good time to test our resolve: We are
watching closely, and we are prepared to take action against anyone
anywhere who violates, or attempts to violate, our sanctions.
Conclusion
As our negotiators seek a comprehensive solution to ensure that
Iran's nuclear program is exclusively peaceful, Treasury and our
partners across the Administration will continue to forcefully
implement our sanctions programs to maintain crucial leverage at this
pivotal moment. I look forward to continuing our work with Congress and
this Committee as we pursue this vital objective.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
FROM WENDY SHERMAN
Q.1. There's a concern that in the past the Iranian regime has
used negotiations as cover to advance their nuclear program.
How will the Interim Agreement prevent Iran from using
negotiations to continue advancing their nuclear program?
A.1. The Joint Plan of Action (JPOA) halts progress of Iran's
nuclear program and rolls it back in key respects. These are
the first meaningful limits that Iran has committed to on its
nuclear program in close to a decade and, without them, Iran
would have otherwise continued to advance critical aspects of
its program. The limits established under the JPOA begin to
address our most urgent concerns, including Iran's enrichment
capacity; existing stockpiles of enriched uranium; and Iran's
prospective ability to produce plutonium using the Arak
reactor. Iran committed in the JPOA to provide increased
transparency and allow for intrusive monitoring of its nuclear
program. Taken together, these measures will prevent Iran from
using the cover of negotiations to continue advancing its
nuclear program, as we negotiate a long-term, comprehensive
solution that addresses fully the international community's
concerns regarding Iran's nuclear program.
Q.2. A key component of the Interim Agreement is that Iran
provides International Atomic Energy Agency (IAEA) inspectors
with access to Natanz and Fordow, as well as other facilities,
mines, and mills. Given the size of Iran, a concern is whether
the IAEA has the capacity to handle the task. Are there enough
inspectors to provide daily visits to the wide range of nuclear
sites across Iran?
Also, let's imagine IAEA inspectors are denied access to an
Iranian nuclear facility. Are there measures in the
implementation plan of the Interim Agreement to report this?
Please provide the Committee with the oversight process and
authorities in the implementation plan of the Interim
Agreement.
Finally, if Iran's actions on granting access to inspectors
are inconsistent with the letter or spirit of the Interim
Agreement, what measures can the P5+1 take?
A.2. The International Atomic Energy Agency (IAEA) will be
responsible for verifying and confirming that Iran is complying
with all nuclear-related measures under the Joint Plan of
Action (JPOA). The IAEA has confirmed it has the technical
capacity to provide the necessary verification, and we are
confident the IAEA will carry out its JPOA-related activities
with the highest degree of professionalism and impartiality.
The JPOA established a Joint Commission to monitor
implementation of the JPOA near-term measures and address
issues that may arise, with the IAEA solely responsible for
verification of nuclear-related measures. The Joint Commission
will be composed of technical experts of the P5+1 countries,
the EU, and Iran. The Joint Commission will meet to discuss the
implementation of the JPOA and any issues that may have arisen
during the preceding month. Any problems will be referred to
the Political Directors of the P5+1 and Iran to resolve, as
appropriate.
The enhanced monitoring measures contained in the JPOA will
enable the IAEA to provide regular updates to the Joint
Commission on the status of Iran's implementation of its
commitments. The IAEA said it would need to nearly double the
staff resources devoted to Iran, and several member States,
including the United States, have pledged additional
contributions to support this effort.
If Iran does not meet its JPOA commitments, backslides, or
does not negotiate in good faith, we can reimpose all of the
sanctions. And since we are not allowing Iran lump-sum access
to its funds, we can turn off that flow during the 6-month
duration of the JPOA. As we have noted, we will continue to
watch closely to ensure Iran complies with the nuclear-related
provisions in a timely and faithful manner.
Q.3. While speaking at the Saban Center on December 7, 2013,
President Obama said that there was a ``fifty-fifty chance''
that an end-deal with Iran could be reached. He said, ``[it] is
not the choice between this deal and the ideal, but the choice
between this deal and other alternatives.'' Addressing the
``fifty-fifty'' remarks, what is causing such doubt? Is it
Iran? Moreover, could you please define the ``alternatives''
mentioned in President Obama's statement?
A.3. We are approaching these negotiations in good faith and
with the intent to reach a comprehensive agreement in the 6-
month timeframe. We acknowledge this will not be an easy task.
We also remain concerned about any effort to undercut the
negotiations and the prospect of reaching a comprehensive
resolution, particularly from hardline elements in Iran. If
Iran does not meet its JPOA commitments, backslides, or does
not negotiate in good faith, we can reimpose all of the
sanctions. And as President Obama has repeatedly stated, we
remain committed to preventing Iran from acquiring a nuclear
weapon.
Q.4. You have said that the Interim Agreement for the P5+1 and
Iran is, essentially, a trust-building exercise. As you are
well aware, since 1984 Iran has been designated a State sponsor
of terrorism. Iran has armed, trained, and financed terrorist
groups and is the leading sponsor of Hezbollah and Hamas.
Additionally, Iran has armed insurgents who have fought and
killed U.S. troops in Afghanistan and Iraq.
In your hearing, you mentioned that the Iranian Ministry of
Foreign Affairs and Foreign Minister Zarif have responsibility
for the nuclear negotiations, while the Iranian Revolutionary
Guard Corps Quds Force leads Iranian activities that
destabilize the region. Do you see Iran's foreign policy
evolving as a result of the P5+1 negotiations over their
nuclear program? Also, do you see the P5+1 negotiations leading
to other diplomatic openings with Iran?
A.4. Our discussions with Iran through the P5+1 and bilaterally
throughout this process have focused exclusively on the nuclear
issue. We believe that the Supreme Leader empowered President
Rouhani to negotiate with the United States and the
international community to resolve the nuclear issue. However,
we assess that there are other Iranian elements outside the MFA
that have influence and control over other aspects of Iran's
foreign policy.
Progress on the nuclear issue does not change our resolve
in pushing back against Iranian support for terrorism, threats
against our friends and partners, and violations of human
rights. However, progress on the nuclear issue may lead to
progress in other areas. As the President said on September 24
at the United Nations, ``I do believe that if we can resolve
the issue of Iran's nuclear program, that can serve as a major
step down a long road towards a different relationship, one
based on mutual interests and mutual respect.''
If Iran wants to move in a different direction as part of
the reorientation of its foreign policy, we would welcome that
change. However, the international community must see concrete
actions to that effect.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
FROM WENDY SHERMAN
Q.1. When the interim agreement with Iran was announced, I
understood there to be a 6-month clock to work towards a final
deal.
When does the 6-month clock begin, and is this date the
same for all parties?
A.1. Pursuant to the Joint Plan of Action (JPOA) and related
technical understandings between the P5+1 and Iran, the
International Atomic Energy Agency (IAEA) on January 20
verified that Iran had initiated or completed a number of
technical steps required for the JPOA to be implemented. As a
result of Iran's meeting its initial commitments,
implementation of the JPOA began on January 20. In return for
important steps to constrain Iran's nuclear program, the P5+1
committed to provide Iran with limited, temporary, and targeted
sanctions relief for a period of 6 months, starting on January
20, 2014, and concluding on July 20, 2014.
Q.2. Iran has insisted on the international community
recognizing its right to enrich, while United Nations Security
Council resolutions require that Iran verifiably suspend all
enrichment-related activities.
With the Geneva agreement essentially permitting Iran to
enrich uranium up to 5 percent, how will future agreements deal
with this inconsistency?
Can you explain what sort of enrichment program Iran will
have if you get what you consider to be a good final deal?
A.2. The United States has not recognized that Iran has a
``right'' to enrich, and the Joint Plan of Action (JPOA) in no
way conveys recognition of any ``right to enrichment.'' As
negotiations on a comprehensive solution are set to begin later
this month, we are prepared to consider in the end state a
strictly limited enrichment program, but only if the Iranians
accept rigorous limits on and transparent monitoring of the
scope and level of enrichment activities, capacity, where it is
carried out, and stocks of enriched uranium. The JPOA specifies
that the comprehensive solution would involve a ``mutually
defined enrichment programme with practical limits and
transparency measures to ensure the peaceful nature of the
programme.'' Therefore, any Iranian enrichment capability would
be entirely conditional on reaching agreement on its scope. If
we can reach an understanding with Iran on strict constraints,
then we can contemplate an arrangement that includes a very
modest amount of enrichment that eliminates Iran's capacity to
obtain a nuclear weapon in any reasonable way. Moreover, it is
also important to stress that Iran must satisfy the United
Nations Security Council (UNSC) as part of any comprehensive
solution. The UNSC sanctions will continue until the United
States and P5+1 judge that Iran has resolved all concerns
satisfactorily.
Q.3. If the 6-month moratorium expires and no permanent deal is
struck, do you believe that it will be possible to reorganize
effective global sanctions to prevent Iran from achieving
nuclear capability?
A.3. To be clear, the Joint Plan of Action suspended sanctions
on only a handful of very specific activities for the 6-month
period. All of those suspensions are reversible, and on July
20, the full range of sanctions will snap back into force
absent progress on negotiation of a comprehensive solution.
Moreover, the vast majority of our sanctions, including those
on Iran's energy sector, its connections to the international
financial system, and its access to sensitive technologies,
remain in place. In addition, if the Iranians prove unwilling
to negotiate credibly toward a comprehensive solution, then we
will be in a much stronger position to lead the world to impose
an even tougher set of sanctions on Iran than we would be if we
had not negotiated the JPOA and given it a credible, reasonable
chance to succeed.
Q.4. Hard currency frozen by sanctions in overseas bank
accounts may soon be transferred back to Tehran under the deal.
President Rouhani may be aiming to gain time and money to
advance Iran's nuclear program. Multiple IAEA reports,
including those from March 2011 and November 2011, have
provided extensive descriptions of Iranian research involving
activities related to the development of a nuclear explosive
device and noted that some research may still be ongoing.
How has the recent deal addressed such concerns?
A.4. The Joint Plan of Action (JPOA) is clear that Iran, in
conjunction with the Joint Commission, will ``work with the
IAEA to facilitate resolution of past and present issues of
concern,'' which is a reference to the possible military
dimensions (PMD) of Iran's nuclear program. In parallel, the
International Atomic Energy Agency (IAEA) and Iran adopted the
``Joint Statement on a Framework for Cooperation'' that is also
aimed at resolving these past and present issues of concern,
including PMD. Finally, Iran must also address relevant United
Nations Security Council resolutions related to its nuclear
program--which call for Iran to cooperate fully with the IAEA
to resolve all outstanding concerns as part of any
comprehensive solution. During the next 6 months of
negotiations, all sanctions on more than 600 individuals and
entities targeted for supporting Iran's nuclear or ballistic
missile program will remain in effect.
As we have made clear, issues related to the possible
military dimensions of Iran's nuclear program must be resolved
to the satisfaction of the United States and P5+1 in
negotiations on a comprehensive solution. We continue to urge
Iran to work with the IAEA to resolve the Agency's
investigation into past and present concerns without delay.