[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





                 MAJOR BENEFICIARIES OF THE IRAN DEAL: 
                           IRGC AND HEZBOLLAH

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                    THE MIDDLE EAST AND NORTH AFRICA

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 17, 2015

                               __________

                           Serial No. 114-92

                               __________

        Printed for the use of the Committee on Foreign Affairs


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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       BRIAN HIGGINS, New York
MATT SALMON, Arizona                 KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas            GRACE MENG, New York
SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
DANIEL DONOVAN, New York

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

            Subcommittee on the Middle East and North Africa

                 ILEANA ROS-LEHTINEN, Florida, Chairman
STEVE CHABOT, Ohio                   THEODORE E. DEUTCH, Florida
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
DARRELL E. ISSA, California          BRIAN HIGGINS, New York
RANDY K. WEBER SR., Texas            DAVID CICILLINE, Rhode Island
RON DeSANTIS, Florida                ALAN GRAYSON, Florida
MARK MEADOWS, North Carolina         GRACE MENG, New York
TED S. YOHO, Florida                 LOIS FRANKEL, Florida
CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York





















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Emanuele Ottolenghi, Ph.D., senior fellow, Foundation for Defense 
  of Democracies.................................................     6
Matthew Levitt, Ph.D., Fromer-Wexler Fellow, director, Stein 
  Program on Counterterrorism and Intelligence, Washington 
  Institute for Near East Policy.................................    37
Suzanne Maloney, Ph.D., interim deputy director, Center for 
  Middle East Policy, The Brookings Institution..................    48

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Emanuele Ottolenghi, Ph.D.: Prepared statement...................     8
Matthew Levitt, Ph.D.: Prepared statement........................    40
Suzanne Maloney, Ph.D.: Prepared statement.......................    50

                                APPENDIX

Hearing notice...................................................    62
Hearing minutes..................................................    63
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    64

 
        MAJOR BENEFICIARIES OF THE IRAN DEAL: IRGC AND HEZBOLLAH

                              ----------                              


                      THURSDAY, SEPTEMBER 17, 2015

                     House of Representatives,    

           Subcommittee on the Middle East and North Africa,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2:07 p.m., in 
room 2172, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the subcommittee) presiding.
    Ms. Ros-Lehtinen. The subcommittee will come to order.
    After recognizing myself and Ranking Member Deutch for 5 
minutes each for our opening statements, I will then recognize 
any other member seeking recognition for a minute. We will then 
hear from our witnesses.
    And, without objection, your prepared statements, madam and 
gentlemen, your prepared statements will be made part of the 
record.
    Members may have 5 days to insert statements and questions 
for the record, subject to the length limitation of the rules.
    The Chair now recognizes herself for her remarks.
    As we confront the fallout from the Iran nuclear deal, it 
is important that we examine two critical networks, as they are 
two critical criminal networks--that stand to gain the most 
from sanctions relief: The Islamic Revolutionary Guard Corps 
and Iran's proxy, Hezbollah.
    Made up of at least 150,000 personnel, the Revolutionary 
Guard Corps is responsible for Iran's external and internal 
security, including the protection of the key strategic oil 
waterway, the Strait of Hormuz; the development of Iran's 
ballistic missile program; and maintaining order and control of 
the Iranian people.
    It oversees the Quds Force, the asymmetric war and terror 
operators of the IRGC, who are behind the deaths of hundreds of 
American service men and women and coalition forces in Iraq and 
who continue to plan operations on the ground in Iraq and Syria 
while undermining our national security interests.
    The IRGC is Iran's single largest economic actor. It owns 
the country's largest construction company, its main 
telecommunications company, and controls at least 25 percent of 
the Tehran Stock Exchange. The IRGC owns and controls banks, 
its officials sit on and control the boards of private 
companies, and it is the primary player in the construction and 
infrastructure sectors as well as, increasingly, the energy 
sector.
    Because the IRGC controls so much of the Iranian economy, 
it is poised to gain billions from the deal and Iran's economic 
growth. When the administration argues that the Iranian regime 
will invest its sanctions relief into infrastructure, what they 
are not telling you is that the IRGC, a terror organization in 
its own right, will be the one cashing in on all the 
infrastructure, all the construction, all the energy projects. 
Companies are already lining up to do business with Iran, and, 
as the sanctions come off, more money will be funneled to IRGC 
companies, who will then turn right around and use that money 
for their nefarious activities.
    As such a big player in Iran, the IRGC has a vested 
interest in maintaining its alliance with the regime and 
ensuring the regime's survival, both inside Iran by maintaining 
its authority over the people of Iran but also by continuing to 
expand regionally and fulfilling its hegemonic ambitions.
    Fulfilling those ambitions requires the continued work of 
the Quds Force--training Shia militias in Iraq, funneling funds 
and arms to Syria's Bashar al-Assad, and supporting Houthi 
fighters in Yemen. Incredibly, the Iran deal delists and lifts 
certain sanctions from some of the same people leading these 
very actions, including the current Quds Force commander, 
Soleimani, and the former Quds Force commander and Defense 
Minister Vahidi. And, as we know, he is wanted by Interpol for 
his role in the AMIA Jewish community center bombings in Buenos 
Aires.
    As a matter of fact, almost half of the entire nuclear 
agreement is pages and pages of delisting of individuals, of 
companies, and vessels from the U.S. or EU sanctions list.
    The second organization that will benefit enormously from 
sanctions relief is one of the world's most dangerous and 
capable terror organizations, Hezbollah. Trained, equipped, and 
funded by the Quds Force, Hezbollah is said to be responsible 
for some of the world's most infamous terror attacks, including 
the 1983 U.S. Marine barracks bombing in Beirut, the AMIA 
Jewish community center which I just referenced, and the 1996 
Khobar Towers bombing, just to name a few.
    A stronger Hezbollah undermines our interests in Lebanon, 
where that fragile country continues to grapple with internal 
strife. And its forces are deeply involved and critically 
important to Iranian efforts in Syria, helping Iran to prop up 
Assad and prolonging the chaos, the destruction, the tragedy 
that is spreading further and further outside the borders of 
Syria.
    Hezbollah's leader recently reaffirmed the terror 
organization's ideological partnership with Iran, saying that 
the nuclear deal would not stop Iran from providing it material 
and financial support. And now that we have lifted Iran's arms 
embargo and ballistic missile sanctions, Hezbollah will soon be 
able to obtain even more sophisticated weaponry in order to 
carry out operations like the one we recently saw with a terror 
cell in Kuwait.
    Sanctions relief from the Iranian deal will not only free 
up resources for Iran to spend more on Assad, it will allow 
Hezbollah to extricate itself from Syria, where its forces have 
been bogged down, and return to its focus of its top priority 
and target: The democratic Jewish State of Israel. The 
possibility that Hezbollah will launch attacks against Israel 
is increasingly likely thanks to the Iran deal and Iran's 
increasing capability to provide assistance and advanced 
weaponry.
    We must consider the impact of both direct and indirect 
sanctions relief from the Iran deal and what these additional 
resources will do for the Iranian regime's next steps in the 
region, including what it will do for the capabilities of 
Iran's proxies, like Hezbollah, and the consequences for our 
own interests and the interests of our allies.
    I look forward to hearing from our witnesses on exactly who 
and which entities stand to gain the most from this disastrous 
agreement, what we can expect next from the IRGC and Hezbollah, 
and what we here in Congress can do to prevent this from 
happening.
    So pleased to yield to the ranking member, Mr. Deutch of 
Florida.
    Mr. Deutch. Thank you, Madam Chairman.
    And while this is not the first hearing we have had to look 
at Iran's sponsorship of terrorism, it takes on new 
significance in the wake of the nuclear agreement, as Iran 
stands to gain access to billions of dollars.
    After the Iran deal debate, it is important that the 
administration and my colleagues continue to be clear about the 
nature of this regime. Iran was designated a state sponsor of 
terror in January 1984, after it orchestrated the deadly U.S. 
Embassy bombing in Beirut which killed 63, the horrific attack 
on the Marine barracks that killed 241 U.S. servicemembers, and 
the bombings of the U.S. and French Embassies in Kuwait. Both 
1983 attacks were carried out by what would become Hezbollah.
    Despite the U.S. designation in 1984, in September of that 
year Hezbollah carried out another attack on the U.S. Embassy 
annex in Beirut, killing 23. It was Hezbollah that hijacked TWA 
Flight 847, resulting in the death of a U.S. Navy diver. It was 
Hezbollah that bombed the Israeli Embassy in Argentina and the 
AMIA Jewish center in the early 1990s.
    It was a Hezbollah-linked group that bombed the Khobar 
Towers in Saudi Arabia, killing 19 U.S. Air Force personnel in 
1996. It was Hezbollah that blew up a tourist bus of Israelis 
in Bulgaria in 2012. And it was Hezbollah that attempted to 
carry out dozens of foiled terrorist attacks around the world--
all of this done, of course, with financial and material 
support from, and at the direction of, the Iranian regime.
    Iran has continued to supply Hezbollah with weaponry to 
fight alongside Assad's forces in Syria. Weapons transfers from 
Iran to Hezbollah have allowed the terrorist organization to 
amass an arsenal of nearly 100,000 rockets in Lebanon, with the 
ability to reach every corner of Israel. Iran's terror proxies 
are directed by the Iranian Revolutionary Guard Corps' elite 
Quds Force, led by the infamous general Qasem Soleimani, who 
has been spotted on the battlefields of Iraq and, according to 
reports, may have just recently again visited Russia, his 
partner in Syria. The IRGC is aiding the Houthis in Yemen and 
stirring unrest via their allies in countries throughout the 
Gulf.
    The IRGC is the most powerful economic actor in Iran. In 
fact, no one has benefited under sanctions more than the 
potentially hundreds of IRGC-owned companies that no longer had 
to deal with international competition for construction or 
energy projects, and no one will likely benefit more when these 
IRGC-owned companies are delisted and sector-based sanctions 
removed.
    Now, there are certainly disagreements over exactly what 
Iran will do with its sanctions relief. No doubt this regime, 
which is obsessed with its own survival, will use money to 
revitalize Iran's economy. President Hassan Rouhani was elected 
on his pledges to bring real economic relief to the people of 
Iran, and, by all accounts, he wants to deliver. But it is 
logical that some portion of Iran's newfound wealth will flow 
to its terror proxies. And regardless of how you feel about the 
nuclear deal, no one can dispute that Iran remains the world's 
largest state sponsor of terrorism.
    Despite crushing U.S. international sanctions, Iran has 
sustained its destabilizing activity with relatively limited 
resources, but that will soon change. In fact, not only did 
Iran receive sanctions relief, but it received repeal of the 
arms embargo and ban on the transfer of ballistic missile 
technologies in 5 and 8 years respectively. Now we are faced 
with the reality of advanced weaponry sales to Iran that will 
undoubtedly fall into the hands of Hezbollah, Hamas, Shiite 
militias, and other bad actors like Al Shabaab in East Africa.
    The IRGC already possesses ballistic missile capabilities 
that threaten its neighbors. Now, in 8 years, it will be free 
to purchase technologies to advance its program. This committee 
held a hearing on Iran's quest for intercontinental ballistic 
missiles earlier this summer, where experts testified that the 
only logical use for an ICBM is the delivery of a nuclear 
warhead.
    My colleagues on this committee are split on support for 
the JCPOA, but we cannot allow our already-expressed positions 
to hinder our efforts to work together to do whatever we can to 
block Iran's ability to exploit its anticipated windfall for 
dangerous and destructive activities.
    We must now come together for a practical discussion on 
what more the United States can do to counter Iran's 
destabilizing activities in the region and around the world. 
This means increasing intelligence cooperation with Gulf 
partners, strengthening the capabilities of our friends in the 
region, enhancing Israel's qualitative military edge, 
redoubling our efforts to interdict weapons shipments, and 
continuing to enforce existing and to impose new sanctions 
against those who support terrorism or engage in human rights 
abuses. If they received nuclear proliferation sanctions relief 
under the deal but they support terror or abuse human rights, 
then the individuals or entities must continue to be 
sanctioned.
    I look forward to hearing from our experts today as to what 
steps the U.S. and the international community can take to 
blunt the impact of Iran's newfound financial resources and the 
strengthening of the dangerous regime.
    And I yield back.
    Ms. Ros-Lehtinen. Thank you very much, Mr. Deutch.
    Mr. Cicilline.
    Mr. Cicilline. Thank you, Madam Chairman and Ranking Member 
Deutch, for calling this hearing today.
    It is absolutely critical that, as the Joint Comprehensive 
Plan of Action is implemented, Congress and the administration 
are relentless and vigilant in monitoring its implementation 
and that we work together with Israel and with our allies in 
Europe and the Middle East to combat the destabilizing activity 
of Iran throughout the region.
    In order to strengthen its implementation, Congress should 
introduce legislation as necessary, and I look forward to 
working with my colleagues on this committee in doing so to 
ensure that the necessary steps are taken.
    In particular, I have expressed to the President my strong 
support for an expedited renewal of the Israeli defense 
agreement for a new 10-year period. And, of course, robust 
funding must be provided by Congress. Additionally, Congress 
must provide additional financial resources to support the 
implementation and monitoring process through the IAEA and 
increase funding for U.S. intelligence and diplomatic 
activities.
    The administration must also develop a specific plan with 
the P5+1 and Israel to respond to any violations of the Joint 
Comprehensive Plan of Action by Iran and to work together to 
confront Iran's destabilizing activities in the region. In 
addition, we must continue to aggressively pursue appropriate 
non-nuclear sanctions against individuals and organizations 
responsible for terrorism activity and violations of human 
rights.
    There is no question that the IRGC and Hezbollah will 
continue to take actions to support terrorism throughout the 
region, and it is incumbent upon the United States to ensure 
that we have a robust action plan to combat these activities in 
close cooperation with our allies. I look forward to hearing 
the witnesses' suggestions for actions we can take to mitigate 
the dangers posed by Hezbollah and the IRGC.
    And I thank the witnesses for being here.
    And, with that, I yield back.
    Ms. Ros-Lehtinen. Thank you very much, Mr. Cicilline.
    Ms. Meng of New York.
    Ms. Meng. Thank you, Chairwoman Ros-Lehtinen and Ranking 
Member Deutch, for your longstanding stellar leadership here. I 
know that you have worked closely and very hard on issues of 
terrorism, Iran's funding of it, and this recent deal very 
closely.
    While I appreciate that many of my colleagues have voiced 
disapproval of the Joint Comprehensive Plan of Action during 
last week's vote, I am troubled with the prospect of it moving 
forward. In addition to the direct outcome of the Iran deal 
with regards to nuclear capabilities, there are serious 
concerns about Iran's access to funds, especially given their 
track record of funding universally recognized terrorist 
groups.
    I am interested in hearing the consequences of this deal as 
it relates to these beneficiaries and ways that we can mitigate 
any potentially disastrous outcomes.
    Thank you. I yield back.
    Ms. Ros-Lehtinen. Thank you so much.
    And hearing no other requests for time, I am pleased to 
present our panel.
    First, we are pleased to welcome Dr. Emanuele Ottolenghi, 
who is a senior fellow at the Foundation for Defense of 
Democracies. Previously, Dr. Emanuele headed the Transatlantic 
Institute in Brussels, and he has advised several foreign 
ministries in Europe on the subject of Iran.
    We welcome you, sir.
    Second, we welcome back a good friend of our subcommittee, 
Dr. Matthew Levitt, director of the Stein Program on 
Counterterrorism and Intelligence for the Washington Institute 
for Near East Policy. Previously, Dr. Levitt served as the 
Deputy Assistant Secretary of Intelligence and Analysis at the 
U.S. Department of the Treasury, a branch chief under the 
Director of National Intelligence, and a counterterrorism 
advisor to the State Department's Special Envoy to the Middle 
East.
    Welcome back.
    And last but certainly not least, we welcome back Dr. 
Suzanne Maloney, who is the interim deputy director of the 
foreign policy program for the Brookings Institution. Dr. 
Maloney has served as an external advisor to the State 
Department on issues related to Iran. She has also served as a 
policy planner for the Middle East for the Secretary of State 
and the director of the Council on Foreign Relations' task 
force on U.S. policy toward Iran.
    Welcome to all three. Your written remarks will be made a 
part of the record. Please feel free to summarize.
    And we will begin with you, Dr. Emanuele.

    STATEMENT OF EMANUELE OTTOLENGHI, PH.D., SENIOR FELLOW, 
             FOUNDATION FOR DEFENSE OF DEMOCRACIES

    Mr. Ottolenghi. Thank you, Chairman Ros-Lehtinen, Ranking 
Member Deutch, and members of the committee. On behalf of FDD 
and its Center on Sanctions and Illicit Finance, I am very 
grateful for the opportunity to testify.
    Iran's Islamic Revolutionary Guard is the regime's top 
exporter of terrorism and a deadly instrument of domestic 
repression. My testimony describes how, regrettably, the Guards 
will benefit greatly from the Joint Comprehensive Plan of 
Action.
    The JCPOA dismantles most of the international nuclear 
sanctions against Iran, thereby creating a major stimulus 
package for its economy. The IRGC and the Supreme Leader's 
business empire will be its main beneficiaries. Their economic 
ascendance will fortify their domestic influence.
    Although the U.S. retains the legal edifice of sanctions 
against the IRGC, it is insufficient to exclude the IRGC from 
this windfall for four reasons: First, on implementation day, 
just months from now, the JCPOA lifts or suspends sanctions 
against entire sectors of the Iranian economy. The IRGC is 
active in each sector. IRGC companies will get the lion's share 
of business opportunities.
    Second, the lifting of sectoral bans will provide the IRGC 
easier access to dual-use technology in the aerospace, defense, 
and nuclear sectors.
    Third, on implementation day, the JCPOA will delist 
companies that assisted the IRGC's nuclear and missile 
procurement efforts, as well as its support for Hamas and 
Hezbollah and for the Assad regime in Syria. A change of 
behavior was not a condition for their delisting.
    Fourth, most IRGC companies were never identified as such 
by EU or U.S. authorities. Treasury has listed only 19 IRGC 
individuals, 23 companies, 4r military entities, and 2 academic 
institutions. The EU has listed just 25 companies. My written 
testimony names hundreds of companies owned or controlled by 
the IRGC that should have been designated.
    Absent the change in approach by Congress or the 
administration, the post-sanctions economic climate will likely 
benefit the IRGC because, in practice, the global business 
community looks to the U.S. Treasury for a way to assess risk. 
Companies seeking to reenter Iran will assume that what is not 
explicitly forbidden is allowed.
    Let me offer you the example of Iran Aluminum Company, or 
IRALCO, Iran's largest aluminum producer. The EU sanctioned it 
in 2012 because it had assisted Iran's nuclear procurement, 
including a contract to supply aluminum to Iran's Centrifuge 
Technology Company. The U.S. never designated IRALCO, even 
though it is partially owned by an IRGC investment company that 
is under U.S. sanctions. And because IRALCO was only sanctioned 
for nuclear-related activities, the EU will delist it on 
implementation day.
    Madam Chairman, I therefore strongly recommend that, first, 
there be an increase in U.S. designations against the IRGC 
because of the IRGC's unequivocal role in terrorism and other 
nefarious activities. If Congress and Treasury were to 
designate hundreds of IRGC companies before implementation day, 
this would send a very strong message to the business community 
contemplating Iranian contracts.
    Second, to help this process along, Congress should require 
Treasury to lower the threshold for designations. As I explain 
in greater detail in my written testimony, the IRGC has engaged 
in a pattern of obfuscation to hide its control of many 
corporations. Even with a minority share, the IRGC often 
controls these companies through the board of directors. 
Congress can also mandate that Treasury maintain and publish an 
IRGC watchlist to identify and report on companies that do not 
yet reach the designation threshold.
    Third, Congress should also require the State Department to 
designate the IRGC as a foreign terrorist organization. 
Designating the IRGC as an FTO will provide another warning to 
foreign companies considering business in Iran. Listing the 
IRGC as an FTO will also emphasize that the IRGC cannot be 
decoupled from the Quds Force; they are one and the same.
    Fourth, Congress can leverage future trade agreements with 
Europe to limit the IRGC's operations there. Congress should 
require the Transatlantic Trade and Investment Partnership 
between the U.S. and the EU to stipulate that any European 
company contracting with Iran must certify that none of the 
business partners are associated in part or in whole with the 
IRGC, requiring also that the EU report annually on European 
companies investing in Iran, placing local merchant 
transactions under public scrutiny. At a minimum, Congress 
should encourage international corporations to demand an 
exclusion clause to halt commercial activities with all 
suspected or designated IRGC entities.
    These are just a few highlights from my written testimony. 
I thank you for the opportunity to testify, and I very much 
look forward to your questions.
    [The prepared statement of Mr. Ottolenghi follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    
Note: Appendices to the above prepared statement may be found on the 
Internet at http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=103958
                              ----------                              

    Ms. Ros-Lehtinen. Thank you very much for those 
recommendations, Doctor.
    Dr. Levitt?

   STATEMENT OF MATTHEW LEVITT, PH.D., FROMER-WEXLER FELLOW, 
 DIRECTOR, STEIN PROGRAM ON COUNTERTERRORISM AND INTELLIGENCE, 
           WASHINGTON INSTITUTE FOR NEAR EAST POLICY

    Mr. Levitt. Chairman Ros-Lehtinen, Ranking Member Deutch, 
members of the committee, thank you for the opportunity to 
appear before you today to discuss the recent activities of two 
of the major beneficiaries of the Iran deal: The IRGC and 
Lebanese Hezbollah.
    Allow me to focus on Hezbollah.
    Iran is Hezbollah's primary benefactor, giving the Lebanese 
party and militant group some $200 million a year, in addition 
to weapons training, intelligence, and logistical assistance. 
But over the past 18-plus months, Iran had cut back its 
financial support to Hezbollah, a collateral benefit of the 
unprecedented international sanctions regime targeting Iran's 
nuclear program as well as the fall in oil prices.
    The cutback mostly curtailed Hezbollah's political, social, 
and military activities inside Lebanon. Its social service 
institutions cut costs. Employees received paychecks late or 
were laid off. Funding for organizations like its satellite 
television station Al Manar were reduced.
    By contrast, Hezbollah's Syrian operations, which have been 
a priority for Tehran given its commitment to defending the 
regime of Bashar al-Assad, have shown no sign of financial 
hardship. In fact, Hezbollah is busier than ever, especially in 
Syria, where it is engaged in expensive militant operations and 
support activities.
    Meanwhile, the group has expanded its regional activities 
further afield, straining its coffers, even as it had to cut 
back on its activities in Lebanon. With renewed funding from 
Iran, even a little bit of funding, Hezbollah would be more 
aggressive at home and abroad, challenging less militant 
parties across the Lebanese political spectrum and boosting its 
destabilizing activities outside of Lebanon.
    The war in Syria has dramatically changed Hezbollah. The 
group is now a regional player engaged in conflicts far beyond 
its historic area of operations. The strongest indicators of 
Hezbollah's transformation are structural. Since 2013, it has 
added two new commands, one along the Lebanese-Syrian border 
and one in Syria itself, to its existing bases in Southern and 
Eastern Lebanon.
    This points to a serious commitment to conflicts well 
beyond Lebanon's border. Today, there are between 6,000 and 
8,000 Hezbollah operatives in Syria. Meanwhile, Hezbollah has 
transferred key personnel from its traditionally paramount 
southern command to Syria and even to Iraq and to Yemen.
    Hezbollah's transformation into a regional actor is acutely 
felt by the group's operatives themselves. ``We should not be 
called Party of God,'' one Hezbollah commander told the 
Financial Times. ``We are not a party now. We are 
international. We are in Syria, we are in Palestine, we are in 
Iraq, and we are in Yemen. We are wherever the oppressed need 
us. Hezbollah is the school where every freedom-seeking man 
wants to learn.''
    Meanwhile, Hezbollah remains committed to conducting 
terrorist activities around the world. And just about a year 
ago last September, the National Counterterrorism Center warned 
they remain concerned the group's activities could either 
endanger or target U.S. and other Western interests, not just 
Israel.
    In April 2014, there was a Hezbollah operative arrested in 
Thailand; in November 2014, another in Peru, and this man had 
married an American citizen. Most recently, there was a new 
plot thwarted in Cyprus, where an individual who was a dual 
Lebanese-Canadian citizen had stockpiled 8.2 tons of ammonium 
nitrate. And, according to Israeli investigators, Hezbollah was 
using Cyprus as a point of export from which to funnel 
explosives for a series of attacks not just in Cyprus but 
elsewhere in Europe.
    It is against this backdrop that sanctions relief will take 
place. And whatever amount of money Iran receives, it will 
presumably spend the bulk of these moneys on pressing domestic 
needs, but it will undoubtedly also direct substantial funding 
to foreign adventures. And that is something that none of us 
can tolerate. Even a small percentage of the lower-end 
estimates of Iran's sanctions relief would provide a windfall 
to its proxies.
    In all likelihood, Iranian support for such behaviors will 
only increase in the wake of a deal. Iranian leaders who backed 
the deal will likely feel the need to prove their anti-American 
and pro-revolutionary bona fides, especially since the deal is 
widely seen in Iran as a victory for Rouhani and his allies 
over the IRGC and hardliners.
    It is important to note, also, that we are losing at least 
one critical tool to combat Hezbollah's financing. In March 
2014, then-Treasury Under Secretary David Cohen touted the 
collateral counterterrorism benefit of counterproliferation 
sanctions targeting Iran's banking and oil sections. He said, 
and I quote:

        ``In fact, the success of our unprecedented Iran 
        sanctions regime, including sanctions on Iranian 
        financial institutions and Iran's ability to sell its 
        oil, has had the collateral benefit of squeezing 
        Tehran's ability to fund terrorist groups such as 
        Hezbollah.''

That will no longer be the case even as Iran remains, in the 
words of the Financial Action Task Force, an ongoing and 
substantial money-laundering and terror-financing risk.
    A few weeks ago, a Saudi Hezbollah operative, Ahmed al-
Mughassil, was detained in Lebanon. He was the mastermind of 
the 1996 Khobar Towers bombing. Hopefully, this is going to 
lead to a whole lot more intelligence-sharing between us and 
our Gulf allies. It should reveal a tremendous amount of 
information about Hezbollah, Lebanese Hezbollah, Saudi 
Hezbollah's connections to the IRGC.
    One area of inquiry and action that could yield 
particularly positive results would be to target in fairly 
quick suggestion a variety of Hezbollah front companies and 
logistics nodes around the world. The theme of my written 
testimony is that Hezbollah relies heavily on such fronts to 
carry out its operations from Europe to Iraq, from China to 
Dubai.
    But that can't be all we do. As Emanuele said, we need to 
also designate IRGC and Quds Force elements, as well, or the 
Iranians will feel that all we are doing is targeting their 
other proxies.
    There are many areas of the Iran deal that warrant close 
attention as the deal moves toward implementation. Contending 
with what Secretary of the Treasury Jack Lew referred to as 
``Iran's menacing behavior,'' in particular through the Quds 
Force and Hezbollah, must be at the top of the list. Failure to 
do so would not only undermine the logic of the Iran deal as 
articulated by the administration, it would add to the very 
real trust deficit currently affecting our relationships with 
allies both in the region and around the globe.
    Thank you very much.
    [The prepared statement of Mr. Levitt follows:]
    
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    Ms. Ros-Lehtinen. Thank you, Dr. Levitt.
    Dr. Maloney?

 STATEMENT OF SUZANNE MALONEY, PH.D., INTERIM DEPUTY DIRECTOR, 
    CENTER FOR MIDDLE EAST POLICY, THE BROOKINGS INSTITUTION

    Ms. Maloney. Chair Ros-Lehtinen, Ranking Member Deutch, 
members of the committee, thank you so much for the opportunity 
to appear before the committee today on this very important 
issue.
    The wide-ranging sanctions relief incorporated in the Iran 
nuclear deal has elicited what I believe to be a widely shared 
sense of affront at the appearance of rewarding Tehran after 
decades of bad behavior. And this is magnified by the irony 
that Washington is being forced to effectively cede the most 
effective instrument in its policy toolbox, the sanctions 
regime, at the very moment when its efficacy has finally been 
confirmed, even as some of the most strategically relevant 
aspects of the Iranian challenge remain unabated. That 
unescapable reality underscores the importance of identifying 
and implementing new mechanisms for addressing Iran's 
problematic regional policies.
    Let me emphasize just two aspects of my written testimony. 
The first is the question of what Tehran will do with the money 
that it receives from the sanctions relief and the new trade 
and investment that is facilitated by the post-deal context.
    The public discussion of the deal and its provisions have 
tended to emphasize the availability of new resources for 
Tehran's support of terrorist groups and other violent proxies, 
as well as its assiduous efforts to extend its influence across 
the region. However, it should be acknowledged that the most 
pressing needs facing Tehran today are not those related to its 
regional posture but to its domestic economy.
    The sanctions regime that was so effective in succeeding in 
shifting Iran's approach and changing its longstanding nuclear 
recalcitrance did not come as a result of restrictions that 
impeded its ability to sustain its regional policies but, 
rather, because of the more immediate and potentially 
unsettling implications for the stability and the survival of 
the regime at home. The sanctions were felt far more 
immediately and more profoundly by the average Iranian than by 
the average beneficiary of Tehran's terror subsidies.
    And it was these concerns about the erosion of Iran's 
economic base and the legitimacy of the system that generated 
the decision to negotiate in full seriousness and the elevation 
of Hassan Rouhani. For this reason, it is important to 
appreciate that the domestic requirements and priorities will 
loom large in the allocation of deal-related windfalls that 
will accrue to Tehran over the course of the next year. Rouhani 
is keenly concerned with Iran's dire economic predicament. 
Rehabilitation is ranked at the top of his agenda, in parallel 
with the nuclear file.
    This isn't simply a matter of policy preferences for 
Rouhani and his team. Iran has real politics, and its 
population is impatient to reap the peace dividend that it was 
promised more than 2 years ago when they elected Rouhani to the 
Presidency with the expectation of an end to the nuclear 
impasse.
    Let me also speak to the question of how sanctions relief 
will impact Iran's regional policies. Unfortunately, the long-
term track record is clear: Iran's support for terrorism has 
never been driven primarily or even substantially by resource 
availability. In fact, Iran's most destructive regional 
policies have been undertaken and sustained at times of epic 
sanctions and economic constraints.
    These policies were initiated during the early post-
revolutionary period, just at the moment that Iran's economy 
reached its lowest point as a result of revolutionary chaos and 
upheaval and the eventual Iraqi invasion of Iran and throughout 
the long, brutal, and costly war that followed. In fact, many 
of Iran's worst regional abuses took place during this first 
decade, mentioned during the chair and the ranking member's 
statements: The cultivation of Hezbollah, the 1983 and 1984 
bombings, and the direct and deadly assistance to subversive 
groups around the region.
    The same trends have held course over the past decade as 
externally imposed economic pressures as well as the fall in 
oil prices have reached or even surpassed the heights of the 
hardships during the war. Sanctions have provided no remedy to 
Iran's efforts to extend its influence through nefarious 
activities and allies and its substantial investment in fueling 
and fighting conflicts in Iraq and Syria.
    Even since 2010, as the world has targeted Iran's regional 
power projection and its support for terrorist proxies, there 
is little evidence that sanctions have impeded Iran's most 
destabilizing policies.
    So the question that concerns the committee today is, what 
can we do? My colleagues have, I think, provided a number of 
important and constructive recommendations. Sanctions relief 
will undoubtedly exacerbate the challenges that we face, but 
the nuclear deal takes one of the most pressing aspects of the 
problem off the table at least for the next decade.
    This provides us an opportunity to construct a bipartisan 
approach here at home and to, for the first time in the history 
of the Islamic Republic, really create a multilateral, durable 
alliance that addresses the regional challenge that Iran poses.
    Thank you.
    [The prepared statement of Ms. Maloney follows:]
   
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    Ms. Ros-Lehtinen. Thank you very much.
    And we have just been called to the House floor for a 
series of votes, but we will not be able to come back. I will 
turn in my questions to you. If I can give you a homework 
assignment, to answer these for me, I would appreciate it.
    And let me turn to Mr. Cicilline in the remaining time for 
the questions. He is recognized.
    Mr. Cicilline. Thank you, Madam Chair.
    And thank you again to our witnesses.
    I am interested, Dr. Maloney, you said that Iran's support 
for terrorism has never been determined by availability of 
resources, which suggests that the advent of additional 
resources--I guess, explain, sort of, what you mean by that 
before I----
    Ms. Maloney. I think simply if you look at the long-term 
track record of the Iranian regime has done around the region, 
it has not been dictated by either the availability of or the 
lack of availability of funds. And, in fact, we have seen the 
intensification of its worst policies, whether it is in 
Lebanon, Iraq, or in Syria, at times of greatest economic 
pressure. The regime always finds ways to fund the guns; it is 
the butter at home that suffers.
    Mr. Cicilline. And certainly the argument has been made 
that there will be some pressure on Rouhani and the regime to 
respond to some of the very pressing domestic issues that face 
the Iranian people. But I would ask each of the witnesses, what 
are the things--you know, presuming some portion of the 
sanctions relief will be directed to activities that Iran is 
currently engaged in in the region, destabilizing activities, 
and presumably some increase in that, what are the best things 
that we can do, that Congress can do, to help mitigate the 
impact of those activities, reduce the likelihood that they 
will happen, or impose significant costs on Iran for engaging 
in that activity? What would you recommend as the one or two 
things, actions we can take as a Congress to respond to that?
    I guess start from left to right.
    Mr. Ottolenghi. Thank you, sir.
    I would suggest three things.
    The first is that you retain, both Congress retains and the 
administration retains, legal instruments to go after entities 
involved in aiding and supporting terrorism. And these 
instruments also allow you to prod and press allies who in this 
current climate may be less inclined to take action.
    One clear example is the case of the Iranian private 
airline Mahan Air. Mahan Air has been an accessory to Assad's 
war crimes by transporting weapons and personnel, including 
foreign militias, back and forth from Iran to Syria. It 
continues to do so, as far as my record tells me. The latest 
flight happened 2 days ago. So they are not deterred.
    Now, the problem with Mahan Air is that is only under U.S. 
sanctions. Europeans have never sanctioned Mahan Air, and, in 
the current climate, Mahan Air is actually expanding its 
destinations in Europe. So----
    Mr. Cicilline. I want to give the other witnesses--but you 
said you had three things. If you could just tick them off.
    Mr. Ottolenghi. Yes.
    The second thing is that a lot of the funds that will go to 
economic projects in Iran will actually be allocated through 
public contracts and vendors to IRGC companies. So this will be 
an indirect way to help IRGC companies get funds.
    And the third thing is that a lot of the IRGC personnel has 
never been sanctioned, will not be affected by travel bans, so 
will be a lot more free to travel around the world in 
procurement efforts. Again, going after these individuals more 
vigorously will help contain their activities.
    Mr. Cicilline. Thank you.
    Dr. Levitt?
    Mr. Levitt. Thank you.
    In brief, I would just say I completely agree with Dr. 
Maloney that Iran has funneled money, whether it had it or not, 
to these types of activities. But it is true that when they 
have had more money they have funneled more. As I noted, they 
have cut back on Hezbollah's budget, and we expect that to pop 
up again.
    The general theme here is that there has to be a cost. We 
have never incurred serious costs, political costs, for actual 
acts of terrorism--not after the Marine barracks, not after the 
Embassy, not after Khobar. It would be very interesting to see 
what happens after we get more information out of Mughassil to 
see what happens then.
    There is a tremendous amount of work to be done, as Emanuel 
suggested, with the Europeans--formally, in terms of helping 
them understand the structure, how serious we are about this, 
and then informally.
    And Treasury Department swears up and down, and I believe 
them, that they intend to go on new dog-and-pony shows of the 
kind that I went out on when I was the DAS for intel to educate 
people about the risks of doing business with Iran. We can no 
longer tell people, ``Don't do business with Iran,'' but we 
sure can highlight the risks. And the risks are massive, 
because the IRGC is more embedded in the Iranian economy now 
than it ever was before. And this would be very effective.
    Mr. Cicilline. Dr. Maloney, I think I have a few seconds 
left.
    Ms. Maloney. Very quickly, the focus, as Matt has just 
said, on building a real coalition with Europe, I think, is the 
kind of kryptonite that we need to go after Iran on these 
issues. We have spent 36 years trying to find a way to impede 
Iran's support for terrorism. What worked on the nuclear issue 
was that kind of international multilateral coalition.
    Mr. Cicilline. Thank you.
    I thank the chairman.
    Ms. Ros-Lehtinen. Thank you so much.
    And I will just make a last statement before we go vote. 
The administration has attempted to assuage concerns that Iran 
will not use its sanctions relief to support terror, that the 
money is already tied up in other ventures. But, as we have 
heard, the IRGC is one of the major actors of the Iranian 
economy, with a presence in nearly every sector.
    Administration officials also tell us that U.S. sanctions 
against IRGC and its officials will not be lifted. However, it 
is clear that we have only scratched the surface when it comes 
to sanctioning IRGC companies. As you pointed out, all of the 
subsidiaries--and their subsidiaries are not under sanctions 
like their parent companies. And so how effective can our 
remaining sanctions be if these subsidiaries remain free from 
sanctions?
    So we will leave that intriguing topic for the next 
hearing. Thank you so much, ladies and gentlemen.
    And, with that, our subcommittee is adjourned.
    [Whereupon, at 2:45 p.m., the subcommittee was adjourned.]

                                     

                                     

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