[Senate Hearing 114-442]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 114-442

 
UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRAN DEAL: ADMINISTRATION 
                              PERSPECTIVES

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                                   ON

EXAMINING THE NATURE OF THE SANCTIONS RELIEF THAT IS BEING PROVIDED TO 
   IRAN, INCLUDING THE RECENT FOCUS ON THE POTENTIAL FOR GIVING IRAN 
   ADDITIONAL ACCESS TO THE U.S. FINANCIAL MARKET IN RETURN FOR ITS 
 PREVIOUSLY NEGOTIATED TEMPORARY NUCLEAR-RELATED COMMITMENTS SET FORTH 
             IN THE ``JOINT COMPREHENSIVE PLAN OF ACTION''

                               __________

                              MAY 25, 2016

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban Affairs
  
  
  
  
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

MIKE CRAPO, Idaho                    SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois                  JON TESTER, Montana
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
JERRY MORAN, Kansas

           William D. Duhnke III, Staff Director and Counsel

                 Mark Powden, Democratic Staff Director

                    Dana Wade, Deputy Staff Director

                    Jelena McWilliams, Chief Counsel

    John O'Hara, Senior Counsel for International Terrorist Finance

            Laura Swanson, Democratic Deputy Staff Director

                Graham Steele, Democratic Chief Counsel

               Colin McGinnis, Democratic Policy Director

                       Dawn Ratliff, Chief Clerk

                      Troy Cornell, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor
                          
                          
                          
                          

                                  (ii)
                                  
                                  


                            C O N T E N T S

                              ----------                              

                        WEDNESDAY, MAY 25, 2016

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2

                               WITNESSES

Adam J. Szubin, Acting Under Secretary for Terrorism and 
  Financial Intelligence, Department of the Treasury.............     3
    Prepared statement...........................................    34
    Responses to written questions of:
        Chairman Shelby..........................................    39
        Senator Cotton...........................................    44
        Senator Warner...........................................    46
Stephen D. Mull, Lead Coordinator for Iran Nuclear 
  Implementation, Department of State............................     5
    Prepared statement...........................................    36
    Responses to written questions of:
        Chairman Shelby..........................................    48
        Senator Brown............................................    50
        Senator Toomey...........................................    51
        Senator Cotton...........................................    52
        Senator Warner...........................................    55

                                 (iii)


UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRAN DEAL: ADMINISTRATION 
                              PERSPECTIVES

                              ----------                              


                        WEDNESDAY, MAY 25, 2016

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 2:31 p.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Richard C. Shelby, Chairman of the 
Committee, presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    Yesterday here in this Committee, we received testimony 
from a panel of experts on the challenges and the consequences 
of suspending economic sanctions on Iran as agreed to in the 
Iran deal.
    They discussed, among other things, several issues in 
implementing the deal and the risks posed by granting Iran 
additional concessions in light of its demand for more economic 
relief.
    And while the Administration has been campaigning for 
Iran's rapid reintegration into the world economy, there is 
nothing preventing Iran from using funds made available under 
the deal to further destabilize the region. This includes 
further contributions to known terrorist organizations such as 
Hezbollah.
    It also includes additional investment in Iran's ballistic 
missile system, which could be a conduit for restricted nuclear 
activities should Iran back away from the deal.
    Given these and other serious threats, which Iran has made 
clear will persist, the Administration must have the ability 
and the will to reimpose swift punitive measures should Iran 
not uphold its end of the agreement. And I believe Congress 
must ensure that the statutory authority is in place to reapply 
strong economic sanctions against Iran if need be.
    I look forward to hearing our witnesses' testimony today on 
how the Iran deal is being implemented and, in particular, the 
actions the Administration is taking to further facilitate 
Iran's access to the global financial system.
    Our first witness is Mr. Adam Szubin. He is no stranger to 
this Committee. He is Acting Under Secretary of the Treasury 
for Terrorism and Financial Crimes of the Office of Terrorism 
and Financial Intelligence, and his nomination is pending on 
the Senate floor for the permanent job.
    He will be followed by the Honorable Stephen D. Mull, Lead 
Coordinator for Iran Nuclear Implementation at the U.S. 
Department of State.
    I welcome both of you gentlemen. Your written statements 
will be made part of the record in their entirety, and at this 
point I will recognize Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman. Mr. Szubin, Mr. 
Mull, welcome to both of you.
    Yesterday we heard a range of witnesses discuss the Joint 
Comprehensive Plan of Action and the application of the 
existing sanctions architecture to combat Iran's malicious 
activity. Those remaining sanctions target Iran's sponsorship 
of terrorism, its human rights abuses, its ballistic missile 
activity, all inconsistent with U.N. Security Council 
resolutions.
    Today we hear from two senior Administration officials who 
play key roles in Iran policy. They will share their 
perspective on the progress of implementation, the 
effectiveness of our broader strategy to combat Iran's 
dangerous and destabilizing behavior in the region, and how we 
might strengthen it consistent with our JCPOA commitments.
    Ambassador Stephen Mull is the State Department's Lead 
Coordinator for the Iran Nuclear Agreement. Thank you for the 
work you are doing.
    Our chief sanctions enforcer in the U.S., Adam Szubin, 
serves as Acting Under Secretary for Terrorism and Financial 
Crimes in the Treasury Department. As our witnesses unanimously 
reaffirmed yesterday in response to a question from Senator 
Donnelly, he is eminently qualified, and when we went down the 
line whether they liked the agreement or did not like the 
agreement, whether they were supportive of it today or still 
critical of it today, they all agreed that Mr. Szubin should be 
confirmed. He is eminently qualified having served initially in 
the Bush administration and the Obama administration in key 
national security roles related to economic sanctions and 
countering terrorist financing. It is inexcusable that Mr. 
Szubin's nomination was pending in this Committee for almost a 
year. For no apparent reason was it not acted on. Finally, we 
acted on it, and now it is being held up by the Republican 
leadership, again, for no apparent reason--this despite the 
fact that the Under Secretary for Terrorism and Financial 
Crimes is one of the most important national security posts in 
our Government. When I hear colleagues on this Committee and in 
the Senate overall so critical of the JCPOA, even writing 
letters to the leadership of a country that is not our friend, 
and then some of those same people block his nomination for one 
of the most important national security posts in our 
Government, I am just perplexed.
    As we heard again yesterday, allowing this proven leader to 
remain unconfirmed undermines America's influence in our 
efforts to track terrorists and stop them from raising money on 
the black market or elsewhere.
    Mr. Szubin's job is focused on leading our country's effort 
to disrupt terrorist financing by al Qaeda, by ISIS, by other 
groups, and especially important to today's hearing, he leads 
U.S. efforts to combat Iran's malicious activity in the region. 
The Senate should vote to confirm him today.
    As we heard in our hearing yesterday, Iran has so far 
complied with its JCPOA commitments. The U.S., Israel, and 
other allies in the region are safer and more secure because of 
that. Whether we support it or oppose the JCPOA, we all 
recognize the need to continue to combat the persistent threat 
that Iran poses to the U.S. and our allies. It requires the 
Administration to enforce existing sanctions, to designate new 
sanctions targets, to block Iran's pursuit of military 
technologies, and to take other steps to confront Iran and its 
terrorist proxies like Hezbollah.
    It also requires continued coordination with the 
international coalition whose joint actions make the sanctions 
regime effective enough to bring Iran to the negotiating table 
and force it to agree with the JCPOA in the first place. I look 
forward to hearing our witnesses today describe our strategy in 
each of these fronts.
    Last, Mr. Chairman, in addition sanctions and JCPOA 
oversight, Congress must also support robust military and other 
aid to regional partners like Israel. We should be focused on 
ensuring strict implementation of the agreement and on the most 
effective ways to pressure Iran's leaders to change their 
destabilizing behaviors in the region.
    I welcome our distinguished Administration witnesses this 
afternoon. I look forward to hearing their perspectives.
    Chairman Shelby. Mr. Szubin, you may proceed.

    STATEMENT OF ADAM J. SZUBIN, ACTING UNDER SECRETARY FOR 
    TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF THE 
                            TREASURY

    Mr. Szubin. Thank you very much. Chairman Shelby, Ranking 
Member Brown, Members of the Committee, it is a pleasure to be 
back with you today, and thank you for inviting me to discuss 
our implementation of the JCPOA.
    Very shortly after I started at the Treasury Department, in 
2004, we saw with alarm the progress that Iran was making in 
its covert nuclear program and understood that this was a 
national security threat of the highest order. From that time, 
the talented women and men in my office have devoted literally 
tens of thousands of hours to addressing this threat. It has 
been an effort like nothing I have ever seen or been a part of, 
working with the intelligence community to identify and track 
Iranian front companies and their movements of funds, working 
with the private sector and banks here and abroad to strengthen 
the vigilance posed with respect to the activities carried out 
by Iran, working with law enforcement and regulators to hold 
sanctions violators accountable, and working alongside our 
diplomats and foreign counterparts to make clear to Iran that 
the price of its illicit nuclear program was complete isolation 
from the international community. Partly, and probably most 
importantly, we worked very closely with the Congress, 
including Members in particular of this Committee, to secure 
tough legislation, bipartisan legislation, that sharpened our 
sanctions tools, deepened their impact, and, I believe, brought 
Iran to the bargaining table.
    After nearly a decade, the accumulated pressure had its 
intended effect, bringing Iran to the table, convincing it to 
accept far-reaching constraints on its program. The JCPOA was a 
tremendous breakthrough. It is a peaceful means of eliminating 
one of the world's most persistent national security threats.
    Iran was a few months from having enough fissile material 
for a potential nuclear weapon, and it was advancing. Today 
Iran's breakout time has been extended to beyond a year, and we 
are all safer for it.
    Since Iran has kept its end of the deal, we must uphold 
ours. It is in our national security interest to ensure that 
the JCPOA works as intended and stands the test of time. And it 
is, therefore, important to fulfill all of the commitments that 
we made in the deal.
    Iran is already seeing benefits under the deal. It has 
opened new banks accounts around the world. It has gained 
access to billions of dollars in reserves. And its oil exports 
to Europe have recovered to about half of their presanctions 
levels.
    That said, we still see companies and banks around the 
world who are hesitating based on concerns about doing business 
in Iran. Some are concerned about Iran's financial transparency 
and the designation of Iran by the FATF, the Financial Action 
Task Force, because of its anti-money laundering and 
counterterrorist financing deficiencies.
    Others are noting concerns about corruption, as well as 
regulatory and other obstacles to doing business in Iran. And 
still others cite Iran's provocative behavior outside the 
nuclear file, including its active support for terrorism and 
its ballistic missile testing.
    As President Obama said recently, ``Iran has to understand 
what every country in the world understands, which is 
businesses want to go where they feel safe, where they do not 
see massive controversy, where they can be confident that 
transactions are going to operate normally.''
    As Iran pursues more business, I believe it is incumbent on 
Iran to address these problems, to undertake meaningful 
reforms, and create an environment in which businesses feel 
secure.
    I have talked a little bit about the sanctions relief that 
we have delivered under the JCPOA. But I also want to make 
clear what the deal does not mean.
    First, with only limited exceptions, the primary U.S. 
embargo on Iran remains in place, including the prohibitions on 
U.S. persons investing in Iran and the prohibitions on Iran 
accessing U.S. financial markets.
    Along these lines, let me say clearly, we have not promised 
nor do we have any intent to give Iran access to the U.S. 
financial system or to reinstate what has been known as the 
``U-turn'' authorization.
    Additionally, we have maintained all of our sanctions 
designed to counter Iran's malign activities outside of the 
nuclear file.
    Iran continues to be the world's leading sponsor of 
terrorism and to play a significant and unhelpful role in the 
region. It supplies funding and weapons to Hezbollah, to the 
Assad regime, and to the Houthis in Yemen, and it continues to 
develop its ballistic missile program, in contravention of U.N. 
Security Council resolutions. And it continues to violate human 
rights within Iran.
    Under our current sanctions regime, we have designated more 
than 200 Iranian-linked firms and individuals along these 
grounds. Thanks to Congress, those designations continue to 
have effect beyond our borders. Secondary consequences attach 
for any foreign financial institution that does business with 
any Iranian party that we have designated and any that we will 
designate in the coming days.
    We have kept at it. Indeed, since the implementation of the 
JCPOA, we have targeted new actors, including key actors in 
their ballistic missile program, agents of Mahan Air, which has 
acted as the Qods Force's airline, and a central Hezbollah 
money-laundering network. Ultimately, we must remain clear-eyed 
about the nature of the non-nuclear threats posed by Iran, and 
we will continue to do so.
    Thank you again for inviting me to appear today. I look 
forward to our continued work with this Committee and to taking 
your questions.
    Chairman Shelby. Secretary Mull.

STATEMENT OF STEPHEN D. MULL, LEAD COORDINATOR FOR IRAN NUCLEAR 
              IMPLEMENTATION, DEPARTMENT OF STATE

    Mr. Mull. Thanks very much, Chairman Shelby, Ranking Member 
Brown, and other distinguished members of the panel. It is a 
great pleasure to appear with you today for the first time for 
me before this Committee to brief and hear your questions and 
concerns about the Joint Comprehensive Plan of Action. It is a 
special honor to appear with my colleague Adam Szubin, who does 
such an extraordinary job every day defending America's 
security as America's chief sanction enforcer at the Treasury 
Department.
    I am pleased to report that as of today, 4 months after the 
implementation of the agreement, the agreement, in fact, has 
been fully implemented by all the parties to it, and I think it 
is important that we as a country recognize the contribution 
that that has made to making ourselves and our allies and 
friends, especially in the Middle East, more secure.
    As of Implementation Day under the Joint Comprehensive Plan 
of Action, which was on January 16th, Iran had completed dozens 
of specific actions to constrain its nuclear program and 
subject it to greater transparency from the International 
Atomic Energy Agency. It reduced by 98 percent its holding of 
enriched nuclear material that could have been used to build a 
bomb, shipping about 25,000 pounds of enriched material out of 
Iran. It cut its installed centrifuges by about two-thirds, and 
agreed to tight controls on future enrichment activities. It 
destroyed the core of the heavy-water reactor at Arak which 
could have produced weapons-grade plutonium, another pathway to 
a nuclear weapon that this deal has foreclosed. And its 
implementation of these commitments has not increased the time 
Iran would need to produce a nuclear weapon--from about 2 
months before the agreement took place to about a year today, 
so a multifold increase in the amount of time, the so-called 
breakout time, that Iran would need to produce a nuclear 
weapon.
    These actions were complemented by the historically 
comprehensive verification and monitoring measures that we 
specified in the JCPOA. And thanks to those, Iran is now 
subject to the greatest monitoring and verification regime in 
the entire history of nuclear power. That gives us the 
confidence that, if Iran should decide to break out of its 
commitments, we would detect that attempt immediately, and we 
would have ample time to respond.
    In the event of Iran's noncompliance, at the same time we 
have preserved our ability to snap back the penalties that 
Under Secretary Szubin described that brought Iran to the 
negotiating table in the first place.
    As you know, in exchange for Iran's meeting its nuclear-
related commitments under the JCPOA, we met our commitments by 
lifting the nuclear-related secondary sanctions on Iran. In an 
effort to provide greater clarity to the public and private 
sectors on what sanctions were lifted and what sanctions remain 
in place, we have been participating in outreach activities 
with the public and private sectors and Governments, at the 
request of other Governments, in order to explain U.S. 
commitments under the JCPOA. As long as Iran continues to meet 
its nuclear commitments, we will continue to meet our 
commitments in the deal as well.
    While we are encouraged by Iran's implementation of its 
nuclear commitments thus far, we have always recognized that 
the JCPOA would not resolve all of our concerns with Iran. And, 
in fact, it has not resolved our concerns with Iran. Instead, 
the JCPOA was specifically aimed at addressing the most urgent 
issue of verifiably ensuring that Iran does not obtain a 
nuclear weapon. Thanks to our efforts to date, we have made 
significant progress toward that goal, and the United States 
and our partners are safer because of those efforts.
    I very much look forward to your comments and questions. 
Thank you.
    Chairman Shelby. Mr. Szubin, there are a lot of us here, so 
I will try to be as brief as I can. One of Iran's priorities is 
to be able to engage in international trade in dollar-
denominated transactions, which would not only give it access 
to the world's strongest and most liquid currency, but would 
also further legitimize its financial system.
    Can you confirm that there are no plans now or in the 
future for this Administration to allow Iranian, U.S., or 
foreign persons at any point to engage in either direct or 
indirect dollar-denominated transactions or dollar clearing in 
any form, including offshore facilities or through interbank 
bookkeeping or other conversions or transfers?
    Mr. Szubin. Well, thank you, Chairman Shelby. The question 
addresses quite a lot.
    Chairman Shelby. It does.
    Mr. Szubin. And I will do my best to answer every aspect.
    First, you are absolutely right that the dollar is, and 
thankfully remains, the international currency of choice. Yes, 
I am sure Iran would like to be able to do its trade through 
the dollar through U.S. financial institutions. That is the 
gold standard when it comes to how international trade is done. 
That is not a part of the JCPOA.
    Iran is not given relief from the prohibition on accessing 
U.S. financial institutions under this deal. We have been very 
clear about that throughout, and we have not restored anything 
like the U-turn transaction that once allowed Iran to do 
offshore-to-offshore clearing with a U.S. bank in the middle.
    Now, your question touched on two different types of 
activity: one is transactions in the U.S. dollar, which 
typically take place through a U.S. bank; the other is offshore 
dollar clearing. On the first, that is what I was just 
clarifying. Secretary Lew has said so; I have said so 
repeatedly. U.S. financial institutions are off limits to Iran.
    If there is a foreign institution that is doing business 
with Iran, our sanctions do not prohibit that, by and large, 
unless they are dealing with the IRGC actors I referenced in my 
opening statement, so long as they steer clear of our banks and 
our financial system. And that is true regardless of the 
currency. So if there is a bank in China that is doing 
transactions with Iran, it can do those in renminbi, in the 
local currency, in euro, in yen. It can do them in U.S. dollars 
based on the dollars that it has on hand. And every major 
international bank, of course, has some access to dollars in 
its own vaults and on its own books.
    But that is not the same thing as gaining access to, as you 
described it, the prestigious U.S. financial system and all 
that comes with it.
    Chairman Shelby. But with their assets they could buy 
dollars anywhere in the world and move them, could they not, 
and use the dollars?
    Mr. Szubin. I am sorry, Senator?
    Chairman Shelby. I said they could still use the dollars as 
a medium of exchange if they had them.
    Mr. Szubin. If they are holding U.S. dollar bills, yes. 
They can do with them what they want.
    Chairman Shelby. Sure.
    Mr. Szubin. You know, it is an interesting question. We do 
not treat the U.S. dollar bill as a controlled commodity. If 
there is a U.S. sensitive good, a nuclear good, we treat that 
as a controlled commodity, and even once we have exported it 
offshore, we assert jurisdiction on that if it is ever going to 
be reexported or reexported again. We do not treat dollar bills 
in that way, and I think that is a good thing. I think that is 
part of what has allowed the U.S. dollar to emerge as the 
primary currency of choice.
    Chairman Shelby. Secretary Mull, what is your answer to 
that question?
    Mr. Mull. Which question, about the dollars or the----
    Chairman Shelby. The whole question I asked him. I directed 
it at both of you.
    Mr. Mull. Yes, well, we completely agree there is 
absolutely no plan to open the U.S. financial system to the 
Government or businesses from Iran. The U.S. financial system 
is off limits. We very tightly guard access to the U.S. 
financial system through the programs that the Treasury 
Department has. We reinforce the Department of Treasury's 
efforts diplomatically in our engagement with our foreign 
partners, and we completely agree with Acting Under Secretary 
Szubin's analysis.
    Chairman Shelby. I have a little time left. I want to yield 
my time to Senator Toomey because he has got to preside over 
the Senate. Senator?
    Senator Toomey. Thank you very much, Mr. Chairman, and 
thanks for having this hearing. As you know, the JCPOA, more 
commonly known as the ``Iran Nuclear Deal'', I thought this was 
a terrible deal at the time. I thought then it was a bad idea 
to turn over $100 billion to the world's leading State sponsor 
of terrorism while, among other things, allowing them to retain 
a significant nuclear infrastructure. And, of course, a 
bipartisan majority of Senators disapproved of this. But I 
would like to focus on what has happened since then and the 
Administration's response to it since the deal was announced.
    To this day, my understanding is the Iranians have still 
refused to sign or ratify the agreement. They have delivered 
weapons to the Assad regime. They have taken 10 American 
sailors hostage at gunpoint and used the event for propaganda 
purposes, fired missiles near U.S. surface ships in the Strait 
of Hormuz. They took delivery of advanced surface-to-air 
missiles from Russia, fired several ballistic missiles in 
flagrant violation of U.N. Security Council Resolutions 1929 
and 2231. And despite all of this bad behavior post-JCPOA 
conclusion, it seems to me the Administration is, nevertheless, 
conferring more benefits upon the Iranians than the JCPOA even 
requires.
    We learned the Administration has some plans, I believe, to 
reward Iran with $8.6 million U.S. taxpayer dollars in return 
for getting rid of the heavy water that they are obligated to 
get rid of anyway without American compensation under the 
JCPOA. And despite laws that prohibit Iran from having access 
to U.S. banking, we hear that the Treasury explores loopholes 
that could permit them, notwithstanding the prohibition, as I 
understand, on the U-turn transactions. We have Secretary Kerry 
actively lobbying banks in Europe to do business with Iran. And 
according to the Iranian Government, the Obama administration 
is asking the Iranians to keep quiet about missile tests.
    Now, it seems, the way it looks to me, that the 
Administration has taken it upon itself to be responsible for 
the reintegration of the Iranian economy with the global 
economy. And that strikes me as a very bad idea.
    Just yesterday, Juan Zarate, who is proximately your 
predecessor at Treasury, laid out several reasons why it is a 
bad idea for the Administration to take this role, and I am 
paraphrasing, but one is that it certainly looks like it is the 
Administration condoning bad behavior.
    Second, it creates a dual standard. On the one hand, we are 
fining European banks and U.S. banks for engaging in 
questionable transactions with entities including Iran and 
others, but yet here we are encouraging those very same banks 
to do this business with Iranian banks. And, most importantly, 
it seems to me we are giving up the strategic opportunity to 
put the onus on the Iranians to convince the rest of the world 
that they should not be subject to any further sanctions 
because they have gotten their act together, because they are 
behaving, and yet we are not doing that.
    So I guess my question is directed mostly to Ambassador 
Mull. Why does it seem that the Administration has appointed 
itself as the party responsible for Iran's reintegration into 
the world economy, despite the fact that the JCPOA does not 
require that?
    Mr. Mull. Senator, thanks very much for your question. With 
respect, I would not agree that we have appointed ourselves in 
that role. As I alluded in my opening comments, Iran engages in 
seriously destabilizing behavior that threatens our security, 
that threatens the security of our friends in the region and 
around the world. However, as a result of this deal, Iran is 
not able to perform those threatening activities with the 
credible threat of a nuclear weapon to back it up.
    So while we confront Iranian behavior on all of these 
issues, whether it is on missile, whether it is on regional 
destabilization activities, support for the Houthis in Yemen 
and elsewhere, we can feel more comfortable that Iran does not 
have nuclear weapons to back that up.
    Senator Toomey. I get that, but just so that I understand, 
is it the policy of the Administration to pay Iran for the 
heavy water?
    Mr. Mull. The United States decided to purchase heavy water 
when it became----
    Senator Toomey. And that is not required by the JCPOA.
    Mr. Mull. It is certainly not.
    Senator Toomey. Has Secretary Kerry been visiting European 
banks and encouraging them to do business with Iran?
    Mr. Mull. Secretary Kerry, at the request of our foreign 
allies, has met with foreign businesses and banking communities 
to explain the extent of U.S. sanctions that are still in 
effect and those that have been lifted because----
    Senator Toomey. It has been characterized by some European 
banks as him actively encouraging them to do business with 
Iran----
    Mr. Mull. No, he----
    Senator Toomey. ----despite the outrageous behavior.
    Mr. Mull. Sir, I actually participated with Secretary Kerry 
in one of those meetings. He was not doing that at all. He was 
explaining and making clear what the impact of U.S. commitments 
under this deal were. Obviously, it is a bank's responsibility, 
businesses' responsibilities to make their own decisions. We 
cannot force them into it. And as Secretary Kerry has made 
clear publicly, Iran bears the major brunt of responsibility, 
if it wants to be integrated with the rest of the world, in 
making itself an attractive destination for investment by 
complying with standard laws and practices and banking 
transparency, anti-money laundering, and anticorruption 
efforts.
    Chairman Shelby. Thank you, Senator.
    Senator Toomey. Mr. Chairman, thank you very much.
    Chairman Shelby. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Ambassador, you outlined, I thought very well, the progress 
we have made on implementation and compliance on reducing 
uranium levels, on restrictions on R&D and centrifuge 
production on the redesign of the Arak reactor, the conversion 
of the Fordow facility, ongoing inspections, verification. Has 
there been concern expressed by the IAEA so far of cheating on 
Iran's part?
    Mr. Mull. No, sir, there has not been. The IAEA issued a 
report at the end of February, the first required after 
Implementation Day, in which it confirmed that Iran was in full 
compliance. It will issue another report very soon. The 
preliminary information is that they will again make that 
determination.
    Senator Brown. Thank you. And as you know, the P5+1 came 
together obviously in support of the agreement, as we built 
consensus through really over a decade-long period, from 
Condoleezza Rice to Hillary Clinton to John Kerry and the work 
that Acting Secretary Szubin did. Are there significant--
holding that coalition together and moving forward and making 
the world safer, making the region safer, are there significant 
disputes of interpretation or implementation among the P5+1?
    Mr. Mull. No, sir. I think that there has been remarkable 
unity among the P5+1 in approaching this deal from the outset. 
We meet regularly, we converse regularly. I am in regular 
contact with my counterparts among all the P5+1 to make sure 
that we stay on the same page, and there are ample 
opportunities to raise differences in interpretation. Frankly, 
there have not been any serious differences between----
    Senator Brown. Are there major political challenges made by 
the majority party in some of these countries the way there is 
now, the majority party in the legislative branch where there 
seems to be almost no support, even though--from one of the 
political parties in this city for an agreement that all six 
countries have come together unified?
    Mr. Mull. My impression is in traveling to the countries of 
the negotiating parties, some of which are obviously more 
democratic than others, nevertheless there is strong, broad-
based political support in each of those countries.
    Senator Brown. OK. Thank you for that. I think it is 
important to put this in political context. Under Secretary 
Szubin, I wanted to ask you a question. The long-term goal, 
obviously, is to keep Iran from building a nuclear weapon. For 
years, the U.S. Government, regardless of Administration, 
beginning in the Bush administration, Secretary Rice, then the 
Obama administration, Secretaries Clinton and Kerry, have 
moved--have woven together this consensus with the P5+1 in sort 
of an unprecedented way when so often there are few issues that 
all of those countries can agree on the way they have here.
    You said at the FDD Washington Forum recently, at their 
conference, you expressed concern that new mandatory non-
nuclear sanctions legislation would risk undermining our unity 
with those international parties. What did you mean by that?
    Mr. Szubin. As you point out, Senator Brown, that consensus 
was hard won, and there were some very difficult patches, to be 
honest. Our sanctions, in particular the sanctions that 
Congress passed, with huge bipartisan majorities, to tough our 
sanctions on Iran, that really did succeed in putting the 
squeeze to them, their banks, their oil exports. Those were not 
popular overseas, even among some of our closest partners. And 
the fact that we were able to bring them all together really is 
a credit to the State Department and to some persistent 
diplomatic work to come to the table and say we have got this 
leverage, Iran is saying they want to negotiate, let us do so 
and let us craft a tough deal that holds them to their 
commitments.
    With respect to new sanctions legislation, what I was 
referring to is new sanctions that would restore the sanctions 
that have come off, by which I mean, for example, new sanctions 
saying Iran cannot sell its crude oil or Iran cannot access its 
foreign reserves. Sanctions of that type, obviously, if they 
are nuclear sanctions, would be contrary to the letter and the 
spirit of the agreement. If they were premised on other non-
nuclear conduct, the agreement is silent on that. But certainly 
our allies around the world would see us taking back major 
chunks of the sanctions relief as bad faith, and I do not think 
we want to isolate ourselves in that way.
    Senator Brown. And they made that clear to you?
    Mr. Szubin. Yes, and to my colleagues at State.
    Senator Brown. Thank you.
    Chairman Shelby. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman. Thank you, 
Senator Brown.
    You have made it very clear, Mr. Szubin, that the Iranians 
do not have direct or indirect or U-turn access to the American 
financial system. I presume that the only way they would get 
such access would be to meet every objection we have to their 
terrorist behavior, to their missile technology activities, the 
whole host of legislative provisions and Administration policy 
that prevents their access. Is that fair?
    Mr. Szubin. That is correct, Senator, and that is a very 
effective piece of continued leverage that we, the U.S. 
Government, hold.
    Senator Reed. And, indeed, some of the reluctance you 
described of dealing with Iran is the economic culture, the 
lack of legal clarity, but one is the fact that this denial of 
access to the American financial system concerns some people 
who otherwise might do business with Iran. Is that correct?
    Mr. Szubin. Yes, sir.
    Senator Reed. So we still have some leverage, in fact, 
significant leverage on how Iran can enter the international 
financial market, correct?
    Mr. Szubin. That is correct, Senator.
    Senator Reed. And, Mr. Ambassador, there is a rather 
complex resolution system in the JCPOA. Has that been used so 
far? Have we got to a point where we had to call upon the 
resolution process?
    Mr. Mull. No, Senator, we have not, because the parties to 
the agreement all agree, and affirmed by the IAEA, that on the 
nuclear side Iran is in full compliance with the deal. We have 
received no reports of denied access to attempts to inspect in 
Iran by IAEA inspectors.
    On the sanctions relief side, it is clear, I think there is 
no secret, that various Iranian officials have complained that 
sanctions relief has not come as quickly as they have expected, 
but they have not charged that there has been a formal 
violation of the agreement, so there has been no conflict to 
resolve as of yet.
    Senator Reed. Very good. For both of you--Mr. Szubin, you 
can start--have we seen Nations like Russia, China, and other 
countries attempt to circumvent the issue of connection to the 
U.S. financial system by setting up sort of specialized 
boutique institutions, or they are not doing that, they are 
simply, you know, continuing in their usual manner?
    Mr. Szubin. It might useful, although I always hesitate to 
bring up analogies, but it might be useful to bring up the 
analogy of tax avoidance and tax evasion. There are ways to do 
business internationally that avoid the U.S. financial system. 
The U.S. financial system is still the primary way. It is, as I 
said, the gold standard, but there are ways to do international 
trade without it, and places like China and Russia, as you 
mentioned, are certainly looking to develop more robust 
alternatives. And, you know, in no small part, that might be a 
reflection of the fact that we have been a leader in putting 
sanctions on Russia due to their very unhelpful activities in 
Crimea, eastern Ukraine.
    But with respect to actions that would circumvent our 
banks, that would violate our sanctions, no, we have not seem 
them actively doing that on behalf of Iran.
    Senator Reed. Thank you very much.
    Mr. Ambassador, any comments?
    Mr. Mull. No, we have not seen any activity like that 
either at the State Department.
    Senator Reed. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Corker, thank you for your 
indulgence.
    Senator Corker. No. Thank you, sir. Thanks for having the 
hearing.
    Ambassador, you mentioned the snapback provisions in your 
opening comments, and, of course, for a snapback provision to 
work, you have got to have something to snap back to that is in 
place. And so I assume per your statement you agree with most 
of us here that extending the Iran Sanctions Act before it 
expires is something that would be good for this agreement.
    Mr. Mull. Senator Corker, obviously, the Iran Sanctions Act 
is in place until the end of this year. And, of course, we 
have----
    Senator Corker. We leave here, you know, pretty soon, and 
we are not coming back. And so in order for there to be 
sanctions to snap back to, you would agree we need to get on 
with our business, would you not?
    Mr. Mull. Well, having the ISA in place or not is not 
necessary for snapping back. We have sufficient authority 
through various Executive orders already in place.
    Senator Corker. But you would not object to it because you 
realize there has to be a regime to snap back to, and so you 
would support us doing our job and extending it, would you not?
    Mr. Mull. Well, the Administration is ready to work with 
the Congress on that question. We would have to see what form 
it would take. I know earlier this year there had been----
    Senator Corker. Well, you know what form it would take. We 
have already passed it. It expires. And if we extend it, it 
would be in the same form.
    Mr. Mull. Yes, sir, there have been various, slightly 
different variations in how it would be renewed, so we are 
certainly willing to have that conversation with the Senate.
    Senator Corker. Yeah, but you seem very wishy-washy on 
this, just for what it is worth, as you have been in multiple 
settings and it is very off-putting. Either you support the 
Iran Sanctions Act being extended or you do not. I would like a 
yes or no, because you cannot snap back to something that does 
not exist after January 1st.
    Mr. Mull. Well, sir, yes, we can fully snap back to the 
sanction regime that was in place prior to the deal whether or 
not the ISA is in place. We have--I will try not to be wishy-
washy. There are different forms of renewal of the ISA, some of 
which might have an impact on keeping our commitments under the 
JCPOA. So the Administration is very open to working with the 
Congress in approaching that question.
    Senator Corker. Mr. Szubin, at the end of the day, Iran 
wants access to U.S. dollars most. Is that correct?
    Mr. Szubin. I would say the dollar and the euro are the two 
currencies that they want the most.
    Senator Corker. So I know that we, per the sanctions we 
have in place relative to terrorism and human rights and other 
kinds of things, are precluding U.S. banks from participating, 
and you have discussed thoroughly the fact that U-turn 
transactions are not going to be allowed. But isn't it a little 
strange that we are out marketing--and we are doing that--to 
other foreign banks, telling them that if they have dollar 
reserves, that is not going to affect their ability to do 
business with us, and they are more than free to do that. It is 
kind of a weird--it is strange to be so adamant about the fact 
that U.S. banks cannot do it, and yet you are out--you are 
doing this, we know this. I mean, Stuart Levey, who preceded 
you, has written a great op-ed and has said that HSBC is not 
going to be doing business because of the continued problems 
that Iran poses to the world and the activities they have been 
involved in.
    But is it not somewhat duplicitous for us to be carrying 
out our diplomacy in the way that we are doing it, where we are 
encouraging other people around the world to use their dollar 
reserves to make sure that Iran's economy does come back, but 
over here smugly saying that we, in fact, are not doing that 
U.S. banks?
    Mr. Szubin. Senator, we are not encouraging foreign 
businesses, foreign banks to do this business. We try to steer 
clear of encouraging banks to take on any business. It is just 
not our place as the Treasury Department to be encouraging that 
type of work, certainly least of all with a country like Iran 
where we have active sanctions against them here in the U.S.
    What I think is fair and actually is our responsibility is 
that when we get the questions--and we get a barrage of 
questions every week, ``Can I do this without getting into 
trouble with U.S. law? Can I do that?''--we need to be able to 
call it right down the line.
    Senator Corker. But it is strange policy, is it not, that 
we have foreign banks that we are clearing to use their dollar 
reserves to do business with Iran and not our own?
    Let me move to another topic because my time is running 
out. If a bill were to pass the House and the Senate that in no 
way reimposed the nuclear sanctions that were in place but used 
other sanctions to deal with the fact that, let us face it, I 
mean, Iran is not complying with UNSCR, the U.N. Security 
Council Resolution, relative to ballistic missile testing, 
right? I mean, they are not in compliance--would you agree with 
that?--with the spirit of that.
    Mr. Szubin. I would agree.
    Senator Corker. Well, that is a fact, and nothing has 
happened. And one of the things about this snapback provisions 
is we know they are ineffective because we know that Russia and 
China will do the same thing that they have done relative to 
ballistic missiles. They are not going to allow sanctions to be 
put in place.
    So if Congress were to pass sanctions--not the same 
sanctions that were utilized for the nuclear deal--on ballistic 
testing, on human rights, on terrorism, and those types of 
things, it would seem as if you all have not precluded that, 
and you all would not stand in the way of us doing that if we 
felt it was an important thing to do. Is that correct?
    Mr. Szubin. So, first, I would say the deal was structured 
in a way so that Russia and China, no matter how belligerent 
they want to be, cannot stand in the way of the U.S., even by 
ourselves, even if the Europeans are not with us, ensuring the 
full snap back of U.N. sanctions, and I think that is a very 
powerful aspect of leverage in terms of keeping Iran to its 
commitments.
    Senator Corker. Except that none of them would be involved 
in it. It is not very powerful, but keep going. In other words, 
we would be, but they would not.
    Mr. Szubin. But we would have the ability to reinstitute 
all of the U.N. Security Council sanctions. I am not talking 
about U.S. sanctions, which, of course, we retain the ability--
--
    Senator Corker. I know, but they would not participate in 
that. But keep going. We know they are not going to participate 
in that, and that is a ridiculous thought to think that if they 
do not agree with it, they are going to go ahead and put 
sanctions in place. It is very naive and sophomoric. But keep 
going.
    Mr. Szubin. I would dispute the characterization, but let 
me keep going.
    With respect to new sanctions to be put in place, as I 
mentioned in response to an earlier question, I think from 
Chairman Shelby, we would have to look at what are the 
sanctions affecting. If the sanctions are predicated on 
missile, on terrorism, that is all fair grounds. And we have 
said that consistently. In fact, we have not only said that to 
Congress; we have done that. We have imposed sanctions on----
    Senator Corker. So we could do that, too. If we wanted to 
put additional sanctions in place that were not the nuclear-
related sanctions, on human rights, on terrorism, and on 
ballistic testing, you would be OK with that?
    Mr. Szubin. What I would say is there is nothing in the 
JCPOA that would preclude that. Now, in terms of the 
Administration's views, what it would go to is: What are those 
sanctions doing? If the impact of those sanctions is to say no 
dealings with Iran's central bank, no purchasing Iran's crude 
oil, no purchasing Iran's petrochemicals--the whole list of 
things that Congress engineered in order to get Iran to the 
table on the nuclear deal--if we were to put all of those back 
but call them terrorism or missile sanctions or human rights 
sanctions in lieu of calling them nuclear sanctions, I am 
confident that would be viewed as bad faith, not by Iran but 
by----
    Senator Corker. But if there were sanctions different 
than----
    Mr. Szubin. ----our colleagues around the world.
    Senator Corker. Sanctions different than that are not an 
issue, is what I am hearing. So I thank you for----
    Mr. Szubin. I think there would be a lot of room for 
discussion on sanctions different than that, but that would be 
the analysis we would bring to the question.
    Senator Corker. Thank you.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Secretary, first of all, my deepest condolences on the 
passing of your father. Rabbi Szubin was an extraordinary 
religious and community leader in Teaneck, New Jersey, and we 
all mourn his loss.
    And as someone who has been following Iran for a quarter of 
a century in the Congress and obviously did not support the 
JCPOA, I must say that I cannot think of anybody better to be 
in your position than you. And I think you are critical, your 
permanent appointment is critical to the national interest and 
security of the United States. And even when we disagree on 
policy, I have no question that you vigorously pursue the law. 
And so I hope we will get to that point.
    Now, that is the easy part. I have a real concern, 
Ambassador, the way you answer the question, so let me put it 
more succinctly. If we take the Iran Sanctions Act as it was 
passed in law and do not change it at all, are you telling me 
that renewal of the law as it exists is in any way a violation 
of the JCPOA?
    Mr. Mull. Senator Menendez, what I am saying is that the 
Administration is ready to work with the Senate----
    Senator Menendez. No, that is not my question. Please, do 
not give me State Department legalese. It is a very simple 
question. Is reauthorization of the Iran Sanctions Act that I 
and others were the architect of, as is, without any changes, 
reauthorizing it, and it expires in 7 months in an election 
year where we will be here very little, is such a 
reauthorization a violation of the JCPOA? Yes or no. It is 
either a violation or it is not--one of the two.
    Mr. Mull. Sir, we would have to look at that at the time 
that it was submitted for----
    Senator Menendez. OK. So then that contravenes everything 
that we were told at the Senate Foreign Relations Committee 
that, in fact, the existence of the reauthorization and the 
reauthorization itself is not a violation of the JCPOA. And if 
you are going to herald that you are going to snap back to 
something, you have to snap back to what Secretary Szubin in 
his opening remarks admitted, as well as the Administration has 
at different times, that it was the sanctions regime that 
Congress was a significant part of structuring that helped 
bring Iran to the negotiating table. It either is or it is not. 
You cannot embrace it in one moment and then throw it away in 
another.
    So we have 7 months before its expiration, and I cannot 
fathom for the life of me how we do not embrace authorizing it 
as it is so that at the end of the day the Iranians know that 
if in the out-years there is any violation, there is immediate 
snap back to the most significant sanctions that exist.
    Now, Secretary Szubin, let me ask you this: You recognize 
that the sanctions were a driving force at bringing Iran to the 
table. At the same time, those sanctions were never originally 
embraced by the international community. We had to work at it. 
America had to lead. It had to bring people in common cause. 
And that is normally the case. Is that a fair statement?
    Mr. Szubin. It certainly is in this case, Senator.
    Senator Menendez. OK. So now, if U.S. leadership is 
important--and it is always going to be important. We are never 
going to get the world to automatically say, ``Oh, yes, let us 
have sanctions.'' We have had to lead. And if sanctions on non-
nuclear issues with non-nuclear remedies to those sanctions, 
meaning not oil, not access to their reserves, but other 
consequential sanctions to individuals and entities for 
violations of missile technology, in violation of U.N. Security 
Council resolutions for terrorism, for destabilizing the 
region, for human rights were pursued, that is not in violation 
of the JCPOA.
    Mr. Szubin. That is right, Senator, and we, I think, need 
to be very clear, not just in our words but in our actions, 
that we are going after those aspects of Iran's activities.
    Senator Menendez. And here is my concern: So Stuart Levey, 
who was the Under Secretary for Terrorism and Financial 
Intelligence from 2004 to 2011, is an op-ed piece said, ``On 
the one hand, Washington is continuing to prohibit American 
banks and companies from doing Iran-related business. In 
February, FATF reaffirmed its prior concerns about the `serious 
threat' Iran poses to the international financial system, 
urging countries to apply effective countermeasures. The U.S. 
Treasury Department's designation of Iran, including its 
central bank and financial institutions, as a primary money-
laundering concern also still stands. As part of that 
designation, Treasury determined that `the international 
financial system [is] increasingly vulnerable to the risk that 
otherwise responsible financial institutions will unwittingly 
participate in Iran's illicit activities.' ''
    And so he goes on to say that Secretary Kerry ``is asking 
international banks to do what U.S. banks cannot do, even 
though those are admitted risks.''
    So it is difficult to understand that--I understand that we 
have met all of our obligations under JCPOA. Is that not 
correct?
    Mr. Szubin. Yes, Senator.
    Senator Menendez. The process and whatever we had to do has 
been met. So if I have met all of my obligations, I do not 
understand why I have to go above and beyond and to suggest to 
other financial institutions outside of the United States that 
they should take a risk that, in fact, U.S. financial 
institutions do not.
    And, finally, how is it that with the IRGC being such an 
incredible part of the very essence of business in Iran, so to 
speak, that we in essence are suggesting that you can have 
encouraging foreign entities to do business with Iranian 
entities yet threatening sanctions for possibly dealing with 
the IRGC on the other hand?
    Mr. Szubin. There is a lot in those questions, and I will 
do my best to be succinct.
    First, we are not encouraging foreign banks to take on this 
line of business, we are not encouraging foreign businesses to 
do so, and we are not try to minimize in any way all of those 
concerns outside of the nuclear file that you have cited. In 
fact, we have been calling attention to them through public 
remarks from the State Department and through designations from 
Treasury against these missile actors, against human rights 
actors, against those supporting Hezbollah. So we are not 
trying to sweep any of that under the table. We know that it is 
a very complicated risk assessment if a foreign bank is looking 
at Iran and deciding whether or not to go in. And we are not 
trying to pretend that is otherwise.
    What we are doing is being very clear about what the 
sanctions scenario looks like, and so while it may be a very 
risky proposition, dealing with Iran in the sense of allowing 
their foreign reserves to flow, purchasing crude oil from them, 
purchasing petrochemicals, exporting car kits was once 
sanctionable. Even if it was as foreign actor whose business 
did not touch our shores, you could get in trouble with my 
office for doing that. And that is no longer the case after 
Implementation Day.
    That is what we need to do. We need to just be calling it 
right down the line. And I would pick up on Senator Corker's 
comments that that is a strange posture to be in where we have 
got tough U.S. sanctions in place but foreign actors are 
allowed to do the business. I concur. It is also the norm when 
it comes to our sanctions. Our sanctions on al Qaeda, on ISIL, 
our sanctions on Hamas, U.S. companies are held to our 
standards; foreign companies are held to different standards, 
and typically their sanctions regimes are not quite as high. 
That does not mean we are not working to raise them, but that 
difference and perhaps that awkwardness is one that we live 
with every day at Treasury.
    I am sorry. Now I am forgetting the final piece of your 
question.
    Senator Menendez. IRGC.
    Mr. Szubin. Yes, so the IRGC does have a foothold in a lot 
of sectors in Iran's economy, and that is something that we are 
pushing back against. I think right now this moment is actually 
a moment of great potential because we are hearing for the 
first time not just U.S. Government officials saying, ``You 
have to look at what the IRGC is doing. It is a pernicious 
influence within your economy.'' You are hearing foreign banks, 
foreign companies, foreign potential investors saying to the 
Iranians, ``I cannot come in. This looks like the IRGC is in 
that sector, and I am not comfortable with that.''
    That produces, I believe, very constructive pressure within 
the Iranian system, and believe me, there are those within the 
Iranian system who would like to see the IRGC pushed out, who 
would like to see real economic reform occur. And the fact that 
we now have international voices, commercial voices with money 
who Iran is trying to incentivize saying that same message is 
very helpful right now.
    Chairman Shelby. Senator Kirk.
    Senator Kirk. Thank you.
    Mr. Szubin, I wanted to take you back to May 12th when Mr. 
Levey published an important op-ed in the Wall Street Journal. 
As he said, the Administration is pressuring foreign banks to 
do more business with Iran. In the op-ed, Mr. Levey explains 
why HSBC and many U.S. banks have absolutely ``no intention of 
doing . . . business involving Iran.''
    Mr. Szubin. Yes, thank you, Senator. Obviously, Mr. Levey 
is not just a former mentor of mine but a close friend.
    Senator Kirk. He was your boss for 7 years.
    Mr. Szubin. That is right, and remains a close friend, and 
it is nice to see his picture up behind you, to have a friendly 
face up there on the dais.
    Mr. Levey is speaking for HSBC, and he has been very clear 
about what HSBC is going to do with Iran and, more importantly, 
what they are not going to do with Iran, and that is their 
prerogative. It is every bank's prerogative to decide what they 
are comfortable doing and what they are not comfortable doing. 
And it is not for us in the U.S. Government to try to 
substitute our judgment for theirs or try to push on their 
calculus.
    What we do have to do and will continue to do is set out 
what our sanctions guidelines are right down the line.
    Senator Kirk. When you testified, I wrote down your words 
here: ``unhelpful,'' ``not good.'' You sound like you are an 
advocate for sanctions against Iran.
    Mr. Szubin. I am also an implementer of sanctions against 
Iran.
    Senator Kirk. You keep up with the intelligence, don't you, 
as Under Secretary for Intelligence and Terrorism? Could you 
please tell me what the Iranians reported to have written on 
the side of the Shahab-3 missile that they just launched? Do 
you even know what they said?
    Mr. Szubin. Yes, Senator, and here I want to be clear: I am 
not referencing intelligence but, rather, open press reports 
appropriate for this setting, which said that they wrote, I 
believe, ``Death to Israel.'' That is not the exact quote, but 
something to that effect on the side of the missile.
    Senator Kirk. They wanted to say to wipe Israel off the 
face of the Earth. For such a distinguished religious scholar 
such as your dad, what would he have thought about that 
sentiment?
    Mr. Szubin. He would have been appalled but not surprised. 
That, sadly, lamentably, is not a new statement coming out of 
Iran. And it is one that we have heard from previous Iranian 
administrations. It is the reason why we were all so concerned 
that their nuclear program was proceeding unchecked and they 
were bringing more and more centrifuges online.
    When I came to Treasury in 2005-06, I frankly did not think 
we had a more serious, more pressing National security threat 
than Iran's advancing, unchecked nuclear program because of, in 
part, the attitudes that you are describing.
    Senator Kirk. Let me go to another subject. We understand 
from various sources that the Iranians have now executed over 
1,000 just for being gay. What is your comment on that record 
of human rights?
    Mr. Szubin. Iran has a deplorable record of human rights, 
and it is not just with respect to gay people. They have been 
persecuting religious minorities----
    Senator Kirk. So you would agree they have killed about 
1,000 people just for being gay.
    Mr. Szubin. I do not know the statistics on that, but the 
record is pretty clear with respect to their abuse of human 
rights within Iran. It is against political dissidents. It is 
against religious minorities, against their gay population. And 
Iran needs to be held accountable for that. It is something 
that the State Department has been very vocal about, not just 
in their public reports but in private meetings with Iran. I do 
want to note the very important success that my State 
Department colleagues had in bringing back a series of American 
detainees who had been held in Iran for a very long time and 
getting them back here to their families. And I think we are 
all very grateful for the hard work that----
    Senator Kirk. I might point out that ransom tends to work 
in bad situations and incur more kidnappings.
    Mr. Szubin. Well, there was no ransom paid. There were----
    Senator Kirk. I would beg to differ.
    Mr. Szubin. There was a prisoner exchange with respect to 
Iran, and I was very glad to see that carried out and to see 
those Americans come back home.
    Senator Kirk. A hundred billion bucks a guy is a high 
ransom payment. We would pretty much run out of money quickly 
if we were paying ransom rates at that rate.
    Mr. Szubin. So the $100 billion I believe you are 
referencing is a figure that states Iran's total foreign 
reserves. That is not money we gave them. That is Iran's total 
foreign reserves. In reality, about $50 billion of that is 
gone. It has been committed to bad loans or to propping up 
their banks. Iran does not have access to----
    Senator Kirk. I am glad you mentioned bad loans because I 
wanted to go in how you do not speak for us here in the Senate, 
that we have views about what good practices should be. I would 
say on this Committee I will be encouraging our members to 
further define the subject of what a good fiduciary does, and 
investing in Iran is not that. And if you are seeking to do 
more and more business, we will see you as more of a systemic 
risk here in this Committee.
    Mr. Szubin. We certainly hear you loud and clear, Senator, 
and agree----
    Senator Kirk. Because of killing of gay people left and 
right, you are kind of an unstable personality.
    Mr. Szubin. Yeah, so we will ensure that we enforce our 
sanctions, that American companies are not investing in Iran, 
and that we keep this embargo in place, as the Senator was 
saying, until we see Iran complying with a whole host of 
concerns that the U.S. Government and our Congress maintain.
    Senator Kirk. Thank you.
    Chairman Shelby. Thank you, Senator.
    Senator Tester.
    Senator Tester. Thank you, Mr. Chairman, and I want to echo 
what so many on this panel have said and that I believe you, 
Mr. Szubin, need to be confirmed if we are going to talk about 
really bearing down on terrorism. You do play a critical role 
in that and the many other trafficking things that happen out 
of Iran. So I do not get it, quite frankly, why you still are 
in limbo, but you are still in limbo, and I think it is an 
incredible disservice to a person of your talent and your 
ability, and I apologize for that, and hopefully we can get you 
across the finish line sooner rather than later. I want to 
thank you both for your service. You both do not have to answer 
these questions, but if you disagree with one another, let me 
know.
    Mr. Levey had said, as was said earlier, that we are 
encouraging other banks to do what we cannot do in Iran. Is 
that correct?
    Mr. Szubin. No, Senator.
    Senator Tester. OK. Is the Administration in any way, Kerry 
or otherwise, encouraging other banks to do business in Iran?
    Mr. Mull. No, sir. We are explaining U.S. sanctions law.
    Senator Tester. Is Kerry lobbying banks, not our banks--or 
our banks, any bank, to do business in Iran?
    Mr. Mull. No, sir.
    Senator Tester. OK. This is the damnedest hearing I have 
ever been at in my life, quite frankly, because I have heard 
accusations being made right and left, and you guys have 
refuted them. Now, it is one of two things. Either the 
information is not good, or you guys are not telling the truth. 
I am assuming the information is not good, because I appreciate 
what you are doing.
    I want to ask you something, Mr. Mull. The snapback 
provisions that were talked about by my friend Bob Corker and 
my friend Bob Menendez, is it your intention to snap those 
previous sanctions back in total if Iran violates this 
agreement?
    Mr. Mull. Sir, I think if Iran violated the agreement, we 
would first apply a very careful and quick analysis to how 
severe the violation is. The gold standard that we apply in 
making decisions is the concept of breakout time: How long 
would it take Iran to produce a nuclear weapon? If Iran 
inadvertently exceeds a limit, as briefly happened in the 
heavy-water account earlier this year----
    Senator Tester. Yes.
    Mr. Mull. Then we talked to them. They brought it under. 
They came quickly back into compliance.
    If, however, Iran took steps to violate the core 
requirements of the agreement that affected its ability to 
rapidly build a nuclear weapon, I can assure you we would move 
very swiftly to reimpose the appropriate degree of sanctions 
that had existed before.
    Senator Tester. OK. Can you tell me, there was a statement 
made earlier by one of the Senators that we have allowed Iran 
to maintain a significant part of their nuclear infrastructure. 
Could you shed some light on that, either one of you?
    Mr. Mull. I will be happy to take that question, Senator. 
In fact, Iran has significantly reduced and constrained its 
nuclear program by removing more than 12,000 centrifuges and 
dismantling them and putting them into permanent storage as 
well as removing 25,000 pounds of enriched nuclear material 
that could have been used to build a bomb.
    There are some elements of an enrichment program that are 
allowed to exist under the deal, under very tight control. Its 
entire nuclear program is under 24/7 monitoring by the IAEA 
through inspections, cameras, and other monitoring 
capabilities, unlike any other in the world.
    Senator Tester. OK. There was some discussion here on the 
snapback provisions that Russia and China would not be a part 
of them. Mr. Szubin, I think you agreed with that, And, 
regardless, that does not mean we could not bring those 
sanctions back on. Is that correct?
    Mr. Szubin. Yes, Senator, my point was, first, on the 
procedural aspect that the deal is set up in a way that any one 
country--obviously, we would try to build a coalition of 
countries----
    Senator Tester. Sure.
    Mr. Szubin. ----including, ideally, all the P5+1 were Iran 
in breach to say we need to snapback sanctions. But in the 
absence of that, any one country, if it finds Iran to be 
breaching its commitments, can ensure the full snap back of the 
U.N. Security Council sanctions.
    Senator Tester. I have got it. So if we could take a step 
back, it seems to me that same argument could be used, could 
have been used when this was in front of us, when we had the 
P5+1 who all thought this agreement should go forward. If we 
would have said no, do you think those other countries would 
have gone forward regardless?
    Mr. Szubin. It would have been, from a sanctions 
perspective, impossible to go forward with this deal without 
the U.S.
    Senator Tester. Right.
    Mr. Szubin. Because the U.S. obviously as a member of the 
Security Council needs to approve changes to any Iran 
resolutions in the United Nations, and any changes to our own 
sanctions obviously require us as well.
    Senator Tester. OK. Thank you very much, Mr. Chairman.
    Chairman Shelby. Senator Cotton.
    Senator Cotton. I want to return first to an exchange that 
Senator Kirk had. We did not have a prisoner exchange. We 
released duly convicted prisoners in our courts of law, and we 
waived warrants that were outstanding. They released hostages. 
I agree with Senator Kirk that the money that was associated 
with those payments was ransom, but we do not have to get into 
semantics.
    I would like to know this: That $1.7 billion that was 
released in close proximity to Iran's release of our hostages, 
how did we pay that? With dollars?
    Mr. Szubin. I do not believe that dollars were used in 
those payments.
    Senator Cotton. Does the Treasury Department just have 
billions of Iranian rials sitting around the basement?
    Mr. Szubin. No, but Iran has accounts in Europe and in 
other third countries, and we can certainly make currency 
available in other denominations.
    Senator Cotton. And what was that? What currency was it?
    Mr. Szubin. I would need to go back and check on that, but 
I would be happy to get you those answers afterwards.
    Senator Cotton. I would like that for the record, please. I 
would also like for the record the currency in which we will 
pay $8.6 million for Iran's heavy water, the purchase of which 
was announced recently.
    Ambassador Mull, are we obligated under the JCPOA to buy 
Iran's heavy water?
    Mr. Mull. No, sir.
    Senator Cotton. If we had declined to purchase that heavy 
water, do you believe that would be a legitimate reason for 
Iran to withdraw from their obligations under the JCPOA?
    Mr. Mull. No, sir. Iran was compelled under the terms of 
the deal to stay below the cap of 130 metric tons of heavy 
water. They had the responsibility to dispose of that excess 
heavy water by offering it for sale and delivering it to a 
foreign buyer.
    Senator Cotton. Secretary Moniz stated that purchase was 
going to be a one-time purchase, so I offered an amendment that 
would merely codify that commitment. Yet the President issued a 
veto threat of the amendment. Is the Energy Department planning 
on making further purchases of Iran's heavy water?
    Mr. Mull. Secretary Moniz has explained to me that, no, he 
does not--the Energy Department does not plan any future 
purchases at this time. However, heavy water is something very 
important to our scientific and medical research community. The 
market supply is unpredictable, and so the Administration is 
reluctant to foreclose the possibility of buying heavy water 
where we are able to.
    Senator Cotton. Which is why we frequently buy it from 
allies like Canada and India.
    Moving on, I want to return to questions that Senator 
Corker and Senator Menendez had and just get a clear answer. 
Will the Administration commit to a pure extension of the Iran 
Sanctions Action, yes or no?
    Mr. Mull. Senator, all I can say is that the Administration 
is ready to work with the Congress in studying that question.
    Senator Cotton. You also would not commit to Senator 
Menendez that such an extension, not a substantive change, just 
striking the date and extending the current terms, might be a 
violation of the JCPOA.
    Mr. Mull. No, I did not say yes or no that it would----
    Senator Cotton. To use Senator Corker's language, you were 
wishy-washy in replying to Senator Menendez.
    Mr. Mull. Well, there have been----
    Senator Cotton. Let me put it this way: Does the Iran 
Sanctions Act currently violate the JCPOA?
    Mr. Mull. Well, the JCPOA came into effect with the Iran 
Sanctions Act still in place.
    Senator Cotton. I find it hard to believe that a simple 
extension of it, changing nothing but the date, would, 
therefore, be a violation.
    Has the State Department designated any Iranians as human 
rights violators since the JCPOA was finalized?
    Mr. Mull. Since the JCPOA was finalized last July, there 
have not been--although there has been a history of multiple 
sanctions on human rights grounds, especially since the passage 
of the CISADA Act in 2010, there have not been any sanctions 
imposed for human rights grounds since July of last year. 
However, the State Department continues to fight very hard to 
shine a spotlight on human rights violations in Iran through 
the United Nations, the Human Rights Committee, also through 
our regular reporting on the International Religious Freedom 
Report, the Human Rights Report, Trafficking Persons Report.
    Senator Cotton. So I understand all that, but I will infer 
that Iran's human rights record has miraculously changed in the 
last year then.
    Mr. Mull. No, sir.
    Senator Cotton. Mr. Szubin, I want to move to the question 
which is in some controversy here but also in public debate: 
the total value of sanctions relief that Iran will receive. For 
the record, I know the answer from private briefings on my 
other committees. I would like to know from you, though, in 
public here, what is the total value of sanctions relief Iran 
will receive from the JCPOA? Just top line. I do not need to 
know how much debt they have or bad contracts or anything else. 
What is the amount of sanctions relief they will receive?
    Mr. Szubin. Senator, our top-line figure in terms of their 
new access to reserves is around $50 billion. That is----
    Senator Cotton. $50 billion, 5-0?
    Mr. Szubin. Yes, Senator, that is what I have testified 
here before this Committee and what we have said publicly. Your 
question, though, is asking a bigger question, which is: How 
much relief will Iran get, not how much of their foreign 
reserves are coming out from under escrow? Relief obviously 
takes the form of new oil sales. Iran is selling more oil than 
they were when they were under those sanctions restrictions 
that Congress put in place. Iran is selling more 
petrochemicals. Iran is able to import autokits to try to get 
its auto industry back online.
    Senator Cotton. So $50 billion, though, that is the gross 
sanctions relief that they might receive? Not net. Not net of 
any bad contracts or debt they have to other countries. The 
gross sanctions relief they will receive.
    Mr. Szubin. No, sir----
    Senator Cotton. President Obama suggested in an interview 
with Jeffrey Goldberg in The Atlantic last month that it might 
be as high as $150 billion, 1-5-0.
    Mr. Szubin. Senator, I want to be very precise. I am happy 
to answer as many questions as you have on this. But I think it 
is important to be specific about our terms. Fifty billion is 
not new money that we or the P5+1 are giving Iran. That is 
Iran's own foreign reserves that were bottled up in escrow 
accounts under the sanctions. As of Implementation Day, those 
restrictions came off. Iran has access to those today.
    That is not the total value of the deal to Iran. Iran is 
also looking to the deal to provide new trade, new investment. 
It has been slow----
    Senator Cotton. No, I get that. Barack Obama has brought 6-
percent economic growth to Iran even though he has only brought 
2 percent to the United States. I am talking about the gross 
value of sanctions relief. CIA Deputy Director David Cohen last 
year, when he was still at the Treasury Department, testified 
that $100 billion in Iranian foreign currency reserves were 
blocked by sanctions before the JCPOA.
    Mr. Szubin. That is correct.
    Senator Cotton. Is that an accurate figure?
    Mr. Szubin. Yes.
    Senator Cotton. So now they are no longer blocked.
    Mr. Szubin. That is right. Those restrictions on Iran's 
foreign reserves have been released, which means Iran can now 
access its foreign reserves. The total amount of those reserves 
that are accessible is $50 billion at most, and that is our 
conservative estimate, but that continues to be our estimate.
    Senator Cotton. Mr. Mull, you look like you would like to 
respond.
    Mr. Mull. No. I completely agree with my----
    Senator Cotton. OK. Well, for the record, I would like to 
say that this Administration continues a longstanding pattern 
of misleading the American people in public settings and 
telling the Congress the truth in private settings.
    Chairman Shelby. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman. And once again I 
will go on the record saying that I sleep easier knowing, Mr. 
Szubin, that you are on the job. I greatly appreciate that you 
take your enormous talents and incredible ability to serve our 
country in a role that is so incredibly critical to our 
security. I think it is hard sometimes when we are home to 
explain how a position at the Department of Treasury could be 
so critical to our national security interests. And I also 
stand appalled, quite honestly, that your confirmation is 
pending. Yesterday, I do not know if you had an opportunity to 
see the testimony of--or the questioning of my friend Joe 
Donnelly who questioned a number of people very critical of the 
Iranian deal basically all saying what high regard they had for 
you. And since your father was mentioned earlier, I want to 
express our regrets at his passing in March. He was quite an 
enormous figure in his community and, I know, a great 
inspiration to you. And anyone who questions your patriotism on 
this issue, shame on them. I know where your heart is. We have 
spent a lot of time.
    But I want to get to the questions. Ambassador Mull, in the 
last 7 months since the deal was reached and the 4 months since 
the IAEA verified that Iran had met their commitments required 
to trigger implementation of the deal, how would you assess 
Iran's level of follow-through on its commitments? Are there 
any areas that you believe Iran has not been forthcoming? And 
the great concern that we expressed during our trip to the IAEA 
was that we do not want erosion of this deal, and it is the 
steady--you know, kind of like when somebody is a little kid 
and they just take an inch, take an inch, and take an inch and 
pretty soon have a mile? We do not want them taking an inch. 
And so we need to know from you what you are doing. Have you 
seen any incremental creep in terms of noncompliance and what 
currently is being done? And what is the appetite at the 
International Agency to make sure we do not see that creep?
    Mr. Mull. Yes, ma'am, thank you. That is an excellent 
question. I have to tell you, when Secretary Kerry asked me to 
take this job last summer, he was very clear that we must have 
zero flexibility in interpreting the very strict and very 
specific requirements of this 159-page deal, and we take that 
operating instruction to heart every single day that my team 
and I show up for work.
    I can tell you--and the IAEA has confirmed this in its 
reporting since Implementation Day--that, in the main, Iran is 
compliant with the requirements. It undertook all of the 
measures it committed to do during the negotiations of this 
deal.
    Senator Heitkamp. And it is your testimony today that there 
has been no, even, as you would see it, immaterial breach of 
this agreement?
    Mr. Mull. So what I would say, Senator, is that there have 
been a handful of occasions since this deal was agreed to last 
July in which Iranian activities raised some questions about 
Iran's intent in undertaking those activities. For example, the 
IAEA documented in February that for a very short time since 
Implementation Day, Iran slightly exceeded the cap on the 
amount of heavy water it is allowed to have. The monitoring 
system worked perfectly. The IAEA immediately alerted all of 
the agreement parties that this had happened. We engaged with 
Iran. Iran responded, saying, ``Yes, we will bring it under 
immediately,'' and within a matter of days, shipped out 20 tons 
of the material to bring it under compliance again.
    As I mentioned, there have been a few other--a handful of 
other instances like that. We have briefed the Senate 
privately, in closed session, every time that those have 
happened. Every single time, Iran has responded to those 
conversations to bring itself in compliance according to our 
understanding.
    Senator Heitkamp. OK. Mr. Szubin, I think that there is a 
narrative that is being written sometimes--and it depends on 
who you are--up here that we no longer are interested in any 
sanctions against Iran because we do not want to upset the 
internal political structure of that country resulting in maybe 
a less friendly or more conservative election. Can you respond 
to that? Because I think a lot of what we are talking about 
here is human rights violations, obviously antiballistic 
missile. You know, how are we going to maintain a sanction 
regime on those things that go outside or have never been part 
of this deal? And is there an attitude within the 
Administration that we are not going to sanction based on 
concern about internal politics in Iran?
    Mr. Szubin. Not at all, Senator. The guidance I have been 
given from Secretary Lew and from the Administration is to keep 
at it when it comes to Iran's non-nuclear behavior. And if that 
were not the case, you would not have seen us coming out with 
designations, new asset freezes, new sanctions, even since this 
agreement was entered, even since Implementation Day in 
January.
    Since the beginning of January, we have gone after 
ballistic missile procurement rings. We have gone after the 
liquid fuel and propellant industry within Iran and those who 
are procuring on their behalf. We have gone after Hezbollah 
money launderers, who are, after all, an Iranian proxy. And we 
have gone after Mahan Airlines and their procurement agents. 
That is an Iranian airline that is being used by the IRGC Qods 
Force to ferry munitions and military advisers to places like 
Syria and Yemen. We would not be doing any of that if we were 
trying to take a soft-glove or a hands-off approach with 
respect to Iran.
    Finally, I just wanted to thank you, Senator Heitkamp, and 
Senator Menendez for the very kind words about my father. I 
deeply appreciate them.
    Senator Heitkamp. Thank you.
    Chairman Shelby. Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Mr. Szubin, I am not sure that there is a better placed 
individual in the executive branch than you to speak 
authoritatively on sanctions relief, and I would like to just 
address two items because I really would like to see if we 
cannot get to a factual agreement on what has happened so far. 
I want to just begin. I understand--and we have asked the 
Secretary about the Iran sanctions which will expire in 
December, and I understand that you have been involved in 
explaining to individuals who ask questions about what is in 
violation and what is not in violation of the JCPOA. And part 
of that, I would imagine, is under the sanctions which are 
currently in effect that will expire in December. And I am just 
curious. I think Senator Menendez was on the right track when 
he was not asking whether or not the Administration would 
consider it but, rather, if it would be in violation of the 
JCPOA. And I would like to give you the opportunity as well to 
respond in your role and interpretation of these. If we were to 
extend the Iran sanctions in December, would that be in 
violation of the JCPOA? You are probably the best person out 
there that has looked at this.
    Mr. Szubin. Well, I appreciate the confidence, Senator. I 
think with respect to what the international agreement says, I 
would defer to the State Department. But what I can tell you 
from a sanctions implementation perspective is that when we are 
out there explaining to foreign Governments, foreign banks, not 
just what the sanctions landscape looks like through the end of 
this year, through the end of December, but what the sanctions 
landscape will look like going into 2017, 2018, and beyond. We 
presume that those authorities will be there to be put back in 
place. In other words, that the sanctions that have been lifted 
or relieved as part of the JCPOA, when we talk about snap back, 
we talk about snapping all of them back. And that does not mean 
snapping a portion of them back.
    Senator Rounds. So your understanding is you explain it to 
other entities that are asking specific questions so they stay 
in good graces with our Government and with the Treasury 
Department, you basically explain to them, based upon having 
these sanctions in place?
    Mr. Szubin. Yes.
    Senator Rounds. Thank you. Let me ask another question then 
as well, and that is, we are talking a little bit, and you have 
tried to be specific, but I think there are still some 
misunderstanding with regard to the assets that Iran has access 
to. I will try to put this in a way so that you can answer in a 
public setting based upon publicly available information.
    First of all, does the Administration count committed 
assets to the sanctions relief total? We have got some assets 
which are committed. They are held. All right. But also those 
have been--they are perhaps--another word would be ``pledged'' 
assets?
    Mr. Szubin. Exactly.
    Senator Rounds. All right.
    Mr. Szubin. So we would count those as among the 100 
billion that exist no paper, but those are not accessible, in 
the same way that my house, which is under a heavy mortgage, is 
not accessible to me. If I wanted to sell that on the open 
market, I could not. It belongs to the bank.
    Senator Rounds. I think part of where the question comes in 
is that if you tell someone that you have restricted their 
ability to that asset now--and by that I mean the asset may be 
a business, and it is mortgaged, and you say we are going to 
release our hold on it, even if someone else also has a hold on 
it, you have now made it more liquid than what it was before. 
Is that a fair statement?
    Mr. Szubin. I do not know that I would agree with that. In 
other words, if you are talking--and we can be very specific 
even in this setting. If you are talking about collateral that 
Iran has put down in a third country to basically serve as the 
collateral for extensions of credit or foreign trade from that 
country, that is not liquid. Iran cannot get it back.
    Now, the fact that there might have once been two 
restrictions on that and there is only one now, I do not view 
it as liquid. We do not view those as accessible.
    Senator Rounds. But our relief for them of sanctions on 
assets they had are $100 billion or more?
    Mr. Szubin. The total Iranian foreign reserves, if you are 
talking from the books perspective, was $100 billion.
    Senator Rounds. OK.
    Mr. Szubin. The amount of that that is accessible now after 
Implementation Day----
    Senator Rounds. Is $50 billion.
    Mr. Szubin. ----we put at $50 billion. And I also want to 
add, because Senator Cotton raised sort of a reference to the 
fact that he might be hearing something different in a closed-
room setting, in a classified setting--I obviously cannot talk 
about intelligence today, but I can tell you that that figure 
is the same, whether we are briefing in a SCIF or whether we 
are briefing in this setting. So I do not know what Senator 
Cotton was referring to. Obviously, he has left, and I am sorry 
for that, but we would be happy to talk with you, Senator, or 
with any others on this Committee.
    Senator Rounds. There is a discrepancy there because I have 
attended the same meetings, and I have heard different numbers 
as well.
    Mr. Szubin. OK. Then I would be very eager to follow up 
with you there.
    Senator Rounds. OK. Now, if I could, and I recognize that 
my time has expired, but I am just curious if these--no, I 
will--thank you, Mr. Chairman. I appreciate it. My time has 
expired.
    Chairman Shelby. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    I want to say, Mr. Szubin, I am very sorry to hear about 
your father. I know this is a difficult time for you and your 
family. I appreciate your being here with us.
    Last July, the United States and its applies reached an 
agreement with Iran to roll back its nuclear program in 
exchange for relief from some economic sanctions, and skeptics 
of the deal at the time predicted that it would yield a giant 
payday for Iran. But a recent report by former Treasury 
officials and other sanctions experts concluded that, and I am 
going to quote here, ``Contrary to myriad public claims, the 
implementation of the Joint Comprehensive Plan of Action did 
not lead to a $100 to $150 billion immediate windfall for the 
Iranian regime and a rapid groundswell of new investment 
revenue.''
    So, Under Secretary Szubin, I just want to highlight this 
point. How much relief has Iran actually received from 
previously frozen assets so far under the nuclear deal?
    Mr. Szubin. There is about $50 billion in previously 
escrowed assets that Iran now has full legal access to as a 
result of coming into compliance with their nuclear commitment.
    Senator Warren. OK. So they have $50 billion that they will 
have legal access to. Have they accessed all of that yet?
    Mr. Szubin. So that is a trickier question to answer 
because it is not Iran's goal to move all those 50 to someplace 
new.
    Senator Warren. Fair enough. But we are looking at 50. That 
is all I needed.
    Mr. Szubin. Yes, we are looking at----
    Senator Warren. We are looking at 50. That is kind of the 
top number there. And how does that number compare to Iran's 
domestic economic needs.
    Mr. Szubin. It is dwarfed by those economic needs. We have 
testified in the past and we continue to assess that Iran is 
facing about $500 billion in economic needs just to bring their 
economy back to ground level.
    Senator Warren. So at least ten times the amount that they 
received in the frozen----
    Mr. Szubin. Yes. Yes, Senator.
    Senator Warren. From the previously frozen assets.
    Mr. Szubin. Including things like unpaid pensions and 
raided funds that Iran needs to now reconstitute.
    Senator Warren. OK. So it seems like it is a very small 
amount in comparison to their full economic needs.
    Mr. Szubin. I would agree with that characterization.
    Senator Warren. OK. Iranian officials are complaining about 
what they see as the slow pace of sanctions relief and the lack 
of additional foreign investment that they expected as a result 
of the nuclear deal. But Iran faces barriers to foreign 
investment that go well beyond the complexities of longstanding 
nuclear-related sanctions that were recently lifted. Iran has a 
long history of money laundering, terrorist financing, 
corruption, all of which deter foreign investment and 
contribute to Iran's bad reputation globally.
    So, Under Secretary Szubin, instead of blaming the United 
States for its failure to emerge from economic isolation, what 
steps should Iran be taking if it wants to become a responsible 
member of the international financial and commercial system?
    Mr. Szubin. Well, that is a critically important question, 
and the answer it calls for is quite a long one because, as you 
note, there are concerns about Iran's behavior across a whole 
range of conduct. Obviously, being designated by the 
international standard-setting body on money laundering and 
corruption, the FATF, as on their black list is not a good 
place to be if you are trying to attract investment, if you are 
trying to attract trade.
    To the credit of President Rouhani in Iran, I think they 
are finally internalizing the fact that if they do not start 
addressing these areas, they are not going to see the foreign 
business come in; they are not going to see the investment pour 
in. And so we do see Iran probably for the first time grappling 
with some of these issues.
    Senator Warren. So Iran may comply with the nuclear deal 
and get the sanctions lifted, but if they fail to grapple with 
their other problems, with terrorist financing, with the lack 
of transparency in their economy, then you are saying they 
really are not going to be able to rejoin the Nation's economic 
system and not be able to build much of a future for 
themselves.
    Mr. Szubin. There is a lot of truth to that, Senator. I do 
try to resist sort of the black or white----
    Senator Warren. Fair enough.
    Mr. Szubin. ----analysis here because I think the reality 
is somewhere in between. And we are accused in some corners of 
having generated a windfall for Iran. That is not the case. We 
are accused by the Iranians of having provided zero sanctions 
relief and, therefore, reneging on our commitments. That is not 
the case.
    First of all, we have fulfilled every one of our 
commitments. With respect to the business climate, it is 
complicated, and there are a lot of factors that are causing 
banks and institutions to pause. As I said, there is some 
progress that we see from Iran, but there is a long way for 
them to go. And I think your bottom-line conclusion that it is 
going to take some time is accurate. I think Iran has a lot of 
work to do.
    Senator Warren. Well, I think it is very important to know, 
as Congress goes from, because, you know, it is no secret that 
there are some people in Congress who are committed to seeing 
the Iran nuclear arrangement fail at any price, and we are 
hearing a lot of rumbling about holding up sanctions relief 
even if Iran complies with the deal, which may be good politics 
for some Senators, but it seems to me that it plays directly 
into the hands of the hardliners in Iran who want to blame the 
West for their economic woes.
    As you rightly point out, Iran must implement serious 
structural reforms, crack down on money laundering, stop 
sponsoring terrorism, if it wants to attract sustained 
investment. But the best way to change Iran's behavior is to 
keep the pressure on. The worst is to try to score political 
points in a way that gives the Iranians an excuse not to make 
the changes that they need to make.
    It seems to me that our job is to make sure that if Iran 
rejects comprehensive reforms, then it has no one to blame for 
its economic problem except itself. Thank you.
    Thank you, Mr. Chairman.
    Mr. Szubin. I agree, Senator.
    Chairman Shelby. Senator Vitter.
    Senator Vitter. Thank you, Mr. Chair. Thank you both for 
being here.
    As you know, a bipartisan majority of this Committee and of 
the Senate opposed the Iran deal, thought it was a bad deal. 
But I think what you are hearing today is an additional major 
concern that I share. Since the deal, a lot of us are seeing 
two things: Iran taking horrible, negative, bad actions against 
us, against our allies, since then, in many areas, terrorism, 
human rights, ballistic missiles, on the one hand; on the other 
hand, we have helped them beyond our obligations under the 
deal. And that, in addition to the deal, is very concerning to 
a lot of us, what Senator Toomey talked about, what Senator 
Cotton talked about. Is that characterization not correct?
    Mr. Szubin. Senator, I certainly agree that we have seen 
Iran come into compliance with their commitments under the 
deal. What I would say from our end is we have done the same. I 
do not see us encouraging foreign companies, foreign banks to 
do business. That is not something we do in any context, least 
of all in this one.
    Senator Vitter. What about the heavy water transaction? You 
all have testified that was not an obligation of ours under the 
deal, correct?
    Mr. Mull. Yes, sir, that is right. It was not part of the 
deal.
    Senator Vitter. So what did we get for that? They clearly 
wanted it. They wanted that outlet. They wanted those dollars. 
What did we get out of it?
    Mr. Mull. We got out of it a supply of heavy water that is 
very important to scientific and commercial research.
    Senator Vitter. For which we have had multiple other 
avenues from allies, correct?
    Mr. Mull. Not exactly true. For example, the principal 
producers, we do not have an heavy water production 
capabilities, our own in the United States. The principal----
    Senator Vitter. Mr. Mull, you are not really suggesting 
that we did that deal because we needed the heavy water and we 
could not get it elsewhere. You are not really suggesting that.
    Mr. Mull. Yes, sir, for example, there are only two 
countries that regularly export heavy water: Canada and India. 
Canada ceased production of heavy water in 1997 and only 
sporadically makes it available. The quality of the Indian 
water, the other source of supply, does not completely fit with 
our domestic requirements here in the United States. So in the 
marketplace, Iran was obligated to reduce its holding of heavy 
water, and----
    Senator Vitter. Let me just move on and say that the 
response that we did it because we needed that supply of heavy 
water, I do not think anyone believes that. It was helpful to 
Iran. It was helpful as an outlet. It was helpful for their 
dollars. This notion that Secretary Kerry is meeting with these 
foreign banks for informational purposes, when calls come into 
the State Department about what different treaty obligations 
are and what they mean, are all those calls put through to John 
Kerry's desk? Does he field all those calls? Does he do all 
those meetings? Surely the Secretary of State did not have to 
hold those meetings.
    Mr. Mull. Certainly not, and the Secretary of State is not 
the only person doing that. However, when foreign ministers of 
close allies of the United States make personal requests to 
Secretary Kerry to explain U.S. law, he feels it is part of 
being a good ally to be responsive to those requests.
    Senator Vitter. Well, I think it is clear that the tone and 
tenor of those meetings was to explain clearly exactly how 
those foreign institutions could deal with Iran. A similar 
situation with State sanctions. A lot of States have sanctions 
against Iran. Those can continue if they are based and premised 
on terrorist and other activities non-nuclear related. Is that 
correct?
    Mr. Mull. Yes, sir. The same is true at the Federal level 
as well.
    Senator Vitter. Correct. And yet the Federal Government has 
sent out on a letter to States, and the way I read it is 
lobbying States to lift those sanctions.
    Mr. Mull. Senator, I, in fact, signed that letter because 
the U.S. Government committed to all of its partners in this 
deal that we would explain the impact of the Iran nuclear deal 
to all of our State and relevant local authorities. So the 
purpose of that letter was to explain what the deal was about, 
what the deal had accomplished, and asking--offering this 
information to those authorities that made sanctions decisions 
on the basis of nuclear concerns about Iran, to offer this 
information for their consideration in deciding whether or not 
to move forward.
    Senator Vitter. Well, let me ask this: Is our Government, 
are you or any person in our Government, going to do anything 
beyond the letter in terms of acting against State sanctions?
    Mr. Mull. There are certain constitutional questions at 
play there. I certainly have no plans to do that. Each State 
and local authority has its own----
    Senator Vitter. So the Administration has no plans to go 
beyond that letter?
    Mr. Mull. I am not aware of any at this time, no.
    Senator Vitter. Another example is further restrictions we 
passed on visa waivers related to terrorist concerns. Iran 
balked at that, and Secretary Kerry's immediate response was to 
write them and explain that he will make sure they get the 
waivers they need and want under other categories. Was that an 
obligation under the deal?
    Mr. Mull. No, certainly not, and there were questions about 
the impact of that legislation. Again, when we get questions 
from foreign partners, we try to answer the mail.
    Senator Vitter. Well, again--and my time is up--just to 
summarize, the picture a lot of us see, a majority of us see 
since the deal that we disagreed with was Iran taking negative 
actions, horrible actions in some cases against us and our 
allies, particularly in the categories of terrorism, human 
rights, ballistic missiles, and us bending over backwards in a 
positive way toward them beyond the obligations even of the 
deal we disagreed with.
    Thank you.
    Chairman Shelby. Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    Mr. Szubin, sorry to hear about your father's passing as 
well. Many of my friends in the community held him in high 
regard.
    A specific question on the ballistic missile testing that 
occurred on November 21st, March 8th, and May 9th. Weren't 
those in violation of the JCPOA?
    Mr. Mull. No, sir. Missile launches are not governed by the 
JCPOA. They are not addressed at all by the JCPOA. They are 
governed by a U.N. Security Council resolution.
    Senator Scott. So those ballistic missile testings were not 
in violations of the JCPOA.
    Mr. Mull. No. No, sir.
    Senator Scott. Thank you.
    Mr. Szubin, one of the concerns I have is when I listen to 
Susan Rice and NSA talk about what would happen with the access 
to the $50 billion, her comments on Wolf Blitzer, CNN, was that 
we should expect more nefarious behavior to be funded through 
the resources that will be--have access to from the Iranians. 
Looking back over the history, certainly the CRS has said that 
between $100 and $200 million of funds goes to Hezbollah to 
fund terrorist activities from Iran. In my State of South 
Carolina, there are--back in 1983, the Beirut bombing, 
generally believed to have been perpetrated by Hezbollah, took 
the lives of five South Carolinians who were faithfully serving 
their country at the time, and I will read the names of those 
five South Carolinians: Hospital Corpsman First Class Ronny 
Bates, Sergeant Freddie Haltiwanger, Staff Sergeant Richard 
Holberton, Lance Corporal Michael Solz, Gunnery Sergeant Scipio 
Williams. Those families are still in the midst of a lawsuit, 
Peterson v. Islamic Republic of Iran, along with 50 other 
plaintiffs who all live in South Carolina. It is difficult for 
me to understand and appreciate how we have a lingering lawsuit 
with so many lives being impacted, at least five South 
Carolinians having lost their lives, and we are creating more 
access to more money to continue, as Susan Rice has said, 
nefarious behavior, i.e., in my words, terrorism activity. It 
concerns me that we have done so little to engage in a process 
of stopping that behavior. Comments?
    Mr. Szubin. Absolutely, and, Senator, the concerns with 
respect to Iran, its support for terrorism, groups like 
Hezbollah are ones that I share deeply. And I spend a 
tremendous amount of my time and that of my colleagues across 
the Government in trying to track those funds and trying to put 
substantially greater pressure on Hezbollah. I will say that we 
were aided in this effort by Congress in passing recent 
legislation, which the President signed, which says any foreign 
institution that is knowingly doing business with Hezbollah can 
get into trouble with us as well. And we are seeing the impact 
of that already, even in the few weeks since it was passed.
    I will note that, despite some very alarmist predictions 
before the deal went into effect and as we were talking about 
the deal up in Congress, we have not seen a windfall of money 
coming into Hezbollah. In fact, today Hezbollah, we believe, is 
in the worst financial condition it has been in decades, and 
that is not just a U.S. Government assessment. That is the 
assessment I hear from our allies around the world, including 
in the Middle East, who share our concerns with Hezbollah in a 
very palpable way.
    That does not mean we should be, you know, sitting back and 
being complacent. Far from it. What it means is that our 
continuing efforts in the law enforcement channel, in the 
sanction channel, in the other channels that I should not talk 
about in this setting, to put pressure on Hezbollah are bearing 
fruit and that we should redouble those efforts.
    Senator Scott. But you do not disagree with the fact that, 
according to the Congressional Research Service, the deal has 
provided up to $100 million of funds for Hezbollah through the 
Iranian deal?
    Mr. Szubin. I do not know that statement in the CRS. I 
would be happy to go back and look at it. If that was a 
statement as to what historically Iran's support to Hezbollah 
has been, we actually put the number higher than $100 to $200 
million. But I have not seen any estimates that that would be a 
contribution coming out of this deal to Hezbollah. I would be 
happy to look at that, Senator.
    Senator Scott. I would appreciate that. Thank you.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you, Senator Scott.
    Gentlemen, I thank you both for your appearance today. It 
has been a long hearing, and I wish you well in combating 
terrorism. Thank you.
    Mr. Szubin. Thank you, Chairman.
    [Whereupon, at 4:10 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
                  PREPARED STATEMENT OF ADAM J. SZUBIN
   Acting Under Secretary for Terrorism and Financial Intelligence, 
                       Department of the Treasury
                              May 25, 2016
    Chairman Shelby, Ranking Member Brown, and Members of the 
Committee, thank you for inviting me to appear today to discuss 
implementation of the Joint Comprehensive Plan of Action (JCPOA), the 
nuclear deal we reached with our key partners and Iran. I am pleased to 
be here with my colleague from the State Department, Ambassador Mull.
    I'll begin by explaining how the JCPOA has removed the threat posed 
by Iran's nuclear program--and how our persistent sanctions and 
diplomatic efforts helped achieve that result. I'll then outline the 
role non-nuclear sanctions continue to play in our approach to Iran, 
and describe our strategy to enforce those sanctions going forward.
The JCPOA
    Since I started at the Treasury Department, in 2004, preventing 
Iran from acquiring a nuclear weapon has been a national security 
priority of the highest order. For more than a decade, we worked to 
ensure that Iran had no potential pathway to a nuclear weapon.
    We did that by designing a sophisticated, targeted sanctions 
regime, and combining it with sustained diplomatic efforts to achieve 
multilateral support for our sanctions. Together with our partners in 
Congress and the international community, we imposed sanctions that put 
massive costs on Iran. That helped bring Iran to the negotiating table, 
and culminated in the JCPOA.
    The JCPOA is a tremendous diplomatic breakthrough. It is a peaceful 
means of eliminating one of the world's most persistent national 
security threats--a nuclear armed Iran. And it has already paid huge 
dividends.
    On January 16, the IAEA confirmed that Iran had completed its 
nuclear-related commitments in the deal. The IAEA has verified that 
Iran has reduced its stockpile of enriched uranium by 98 percent, 
removed \2/3\ of its centrifuges, permanently disabled its reactor at 
Arak, and removed all fissile material from its underground facility at 
Fordow.
    Iran has also accepted an unprecedented and comprehensive 
transparency and verification regime, including continuous monitoring 
of all of its declared nuclear facilities. In addition, Iran has 
committed to under no circumstances ever seek, develop or acquire any 
nuclear weapons, and agreed to prohibitions on activities that could 
contribute to the design and development of a nuclear explosive device.
    Our diplomacy bore fruit. Iran was a few months from having enough 
fissile material for a potential nuclear weapon, and it was steadily 
advancing. Now, Iran's breakout time has been extended to beyond one 
year, and we are all safer because of it.
    The JCPOA represents a sea change. It ensures that Iran's nuclear 
program is and will remain exclusively peaceful. And it is the most 
powerful example we have of how a multilateral sanctions effort, 
coupled with tough and principled diplomacy, can succeed.
Our JCPOA Commitments
    Since Iran has kept its end of the deal, we must uphold ours.
    We've done so by lifting the sanctions we committed to lift, once 
the IAEA verified that Iran delivered on its nuclear-related 
commitments under the JCPOA.
    Let me reiterate what President Obama, Secretary Lew, and Secretary 
Kerry have all made clear: we are not standing and will not stand in 
the way of permissible business activities involving Iran. Nor are we 
blocking Iran's access to funds that are no longer restricted following 
the implementation of the JCPOA, or encouraging others to do so.
    That will remain true for as long as Iran upholds its end of the 
bargain. Because creating economic pressure, on its own, was never the 
purpose of our nuclear-related sanctions. Instead, the goal was to help 
bring Iran to the negotiating table, where Iran would accept far-
reaching constraints on its nuclear program in exchange for certain 
sanctions relief.
    Iran has verifiably implemented its nuclear commitments. We, in 
turn, have kept our commitment to lift the nuclear-related secondary 
sanctions that had been in place. We've also issued clear and specific 
guidance explaining what that means--just as we do when we make 
significant changes to any sanctions program.
    It is in our national security interest to ensure that the JCPOA 
works as intended and stands the test of time. And it is therefore 
important to fulfill all of the commitments we made in the deal.
    To do otherwise would not only undermine Iran's incentive to comply 
with the deal's terms. It would also undermine our own international 
credibility, and our corresponding ability to use sanctions to change 
behavior in the future across the range of national security threats we 
target with our sanctions programs.
The Impact Thus Far
    Iran is already seeing the benefits of this deal. It has opened new 
banks accounts around the world. It has gained access to billions of 
dollars in reserves. And its oil exports to Europe have recovered to 
about half of presanctions levels.
    That said, some are still hesitant in dealing with Iran. That was 
to be expected.
    That does not mean that we have failed to live up to our end of the 
bargain. We have kept every single commitment we've made in the JCPOA, 
lifting all nuclear-related secondary sanctions as promised.
    What it does indicate is that, even with the nuclear concerns 
resolved, international companies still have concerns about doing 
business in Iran. Many of these concerns are not about sanctions.
    Some are concerned about Iran's financial transparency standards, 
and the designation of Iran as a high-risk jurisdiction by the 
Financial Action Task Force, the world's standard-setting body for 
anti-money laundering and counterterrorist financing. Others have noted 
concerns about corruption, as well as regulatory and other obstacles to 
conducting business in Iran. And still others are concerned by Iran's 
provocative non-nuclear behavior, including its active support for 
terrorism and ballistic missile testing.
    As President Obama said recently: ``Iran has to understand what 
every country in the world understands, which is businesses want to go 
where they feel safe, where they don't see massive controversy, where 
they can be confident that transactions are going to operate 
normally.''
    As Iran pursues more business, it is incumbent on Iran to address 
such problems--to undertake meaningful reforms, and create an 
environment in which businesses feel secure.
The Sanctions That Remain
    I've talked about the sanctions relief commitments we have 
delivered under the JCPOA. But I also want to be clear about what the 
deal does not mean.
    First, with certain limited exceptions, we have not changed the 
primary U.S. embargo on Iran.
    The embargo long predates our concerns with Iran's nuclear program. 
In addition to longstanding humanitarian exceptions, the JCPOA includes 
limited exceptions to the embargo, covering the case-by-case licensing 
of the sale of commercial passenger aircraft, parts, and services, the 
import into the United States of Iranian-origin foodstuffs and carpets, 
and certain activities of foreign subsidiaries of U.S. companies. But 
the embargo otherwise remains as is.
    That means we will continue to prohibit U.S. persons from investing 
in Iran, importing or exporting to Iran most goods or services, or 
otherwise engaging in commercial or financial dealings with most 
Iranian persons or companies. Iran will also continue to be denied 
access to U.S. markets.
    Along these lines, let me also say clearly that we have not 
promised, nor do we have any plans, to give Iran access to the U.S. 
financial system, or to reinstate what's called the ``U-turn'' 
authorization.
    Additionally, we have not lifted any of our sanctions designed to 
counter Iran's destabilizing activities outside the nuclear file. As we 
made clear to Iran and our international partners all along, the JCPOA 
does not affect our non-nuclear sanctions.
    These sanctions are not just words on paper. We are vigorously 
enforcing them.
    As we do so, we bear in mind that such sanctions are not means to 
punish or vent frustration. They are intended, together with other 
tools, to pressure Iran to change its strategic calculus on terrorism 
and regional destabilization, on ballistic missiles, and on human 
rights--just as our now-lifted nuclear sanctions helped to push Iran to 
change its calculus on its nuclear program. And if Iran makes such a 
change, then these sanctions, too, could one day be lifted.
    Yet, Iran continues to be the world's leading State sponsor of 
terrorism, and to play a significant role in destabilizing the region. 
It supplies funding and weapons to Hizballah, to the Asad regime, and 
to the Houthis in Yemen. It continues to develop its ballistic missile 
program, in contravention of UN Security Council provisions. And it 
continues to violate human rights.
    Thanks to Congress and the President, we already have the sanctions 
authorities necessary to counter this type of activity. And I can tell 
you, as someone who has spent his career designing and enforcing 
sanctions against Iran--our existing authorities are extremely 
powerful.
    Any Iranian or Iran-related person that we have sanctioned and put 
on our SDN List--or that we add to the list in the future--is subject 
to secondary sanctions. That is a stark threat: a foreign bank that 
does business with such a person could face a total cutoff from the 
U.S. financial system.
    Under our current sanctions regime, more than 200 Iran-linked firms 
and individuals remain sanctioned on non-nuclear grounds. That number 
includes the Islamic Revolutionary Guards Corps, or IRGC, the Qods 
force, and their subsidiaries and senior officials--all of whom we will 
continue to target and expose.
    That number also includes major Iranian defense entities, which 
have done much of Iran's ballistic missile work. Indeed, since the 
implementation of the JCPOA, we have continued to impose sanctions on 
supporters of Iran's ballistic missile program.
    Since the implementation of the JCPOA, we have also continued to 
impose sanctions targeting Iran's support for terrorist proxies.
    Hizballah is a key example. In late January, we sanctioned a major 
Hizballah financial support network, which was laundering criminal 
proceeds to support Hizballah's terrorism and destabilizing activity. 
And just last month, we published new sanctions regulations to 
implement the Hizballah International Financing Prevention Act of 
2015--a law which gives us yet more tools in our campaign to destroy 
Hizballah's financial networks.
    After many years of sanctions targeting Hizballah, today the group 
is in its worst financial shape in decades. And I can assure you that, 
alongside our international partners, we are working hard to put them 
out of business. The JCPOA has no impact on our efforts on this front.
    Ultimately, we are clear-eyed about the nature of the non-nuclear 
threats posed by Iran. We will continue to combat these threats using a 
range of tools at our disposal--including by enforcing existing 
sanctions, and by designating new targets when appropriate.
Conclusion
    In closing, I want to reiterate that, thanks to the JCPOA, we can 
now counter such threats with the nuclear threat off the table--putting 
us, our allies, and the world in a safer position.
    I also want to assure this Committee that the Treasury Department 
will continue to work closely with Congress as we implement our 
existing sanctions to counter Iran's non-nuclear activity, and to serve 
our overall national security goals--just as we did in the years 
preceding the JCPOA.
    Thank you again for inviting me to appear today. I look forward to 
your questions.
                                 ______
                                 
                 PREPARED STATEMENT OF STEPHEN D. MULL
 Lead Coordinator for Iran Nuclear Implementation, Department of State
                              May 25, 2016
    Chairman Shelby, Ranking Member Brown, and distinguished Members of 
the Committee I am pleased to appear before you to discuss the status 
of implementation of the Joint Comprehensive Plan of Action, or the 
JCPOA. Thank you for the opportunity.
    The finalization of the JCPOA in July 2015 was the culmination of a 
years-long process of tough and clear-eyed diplomacy. It also marked 
the beginning of a new process which will require similar vigilance and 
focus, the goal of which is to ensure the JCPOA is fully and 
effectively implemented and therefore that Iran is not able to obtain a 
nuclear weapon. I know that is a goal that we all share equally and I 
appreciate your continued interest in learning about our efforts.
    I am happy to report today that, so far, the JCPOA has been 
implemented by all participants. It is important that we recognize what 
an accomplishment that is towards advancing our national security, and 
that of our allies and partners, particularly those in the Middle East. 
Because of our efforts to date, the security of the United States and 
our partners has been immeasurably enhanced and in conversations with 
allies and partners around the world, we regularly hear support for the 
JCPOA.
    As of ``Implementation Day'' under the JCPOA, which was January 16 
of this year, Iran had completed dozens of specific actions to limit, 
freeze, or roll back its nuclear program and subject it to greater 
transparency by the IAEA. It is worth highlighting a few of these 
actions, given their significance:

    Iran disconnected, removed, and placed in IAEA-monitored 
        storage two-thirds of its installed centrifuge capacity, going 
        from over 19,000 centrifuges to 5,060 used for uranium 
        enrichment at Natanz. These 5,060 centrifuges are the most 
        primitive in Iran's inventory.

    At its previously clandestine Fordow facility, Iran 
        terminated all uranium enrichment and removed all nuclear 
        material.

    Iran reduced its stockpile of up-to-five percent low 
        enriched uranium by 98 percent, going from roughly 12,000 
        kilograms, where it was when we reached the JCPOA last July, to 
        300 kilograms or less with an enrichment limit of no more than 
        3.67 percent, where it must stay.

    Iran removed the core of the Arak heavy water research 
        reactor and filled it with concrete, rendering it permanently 
        inoperable.

    Iran's implementation of these and other key nuclear-related 
commitments increased the time it would take to produce enough fissile 
material for a nuclear weapon--the so-called ``breakout time''--from 
roughly two-to-three months prior to the JCPOA to at least one year.
    These actions were complemented by the enhanced verification and 
monitoring measures specified in the JCPOA. Among them were increased 
IAEA access to Iran's uranium mines, continuous monitoring of Iran's 
uranium mills, and continuous monitoring of Iran's centrifuge 
production, assembly, and storage facilities. Moreover, Iran is 
provisionally applying the IAEA Additional Protocol (AP), which allows 
for much broader IAEA information and access in Iran, and implementing 
Modified Code 3.1, requiring early notification of construction of new 
nuclear facilities or modification of existing ones.
    In other words, Iran is now subject to even greater IAEA scrutiny, 
providing us with confidence that, should Iran seek to break out of its 
commitments, such an attempt would be detected and we would have ample 
time to respond.
    Since Implementation Day, we have maintained focus on ensuring Iran 
is fulfilling all of its nuclear-related commitments in a complete and 
verifiable manner. We were pleased to see that, when the IAEA issued 
its first JCPOA monitoring report in February, it reflected the many 
steps Iran is taking to implement the JCPOA. And without question, 
Iran's continued implementation of its nuclear-related commitments 
under the close watch of the IAEA is in the national security interest 
of the United States and our partners and allies.
    As you know, in exchange for Iran meeting its nuclear-related 
commitments under the JCPOA, we met our JCPOA commitments by lifting 
nuclear-related secondary sanctions on Iran. As Acting Under Secretary 
Szubin has explained, non-nuclear sanctions remain and are an important 
tool, among others, to respond to Iran's harmful activities.
    As long as Iran continues to meet its nuclear commitments, we will 
continue to meet our JCPOA sanctions commitments. And it is in our 
interest and that of the international community to ensure that the 
JCPOA works for all participants, and that the Iranian people begin to 
experience the benefits of sanctions lifting. The JCPOA has already 
started to deliver benefits, as evidenced by public reports of trade 
deals and increasing international commercial and economic activity 
with Iran.
    Some of you may have seen Iranian statements about the United 
States not living up to its commitments. Let me state unequivocally, 
the United States has fulfilled all of our commitments under the 
JCPOA--the lifting of sanctions is working. Today, Iran is able to do 
far more than it was able to under the crushing pressure of sanctions 
impacting nearly every sector just several months ago.
    However, business decisions are complex. They take into account a 
variety of factors. As Secretary Kerry has stated repeatedly, every 
bank or business will make its own decisions about whether to do 
business in Iran, and the United States will not stand in the way of 
business that is now permitted. From a U.S. legal perspective, 
international firms or financial institutions may engage with Iran, as 
long as they do not involve the U.S. financial system or U.S. persons 
and avoid working with entities that remain on our sanctions list.
    We understand that firms continue to have specific sanctions-
related questions or concerns about doing business in Iran. In an 
effort to provide greater clarity to the public and private sectors on 
what sanctions were lifted and what non-nuclear sanctions remain in 
place, the Departments of State and Treasury have been participating in 
extensive outreach with the public and private sectors, mostly at the 
request of other Governments, in order to explain U.S. commitments 
under the JCPOA. Our engagement is focused on providing clear 
information about U.S. sanctions laws in order to assist companies in 
ensuring that their activities are consistent with the JCPOA and U.S. 
law and therefore not sanctionable or prohibited.
    Under the JCPOA, we lifted our nuclear-related secondary sanctions. 
The lifting of nuclear-related secondary sanctions created the 
foundation for a new future and direction for Iran, but Iran must make 
its own decisions on pursuing this path. To take full advantage of the 
economic opportunities created, Iran must address domestic issues that 
also influence international business decision making--including the 
lack of transparency in its financial and business sectors as well its 
own provocative actions, such as the repeated testing of ballistic 
missiles, State sponsorship of terrorism, and unjust detention of dual-
nationals.
    Looking ahead, we will remain committed to ensuring the successful 
implementation of the JCPOA because it makes us all safer. We will 
continue to monitor its full implementation through, among other 
mechanisms, the Joint Commission it established. In April, I joined 
Under Secretary of State for Political Affairs Tom Shannon at the third 
meeting of the Joint Commission. The meeting provided an opportunity to 
review the full range of nuclear and sanctions implementation issues.
    While we are encouraged by Iran's implementation of its nuclear 
commitments thus far, we have always recognized that the JCPOA would 
not resolve all of our concerns with Iran. Instead, the JCPOA was 
specifically aimed at addressing the most urgent issue of verifiably 
ensuring Iran does not obtain a nuclear weapon. Thanks to our efforts 
to date, we have made significant progress toward that goal, and the 
United States and our partners remain safer because of these efforts. 
However, more work remains. We will continue to watch closely to ensure 
Iran does everything it committed to do. I also pledge to continue 
consulting with you as these efforts continue. Thank you again for the 
opportunity.
       RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY
                      FROM ADAM J. SZUBIN

Q.1. Due Diligence Requirements--The Wall Street Journal 
reported that Secretary Kerry told a group of non-U.S. banks in 
May that he would like `` . . . to make it clear that 
legitimate business . . . is available to banks as long as they 
do their normal due diligence and know who they're dealing with 
. . . they're not going to be held to some undefined and 
inappropriate standard.''
    Given that a number of Iran's economic sectors are 
virtually controlled by the Revolutionary Guard and its front 
companies, and that Iran is still a primary money laundering 
concern, do you agree with Secretary Kerry that ``normal due 
diligence'' would satisfy a bank's customer screening process?

A.1. Treasury's Financial Crimes Enforcement Network has 
labeled Iran a jurisdiction of primary money laundering 
concern, and the Financial Action Task Force (FATF), an 
international financial standard setting body has issued 
numerous advisories regarding Iran, most recently in June, 
highlighting the country's elevated risks. While the statement 
noted that FATF was suspending counter measures against Iran 
for 12 months, based on Iran's high level political commitment 
to an action plan meant to remediate its anti-money laundering 
and counter financing of terrorism deficiencies, it emphasized 
that Iran remains on the blacklist of high-risk and 
noncooperative jurisdictions. Furthermore, FATF called on all 
jurisdictions to advise their financial institutions to apply 
enhanced due diligence to business relationships and 
transactions with Iran and emphasized that FATF remains 
concerned with the terrorist financing risk emanating from Iran 
and the threat this poses to the international financial 
system.
    For financial institutions dealing with Iran, whether in 
Europe, the Middle East, or Asia, detailed scrutiny and in 
depth reviews of Iran-related transactions, accounts and 
account holders, are already part of normal due diligence 
practices, as referenced by Secretary Kerry.

Q.2. Gaming the Global Finance Regime--The Financial Action 
Task Force since 2009 has warned countries of its exceptional 
concern with Iran's failure to address its terrorist financing 
risk. Recent statements by Iranian officials, however, have 
indicated that it is taking first steps to improve its anti-
money laundering regime.
    Can an active State sponsor of terror ever be considered a 
legitimate participant in the international financial system?
    Are you concerned that Iran can game the FATF system to 
make it look like it is complying on paper without significant 
improvements that would put it on par with a legitimate 
financial system? Why or why not?

A.2. Iran is the world's leading State sponsor of terrorism, 
and it will not be able to fully reintegrate into the global 
financial system until it ceases such activity. We have a 
number of sanctions and measures to target Iran's financing of 
terrorism, including comprehensive U.S. sanctions against Iran. 
This means that U.S. persons, including U.S. financial 
institutions, are broadly prohibited from dealing with the 
Government of Iran, individuals and entities in Iran, including 
the Islamic Revolutionary Guards Corps (IRGC). Iran's financing 
of terrorism, proliferation activity and lack of transparency 
are all part of the reasons why Treasury's Financial Crime 
Enforcement Network has found Iran to be a jurisdiction of 
primary money laundering concern and issued regular advisories 
warning the public of financial risk associated with Iran.
    The Financial Action Task Force (FATF), an international 
financial standard setting body has issued numerous advisories 
on Iran, most recently in June, highlighting risks associated 
with Iran. The June statement noted that the FATF remains 
concerned with the terrorist financing risk emanating from Iran 
and the threat this poses to the international financial 
system. Therefore, Iran will remain on the FATF blacklist. 
Accordingly, the FATF called on all jurisdictions to advise 
their financial institutions to apply enhanced due diligence to 
business relationships and transactions with Iran.
    Iran has made some progress in meeting international anti-
money laundering and counterterrorist financing (AML/CFT) 
standards, but it remains deficient in many areas. While this 
June the FATF welcomed Iran's high-level political commitment 
to an action plan meant to remediate its AML/CFT deficiencies, 
and suspended its call for counter measures against Iran for 12 
months, if the FATF determines that Iran has not demonstrated 
sufficient progress in implementing the action plan at the end 
of that period, the FATF's call for countermeasures will be 
reinstituted.
    Moreover, the FATF stressed that Iran will remain on the 
FATF blacklist and the FATF will maintain its call for enhanced 
scrutiny until Iran addresses all of FATF's AML/CFT concerns, a 
process that is expected to take years.

Q.3. Classes of Licensed Transactions--At the May 24th hearing, 
the Committee was warned about Treasury using classes of 
licensed transactions as an inroad to the dollarization and 
legitimacy of Iranian transactions. Examples of such classes 
would be the return of Iran's restricted oil escrow funds, 
aircraft purchases, humanitarian transactions, and heavy water 
transactions.
    What other classes of transactions is Treasury considering 
for licenses and dollarization of Iranian transactions?
    Would you commit to discussing these with Congress before 
approving them?

A.3. We have not committed to provide, and are not providing, 
Iran with access to the U.S. financial system. There is no 
intent to issue licenses for classes of transactions for the 
purpose of dollarizing or legitimizing Iranian transactions.
    OFAC has issued general and specific licenses authorizing 
transactions that would otherwise be prohibited under the Iran 
sanctions, when doing so is consistent with broader national 
security and foreign policy interests of the United States. For 
example, OFAC has a history of licensing exports of food, 
medicine, and medical devices to Iran. A long-standing general 
license authorizes funds transfers to or from Iran that are 
ordinarily incident and necessary to give effect to licensed 
transactions, provided that the transfer does not involve 
debiting or crediting the account of (1) a person who is 
ordinarily resident in Iran, except when such person is not 
located in Iran, (2) of the Government of Iran, (3) an Iranian 
financial institution, or (4) any other person whose property 
and interests in property are blocked pursuant to the Iranian 
Transactions and Sanctions Regulations, maintained on the books 
of a U.S. financial institution. Because specific license 
applications include information submitted by private parties 
that may be protected by law, including the Trade Secrets Act 
and the Privacy Act, we are unable to discuss pending specific 
license applications.

Q.4. Beneficial Ownership--Treasury recently issued its final 
rules on customer due diligence and beneficial ownership. The 
rule is intended to make banks keep better track of the owners 
of companies with accounts at their institutions.
    Does Treasury intend to provide specific guidance on how to 
apply the rule with regard to Iran's IRGC and other clerical-
controlled and regime businesses?
    Given the influence and control the IRGC can wield, 
wouldn't any degree of IRGC ownership of a company suggest 
elevated risks?

A.4. It is important to note up front that the new rule on 
customer due diligence and beneficial ownership concerns the 
opening of new accounts in the United States. The United 
States' comprehensive economic sanctions program against Iran 
remains in place, meaning that U.S. financial institutions are 
prohibited from opening accounts for Iranian entities--
including Iranian entities with any level of IRGC ownership. 
This is because our sanctions prohibit U.S. persons, including 
U.S. financial institutions, from dealing with the Government 
of Iran, individuals and entities in Iran (including the IRGC), 
and Iranian Government-owned entities outside of Iran.
    These prohibitions have been in place since 1995, and U.S. 
financial institutions have a long and successful track record 
of not banking Iranian entities in compliance with these 
sanctions.
    The IRGC remains sanctioned by the U.S. and the EU for its 
proliferation activities and in the U.S. for its role in human 
rights abuses. Its covert action arm, the IRGC-Qods Force, is 
designated in the U.S. for terrorism and in the EU for its 
support to the Syrian regime. Activities undertaken by the IRGC 
and the IRGC-QF are part of the reasons why Treasury's 
Financial Crimes Enforcement Network (FinCEN) has found Iran to 
be a jurisdiction of primary money laundering concern and 
issued regular advisories warning the public of financial risk 
associated with Iran. The Financial Action Task Force (FATF), 
an international financial standard setting body has also 
issued numerous advisories regarding Iran, most recently in 
June, highlighting elevated risks associated with in Iran. The 
June statement noted that the FATF remains concerned with the 
terrorist financing risk emanating from Iran and the threat 
this poses to the international financial system. Furthermore, 
the FATF called on its members and urged all jurisdictions to 
advise their financial institutions to apply enhanced due 
diligence to business relationships and transactions with Iran.

Q.5. Treasury Outreach--I understand Treasury does various 
types of outreach to the international financial industry 
either to explain a new regulation or perhaps to deliver a 
warning of a significant threat.
    What countries beyond the UK is Treasury visiting to 
conduct similar rehabilitative outreach on Iran's behalf?

A.5. Over the last 6 years, we have engaged in extensive 
outreach to communicate clarity on our Iran-related sanctions 
architecture to our partners. Consistent with this approach as 
well as our longstanding practice with respect to outreach, we 
have met with business groups and Governments here in 
Washington, DC, and have traveled with our State Department 
colleagues to meet with Governments and businesses abroad to 
provide clarity regarding U.S. sanctions as they apply to 
dealings with Iran after Implementation Day. In such meetings, 
we explain both the scope of the sanctions lifting that 
occurred on Implementation Day and what can and cannot be done 
under remaining U.S. sanctions. Treasury has undertaken this 
type of travel and outreach in the past when major changes have 
been made to the sanctions programs administered by OFAC, 
including during the period of escalating sanctions that 
brought Iran to the negotiating table. So far, we have visited 
more than 20 countries to explain the scope of the remaining 
Iran sanctions. We are ensuring that businesses are fully aware 
that U.S. primary sanctions remain in place and understand what 
that entails going forward. In such engagements, we have made 
clear that U.S. persons and the U.S. financial system cannot be 
involved in Iran-related transactions, unless they are exempt 
from regulation or authorized by OFAC (e.g., licensed sales of 
medicine, medical devices, food and agricultural commodities). 
We also have explained that our sanctions authorities targeting 
Iran's support for terrorism, human rights abuses, ballistic 
missile program, and destabilizing activities in the region 
were outside of the scope of the JCPOA and remain in place.

Q.6. With regard to Iran, should financial institutions be at 
all wary of doing business in Iran given the utter lack of 
transparency in its financial system?

A.6. Iran's systemic money laundering and terrorist financing 
deficiencies will continue to be an important factor in foreign 
financial institutions' decisions to engage with Iran. 
Treasury's Financial Crime Enforcement Network (FinCEN) has 
found Iran to be a jurisdiction of primary money laundering 
concern and issues regular advisories warning the public of 
financial risk associated with Iran. The Financial Action Task 
Force (FATF), an international financial standard setting body 
has also issued numerous advisories regarding Iran, most 
recently in June, highlighting elevated risks associated with 
in Iran. The June statement noted that Iran remains on the FATF 
the black list, and that the FATF remains concerned with the 
terrorist financing risk emanating from Iran and the threat 
this poses to the international financial system. Furthermore, 
the FATF called on all jurisdictions to advise their financial 
institutions to apply enhanced due diligence to business 
relationships and transactions with Iran.
    In addition to considering FinCEN and FATF advisories, U.S. 
financial institutions are subject to many remaining 
restrictions and prohibitions on engaging with Iran, including 
comprehensive U.S. sanctions. This means that U.S. persons, 
including U.S. financial institutions, are broadly prohibited 
from dealing with the Government of Iran, individuals and 
entities in Iran, including the Islamic Revolutionary Guards 
Corps (IRGC).

Q.7. ``Dollarized'' Transactions--One of Iran's priorities is 
to be able to engage in international trade in dollar-
denominated transactions, which would not only give it access 
to the world's strongest and most liquid currency, but would 
also further legitimize its financial system.
    Can you confirm that there are no plans now or in the 
future for the Administration to allow Iranian or U.S. or 
foreign persons at any point in a transaction to engage in 
either direct or indirect dollar-denominated transactions, or 
dollar clearing in any form, including offshore facilities or 
through intrabank bookkeeping or other conversions or 
transfers? Please do not neglect to specifically address the 
possibilities of offshore facilities, and intrabank transfer 
book entries and any other type of conversion opening itself to 
a dollarized transaction.

A.7. The Administration has not been and is not planning to 
enable Iranian access to the U.S. financial system or to 
reinstate the so called ``U-turn'' general license. Until Iran 
has addressed other concerns we have with its behavior outside 
of the nuclear file, the U.S. financial system (including the 
branches of U.S. financial institutions abroad) will remain off 
limits to Iran and U.S. persons will not able to provide 
financial services or products to Iran without explicit 
authorization.
    To be clear, Treasury does not possess legal jurisdiction 
over transactions denominated in U.S. dollars that do not 
involve U.S. persons and occur outside of the United States; 
rather, we exercise jurisdiction over transactions involving 
U.S. persons or that transit the U.S. financial system. The 
free flow of the U.S. dollar, as the international currency of 
choice for international trade, works in the broader economic, 
financial, and strategic interests of the United States. As a 
practical matter, though, most U.S.-dollar-denominated 
transactions worldwide transit the United States and therefore 
come under our jurisdiction.
    We have publicly stated this position in public guidance we 
issued on the JCPOA Implementation Day. We would draw your 
attention in particular to the frequently asked questions 
(FAQs) A.3, C.6, C.7, C.14, and M.9, which reiterate the 
sanctions that remain in place (A.3 and C.14), and that (i) 
U.S. persons remain broadly prohibited from engaging in 
transactions or dealings with Iran unless the activities are 
exempt from regulation or authorized by OFAC (A.3 and M.9), 
(ii) the U-turn is not being reinstated (C.6), and (iii) 
foreign financial institutions cannot clear U.S. dollar 
transactions involving Iranian persons through U.S. persons or 
the U.S. financial system (C.7). These FAQs have been on OFAC's 
Web site since Implementation Day and can be found here: 
https://www.treasury.gov/resourcecenter/sanctions/Programs/
Documents/jcpoafaqs.pdf.

Q.8. Iran Sanctions Act of 1996 Reauthorization--The Iran 
Sanctions Act of 1996, as amended, has been a pivotal piece of 
sanctions architecture since its inception. It is set to expire 
on December 31st of this year.
    What set of circumstances would have either of you advise 
the President to veto a Congressional reauthorization of the 
Iran Sanctions Act at any time before December 31st?
    Would the President veto a Congressional reauthorization of 
the Iran Sanctions Act at any time before December 31st?

A.8. I would refer you to my colleagues at the State Department 
as the Iran Sanctions Act (ISA) is administered by them.
    We would note that when Treasury discusses the post-JCPOA 
sanctions landscape and the potential for sanctions snap back 
with foreign Governments, financial institutions or businesses, 
we make clear that all sanctions--including those in the ISA--
are subject to snap back at any time, throughout the duration 
of the JCPOA. ISA does not need to be extended in order to 
continue to be able to issue sanctions designations when 
warranted, as we have ample authorities to target missile-
related actors, as well as activity related to human rights 
violations, malicious cyberactivity, and other activity of 
concern.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON
                      FROM ADAM J. SZUBIN

Q.1. What is the top-line gross amount of Iranian assets that 
have been unblocked as a result of sanctions relief under the 
JCPOA?

A.1. The Central Bank of Iran (CBI) has recorded itself on 
paper as having the equivalent of about $100 billion dollars 
total in foreign exchange assets, which were inaccessible under 
congressional sanctions. On Implementation Day, the United 
States fulfilled its JCPOA commitments to remove the secondary 
sanctions that restricted the use of those funds. The actual 
amount that CBI has access to today, however, is about half as 
large. Iran has committed over $20 billion as collateral for 
projects with China, which cannot be moved or freely spent. 
Tens of billions in additional funds were disbursed as loans to 
Iran's energy and banking sectors, but those are nonperforming 
loans with no expectation of repayment. Accordingly, the actual 
amount of foreign reserves available to Iran today is 
approximately $50 billion.

Q.2. In January of last year--when he was the Treasury Under 
Secretary for Terrorism and Financial Intelligence--CIA Deputy 
Director David Cohen testified that $100 billion in Iranian 
foreign currency reserves were blocked by sanctions. Was his 
testimony accurate? Have those foreign currency reserves now 
been unblocked?

A.2. As noted, the CBI records itself on paper as having the 
equivalent of about $100 billion dollars total in foreign 
exchange assets. On Implementation Day, the United States 
fulfilled its JCPOA commitments to remove the secondary 
sanctions that restricted the use of those funds. The actual 
amount of foreign reserves available to Iran is the equivalent 
of approximately $50 billion. Foreign financial institutions 
that host accounts where these funds are located are free to 
continue to hold, transfer, or process transactions at Iran's 
request without exposure to secondary sanctions, provided that 
the transactions do not involve persons on OFAC's List of 
Specially Designated Nationals and Blocked Persons (SDN List).

Q.3. In May of last year, President Obama told Jeffrey Goldberg 
of The Atlantic that ``Iran has $150 billion parked outside the 
country,'' and suggested this would be made available to Iran 
under sanctions relief. Was this statement accurate? What type 
of assets make up the $150 billion to which President Obama 
referred?

A.3. Iran has approximately $100 billion worth of foreign 
reserves. Iran was only able to access approximately $50 
billion after we lifted sanctions on Implementation Day. This 
is because over $20 billion is already dedicated to projects 
with China, where it cannot be freely spent, and tens of 
billions in additional funds are effectively nonperforming 
loans to Iran's energy and banking sector--or loans that Iran 
has already provided.

Q.4. Please explain how and in what currency the United States 
paid the $1.7 billion settlement to Iran in connection with the 
freeing of U.S. hostages in January. Please include a 
description of how any U.S. dollars or U.S. financial 
institutions were involved in facilitating the transaction, 
whether directly or indirectly.

A.4. The $1.7 billion that the United States paid to Iran 
represented the settlement of a long pending claim at the Iran-
U.S. Claims Tribunal in the Hague. The funds were paid to Iran 
in non-U.S. dollar currencies in a manner consistent with 
OFAC's regulations. The payment was made by the U.S. Department 
of Defense from the Foreign Military sales account and the 
Department of the Treasury from the Judgement Fund. Iran was 
not given access to the U.S. financial system to complete this 
transaction.

Q.5. Please explain how and in what currency the United States 
will pay $8.6 million to Iran in exchange for heavy water. 
Please include a description of how any U.S. dollars or U.S. 
financial institutions will be involved in facilitating the 
transaction, whether directly or indirectly.

A.5. Payment by the Department of Energy's Isotope Program was 
made in euros in a manner consistent with OFAC's Iran 
regulations.

Q.6. I understand that after the signing of the initial JPOA, 
the Treasury Department was involved in establishing various 
``humanitarian channels'' to facilitate exports to Iran of 
humanitarian goods. I understand that these channels still 
operate.
    Please explain how these channels operate, which financial 
institutions are involved, and whether and how U.S. dollars are 
involved in the channels, whether directly or indirectly.

A.6. In furtherance of the JPOA, the P5+1 committed to 
establish a mechanism to further facilitate the purchase of, 
and payment for, the export of food, agricultural commodities, 
medicine, and medical devices to Iran, as well as medical 
expenses incurred abroad by Iranians. The mechanism, known 
informally as ``humanitarian channels,'' remained in place 
during the JPOA period. Foreign financial institutions whose 
involvement was sought by Iran in hosting this new mechanism 
were provided guidance by OFAC. Companies interested in using 
this financial mechanism coordinated with their Iranian 
counterparties. Transactions for the export of U.S.-origin 
food, agricultural commodities, medicine, and medical devices 
to Iran were already authorized by general license 31 CFR 
560.530, and were not required to be processed through this 
mechanism.
    The institutions that operated humanitarian channels 
pursuant to the JPOA may continue to do so at their discretion 
even after Implementation Day for transactions for the sale of 
food, agricultural commodities, medicine, and medical devices 
to Iran. Following Implementation Day, it is no longer 
sanctionable for non-U.S. entities--including foreign financial 
institutions--to conduct transactions with the Government of 
Iran or Iranian entities, as long as the transactions do not 
violate the U.S. domestic trade embargo on Iran and do not 
involve persons that remain on the SDN List or sanctionable 
conduct described in FAQ A.3.ii-iii of the FAQs issued by 
Treasury in connection with the JCPOA (https://
www.treasury.gov/resource-center/sanctions/Programs/Documents/
jcpoa_faqs.pdf).
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                      FROM ADAM J. SZUBIN

Q.1. In the past, the Administration has said it would support 
reauthorization of the Iran Sanctions Act (ISA) only once 
certain events passed, including the JCPOA Implementation Day 
passed and then the Majles elections in February 2016. I hope 
there are not any new reasons for further postponing any 
movement on this matter. Would the Administration support 
Congressional reauthorization of the Iran Sanctions Act? Would 
reauthorization violate the JCPOA? If there is a timing concern 
about reauthorizing the sanctions, what is that concern, and 
when will the Administration be comfortable with 
reauthorization?

A.1. I would refer you to my colleagues at the State Department 
as ISA is administered by them.
    We would note that when Treasury discusses the post-JCPOA 
sanctions landscape and the potential for sanctions snap back 
with foreign Governments, financial institutions or businesses, 
we make clear that all sanctions--including those in the ISA--
are subject to snap back at any time, throughout the duration 
of the JCPOA. ISA does not need to be extended in order to 
continue to be able to issue sanctions designations when 
warranted, as we have ample authorities to target missile-
related actors, as well as activity related to human rights 
violations, malicious cyberactivity, and other activity of 
concern.

Q.2. Why has the Administration not pursued cyberspecific 
sanctions against Iran, especially given that the Department of 
Justice has already indicted seven Iranian hackers for the dam 
and bank attacks?

A.2. Treasury cannot comment about potential sanctions targets 
or ongoing sanctions investigations. Treasury has, however, 
already imposed financial sanctions on Iranian actors for their 
malicious cyberactivities. For example, in December 2014, 
Treasury sanctioned Douran Software Technologies, an 
information technology firm involved in an Iranian Government 
project to monitor computer activity, under Executive Order 
(E.O.) 13628, which targets censorship and the use of 
information technology to mask grave human rights abuses 
conducted by the Iranian Government against its citizens. At 
the same time, Treasury imposed sanctions on Iranian company 
Abyssec for its support to the IRGC under E.O. 13553, which 
targets human rights abuses perpetrated by officials of the 
Iranian Government and persons acting on behalf of the Iranian 
Government since the June 2009 election. Abyssec assisted the 
IRGC with hacking projects and was used by the IRGC to train 
its employees in cybertradecraft and to develop offensive 
information operations capabilities.
    The Administration is pursuing a comprehensive strategy to 
confront malicious cyberactors, of which Treasury's sanctions 
authorities, including the cyberfocused E.O. 13694, is one 
part, along with diplomatic engagement, trade policy tools, and 
law enforcement mechanisms. We work closely with other Federal 
departments and agencies to assess the options available to 
respond to ever-evolving cyberthreats, and we will continue to 
defend our interests and act to address these threats in line 
with our national security objectives.

Q.3. We continue to see provocative behavior around ballistic 
missile testing and launch from Iran, even after we have levied 
sanctions for the behavior. Have ballistic missile sanctions 
succeeded in materially obstructing Iran's missile component 
procurement networks or in deterring future Iranian test-
launches of ballistic missiles? There have been suggestions 
that additional sanctions on entities that provide financing 
for and logistical support, such as transportation, in support 
of Iranian ballistic missiles would be useful to apply 
additional pressure to address this behavior. What discussions 
have you had within Treasury about how to expand ballistic 
missile sanctions, and what Iranian activities would warrant 
additional sanctions?

A.3. We agree that targeted sanctions are a key element of our 
strategy to disrupt and pressure Iran's missile program and 
procurement. Accordingly, Treasury continues to vigorously 
target Iran's ballistic missile program using its domestic 
authorities, including Executive Order 13382, ``Blocking 
Property of Weapons of Mass Destruction Proliferators and Their 
Supporters'' (E.O. 13382), and will continue to do so. E.O. 
13382 provides a broad basis for designating individuals and 
entities contributing to proliferation activities and networks, 
including those providing financing for or logistical support 
to Iran's ballistic missile program.
    Treasury remains concerned about Iran's ballistic missile 
program and its continued testing and launches, and we have 
responded by continuing to designate core entities and key 
networks involved in, or provide support for, such activity--
including in designations in January and March of this year. 
For example, the designations on January 17, 2016, exposed and 
targeted individuals and entities involved in procurement 
activity on behalf of Iran's ballistic missile program, 
including the financial transactions for procurement of goods 
for Iran's carbon fiber production line. These designated 
individuals and entities are now subject to asset-blocking 
sanctions, effectively cutting them off from the U.S. financial 
system. Additionally, if a foreign financial institution 
conducts or facilitates a significant transaction with, or 
provides significant financial services for, any Iranian or 
Iran-related persons who remain on our SDN List, including 
those designated on January 17, 2016, and March 24, 2016, it 
risks losing its access to the U.S. financial system.

Q.4. As you are talking to international firms and financial 
institutions about what is and is not permissible under our 
current sanctions regime, are you also reiterating your message 
that Iran, not the United States, is responsible for how much 
economic relief they receive from the JCPOA? If so, what has 
their reaction been to that statement? If not, what are you 
saying in these meetings to push back against the Iranian 
accusation that the U.S. is to blame for their economic woes?

A.4. In our outreach to international firms, financial 
institutions, and foreign Governments, we have reiterated that 
the United States has met all of its commitments under the 
JCPOA, including by lifting the sanctions it committed to lift 
under the JCPOA. OFAC has been clear in its outreach that U.S. 
commitments do not go beyond those outlined in the JCPOA. We 
hear from some foreign firms and financial institutions that 
U.S. sanctions laws are sufficiently complex that they hesitate 
engaging with Iran for fear of running afoul of U.S. sanctions. 
There are complex business decisions to be made, but we have 
made clear the firms and financial institutions must make those 
decisions, and that Treasury and OFAC do not seek to influence 
those decisions. Rather, it is our responsibility to ensure 
that they know the rules of the road and are making decision 
with a clear understanding of our regulations. Foreign firms 
and financial institutions have generally acknowledged that 
their hesitancy to engage with Iran is due in large--and 
sometimes predominant--part to issues related to the business 
conditions and investment climate in Iran that are wholly 
unrelated to sanctions, including: corruption; lack of 
corporate transparency; antiquated accounting standards; and 
Iran's designation as a high-risk jurisdiction by the Financial 
Action Task Force, the world's standard-setting body for anti-
money laundering and counterterrorist financing, due to Iran's 
deficiencies in countering money laundering and terrorism 
finance. In addition, as the President has stated, Iran's own 
behavior is important to generating confidence that Iran is a 
safe place to do business, and provocative actions such as 
missile launches calling for the destruction of Israel make 
businesses nervous. We have made clear, time and again, that it 
is up to Iran to address these concerns.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY
                      FROM STEPHEN D. MULL

Q.1. On May 24th, the Committee received testimony that Iran's 
ballistic missile arsenal--the largest in the region--can reach 
any part of the Middle East, including Israel, and that Iran 
has conducted five ballistic missile tests.
    How important is it to U.S. national security interests 
that Iran terminate its ballistic missile program?
    Of the five recent missile tests, how many of those were 
sanctioned or sanctionable? Should Iran be allowed to continue 
testing? How does the Administration intend to stop future 
tests?

A.1. Iran has long had the largest ballistic missile program in 
the Middle East, and has deployed over the past 30 years 
hundreds of conventionally armed ballistic missiles--including 
its Shahab-3 medium range ballistic missile. Iran deploys such 
ballistic missiles to project power regionally and deter 
potential adversaries. These missile programs remain one of our 
most significant nonproliferation challenges, contributing to 
regional tension and posing a serious risk to international 
stability.
    Because these activities pose a significant threat to U.S. 
national security, we use a wide range of multilateral and 
unilateral tools to address Iran's ballistic missile program. 
For example, we use our participation in the Missile Technology 
Control Regime (MTCR) to prevent the spread of critical missile 
technologies and to raise awareness among the 33 other MTCR 
Partners (members) of the proliferation concerns posed by 
Iran's missile development, procurement, and proliferation 
activities. Bilaterally, we continue to work with other 
countries to interdict missile-related shipments intended for 
Iran. Additionally, we have called attention to Iran's missile 
testing activities that are inconsistent with and in defiance 
of UNSC Resolution 2231; including by reporting Iran's March 
2016 missile launches to the Security Council and requesting 
the Council review this matter to determine an appropriate 
response. These bilateral and multilateral efforts are critical 
to persuading countries to prevent transfers of sensitive 
technology to Iran and also to raising the political costs to 
Iran for its missile development and testing activities.
    We bolster these multilateral and bilateral efforts with 
unilateral authorities to impose sanctions on entities 
connected to Iran's ballistic missile programs, procurement 
network, or testing activities. Following Iran's missile tests 
in March 2016, the United States designated two Iran-based 
entities directly involved with Iran's ballistic missile 
program under Executive Order (E.O.) 13382. These sanctions 
follow our actions in January 2016, when the United States 
designated three entities and eight individuals involved in a 
network that procured materials and equipment for Iran's 
ballistic missile program. These measures were also taken 
pursuant to E.O. 13382 and reflect our continued concerns about 
Iran's missile program, including its October 2015 missile 
launch.

Q.2. One of Iran's priorities is to be able to engage in 
international trade in dollar-denominated transactions, which 
would not only give it access to the world's strongest and most 
liquid currency, but would also further legitimize its 
financial system.
    Can you confirm that there are no plans now or in the 
future for the Administration to allow Iranian or U.S. or 
foreign persons at any point in a transaction to engage in 
either direct or indirect dollar-denominated transactions, or 
dollar clearing in any form, including offshore facilities or 
through intrabank bookkeeping or other conversions or 
transfers? Please do not neglect to specifically address the 
possibilities of offshore facilities, and intrabank transfer 
book entries and any other type of conversion opening itself to 
a dollarized transaction.

A.2. The Administration is not planning to reinstate the 
authorization for ``U-turn'' transactions or give Iran access 
to the U.S. financial system. The Administration fully stands 
by our previous statements, and on Friday, April 1, President 
Obama confirmed during a press conference that reports that the 
Administration will grant Iran access to the U.S. financial 
system are inaccurate.
    We will continue to vigorously enforce remaining sanctions 
on Iran, including our primary sanctions that generally 
prohibit U.S. financial institutions from clearing U.S. dollars 
through the U.S. financial system for Iran-related 
transactions, holding correspondent account relationships with 
Iranian financial institutions, or entering into financing 
arrangements with Iranian banks.

Q.3. The Iran Sanctions Act of 1996, as amended, has been a 
pivotal piece of sanctions architecture since its inception. It 
is set to expire on December 31st of this year.
    What set of circumstances would have either of you advise 
the President to veto a Congressional reauthorization of the 
Iran Sanctions Act at any time before December 31st?
    Would the President veto a Congressional reauthorization of 
the Iran Sanctions Act at any time before December 31st?

A.3. It is not necessary to extend the Iran Sanctions Act (ISA) 
at this time, since it does not expire until the end of 2016. 
Right now our focus is on continuing to verify that Iran is 
implementing its nuclear-related commitments under the Joint 
Comprehensive Plan of Action (JCPOA). Further, it is not 
necessary to renew the Iran Sanctions Act in order to retain 
the ability to snapback sanctions. The President could utilize 
his authorities under the International Emergency Economic 
Powers Act (IEEPA) and other statutes to impose a variety of 
economic sanctions that would allow us to recreate sanctions 
currently required under ISA, if necessary. Indeed, much of our 
Iran sanctions architecture has been created through the use of 
Executive Orders that were issued pursuant to IEEPA. These 
E.O.s can be issued in as little as a few days, which means 
that we could quickly reimpose sanctions in a snapback 
scenario.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                      FROM STEPHEN D. MULL

Q.1. Ambassador Mull, you said that the U.S. purchase of Iran's 
heavy water was in our commercial interest, even though there 
are other suppliers of this material that we consider allies. 
Are there other U.S. suppliers for this material?

A.1. There are only two countries that regularly export heavy 
water: Canada and India. The United States currently has no 
capability to produce heavy water. Canada exports heavy water 
from inventory only. While the substantial U.S. demand for 
heavy water for non-nuclear applications has been reliably met 
in recent years, there is a history of challenges over the past 
decade.

Q.2. Can you explain why from your perspective purchasing this 
heavy water from Iran, and not from other suppliers such as 
Canada and India, made sense? Have any other Nations now 
started to explore purchase agreements to buy this material to 
ensure it isn't acquired on the international market by others 
for nefarious purposes?

A.2. The Joint Comprehensive Plan of Action (JCPOA) ensures 
that Iran's nuclear program is and will remain exclusively 
peaceful. To reach Implementation Day, the JCPOA required Iran 
to take a number of nuclear-related steps that cut off Iran's 
pathways to acquire enough fissile material for a nuclear 
weapon, including the plutonium pathway, such as removing the 
core of the Arak heavy water research reactor and filling it 
with concrete, rendering the core permanently inoperable. 
Moreover, Iran reduced its stockpile of nuclear-grade heavy 
water to less than 130 metric tons (MT), which is the current 
cap under the JCPOA. Specifically, Iran exported its excess 
heavy water to Oman, where it is under IAEA monitoring and 
verification, in anticipation of a sale on the international 
market.
    The United States does not produce heavy water, and 
currently has no inventory of heavy water that is suitable for 
industrial and research applications. While the substantial 
U.S. demand for heavy water for non-nuclear applications has 
been reliably met in recent years, there is a history of 
challenges over the past decade. Most international producers 
of heavy water fill their domestic nuclear demand before it 
making it available for sale. Moreover, the global supply of 
heavy water available to the international market is limited 
while demand continues to grow. Iran making available its 
excess heavy water reduces the unpredictability of 
international supplies and helps address these challenges.
    This purchase provides U.S. industry with a critical 
product, while also providing a final disposition for excess 
heavy water that was exported from Iran prior to Implementation 
Day as contemplated in the JCPOA. The United States was under 
no commitment to purchase heavy water from Iran, nor is it 
committed to do so in the future. It is possible that other 
countries with a need for heavy water may choose to purchase 
excess Iranian heavy water as well, and we understand certain 
countries have already expressed interest in doing so.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                      FROM STEPHEN D. MULL

Q.1. In response to questions I asked you during the hearing, 
you noted that you accompanied Secretary Kerry on his recent 
meetings in Europe and were present when he was meeting with 
European banks in London on or around May 12th. We have 
received conflicting reports of whether the Secretary was 
merely clarifying the scope of sanctions or was encouraging 
banks to reengage with Iran.
    Please provide me with any notes, minutes, readouts, and/or 
summaries prepared by Secretary Kerry or any State Department 
staff in connection with these meetings.

A.1. Similar to what was done previously when we were ramping 
up sanctions on Iran, we are engaging with private sector and 
foreign Government stakeholders to help them understand the 
contours of the sanctions relief that was effectuated on 
January 16, 2016. As Secretary Kerry stated, his meetings in 
London in particular were an effort to make it clear that 
permissible business, within the scope of the Joint 
Comprehensive Plan of Action (JCPOA), is available to foreign 
banks.

Q.2. According to Reuters, British Foreign Secretary Phillip 
Hammond, said that the strategic objective of the joint meeting 
between U.K. officials, U.S. officials, and European bankers 
was to draw Iran back into the international community, and 
actively work ``to allow these European and global banks to 
support European businesses in resuming normal trade and 
investment patterns with Iran.''
    Does Secretary Kerry disagree with Mr. Hammond's 
characterization of the meetings' objectives, which seem to be 
at odds with merely ``clarifying'' the scope of U.S. sanctions?
    If you agree with Mr. Hammond, what does Secretary Kerry 
view as ``normal trade and investment patterns with Iran?''

A.2. Commensurate with past practice, we are conducting 
outreach and clarification to Governments and businesses to 
help them understand the contours of the sanctions relief that 
was effectuated on January 16, 2016, when the IAEA verified 
that Iran has met key nuclear-related commitments specified in 
the Joint Comprehensive Plan of Action (JCPOA). This meeting 
was part of that effort.
    We took a similar approach of meeting with foreign 
Governments and the private sector to ensure that secondary 
sanctions to address Iran's nuclear program were effectively 
and meaningfully imposed, and it is understandable that similar 
engagement is now underway to ensure that nuclear-related 
secondary sanctions are effectively and meaningfully lifted 
consistent with the JCPOA.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON
                      FROM STEPHEN D. MULL

Q.1. What is the top-line gross amount of Iranian assets that 
have been unblocked as a result of sanctions relief under the 
JCPOA?

A.1. The Treasury Department estimates that when our JCPOA 
sanctions relief was effectuated on January 16, 2016 (referred 
to as Implementation Day), the Central Bank of Iran (CBI) about 
$100 billion in assets worldwide. However, our assessment is 
that Iran's usable liquid assets are around $50 billion of that 
total.

Q.2. In January of last year--when he was the Treasury Under 
Secretary for Terrorism and Financial Intelligence--CIA Deputy 
Director David Cohen testified that $100 billion in Iranian 
foreign currency reserves were blocked by sanctions. Was his 
testimony accurate? Have those foreign currency reserves now 
been unblocked?

A.2. The Treasury Department estimates that on Implementation 
Day, the Central Bank of Iran (CBI) held about $100 billion in 
assets worldwide. However, our assessment is that Iran's usable 
liquid assets are around $50 billion of that total.
    The other $50-70 billion are either obligated in illiquid 
projects (such as over 50 projects with China) that cannot be 
monetized quickly, if at all, or are composed of outstanding 
loans to Iranian entities that cannot repay them.  Furthermore, 
because Iran's freely accessible assets constitute the 
country's reserves, not its annual budgetary allowance, Iran 
will need to retain a portion of that $50 billion in available 
assets to defend its currency and engage in international 
trade.

Q.3. In May of last year, President Obama told Jeffrey Goldberg 
of The Atlantic that ``Iran has $150 billion parked outside the 
country,'' and suggested this would be made available to Iran 
under sanctions relief. Was this statement accurate? What type 
of assets make up the $150 billion to which President Obama 
referred?

A.3. The President stated a hypothetical regarding Iran's use 
of reserves to Mr. Goldberg. The Treasury Department estimates 
that on Implementation Day, the Central Bank of Iran (CBI) held 
about $100 billion in assets worldwide.

Q.4. Please explain how and in what currency the United States 
paid the $1.7 billion settlement to Iran in connection with the 
freeing of U.S. hostages in January. Please include a 
description of how any U.S. dollars or U.S. financial 
institutions were involved in facilitating the transaction, 
whether directly or indirectly.

A.4. The settlement in January 2016 of a long-standing claim at 
the Iran-U.S. Claims Tribunal was done on its own merits and 
unquestionably is to the great benefit of the United States. 
The release by Iran of several U.S. citizens was part of a 
reciprocal humanitarian gesture in which the United States 
provided relief to certain Iranian nationals.
    The first settlement payment, in the amount of $400 
million, came out of the Foreign Military Sales Trust Fund, or 
FMS account. Treasury worked with the Defense Finance and 
Accounting Service (DFAS) and the Federal Reserve Bank of New 
York (FRBNY) so that the funds were converted from dollars to 
Swiss francs and credited to a FRBNY account at a European 
bank. On January 17, the payment was provided to an official 
from the Central Bank of Iran for transfer to Tehran.
    The second payment, involving settlement of the dispute 
over interest on the funds in the FMS account, was made from 
the Judgment Fund. The Judgment Fund is the source of funding 
Congress has provided for use generally in paying judgments and 
settlements of claims against the United States when there is 
no other source of funding. Treasury disbursed the payment 
after receiving the appropriate approvals from the Department 
of Justice. The payment from the Judgment Fund was initiated 
through a transfer to an account of a European bank. Pursuant 
to an arrangement between Iran, the home country of that bank, 
and the United States, the European bank converted the $1.3 
billion into Euros and disbursed the banknotes to an official 
from the Central Bank of Iran. This process occurred in two 
installments, one on January 22, and one on February 5.
    The sanctions regime we have built with our international 
partners effectively cut Iran off from the international 
financial system. Iran was very aware of the difficulties it 
would face in accessing and using the funds if they were in any 
form other than cash, even after the lifting of sanctions under 
the Joint Comprehensive Plan of Action. Therefore, effectuating 
the payment of the funds in the FMS account and the subsequent 
payments in cash for the compromise on interest was the most 
reliable way to ensure that the funds were received in a timely 
manner.
    For both payments, no direct transfer was made from any 
U.S. account to Iran. These transactions complied with U.S. 
sanctions law and did not require a unique license, waiver, or 
other form of authorization. Treasury regulations explicitly 
authorize all transactions necessary for payments pursuant to 
settlement agreements entered into by the United States 
Government in a legal proceeding in which the United States is 
a party, such as a settlement of claims before the Tribunal.

Q.5. Please explain how and in what currency the United States 
will pay $8.6 million to Iran in exchange for heavy water. 
Please include a description of how any U.S. dollars or U.S. 
financial institutions will be involved in facilitating the 
transaction, whether directly or indirectly.

A.5. The U.S. Department of Energy's Isotope Program will pay 
Iran the Euro equivalent of approximately $8.6 million in 
exchange for 32 metric tons of heavy water. Payment to Iran 
will be made in Euros. The transaction and the payments were 
all authorized by the U.S. Treasury Department's Office of 
Foreign Assets Control. The routing was through third-country 
financial institutions and is similar to the mechanism that has 
been used for years to allow other authorized transactions--
such as for exports of food and medicine--between the United 
States and Iran.

Q.6. I understand that after the signing of the initial JPOA, 
the Treasury Department was involved in establishing various 
``humanitarian channels'' to facilitate exports to Iran of 
humanitarian goods. I understand that these channels still 
operate.
    Please explain how these channels operate, which financial 
institutions are involved, and whether and how U.S. dollars are 
involved in the channels, whether directly or indirectly.

A.6. In furtherance of the JPOA, the P5+1 committed to 
establish a mechanism to further facilitate the purchase of, 
and payment for, the export of food, agricultural commodities, 
medicine, and medical devices to Iran, as well as medical 
expenses incurred abroad by Iranians. The mechanism, known 
informally as ``humanitarian channels,'' remained in place 
during the JPOA period. Foreign financial institutions whose 
involvement was sought by Iran in hosting this new mechanism 
were provided guidance by the Office of Foreign Assets Control 
(OFAC). Companies interested in using this financial mechanism 
coordinated with their Iranian counterparties. Transactions for 
the export of U.S.-origin food, agricultural commodities, 
medicine, and medical devices to Iran were already authorized 
by general license 31 CFR 560.530, and were not required to be 
processed through this mechanism.
    The institutions that operated humanitarian channels 
pursuant to the JPOA may continue to do so at their discretion 
even after Implementation Day for transactions for the sale of 
food, agricultural commodities, medicine, and medical devices 
to Iran. Following Implementation Day, it is no longer 
sanctionable for non-U.S. entities--including foreign financial 
institutions--to conduct transactions with the Government of 
Iran or Iranian entities, as long as the transactions do not 
violate the U.S. domestic trade embargo on Iran and do not 
involve persons that remain on the Specially Designated 
Nationals (SDN) List or sanctionable conduct described in FAQ 
A.3.ii-iii of the FAQs issued by Treasury in connection with 
the JCPOA (http://redirect.state.sbu/?url=https://
www.treasury.gov/resource-center/sanctions/Programs/Documents/
jcpoa_faqs.pdf).
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                      FROM STEPHEN D. MULL

Q.1. In the past, the Administration has said it would support 
reauthorization of the Iran Sanctions Act (ISA) only once 
certain events passed, including the JCPOA Implementation Day 
passed and then the Majles elections in February 2016. I hope 
there are not any new reasons for further postponing any 
movement on this matter. Would the Administration support 
Congressional reauthorization of the Iran Sanctions Act? Would 
reauthorization violate the JCPOA? If there is a timing concern 
about reauthorizing the sanctions, what is that concern, and 
when will the Administration be comfortable with 
reauthorization?

A.1. The Administration does not believe that it is necessary 
to extend the Iran Sanctions Act (ISA) at this time, since it 
does not expire until December 2016. Right now, we are focused 
on ensuring that Iran continues to fully implement its nuclear-
related commitments under the JCPOA.
    The expiration of the ISA in December will not affect our 
ability to continue to issue sanctions designations when 
warranted, as we have ample authorities to target missile-
related actors, as well as activity related to human rights 
violations, malicious cyberactivity, and other activity of 
concern. Nor would ISA's sunset affect our ability to snap 
sanctions back into place, should Iran significantly fail to 
perform its nuclear commitments in the JCPOA. Existing 
authorities give us all the tools we currently need to monitor 
and respond to any destabilizing activity or JCPOA 
noncompliance from Iran.
    My colleagues and I would be happy to engage in further 
discussions with Congress about how to further foreign policy 
priorities in a manner that does not jeopardize JCPOA 
implementation.

Q.2. Why has the Administration not pursued cyberspecific 
sanctions against Iran, especially given that the Department of 
Justice has already indicted seven Iranian hackers for the dam 
and bank attacks?

A.2. The Administration is pursuing a comprehensive strategy to 
confront malicious cyberactors, a point the President made 
clear when signing the Executive Order enabling the use of 
economic sanctions against malicious cyberactors. That strategy 
includes diplomatic engagement, trade policy tools, law 
enforcement mechanisms, and imposing sanctions on individuals 
or entities that engage in certain significant, malicious 
cyberenabled activities.
    The Department of Justice's March 24 indictment of seven 
individuals for alleged cyberattacks against the United States 
is proof that we will act when we see evidence of cyberthreats 
from Iran.
    We take seriously all such malicious activity in 
cyberspace, and we will continue to use all the tools at our 
disposal, including sanctions, to deter, detect, counter, and 
mitigate such activity in a manner and timeframe appropriate to 
the incidents themselves.

Q.3. We continue to see provocative behavior around ballistic 
missile testing and launch from Iran, even after we have levied 
sanctions for the behavior. Have ballistic missile sanctions 
succeeded in materially obstructing Iran's missile component 
procurement networks or in deterring future Iranian test-
launches of ballistic missiles? There have been suggestions 
that additional sanctions on entities that provide financing 
for and logistical support, such as transportation, in support 
of Iranian ballistic missiles would be useful to apply 
additional pressure to address this behavior. What discussions 
have you had within Treasury about how to expand ballistic 
missile sanctions, and what Iranian activities would warrant 
additional sanctions?

A.3. The United States uses a wide range of multilateral and 
unilateral tools to address Iran's ballistic missile programs. 
While our sanctions authorities are an important part of these 
efforts, we also work with foreign Governments to prevent 
transfers of equipment and technology to entities affiliated 
with Iran's missile program. Such efforts help delay the 
advancement of these programs and make Iran's procurement 
efforts more costly, time consuming, and difficult. In 
addition, we continue to call attention to Iran's missile 
testing activities at the United Nations, for example, 
reporting Iran's March 2016 missile launches to the Security 
Council and requesting the Council review this matter to 
determine an appropriate response. Such efforts help raise 
awareness among other Governments of Iran's missile development 
efforts and raise the political costs to Iran for these 
provocative missile testing activities.
    We bolster these multilateral and bilateral efforts with 
unilateral sanctions authorities to impose penalties on 
entities connected to Iran's ballistic missile programs, 
procurement network, or testing activities. For example, 
following Iran's missile tests in March 2016, the United States 
designated two Iran-based entities directly involved with 
Iran's ballistic missile program under Executive Order (E.O.) 
13382. Moving forward, we will continue to use our current 
unilateral sanctions authorities as warranted to help address 
the full spectrum of Iran's activities related to its missile 
program.

Q.4. As you are talking to international firms and financial 
institutions about what is and is not permissible under our 
current sanctions regime, are you also reiterating your message 
that Iran, not the United States, is responsible for how much 
economic relief they receive from the JCPOA? If so, what has 
their reaction been to that statement? If not, what are you 
saying in these meetings to push back against the Iranian 
accusation that the U.S. is to blame for their economic woes?

A.4. Commensurate with our engagement around the world on the 
occasion of any significant change in U.S. sanctions, we are 
providing guidance necessary to ensure that foreign Governments 
and the private sector understand clearly the extent of U.S. 
sanctions relief provided under the JCPOA. It is in our 
interest to ensure that the JCPOA works for all participants.
    Implicit in your question is the fact that we cannot and do 
not ignore the importance of Iran's own actions in generating 
confidence that Iran is a safe place to do business. For our 
part, we will continue to answer questions and address concerns 
regarding U.S. sanctions lifting, but there are also many 
factors beyond our control slowing Iran's economic recovery 
that have nothing to do with sanctions. And we also recognize 
that it is going to take time for some companies to feel 
confident in reengaging with Iran due to concerns other than 
sanctions.
    President Obama spoke to this recently, when he pointed out 
the importance of Iran's own behavior in generating confidence 
that Iran is a safe place to do business.
    As the President said, ``when Iran launches ballistic 
missiles with slogans calling for the destruction of Israel and 
continues to ship missiles to Hezbollah, that makes businesses 
nervous. When Iran continues to ship missiles to Hezbollah, 
that makes businesses nervous.
    Iran has to understand what every country in the world 
understands, which is businesses want to go where they feel 
safe, where they don't see massive controversy, where they can 
be confident that transactions are going to operate normally.''