[Senate Hearing 114-7]
[From the U.S. Government Publishing Office]
S. Hrg. 114-7
PERSPECTIVES ON THE STRATEGIC NECESSITY OF IRAN SANCTIONS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE ROLE AND IMPACT THAT ECONOMIC SANCTIONS HAVE HAD ON
IRAN'S ILLEGAL NUCLEAR PROGRAM
__________
JANUARY 27, 2015
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
MICHAEL 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
Beth Zorc, Senior Counsel
John O'Hara, Senior Counsel, International/Terrorist Finance
Christopher Ford, Senior Counsel, National Security Policy
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
----------
TUESDAY, JANUARY 27, 2015
Page
Opening statement of Chairman Shelby............................. 1
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 3
Senator Menendez............................................. 5
Senator Corker............................................... 6
Senator Tester............................................... 8
Senator Toomey............................................... 8
Senator Merkley.............................................. 10
Senator Heller............................................... 10
Senator Warren............................................... 11
Senator Sasse................................................ 11
Prepared statement....................................... 64
Senator Heitkamp............................................. 12
Senator Cotton............................................... 12
Senator Donnelly............................................. 12
Senator Rounds............................................... 14
Prepared statement....................................... 65
Senator Reed................................................. 14
Senator Scott................................................ 15
Senator Crapo................................................ 15
Senator Schumer.............................................. 16
Senator Kirk.................................................
Prepared statement....................................... 64
WITNESSES
Antony Blinken, Deputy Secretary of State, Department of State... 18
Prepared statement........................................... 66
Responses to written questions of:
Senator Shelby........................................... 110
Senator Brown............................................ 112
Senator Kirk............................................. 114
Senator Tester........................................... 116
David S. Cohen, Under Secretary for Terrorism and Financial
Intelligence, Department of the Treasury....................... 21
Prepared statement........................................... 69
Patrick Clawson, Ph.D., Director of Research, Washington
Institute for Near East Studies................................ 51
Prepared statement........................................... 74
Mark Dubowitz, Executive Director, Foundation for Defense of
Democracies.................................................... 52
Prepared statement........................................... 79
Additional Material Supplied for the Record
Remarks by President Obama and Prime Minister Cameron in Joint
Press Conference on January 16, 2015........................... 118
Washington Post article, ``Give diplomacy with Iran a chance,''
by Laurent Fabius, Philip Hammond, Frank-Walter Steinmeier, and
Federica Mogherini............................................. 130
(iii)
PERSPECTIVES ON THE STRATEGIC NECESSITY OF IRAN SANCTIONS
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TUESDAY, JANUARY 27, 2015
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:01 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Richard Shelby, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY
Chairman Shelby. The Committee will come to order. We will
not have demonstrations in the Committee. We would have to
clear the room if there are demonstrations in the Committee.
First this morning, I would like to welcome the new Members
to the Senate Banking Committee: Senator Tim Scott, Senator Ben
Sasse, Senator Tom Cotton, Senator Mike Rounds, and Senator Joe
Donnelly. I look forward to working with them and also my
distinguished colleague, the Ranking Member, Senator Brown from
Ohio.
I hope that this is the first of many meetings of the
Banking Committee. If history is any guide, it will be. While
we may express differences in opinion from time to time, I
expect that we can reach common ground on several issues this
Congress.
We will begin today's hearing with an opening statement by
me and the Ranking Member. I will then turn to our Members for
any brief remarks that they may have before we hear from our
witnesses.
Members will be recognized by the Chair in order of
seniority for those present at the gavel and in order of
arrival thereafter. Each Member will be allotted 5 minutes for
as many rounds as time permits.
As soon as a quorum is present--and we are getting close to
it--I will pause briefly to approve--we hope to approve the
Committee's budget, the Committee's rules, jurisdiction, and
Subcommittee membership. But today we will hear from our
witnesses on the role that economic sanctions have had on
Iran's illegal nuclear program.
Iran has long been a serious threat to U.S. national
security interests. It is the world's foremost sponsor of
terrorism; it supports radical regimes; it destabilizes its
neighbors; and it continues to pose a threat to our ally,
Israel.
Further evidence of Iran as a destabilizing force in the
region is the recent ousting of the Government of Yemen. Many
reports credit Iran as a major backer of the rebels in that
uprising.
Since the mid-1980s, Iran has been pursuing capabilities
that would enable it to build nuclear weapons. As as a result,
the United States has led efforts to impose strong and
progressively more stringent sanctions against Iran under both
Democrat and Republican administrations.
Over the past few decades, a bipartisan consensus has
emerged that tough sanctions are essential in order to persuade
Iran to moderate its reckless behavior. Consequently, sanctions
have succeeded where diplomatic efforts have repeatedly failed
to bring Iran to the negotiating table.
After many rounds of talks, it is not at all clear that the
existing sanctions regime will produce a viable nuclear deal
that will protect U.S. national security interests. I think it
is worth repeating that, without the pressure of tough
sanctions, Iran would not have been engaged in any talks in the
first place.
Our common goal now, I believe, is to ensure that these
talks produce an acceptable outcome and that Iran's leaders
understand that such an outcome is in their best interest as
well. So far, it is not clear to me that they believe this. One
indication is that the Iranian regime continues to insist on a
deal that would keep its nuclear capability largely intact.
Such a result would be dangerous because it would allow Iran to
remain within reach of producing nuclear weapons.
I am also concerned that the weakening of sanctions or even
the perception of this may be insufficient to keep Iran at the
table. The Administration has argued that Iran, a country with
a history of defiance and deception, will negotiate a mutually
acceptable agreement without the certainty that harsh sanctions
will take effect if it does not. I respectfully disagree with
the Administration on this.
I believe that the repercussions of Iran's failure to reach
an agreement by midyear should be clearly defined by statute.
The President and other officials have said that Congress
should not interfere, that a deal is close, that the situation
is delicate, and that an attempt to legislate any additional
sanctions may give Iran an excuse to walk away from the
negotiating table.
It has been my experience that if a party is negotiating in
good faith and with the intent to reach an agreement, they will
seek common ground, but not an excuse to walk away. If Iran is
looking for a way out, I believe that they never intended to
ever reach an agreement in the first place. The fact that the
current negotiation has already been extended twice is further
evidence of their recalcitrance.
There is now a growing bipartisan consensus that not only
does Congress have a role to play in ensuring that Iran does
not back away, but it also has a responsibility in this regard.
It is clear that sanctions brought Iran to the negotiating
table, and the threat of future sanctions represents Iran's
only incentive to successfully conclude an agreement. I look
forward to hearing the perspectives of our witnesses today on
this critical issue.
And now I turn to the Ranking Member of the Committee,
Senator Brown.
Senator Brown. Mr. Chairman, could I ask if we are going to
do the Committee business now? Should we do that now?
Chairman Shelby. Do you want to go ahead and do it?
Senator Brown. Sure.
Chairman Shelby. We have a quorum?
Senator Brown. We have a quorum.
Chairman Shelby. We will do it. It is a good idea. Thank
you.
Senator Brown. OK. Thank you.
[Whereupon, at 10:07 a.m., the Committee proceeded to other
business and reconvened at 10:09 a.m.]
Chairman Shelby. Senator Brown.
STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Mr. Chairman. I appreciate your
willingness to delay this hearing from last week and the markup
also by a week from the original notice dates. Historically,
even in a Senate where bipartisanship might be lacking, this
Committee has operated with bipartisan comity, particularly on
the issue of sanctions. We have proceeded with regular order,
carefully assessed policy options in the past, and usually
taken months to craft tough, targeted sanctions, focusing their
effect on Iran's leaders while minimizing harm and unintended
consequences for our Nation and for our allies.
But in a departure from past practice, this hearing
originally was not noticed in a timely way under the rules of
the Senate. I appreciate the willingness of Deputy Secretary
Blinken and Treasury Under Secretary Cohen to testify today.
They were originally given too little notice, and I hope we can
avoid that in the future.
Notwithstanding the Senate rules that guarantee witnesses
chosen by the minority as a matter of right, our initial
request to seat Administration witnesses was refused. In fact,
the Administration is generally not considered to be minority
witnesses. They should not be. All of us should want to hear
from those at the center of these negotiations regardless of
who sits in the Oval Office.
Since we have a number of new Members, it is important to
note that this Committee has not heard directly from the
Administration on Iran since December 2013. Former Chairman
Johnson withheld action on further negotiations while nuclear
negotiations were ongoing--for further legislation while
nuclear negotiations were ongoing and arranged periodic
classified briefings for all of us instead.
People have different views on these issues. The process
should involve not just an oversight hearing like today's, but
also a set of hearings on the legislation that we will mark up
as well.
If this Committee is serious about oversight and serious
about policymaking, we should delay a markup until we get a
full sense of the likely consequences of this very important
action. We should consider the implications of other
legislative proposals which may come before other relevant
committees, like those being developed by Senator Feinstein,
by, jointly, Senators Paul and Boxer; by our distinguished
colleague on this Committee, Senator Corker; and their
relationship to new sanctions legislation. Some might be
helpful, some might not be helpful. Instead, it looks like this
sanctions bill will be hustled through this Committee with no
actual legislative hearings, even though Members likely have
questions about its provisions and, frankly, are uncertain
about what congressional action might mean for the
negotiations.
The President said new sanctions legislation would
dramatically undermine the negotiations and our relations with
negotiating partners and erode international support for
multilateral sanctions. He said he will veto the bill. Our
negotiating partners have expressed strong opposition.
Mr. Chairman, I ask consent that statements by the
President Obama and Prime Minister Cameron and the recent
Washington Post op-ed from the EU foreign ministers and the EU
high representatives, I ask unanimous consent that those be
placed in the record, Mr. Chairman.
Chairman Shelby. Without objection.
Senator Brown. Thank you, Mr. Chairman.
The Committee should hear all arguments on all sides. They
should probe them. We should test them against our own
knowledge and experience on these issues. If Congress acts to
force the President's hand in the next few months by overriding
his veto, and if doing so contributes to the collapse of
negotiations and our heading down the path toward a military
confrontation, Congress, beginning with each one of us, will be
held responsible.
This Committee bears an unusually grave and historic
responsibility to assess the full consequences of acting now.
We should be especially careful to ensure a thorough process.
We have the time to do so since no new sanctions would be
applied for 6 months. In the meantime, existing sanctions will
continue to bite, and to bite hard.
I have supported the search for a diplomatic solution. Some
predicted that JPOA would unravel the sanctions regime. It has
not. Others worried Iran would not comply or would benefit
unduly from sanctions relief or from new trade deals. None of
that, as our two Administration witnesses will affirm today,
none of that has proven true.
There have been situations where we and Iran disagreed
about whether certain things were allowed under the JPOA. They
were litigated and they were resolved by Iran ceasing that
activity.
I am not naive about the likelihood of a deal with Iran. I
know that the President has set those odds roughly at 50-50.
But I think we must allow the President to test these
proposals.
I urge the Chairman to step back and adopt the process
usually used in this Committee under Chairmen of both parties,
undertake additional hearings, delay a markup and further
action to see if a nuclear deal can, in fact, be reached by the
deadline. Ultimately, while some of us might differ on tactic,
it is clear we share the same goal: to ensure that Iran does
not achieve a nuclear weapon, to do that diplomatically, if
possible, while recognizing that other alternatives remain on
the table.
A longer, more orderly process will ensure that we are
fully informed of the potential consequences of our actions so
that no one looks back with regret that we rushed another
critical national security decision through Congress without
fully understanding its implications. Mr. Chairman, history is
an unkind judge of policymakers who make that mistake.
Thank you.
Chairman Shelby. Senator Menendez.
STATEMENT OF SENATOR ROBERT MENENDEZ
Senator Menendez. Well, thank you, Mr. Chairman. For years,
Congress has played a significant role in authorizing nuclear
sanctions on Iran, and I am proud to have taken the lead role
in what has been a bipartisan effort to pass a series of
sanctions that more than anything else has been responsible for
Iran's decision to enter negotiations on its nuclear program.
Now, the legislation that Senator Kirk and I have drafted
would signal to the Iranian regime that there will be more
consequences if they choose not to reach a final deal. This
morning, however, many of my Democratic colleagues and I have
sent a letter to the President telling him that we will not
support passage of the Kirk-Menendez on the Senate floor until
after March 24th and only if there is no political framework
agreement because, as the letter states, we remain hopeful that
diplomacy will succeed in reversing Iran's ability to develop a
nuclear weapon capability in accordance with the timeline that
the P5+1 and Iran negotiating teams have set for themselves,
which is March 24, 2015, for a political framework agreement.
But we also say in this letter that we remain deeply
skeptical that Iran is committed to making the concessions
required to demonstrate to the world that its nuclear program
is exclusively peaceful by March 24th.
The fact is that negotiators are now in their 18th month of
talking, and senior Administration officials continue to
forecast the chance of reaching an agreement at less than 50-
50. In the interim, Iran has breached the Joint Plan of Action
at least once and made a mockery of it a second time by trying
to illicitly procure parts for the Arak reactor in violation of
U.N. Security Council resolutions. Iran is procrastinating
because the longer the negotiations last, the further the P5+1
moves in their direction.
We have slowly shifted positions during the last 18 months
after dismantling Iran's nuclear infrastructure--the Arak
reactor, the Fordow enrichment facility, Iran's 19,000
centrifuges--to allow Iran to keep all those elements in some
form while we settle for alarm bells that will tell us only
when it is too late, when Iran has breached. And without
prospective sanctions that are ready to be implemented, our
only option may very well be what some of my friends are
worried about: either a military one or accepting Iran as a
nuclear weapons state. Neither are desirable.
At the same time, Iran has stonewalled the IAEA's access to
key sites where weaponization activities took place. They are
looking for and seem likely to get an agreement that kicks this
most serious issue down the road, to be addressed at a later
date, after a deal is signed.
I cannot begin to understand how we would build an
inspection and verification regime or how long the agreement
must last until we know how far they have come toward building
a nuclear weapon.
Finally, I want to make a few points clear about the
substance of the Kirk-Menendez bill. As drafted, it would not
violate the Joint Plan of Action. The Joint Plan of Action
limits the imposition of new sanctions during the talks, and
our bill would not impose sanctions until 1 month after the
final deadline runs out at the end of June.
We also provide the President with additional flexibility
through monthly waivers if he believes that they may be on the
verge of a deal and it is in the national security interest to
do so. Only after 2 years of failed negotiations would the
legislation trigger additional sanctions. In my view, we need
Iran to understand that there are consequences if they fail to
reach a comprehensive agreement, and the consequences are
closing loopholes in existing sanctions and expanding sectoral
sanctions.
At the end of the day, Iran must make up its mind about
what is more important: its nuclear weapons program or the
welfare of its people. Until now, Iran has not been motivated
to make such a decision. In my view, a strong, bipartisan bill
that outlines the consequences of failure could be the
motivator that Iranian leaders need to make the hard decisions.
And, Mr. Chairman, I would just say, as someone who voted
against the war in Iraq when many of my colleagues who now seem
to be doves voted for it--which was a monumental mistake, in my
view--and as someone who has worked hard to create the
opportunity so that we do not have the only option of being a
military attack or accepting a nuclear-armed Iran, what I do
not want to see and what I will not submit to is having the
aspirations that we had in North Korea, which ended up not
turning into the aspirations we desired, but turning into North
Korea being a nuclear weapons state, for which we are paying
enormously today. And that is a test of history and judgment
that those who supported that at that time I think will come to
regret as well, should come to regret as well. And that is why
I for one do not want to see it happen a second time.
Chairman Shelby. Senator Corker.
STATEMENT OF SENATOR BOB CORKER
Senator Corker. Thank you, Mr. Chairman, and I look forward
to your leadership and Senator Brown's, and I am one Senator
who would say that I am perfectly happy with the two of you
only giving opening comments. And while I love listening to my
colleagues, I like listening to witnesses more.
I will say that, on the other hand, I appreciate what
Senator Menendez has just said, and I want to thank him and
Senator Kirk for their outstanding leadership on sanctions.
There is no question that our Nation and the P5 together would
not be where we are today had the two of you not led in putting
in place a sanctions regime that most of us here have been
involved in. I want to thank you for that. And so there is no
question to me that we would not be at the table today had that
not occurred.
I, too, want to welcome the new Members. I have found this
to be one of the most outstanding committees in the U.S.
Senate, and I want to welcome everyone here.
I will say to Mr. Donnelly, when I first got here, I, too,
sat in the cameraman's lap.
[Laughter.]
Senator Corker. And I will say that I think my service
during that time was better than it is today. So he is a nice
guy, and I know you will get to know him well.
[Laughter.]
Senator Corker. So thank you.
I think that some of the things that Senator Menendez has
laid out really do bear tremendous scrutiny, and I know we are
going to have some classified briefings to get into more depth.
I know that David Cohen has done a very good job in putting in
place the regime we have. But the fact, if you just looked at
the practical needs for a country like Iran, with one nuclear
reactor--and this is where we began. What are the practical
needs of a country like this? Most scientists would say maximum
500 centrifuges. Maximum.
So here we are, we are negotiating at a point we all know
that is way beyond that. What is the purpose of a country like
Iran having more than 500 centrifuges? Why would they be
putting their citizens through the havoc that they are putting
them through at this point?
We are not focused heavily enough, in my opinion, on the
research and development. We keep talking about Arrow 1's and
Arrow 2's, and people make fun of the little bomb, if you will,
that Bibi Netanyahu showed at the United Nations, talking about
the 20 percent, because we are shipping much or reducing it to
non-usable materials. But the fact is they have Arrow 6's and
above that can go from 0 to 90 percent passing the 20 percent
market like that. And yet we are not focused on that in the
appropriate way.
Again, I would just associate myself with the comments of
Senator Menendez. The previous military dimensions of what Iran
has done is incredibly important for us to know prior to any
agreement being reached. We need to know what their scientists
were able to develop prior to 2003.
Now, Mr. Chairman, I will say this: We have done best when
we were united. This is an issue that I know the Chairman has
to feel this way. I will wait until Schumer finishes his phone
call.
This issue is an issue that we need to address in a
bipartisan way. The last thing we need to do is pass a bill out
of the U.S. Senate that is not veto-proof. So I want to say to
my colleagues on both sides of the aisle, I think we are all
searching for the right way for the Senate and for Congress to
weigh in. And, again, I appreciate the efforts of my
colleagues.
The President just left India. One of my first votes here
was on the 123 Agreement with India that was done under
President Bush. We have voted as a Congress on twenty-seven 123
Agreements, which is a civil agreement with another country
relative to nuclear weapons or civil nuclear activity. And yet
the Administration is telling us today that they do not want us
to weigh in on this agreement.
So, Mr. Chairman, in closing, I hope that we will find a
bipartisan way for this Congress to responsibly weigh in in a
manner that assures that if there is a deal with Iran, it is a
deal that will stand the test of time; that it is a deal that
will ensure that not in the near future will they achieve
nuclear capabilities.
Thank you for the time.
Chairman Shelby. Thank you.
Senator Tester.
STATEMENT OF SENATOR JON TESTER
Senator Tester. Thank you, Mr. Chairman, and I look forward
to your leadership as well as Ranking Member Brown's leadership
on this Committee. And I want to welcome the new Members, also.
This is a very, very good Committee.
I think we are in an interesting situation with the Chair
and Vice Chair not only this Committee but of Foreign Affairs
on this Committee. I think it allows us to glean some
information that may be very, very handy while we talk about
how we are going to deal with Iran into the future.
I would just say this: You know, Iran has been a bad actor.
That is not breaking news. We all know that. But the bottom
line for me is that if we have an opportunity to make them more
predictable in the Middle East without nuclear weapons, I think
that is a risk that we need to take. Knowing full well that
they have not acted appropriately in the past, I think we ought
to give them the opportunity to act appropriately. In the
meantime, verify, verify, verify. And I think that is
critically important as we move forward in these negotiations.
I also want to thank Senator Menendez for his leadership. I
want to thank him for his statement today. I think that what I
heard you say is let the negotiation process work through the
24th of March and then come back and get the Administration in
here and either say enough is enough or, if successes are
happening, move forward.
So I would just say that I want to thank the Chairman,
Ranking Member Brown. It is a little new regime now that I have
not been accustomed to, nor anybody else that was elected since
2006. But by the same token, I think there is an opportunity
here to work in a bipartisan way to move things forward in a
way that works for this country and for the world.
And so, with that, thank you, Mr. Chairman.
Chairman Shelby. Senator Toomey.
STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator Toomey. Thank you, Mr. Chairman. I appreciate your
having this hearing today. I think it is extremely important. I
appreciate the Administration witnesses.
We all do agree, as Senator Tester mentioned, that Iran is
certainly among, if not the most dangerous regime in the world.
The question is: What should we do about it?
I am going to suggest three things that I want to hear more
about and three things that I recommend, Mr. Chairman.
First, I think we do need to pass a sanction bill that
should be at least as strong as the Nuclear Weapon Free Iran
Act of 2014, the Kirk-Menendez bill.
I also think we should make it clear to the President that
he should seek to preclude any uranium enrichment capability by
Iran in a final agreement that is reached.
And I think that any such agreement negotiated between the
Administration and the Iranians should be put to Congress for a
vote before it becomes operational, and let me touch briefly on
why.
First of all, I think additional sanctions are necessary.
The whole purpose of sanctions is to raise the cost of
acquiring nuclear weapons to an unacceptably high level for the
Iranian regime. The whole point is to make the cost exceed the
perceived benefit. It seems to me that sanctions were making
some progress in that direction. They certainly were having a
huge adverse impact on the Iranian economy. Arguably, the
sanctions brought Iran to the negotiating table, but then we
recently eased those sanctions, in my view, without
commensurate concessions from the Iranians. And now Iran has
allowed the second deadline to pass without an agreement. Their
nuclear program continues. Their economy has begun to recover.
So, in my view, prospective, tough, conditional sanctions
should be implemented if Iran for the third time chooses to
obfuscate and delay rather than to reach an agreement, and Iran
should know now that that is what is coming.
Second, the American people will not be saved from a
nuclear Iran if Iran retains the capacity to continue to enrich
uranium. If all Iran wanted was the ability to generate
electricity, they do not need any enrichment capability for
that. The fact is you can buy enriched uranium. The Iranians
have a contract with Russia to do exactly that. There are 18
countries around the world that have peaceful nuclear energy
programs without any active enrichment capability. They
purchase their uranium.
Frankly, the only reason I can think of that Iran would
insist on retaining enrichment capability in an agreement is if
it wants to retain the ability to eventually produce weapons-
grade uranium. And let us remember, any meaningful enrichment
capability can quickly be adapted to a weapons-grade
capability. So I think American security depends significantly
on ending uranium enrichment capability.
Finally, Mr. Chairman, congressional approval of any
agreement is going to make the agreement more durable. The
Obama administration--if an agreement is reached, it is going
to happen with only 18 months left in this Administration. Our
national security interest in preventing Iran from having
nuclear weapons will extend far beyond the remainder of this
Administration's term. So Congress should vote on the
agreement, just as the Senate would ratify any important
treaty, and the Iranian people need to know that they are
negotiating with the American people and have the broad support
of Congress rather than just the President.
So I think Congress should act now; pass a strong sanctions
bill that would go into effect prospectively and conditionally;
make it clear to the President that he should seek to
completely eliminate Iran's enrichment capability; and require
that any agreement negotiated come before Congress.
And let me just close with this, Mr. Chairman. I understand
the Obama administration has threatened to veto any bill that
would do what I have just described, even calling for
prospective and conditional tightening of sanctions. The
President argued in the State of the Union that new sanctions
passed by this Congress at this moment in time will all but
guarantee that diplomacy fails.
Well, there is a problem with this analysis, in my view,
and that is, if the Iranians are serious about a deal, they
would not walk away from the negotiations over conditional,
prospective sanctions that they have the power to avoid and
that do not violate the JPOA. In fact, they would be motivated,
not deterred, by conditional sanctions.
And I think we have to ask ourselves, if they are serious
about reaching an agreement, why aren't they a little bit
concerned about driving us away from the negotiating table? But
rather than showing good faith and any kind of restraint,
instead Iran has violated the Joint Plan of Action, and they
are now rampaging through the Middle East; continuing their
indirect control of Lebanon; propping up Assad while he
massacres several hundred thousand of his own people; exerting
ever more power in Syria and Iraq; and last week, through
proxies, overthrowing a government that was supportive and
cooperative with the United States in Yemen.
So, Mr. Chairman, I think this is overdue. I am very
grateful that you are having this hearing. I look forward to
the testimony of both panels, and I think Congress needs to
act.
Chairman Shelby. Senator Merkley.
STATEMENT OF SENATOR JEFF MERKLEY
Senator Merkley. Thank you very much, Mr. Chairman, and I
think everyone here on this panel has the goal of preventing
Iran from having a nuclear weapon. Not only does it represent a
direct threat, but it represents what could be the start of a
nuclear arms race. We see so much in many international
conflicts in the Middle East, the Shiite and the Sunni history
and mistrust and enmity that drives so much of the conflict,
and certainly a Shiite bomb might well drive a Sunni bomb, et
cetera. The last thing we want is for Iran to have a nuclear
weapon.
That is why we are here, to listen to your testimony and to
gain insight. I certainly want to understand better how the
actions by the Congress may strengthen the negotiating hand of
the United States or damage it, certainly both directly and in
terms of the strength of the collective alliance necessary to
make a sanctions regime effective. Diplomacy is certainly an
art. Those of you who have been deeply engaged certainly have
insights to share with us, and I look forward to hearing them.
Chairman Shelby. Senator Heller.
STATEMENT OF SENATOR DEAN HELLER
Senator Heller. Mr. Chairman, thank you, and to the Ranking
Member, for holding this hearing today. If I may add to what
Senator Corker said to my friend across, Mr. Donnelly, as the
latest Member on this Committee to have sat in your seat, get
to know the cameraman well. There will be times he will feel
like your only friend.
Senator Donnelly. We are already going to a ball game.
[Laughter.]
Senator Heller. Mr. Chairman, in assessing the nuclear
agreement with Iran, my assessment is this: I cannot imagine a
higher risk versus reward scenario than this agreement.
Crippling sanctions brought Iran to the negotiating table in
the first place, and by suspending these sanctions, I am very
concerned that the United States has deteriorated the leverage
that congressional action has provided this Administration.
That is why today is so important. We need to understand
what impact these sanctions are having on Iran and whether it
is bringing them closer to producing a nuclear weapon.
Furthermore, it has always been the policy of the United States
through resolution after resolution, passed with unanimous,
nearly unanimous support by Congress, that Iran should not have
the ability to enrich uranium, even for peaceful purposes. Yet
the interim agreement has effectively codified Iran's right to
enrich uranium, all in the hopes that Iran will keep its
promises to allow international inspections and cease
enrichment activities.
A nuclear Iran is not in the best interest of the Middle
East or Israel, and I am concerned that this deal has created
security risks and uncertainty, not only for the United States
but also for our regional allies.
I am glad this Committee is holding this hearing. I hope it
will move forward with legislation that will hold Iran
accountable as the negotiations continue and allow for proper
congressional oversight.
And with that, Mr. Chairman, I thank you and look forward
to hearing from our witnesses.
Chairman Shelby. Thank you.
Senator Warren.
STATEMENT OF SENATOR ELIZABETH WARREN
Senator Warren. Thank you, Mr. Chairman, and I am looking
forward to working with you and with my good friend, the
Ranking Member, Senator Brown.
You know, we all share a common goal, and that is to
prevent Iran from developing nuclear weapons. At this moment, I
believe our ongoing negotiations with Iran are our best hope
for achieving that goal and should be our first priority, since
undermining those negotiations risks escalation and risks the
possibility of war.
I am looking forward to hearing from our witnesses today
about whether the proposed new sanctions legislation will be
helpful or harmful to that goal. And with that, I yield the
rest of my time.
Chairman Shelby. Senator Sasse.
STATEMENT OF SENATOR BEN SASSE
Senator Sasse. Thank you, Mr. Chairman. Thank you for the
welcome. And, Ranking Member Brown, I look forward to working
with and learning from you and all of my new colleagues. Mr.
Chairman, thank you for your leadership in beginning with this
important strategic issue, and in the interest of getting to
our distinguished witnesses, I ask that my prepared remarks be
made a part of the record.
Chairman Shelby. Without objection, it is so ordered.
Senator Sasse. Thank you.
Chairman Shelby. Senator Heitkamp.
STATEMENT OF SENATOR HEIDI HEITKAMP
Senator Heitkamp. Thank you, Mr. Chairman, and I can assure
Senator Corker and Senator Donnelly, the worst seat in the
house is where now my friend Jerry Moran sits. Enjoy the backs
of the heads of the witnesses and not being able to read their
placards, because focusing is always a good thing over there.
But I only want to add one thought, and I think Senator
Corker is really the only person who has talked about this. A
divided Congress is not in the best interest of our national
interest, especially when we are talking about something that
is the most significant challenge that we have to our national
security and the security of the world today. And so it is
critically important that we listen. It is critically important
that we pay attention to a path forward that can truly unite
this country in a very critical common cause.
And so I look forward to the witnesses. I look forward to
another 2 years of serving on this Committee. I will assure
you, as someone who was new last year, this truly is one of the
best Committees in the entire U.S. Senate, and I welcome all
the new Members.
Chairman Shelby. Thank you.
Senator Cotton?
STATEMENT OF SENATOR TOM COTTON
Senator Cotton. Well, I did not have a statement prepared,
but since you called on me, I will thank you, Mr. Chairman, and
the Ranking Member. I am looking forward to serving on the
Committee.
I know that several Members--the Obama administration has
expressed concern that any prospective, conditional sanctions
could cause Iran to walk away from the table, could minimize
the cooperation we have received. Iran, however, is responsible
for killing and maiming hundreds if not thousands of our troops
in Iraq and Afghanistan. As those who served there know, they
remain the number one sponsor of state terrorism. According to
the State Department, they continue to prop up the Assad
regime. They control the Iraqi Shiite militias. And just in the
last couple weeks, an Iranian-aligned Shiite militant group has
taken over the capital of Yemen. An Iranian general has been
discovered working with Hezbollah on the outskirts of the Golan
Heights to strike Israel. Fortunately, he was discovered by an
Israeli missile.
Iran has reached a defense pact with Russia, and Alberto
Nisman, the prosecutor who is investigating the 1994 bombing of
the Jewish community center in Buenos Aires, largely attributed
to Iran and Hezbollah, has mysteriously turned up dead.
So I have to ask: Is this the cooperation that our
forbearance has achieved us? Can America afford any more
cooperation from Iran?
I yield back.
Chairman Shelby. Thank you.
Senator Donnelly, you are not last today.
STATEMENT OF SENATOR JOE DONNELLY
Senator Donnelly. Thank you, Mr. Chairman. It is an honor
to be on this Committee. I appreciate your hard work and
Ranking Member Brown's, and I want to thank Senator Corker and
Senator Menendez for your leadership on this issue as well.
I am new to this Committee, but from my seat on the Armed
Services Committee, I believe the prospect of a nuclear-armed
Iran is one of the most serious threats to our national
security interests. I am looking forward to working with my
Republican colleague, Senator Sessions, to address this threat
and other proliferation concerns as we lead the Strategic
Forces Subcommittee this year. And I appreciate the seriousness
with which we shall debate this issue in this Committee.
While there are honest differences in how to achieve our
goals, I think it is important to recognize that there is a
strong consensus about the importance of nuclear
nonproliferation. The necessity of ending Iran's nuclear
weapons program is at the top of that list.
The unanimity of support on this issue has fostered a
strong, united effort bringing together not only our European
partners but also Russia and China. We share a belief that not
only is the threat of a nuclear-armed Iran too great to
tolerate, but that Iran's nuclear program could set off an arms
race in the Middle East.
Senator Corker and I heard that just last week when we were
traveling over there. And that would deliver a severe blow to
global nonproliferation efforts and making the world a more
dangerous place.
There is also a strong consensus we should make every
effort to decisively end Iran's nuclear weapons program through
diplomatic means. While we often tout the strength of our
military as the greatest fighting force the world has ever
known, we were also the global leader in driving diplomatic
solutions. Like many of my colleagues here today, I have spoken
with leaders across the world and heard them say that they need
our support, often saying if the United States does not lead
the way, no one will.
As with our military, we have many tools in our diplomatic
toolbox, from international aid to bilateral and multilateral
agreements to sanctions. We are here today to examine those
tools and we can best use them to solve one of the single
greatest threats to U.S. and global security.
Through my years in Congress, I have long supported
sanctions on Iran, and the benefit of hindsight has only
reaffirmed my commitment to these sanctions. There is no
question the strong international sanctions regime, built
through legislation passed by Congress, brought Iran to the
negotiating table. I pray these talks succeed.
It is for that reason that I support legislation to
strengthen sanctions should the Iranians fail to reach an
agreement by the deadline the White House has set. The
legislation this Committee will mark up on Thursday supports
that aim. It would impose new sanctions only if these talks
fail.
By introducing this legislation now, we are sending a clear
message that the time has come for Iran to stop playing games.
However, while I strongly support this legislation, I also
firmly believe we must give the P5+1 talks a chance to succeed.
This effort is far too serious to become a political football
and the consequences are far too great.
Some have expressed serious concerns about passing this
legislation prior to the March 24th deadline in the talks. Our
first panel today will undoubtedly reiterate the
Administration's warnings on what could happen if we act
prematurely, and I take those concerns seriously. I cannot
support any action that would needlessly undermine the chances
for success in this endeavor.
As such, while I intend to cosponsor the legislation, I
believe the Senate should wait until after the March 24th
deadline in the talks to consider this bill on the floor. If
after that deadline passes Iran fails to reach an agreement on
a political framework that addresses the parameters of a
comprehensive nuclear agreement, we should move this forward
decisively. This deadline is a critical test of Iran's
intentions. And while I am realistic about Tehran's willingness
to play fair, I will give them until March 24th to prove
themselves to us and to the world.
Thank you, Mr. Chairman.
Chairman Shelby. Senator Rounds.
STATEMENT OF SENATOR MIKE ROUNDS
Senator Rounds. Thank you, Mr. Chairman and Ranking Member
Brown. I look forward to participating in these hearings. I
also look forward to hearing the testimony from our witnesses
today. Therefore, I have an opening statement that I would
like, with your permission, to have submitted for the record,
and I will yield the rest of my time back.
Chairman Shelby. Thank you. Without objection.
Chairman Shelby. Senator Reed.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Mr. Chairman, and I am
at this point convinced that it is not the right time to pursue
new sanctions legislation, and doing so could diminish our
security, not enhance our security.
In the past, Congress has led the charge for more
aggressive and expansive sanctions, indeed in front of many
Administrations. And the Obama administration's aggressive
implementation of the sanctions regime, together with the
international coalition, the P5+1, have brought Iran to the
negotiating table and led to the Joint Plan of Action. While it
is not a long-term solution, we have seen tangible effects that
the Joint Plan is having some effect.
Since its implementation in January 2014, the Iranians have
taken steps to halt, and in some cases roll back, aspects of
their nuclear program, particularly on three possible paths to
a bomb: enough 20 percent enriched uranium for one bomb, the
installation of next-generation centrifuges, combined with the
growing stockpile of 3.5 percent enriched uranium, and fudging
and advancing the plutonium track at the Arak reactor.
Moving forward with new, unilateral U.S. sanctions at this
time risks undermining the negotiations and could jeopardize
chances to secure additional gains through a comprehensive
agreement. If negotiations are taken off the table, then the
course of action before us will be even more challenging, of
higher risk, and potentially without our international
partners.
Moving forward with sanctions gives one of the most onerous
and brutal regimes in the world the ability to walk away and
attempt to avoid blame. Doing so could also drive a wedge
between the United States and our international allies, and
this international coalition is as important as unilateral
American sanctions.
Earlier this month, British Prime Minister David Cameron
stated that further sanctions, in his words, ``could fracture
the international unity that there has been which has been so
valuable in preventing a united front to Iran.'' This view has
been echoed by top-level P5+1 officials, calling on Congress to
give negotiations a chance and hold off on sanctions.
It makes little sense to decide now what we will do if
negotiations are not successful. We should give these
negotiations a chance and wait to see if a comprehensive
agreement can be reached. With an agreement, Congress can make
a thoughtful determination on the merits and act quickly and
decisively to respond with a much higher probability of
international support. Without an agreement, Congress must and
will act. It is at that point, not now, that we should move
decisively.
To be clear, given the nature of the Government of Iran,
any agreement reached between the P5+1 and Iran must meet
rigorous standards. But such a peaceful resolution to Iran's
nuclear program will not be possible if we do not allow the
negotiations to proceed to conclusion, and pursuing additional
sanction legislation now would harm our best chance to achieve
our objective of preventing a nuclear-armed Iran.
Thank you very much, Mr. Chairman.
Chairman Shelby. Senator Scott.
STATEMENT OF SENATOR TIM SCOTT
Senator Scott. Thank you, Mr. Chairman, and I look forward
to working with you and other Committee Members on this
Committee. I think that we have heard so many opening comments
today that I am going to submit mine for the record. I look
forward to hearing the testimony from our witnesses.
Chairman Shelby. Thank you.
Senator Crapo.
STATEMENT OF SENATOR MIKE CRAPO
Senator Crapo. Thank you, Mr. Chairman. I, too, look
forward to working with you and Ranking Member Brown on the
Committee. As a number of Members have said, this is one of the
most critical Committees in the Congress, and as you can see
from the significance of today's issue, this Committee handles
issues that are critical to our Nation, not only with regard to
our national security but with regard to our economic strength,
our growth of our economy, and protection of and development of
jobs in this country.
So I welcome our new Members as well. This is an exciting
Committee with a multitude of critical issues that we will need
to work forward on. And I want to follow up on comments that
Senator Corker and some of the others have made about the
importance that we develop consensus in this Committee to move
forward. This Committee has a record and a history of moving
forward on the kinds of incredibly important issues that we
deal with on a consensus basis, and it is my hope that we will
be able to continue to develop that path forward. It is what
will help us to bring solutions to this country.
I do also have a lot of the same concerns that have been
expressed by others here that I will not reiterate at this
point. There are a number of questions I have in addition to
the issue of whether we should pursue sanctions legislation
right now, and I am one who believes we should move forward
decisively on new sanctions legislation now. But I also want to
hear from the Administration about what the negotiations are
yielding. I realize that not a lot can be discussed in a
nonclassified environment with regard to that, but the fact is
that the substance of the agreement that we are negotiating is
as critical as the question of timing on new sanctions
legislation. And because of that, I also want to raise the
importance of the fact that whatever the new agreement is that
is reached, if one is reached, it should be submitted to
Congress for a vote and an approval in Congress. And I am very
concerned about the fact that there is some indication that
there will not be an opportunity for Congress to weigh in on
this agreement once it is reached, if we are able to get to a
point where an agreement is achieved.
So, Mr. Chairman, again, I will withhold any further
comments until we get to another situation in which we have the
ability to question and even in a confidential meeting ask
stronger and different questions. But I thank you for having
this hearing and look forward to the future hearings and
actions we will take on this issue.
Chairman Shelby. Senator Schumer.
STATEMENT OF SENATOR CHARLES E. SCHUMER
Senator Schumer. Thank you, Mr. Chairman. And first I want
to congratulate you on Chairman and Senator Brown on Ranking
Member. I look forward to working with you, Mr. Chairman, and
certainly look forward to working with Sherrod under your
leadership. I would just have the record show that Shelby,
Brown, and Schumer are often in the gym at 7:30 a.m., and who
knows what can happen when we are on those bikes huffing and
puffing away.
As many know, I have been a long supporter of strong
sanctions to prevent Iran from achieving their desired goal of
obtaining nuclear weapons. The leaders of Iran would have
continued expanding their nuclear weapon capability, but
sanctions made them think twice about it. The bottom line is
very simple. It is sanctions, tough sanctions, not the goodness
of the hearts of the Iranian leaders, that brought Iran to the
negotiating table.
We in Congress passed important legislation that put strong
pressure on Iran. Senator Menendez and Senator Kirk deserve
tremendous recognition for leading the charge, as they are
doing now.
Sanctions work best when they are multilateral, and getting
the P5+1 and other countries like India and South Korea to be
part of the sanctions regime helped make the sanctions all the
more effective. And in this regard, I want to give a shout-out
to President Obama and his Administration and the gentlemen at
this table. All of you deserve tremendous recognition.
I have to say that critics of the President do not give him
enough credit that he deserves for effectively lining up the
nations behind the sanctions regime which brought them to the
table in the first place.
Having said that, I believe the only way Iran will
voluntarily stop their march to nuclear weapons is if they know
tougher and tougher sanctions will be enacted if they fail to
come to a strong agreement that prohibits them from obtaining
nuclear weapons. That is why I support the Kirk-Menendez
legislation, a bill that would increase sanctions on Iran if
they are unwilling to come to a deal by the Administration's
extension deadline of June 30th. It is almost irrefutable logic
that if sanctions brought Iran to the table, additional and
tougher sanctions are more likely to cause the Iranians to give
in, and give in more quickly, to reach a final deal that will
prevent Iran from becoming a nuclear threshold state.
There are a hierarchy of outcomes here. The worst possible
outcome the world, the United States, and Israel face is a
nuclear Iran. That would be devastating. Make no mistake about
it. A nuclear Iran will lead to a nuclear arms race in the
Middle East, the most volatile region in the world. The chance
of an actual nuclear war occurring--and that would poison the
whole globe, even if it occurred in one portion of the globe--
is much greater, unfortunately, if Iran has a nuclear weapon.
But once we all agree that a nuclear Iran is unacceptable,
I think everyone agrees it would be better to come to that
result with a strong negotiated agreement rather than by
America or Israel, or both, having to take military action. So
if you had to rank the hierarchies of solutions in order of
desirability, the worst, a nuclear Iran; next, having to use
the military option; the best, a negotiated agreement that is
strong and tough enough and prevents Iran from being a nuclear
threshold state.
The President has said that he needs a little more time to
come to this conclusion. Mr. Blinken in his testimony states
the Administration's goal is to conclude the major elements of
a deal by March.
Since a strong, negotiated agreement is the best solution,
a solution that I hope we can come to, I, along with a group of
my colleagues, many of whom are sponsors of the original
Menendez-Kirk legislation, are releasing a letter that states
we will not vote for the bill on the floor of the Senate until
then. If by March 24th the Iranians have not come to an
agreement, the letter states we will vote for the bill on the
floor of the Senate at that time.
Barring significant changes to the bill, I intend to vote
for Kirk-Menendez in the Committee on Thursday so that a bill
can be ready to go if the Iranians are incapable of
demonstrating their real seriousness by March 24th.
And let me just say one word about a proposed settlement,
which I know Senator Corker--even though I was on the phone, I
still heard what you had to say.
[Laughter.]
Senator Corker. I enjoyed listening to your conversation
while I was----
Senator Schumer. About a proposed settlement. There are
numerous vital elements of a successful negotiated agreement,
but one of the most important, the agreement must contain
stronger language that allows inspections anywhere, anytime,
unannounced. This is the only way to ensure that Iran complies
with the agreement since I and most of us have little faith in
the Iranian leadership.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
Senator Moran?
Senator Moran. Mr. Chairman, thank you very much. I will
forgo an opening statement and yield back my time.
Chairman Shelby. Thank you.
On our first panel today, the witnesses are the Honorable
Antony Blinken, Deputy Secretary of State, United States
Department of State; and the Honorable David Cohen, Under
Secretary for Terrorism and Financial Intelligence, United
States Department of the Treasury.
Gentlemen, we welcome you both. Mr. Blinken, both your
written and oral testimony will be made part of the record. You
may proceed as you wish, Mr. Secretary.
STATEMENT OF ANTONY BLINKEN, DEPUTY SECRETARY OF STATE,
DEPARTMENT OF STATE
Mr. Blinken. Thank you very much, Mr. Chairman.
Chairman Shelby, Ranking Member Brown, and Members of the
Committee, it is very good to be with you today to discuss
where we are with our negotiations with Iran to verifiably
ensure that its nuclear program will be for exclusively
peaceful purposes going forward.
Our core goals for these negotiations are clear and they
are consistent: Any agreement must effectively cutoff the four
pathways Iran could take to obtain enough fissile material for
a nuclear weapon--two uranium pathways through its activities
at Natanz and Fordow; a plutonium pathway, through the Arak
heavy water reactor; and a potential covert pathway. Any
agreement must require stringent access, monitoring, and
transparency measures to maximize the international community's
ability to detect quickly any attempt by Iran to break out
overtly or covertly from an agreement. Any agreement must give
us confidence that, should Iran choose to break its
commitments, it would take at least 1 year for it to produce
enough fissile material to make a bomb. And any agreement must
deal with the PMD issue, missiles capable of mating a nuclear
weapon to a missile, and R&D.
In exchange, the international community would provide Iran
with phased sanctions relief tied to verifiable actions on its
part. Such relief would be structured so that sanctions could
be quickly reimposed if Iran were to violate its commitments.
As we speak, negotiations continue among the P5+1 and Iran.
They have been substantive; they have been serious. We have
made progress on some of the key issues that separate us, but
real gaps remain.
Overall, however, we assess that we still have a credible
chance of reaching a deal that is in the best interest of the
United States as well as that of our allies and partners around
the world. Our goal is to conclude the major elements of the
deal by the end of March and then to complete the technical
details by June.
We believe we are negotiating from a position of strength.
In the past, Iran could use the cover of talks to buy time and
advance its programs. Thanks to the interim agreement we
reached, the so-called Joint Plan of Action, or JPOA, Iran's
program was frozen in many respects, rolled back in some, and
international inspectors were given unique access to learn more
about the program during the pendency of the interim agreement.
Before the JPOA, Iran had about 200 kilograms of 20 percent
enriched uranium in a form that could be quickly enriched to
weapons-grade levels. It produced much of that material at the
Fordow facility, buried deep underground. Today Iran has no 20
percent enriched uranium. Zero. None. It has diluted or
converted every ounce, suspended all uranium enrichment above 5
percent, and removed the connections at Fordow that allowed
them to produce 20 percent enriched uranium in the first place.
Before the JPOA, Iran was making progress on the Arak
reactor, which, if it had become operational, and together with
a reprocessing facility, would have provided Iran with a
plutonium path to a nuclear weapon. Once fueled, the Arak
facility would be challenging to deal with militarily. Today
Arak is frozen in place. No new components, no testing, no
fuel.
Before the JPOA, Iran had installed roughly 19,000
centrifuges, the vast bulk at the Natanz facility. Today 9,000
of those centrifuges are not operational. Iran has installed no
new centrifuges, including next-generation models, and Iran's
stockpile of 4 percent low-enriched uranium is capped at pre-
JPOA levels.
And before the JPOA, inspectors had limited access to
Iran's nuclear facilities. Today the JPOA has enabled
inspectors' daily access to its enrichment facilities and a far
deeper understanding of its program--its centrifuge production,
its mines, its mills, and other facilities important to the
program. And the IAEA has repeatedly reported that Iran has
lived up to its commitments under the interim agreement.
Just as we asked Iran to uphold its commitments under the
interim agreement, we have lived up to our commitments to
provide it with limited relief. But as my colleague will make
clear, that relief is dwarfed by the vast amounts denied to
Iran under the existing sanctions regime, which remains in
force. Indeed, under JPOA and throughout its existence,
sanctions pressure on Iran has increased, not decreased.
This Committee is now considering legislation to impose
additional sanctions on Iran should negotiations fail. And I
know, the Administration knows that the intent of this
legislation is to further increase pressure on Iran and, in so
doing, to strengthen the hand of our negotiators to reach a
comprehensive resolution. So while we appreciate the intent of
this effort, it is our considered judgment and strongly held
view that new sanctions at this time are unnecessary and, far
from enhancing the prospects for negotiations, risk fatally
undermining our diplomacy, making a deal less likely, and
unraveling the sanctions regime so many in this body have
worked so hard to establish.
The new sanctions are unnecessary because, as I noted a
moment ago and Under Secretary Cohen will elaborate on, Iran
already is under acute pressure from the application of the
existing sanctions regime. In recent months, that pressure has
only grown stronger with the dramatic drop in oil prices.
Should Iran refuse a reasonable agreement or cheat on its
current commitments under the interim agreement, the Senate
could impose additional sanctions in a matter of hours,
matching or going beyond what the House has already passed. The
Administration would strongly support such action. Iran is well
aware that an even sharper Sword of Damocles hangs over its
head. It needs no further motivation.
So new sanctions are not necessary, in our judgment, but
they pose a real risk. They pose a risk, as we have talked
about before, that Iran could use them as an excuse to walk
away, citing a violation of the interim agreement. Even if the
sanctions and trigger legislation are not a technical
violation, they could be perceived as such and used by Iran as
an excuse both to walk away or indeed to divide our partners
from us.
The trigger legislation is what is on the table right now
before us. I appreciate very much the comments that Senator
Menendez made a short while ago about a letter that he sent the
Administration, which I have not had a chance to read. I heard
Senator Schumer describe it as well. But we appreciate the
recognition that our negotiators could use some additional time
and space to pursue the diplomatic option in the absence of
this legislation being passed.
Let me just very quickly cite the concerns that we have
even with trigger legislation, were it to be passed during
these negotiations.
First, as I noted, this could give Iran an excuse to walk
away from the negotiating table, violate the interim agreement,
and pursue its nuclear program full tilt. Instead of keeping
its uranium enrichment under 5 percent, as it has since the
JPOA was signed, it could start enriching again at 20 percent
or even higher. It could rebuild its stockpile of low-enriched
uranium, going beyond pre-JPOA levels. It could stop the
suspension of the work on the Arak reactor. And it could
eliminate the access that inspectors have.
Second, even if it doesn't walk away or even if it promptly
returns to the table, the process could, in fact, empower
hardliners to press the negotiators to adopt much more
stringent positions at the negotiations and make a conclusion
of the negotiations much more difficult, if not impossible,
using terms that we could not accept. We sometimes have a
tendency to see Iran as a monolith, a country devoid of
politics. In fact, the politics are intense. There are
different camps, and in the event there was a dispute over
whether new sanctions had been imposed by the United States,
the hardliners could user that to press the negotiators to take
positions that would make an agreement very, very difficult, if
not impossible to reach.
Finally, as has been noted--and this is most important,
because ultimately what Iran thinks is much less important than
what our international partners think. Our international
partners believe that the United States, if it is perceived as
acting prematurely through additional nuclear-related sanctions
legislation in the absence of a provocation or a violation by
Iran, their willingness to enforce the existing sanctions
regime, much less add additional sanctions in the event of the
failure of the negotiations, that is likely to be diluted.
Their support, as has been noted, is critical. Without it, the
sanctions regime would dramatically atrophy.
Up until now, we have kept many of these countries on
board, including countries for whom sanctions are clearly
against their self-interest, their economic interest. We have
kept them on board because they believe we are serious about
trying to conclude a diplomatic resolution of Iran's nuclear
program. If they lose that conviction, the United States, not
Iran, risks being isolated, the sanctions regime would
collapse, and Iran could turn everything it turned off under
the JPOA with no consequence. In other words, we would lose
everything we have achieved over the last decade in turning the
tables on Iran, isolating Iran not the United States.
We can debate whether any or all of these things would
happen, but it is the judgment of those I believe are best
placed to know--the diplomatic professionals and other
negotiators who have been at the table with the Iranians, with
our partners for months and indeed for years, that is their
conclusion. They believe the risks are real, serious, and as I
said at the outset, unnecessary. That is their best judgment.
So why run these risks and jeopardize the prospects for a deal
that will either come together or not in the next couple of
months. Why not be patient, especially with the program frozen
under the interim agreement? There is nothing to be gained and,
in our judgment, lots to be lost by acting precipitously.
And, finally, as I noted, this is not just our view. This
is the view of our closest partners. You heard Prime Minister
Cameron a week ago. Some of you may have read the piece written
by the foreign ministers of the United Kingdom, France, and
Germany, and let me conclude with that. They wrote:
``Introducing new hurdles at this critical stage of the
negotiations, including through additional nuclear-related
sanctions legislation on Iran, would jeopardize our efforts at
a critical juncture. While many Iranians know how much they
stand to gain by overcoming isolation and engaging with the
world, there are also those in Tehran who oppose any nuclear
deal. We should not give them new arguments. New sanctions at
this moment might also fracture the international coalition
that has made sanctions so effective so far. Rather than
strengthening our negotiating position, new sanctions
legislation at this point would set us back.''
Thank you, Mr. Chairman.
Chairman Shelby. Secretary Cohen.
STATEMENT OF DAVID S. COHEN, UNDER SECRETARY FOR TERRORISM AND
FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY
Mr. Cohen. Good morning, Chairman Shelby, Ranking Member
Brown, and distinguished Members of the Committee. Thank you
for the invitation to appear before you today.
As this may be my last opportunity to appear before this
Committee before I take on other duties, I want to begin by
expressing my appreciation to you, Chairman Shelby, Ranking
Member Brown, and to all Members of this Committee for the
courtesy that you have shown me over the last several years.
There is no higher national security priority than ensuring
Iran does not acquire a nuclear weapon, and President Obama has
made clear that we will do everything in our power to prevent
that from happening.
For us at Treasury, that has meant working within the
Administration, with Congress, and with international partners
to impose the most powerful sanctions in history. And in many
respects, the sanctions have worked exactly as designed. They
have driven Iran to the negotiating table because Iran's
leaders know that relief from sanctions can come only in
exchange for taking steps that will guarantee that Iran cannot
produce a nuclear weapon.
As we sit here today, no one knows whether the negotiations
ultimately will yield a comprehensive deal. But we, like you,
are dedicated to testing fully the diplomatic path. As we do
so, Iran's economy remains subject to intense pressure from
sanctions.
Under the Joint Plan of Action, which has been in effect
for a little over a year now, Iran halted progress on its
nuclear program, rolled it back in key respects, and allowed
unprecedented inspections of its enrichment facilities. In
exchange, Iran received limited and reversible relief from some
nuclear-related sanctions.
Importantly, the JPOA left in place the full architecture
of our financial, banking, oil, and trade sanctions, our
terrorism and human rights sanctions, and our domestic embargo.
This means that Iran is still cutoff from the international
financial system. It is unable to export even half the oil it
was exporting in 2012, and it is barred by sanctions from
freely accessing most of its oil revenues and foreign reserves.
These sanctions are not just words on the books. We
vigorously enforce them. Since the signing of the JPOA, we have
designated nearly 100 Iran-related targets and imposed over
$350 million in penalties for sanctions evasion. Put simply,
Iran still is not open for business, and its economy remains in
a deep hole. Let me cite just a few metrics.
In 2014 alone, our sanctions deprived Iran of over $40
billion in oil revenues. That is well over twice the total
estimated value to Iran of the JPOA sanctions relief.
Altogether, since 2012, our oil sanctions have cost Iran more
than $200 billion in lost exports and oil proceeds it cannot
access.
Iran's currency, the rial, has depreciated by 16 percent
just since the signing of the JPOA and 56 percent since January
2012. And Iran's economy today is 15 to 20 percent smaller than
it would have been had it remained on its pre-2012 growth
trajectory.
Because of the scope and intensity of the sanctions Iran
currently is subject to, and because of the economic pressure
those sanctions continue to apply, Iran is negotiating with its
back against the wall. Accordingly, we see no compelling reason
to impose new sanctions now even on a delayed trigger. Indeed,
we think new sanctions legislation is more likely to be
counterproductive than helpful in the negotiations.
Today Iran's nuclear program is frozen in its economy, and
thus, its negotiating team remain under enormous pressure
because we have been able to hold together the international
sanctions coalition. Enacting new sanctions now threatens to
unravel this.
If Congress enacts new sanctions now and the negotiations
ultimately prove unsuccessful, our international partners may
blame us, not Iran, for the breakdown in the talks. If that
happens, overall support for the sanctions regime would then
decline, making it more difficult to maintain and more
difficult to intensify sanctions pressure. And if a breakdown
in talks led to the demise of the JPOA, we would lose the
additional insight into Iran's nuclear program and the
restrictions on development that the JPOA has given us.
Make no mistake: This Administration understands and
embraces the power of sanctions. Sanctions are a key component
of many of our most important national security initiatives. We
are not sanctions doubters. But neither do we believe that
layering on additional sanctions is always the right move.
Sanctions are one tool in our toolkit, alongside diplomacy,
military action, and the myriad other ways that we project
power.
If diplomacy does not succeed, the President said that he
``will be the first one to come to Congress and say we need to
tighten the screws.'' But in our view, now is the time to give
diplomacy every chance to succeed, not to create a new
sanctions tool.
Thank you, and I look forward to addressing your questions.
Chairman Shelby. Thank you.
Secretary Blinken, many observers have questioned Iran's
willingness to negotiate in good faith. Even President Obama
assesses the chances of a final nuclear deal at about 50
percent. Do you foresee today any circumstances under which the
Administration would once again extend the negotiations?
Mr. Blinken. Thank you, Mr. Chairman. As I noted, our goal
and intent is to try and include the outlines of an agreement,
the key elements, by the end of March and then to take the time
to June, if we get there, to fill in the technical details.
That is what we are focused on. That is what we are driving
toward.
As I sit here today, I cannot absolutely rule out that we
would look for additional time. For example, if we get to June
and we have the core elements of a deal in place and we are
working on the technical details and it turns out that we need
a little bit more time to dot all the I's and cross all the
T's, we may come and seek it.
Similarly, even in March, were we to get to a point where
virtually all the elements of a deal had been worked out but we
were short on one chapter, we might want a little bit more time
in that initial period to do that. And I should remind you as
well that the way this is structured, the actual deadline is
June. We set ourselves the obligation of trying to reach the
elements, the broad elements of a deal, by March.
So a long way of saying our focus and intent is getting the
elements of a deal done by March and everything concluded by
June, but I do not want to arbitrarily say today that we could
not under any circumstances come back and seek a little bit
more time. It really depends on exactly where we would be.
Chairman Shelby. Would you concede that protracted
negotiations are in Iran's favor, that is, if their goal, as we
believe, is to obtain nuclear weapons?
Mr. Blinken. Actually, Mr. Chairman, I think what has
happened over the life of the interim agreement is that this
has worked very much in our favor. Again, in the past, we have
had talks with Iran where it has been able to advance its
program while it was talking. In this case, we have frozen the
program in critical respects, we have rolled it back in some,
and we have gotten more inspections access than we have ever
had, and with very limited relief, and as my colleague just
laid out, that relief has been dwarfed by the sanctions
pressure that remains on Iran.
So actually throughout this period, I think this has
benefited us, not them.
Chairman Shelby. But you just brought it up, and you said
that you have effectively frozen the program. Nonetheless, Iran
continues to produce low-enriched uranium and reportedly to
work on more advanced centrifuges. We have seen this before. As
President Rouhani has admitted, during the last so-called
suspension of Iran's program, some 10 years ago, Iran
established a technological foundation for rapid subsequent
progress. What evidence do you have today that Iran is not once
again using the cover of international negotiations--that is,
protracted negotiations--to advance its nuclear program?
Because we hear the opposite.
Mr. Blinken. Mr. Chairman, on the question of the
stockpile, under the interim agreement its low-enriched uranium
stockpile is capped at the level it reached before the
agreement went into effect. So that stockpile has not grown,
and indeed, the under 2 percent that it had, which it had a
fairly vast quantity of, that also has been significantly
diluted.
In terms of the research and development and advanced
centrifuges, you are absolutely right that no doubt Iran is
seeking in various ways to continue to perfect other
centrifuges. But under the agreement, it cannot do the critical
kind of testing that is necessary for it to actually make
advances. It cannot run gas through new centrifuges. The R&D is
capped at where it was before the agreement went into effect.
So are they tinkering with centrifuges and trying to build
them someplace? Almost certainly. Are they able to do the kind
of testing, running gas through them, that would materially
advance them? Are they able to connect them together in a way
that would demonstrate that they work? No.
Chairman Shelby. But that is a little more than tinkering,
what they are doing, I believe. According to the International
Atomic Energy Agency, Iran produced more than 500 additional
kilograms of low-enriched uranium--that is a 7-percent increase
in its holdings--between September and November of this past
year alone. That is a 7-percent increase in only 3 months.
Assuming that Iran continues its uranium production at this
same pace and we reach no nuclear agreement, how much stronger
will Iran's nuclear capabilities be at the end of the Obama
administration, say 2 years hence, compared to when the
President assumed office?
Mr. Blinken. Mr. Chairman, under the agreement, again, the
low-enriched uranium stockpile is capped at a level at the end
of the agreement that it was at before the agreement. Whether
there are variations during the----
Chairman Shelby. It might be capped. I am going to use that
word pretty liberally there, that term. But they continue to
pursue their goal, do they not, the best they can, anyway they
can?
Mr. Blinken. As long as it is consistent with the
agreement. If it is inconsistent with the agreement and indeed
the IAEA continues to report on a regular basis that it has
lived up to its obligations under the agreement, it has not
done that.
Chairman Shelby. OK. Secretary Cohen, I will get to you
because time is limited here. Last August, your office at
Treasury and the State Department designated additional Iranian
Government entities, and I will quote, ``for activities that
have materially contributed to or posed a risk of materially
contributing to weapons of mass destruction and for efforts to
support the development of nuclear weapons.'' Doesn't that mean
that the Iranian Government is still trying to develop nuclear
weapons even as we speak?
Mr. Cohen. Well, Mr. Chairman, we did apply sanctions last
August----
Chairman Shelby. I know.
Mr. Cohen.----as we have applied sanctions throughout the
course of this Joint Plan of Action period, and obviously
before as well. We do so against those entities that we see are
violating our sanctions or seeking to violate our sanctions.
There is no question that, as Deputy Secretary Blinken
said, the Iranians remain interested in their nuclear program.
These negotiations are designed to ensure going forward that
Iran cannot produce a nuclear weapon. And in the meantime, we
maintain our sanctions for the specific purpose of ensuring
that we can disrupt every effort the Iranians may make to
advance their program in the meantime.
Chairman Shelby. Secretary Cohen, why should we, and you--
of course, you are a big part of the Government--have any
confidence in a negotiating partner such as Iran that continues
to cheat, not just in terms of evading sanctions but by what a
lot of us believe or have reason to know they continue to work
on developing nuclear weapons?
Mr. Cohen. Well, Mr. Chairman, I think the short answer is
none of us should have confidence that Iran is going to live up
to its current obligations or its future obligations. That is
why the emphasis that many Senators have made here on
verification is something that we are also very interested in.
Deputy Secretary Blinken can speak to this at greater length,
but I think we understand that, today and going forward,
verification is critical.
Chairman Shelby. Secretary Blinken, this last here from me,
I am concerned that Iran, which is designated by the State
Department as the world's leading sponsor of terrorism for so
many years, continues to derail negotiations based on its so-
called right to develop nuclear technology. I can hope that the
U.S. negotiators are resisting Iranian efforts to claim this
``inalienable right'' because it was gravely undermine the
proliferation regime, which we fought so hard to maintain.
Mr. Blinken. We agree with you, Mr. Chairman.
Chairman Shelby. Can you confirm that it is the United
States' position, the State Department's position here, that
Iran enjoys no such right under either Article 4 of the Nuclear
Nonproliferation Treaty or under any other provision or
principle of law?
Mr. Blinken. Yes, Mr. Chairman. We agree with you. It does
not have a right to enrich.
Chairman Shelby. OK. Senator Brown.
Senator Brown. Thank you, Mr. Chairman.
Mr. Cohen, you spoke of the difficulty of holding together
our coalition. Mr. Blinken, you mentioned the potential of
fracturing international unity and the challenge of keeping the
other five nations on board.
Secretary Blinken, as you know, Prime Minister Cameron at
the White House urged Congress not to move forward on new
sanctions, including trigger sanctions taking effect later, now
arguing it would undermine the P5+1 process. Talk through, if
you would, especially as you emphasized, the sacrifice
economically--I think something important to understand--that
our five partners in this have sacrificed economically by being
part of this coalition. Talk through what their views of this
are, give examples how you think our allies might react in
light of those comments.
Mr. Blinken. Thank you, Senator. I think we have heard them
address this very clearly. You alluded to Prime Minister
Cameron. I quoted from an op-ed piece that the foreign
ministers of France, the United Kingdom, and Germany wrote
together, making clear their concerns about additional
sanctions at this time during the midst of these negotiations
that are reaching a critical juncture.
The concern is that any such legislation, even trigger
legislation, could be used and perceived as a violation, even
if technically it is not, of the interim agreement and the
obligation we undertook not to impose new sanctions while we
were negotiating. That starts to sow doubt and confusion. It
may send a message that we are not serious about reaching an
agreement, and it is that seriousness that has helped hold this
coalition together.
The reason so many countries have been with us, in no small
measure thanks to the painstaking diplomacy that we have done
to hold them with us, is because they believe we are serious
about trying to reach a diplomatic resolution of this problem.
The moment they doubt that and lose faith in that, then the
economic incentives many of them have not to abide by the
sanctions regime may start to gain greater force, and they will
say, ``This is not going anywhere. We may as well start to cut
deals. This is going to fall apart.''
Now, maybe our core allies do not do that, although even
some of our core allies I think would be very tempted. But keep
in mind, one of the most important aspects of this--and Under
Secretary Cohen can address this--are the oil sanctions and the
fact that we have capped, and indeed reduced, the purchases of
oil made by critical countries that are not part of the P5+1.
They would like to buy more oil. Depending on where prices go,
that can also be a big influence. They, too, will start to feel
the pressure not to abide by the commitments they made and the
pressure on Iran will be released.
The other aspect is this: You know, the idea that we under
those conditions would be able to impose additional sanctions
on Iran I think would be incredibly difficult. I am even more
worried--and Under Secretary Cohen may want to address this--
about our ability to sustain the existing regime if we wind up
in a situation where there is a dispute among us about whether
we violated our commitments or not under the agreement.
But the bottom line is this: If we thought it was necessary
or indeed helpful to have it, to have these additional
sanctions during the pendency of the negotiations, we would be
the first to welcome it. But in our judgment, it does not give
us anything that we do not already have. And so why run the
risk, even if we cannot prove this is what would happen, even
if it is not 100 percent, there is a real risk, and the people
who are closest to it believe that the risk is serious. Why do
it when we do not need it?
Senator Brown. So your concern, Secretary, is if we were to
do sanctions now with a trigger, our allies, part evidenced by
the op-ed by the three countries and the EU Commissioner, EU
Minister, would--that we would have more difficulty holding
them and I assume China and Russia together to keep the
sanctions as effective as they have been in making progress
during the JPOA?
Mr. Blinken. That is correct. I think the great strength of
our position is the unity we have, that we forged with our
partners in the P5 and indeed with other countries that are
applying the sanctions regime. The strength of these sanctions
goes in the first instance to what has been passed by Congress.
That has been vitally important. But it is magnified
exponentially by the fact that we have countries around the
world who are implementing them. When that goes away, a lot of
what we have achieved, a lot of what you have achieved in this
room and in this body, will be diluted.
Senator Brown. Mr. Cohen, the President expressed concern
last week that if Congress acts, in his words, prematurely on
sanctions, it would potentially hand Iran a PR victory. It
could lead other countries now cooperating with us, along the
lines of Mr. Blinken's comments, to reduce their commitment to
international sanctions.
Based on your experience building these sanctions
painstakingly over the years, how difficult would it be to
maintain them under these circumstances with our allies, what
we do and what they do?
Mr. Cohen. Senator, I think it would be difficult. I think
there is a risk, as Secretary Blinken said, that we would lose
some of the voluntary cooperation, and I would just cite one
example here.
In 2011, the U.N. Security Council passed a resolution,
1929, that called on member states to exercise vigilance over
Iran's banking activities, and there are several paragraphs in
that resolution that did not demand anything from member
states, but called on them to exercise vigilance.
We have used that language, and we have used the very real
sense that we are serious about a diplomatic resolution to get
countries around the world, not just within the P5+1 but
others--in Asia, India, Turkey, others--to apply really serious
vigilance regarding Iran's banking activities. That has had an
enormous impact.
If these countries begin to think that we are not serious
about a diplomatic resolution, they can, consistent with their
obligations under the United Nations Security Council
resolution, be less vigilant, less active in how they look at
Iran banking activity. That will have an impact on the
sanctions regime. That will have an impact on economic activity
in Iran, and it will all be to our detriment.
Senator Brown. And does that have a broader effect on our
diplomatic efforts in the region and our standing in the world?
Mr. Cohen. I would think so. I think it would--and, again,
Deputy Secretary Blinken can speak to this, but I think if our
partners and others around the world begin to doubt that we are
serious about a diplomatic resolution here, I think it redounds
to our detriment in many respects.
Senator Brown. Let me ask one more question. Thank you for
your forbearance.
We have all talked about the role of Congress--certainly
Senator Corker has sort of led the charge on that, and Senator
Menendez has--on what we do with sanctions and what we do at
the conclusion of the agreement, if there is an agreement that
is acceptable. Talk to us about constructive things Congress
can do in anticipation of an agreement to make sure that
inspectors' verification, bolstering sanctions, investigations,
all of those kinds of things where we play a role in enforcing,
making sure this agreement is enforceable, that the inspections
are what they need to be, as both Senator Schumer and Senator
Menendez said. Either of you.
Mr. Blinken. Senator, first I would say that Congress has
played a critical and indeed lead role getting us to where we
are. It plays a critical and lead role now with the knowledge
that Iran has that Congress can act with further sanctions if
Iran walks away or reneges on its agreement. And, critically,
Congress has to play a central role, if we get to an agreement,
to make sure that Iran lives up to its commitments, because
what we are thinking about doing should we reach an agreement
is not to end sanctions immediately but to suspend them, and
then test the proposition, test whether Iran meets a series of
steps that it will have to agree to in the final agreement, and
only at that point, over some significant period of time, would
sanctions actually be lifted, which Congress would have to do
since Congress imposed them. That is the most critical role,
and I think it is really the enforcement regime that would be
built into any final agreement with a snap-back provision so
that suspended sanctions could be reimplemented very quickly
should Iran renege on its commitments.
Now, as to other elements going forward, one of the things
that we have been doing and we will continue to do is to be in
very close contact with you in a classified setting about where
we are on the details of these negotiations. But it is very
difficult to isolate one particular element and say this is
what we have to have on X, Y, or Z, because all of these pieces
have to fit together. And so I think being able to describe the
totality of where we are in a closed setting I think will help
you see where we are trying to get to.
Senator Brown. In closing, Mr. Chairman, so the
Administration is committing to us that there will be a
significant, important role of Congress throughout this process
even if we--if we have an agreement as significant and
important as you hope we get to.
Mr. Blinken. That is correct.
Senator Brown. OK.
Chairman Shelby. Senator Corker.
Senator Corker. Well, I look forward to finding out more
about that role during this questioning and answering.
One of the reasons I like coming to hearings like this is
to read the tea leaves and see where people are, and it is
evident with our strongest Democratic leader on sanctions
saying that he is not willing to vote on his bill until after
March 24th, that if we want to speak with one voice and show
strength to Iran, it is likely that we are not going to vote on
the Senate floor on sanctions until after March 24th.
Mr. Blinken, I would just ask you, do you have a problem
with that?
Senator Blinken. Senator, I think that what I heard Senator
Menendez say and then Senator Schumer say--not having seen the
letter, I would not want to comment on it in detail, but on the
basis of what I heard, I think it recognizes that our
negotiators could use the time and space effectively, not
having legislation pass before the end of March. I think the
commitment to do that is something that we would see very
favorably and would answer a big part of the problem that we
had with the idea of the legislation, even trigger legislation,
being passed now before the end of March.
Senator Corker. And I think that, you know, you know we
have concerns about the limited access that we have to what
Iran is doing. The JPOA allowed them to continue research and
development. We know that they, during these negotiations,
pumped UF6 gas into an IR5 centrifuge. We know that. We caught
them doing that.
I have heard our negotiators tell us that Zarif could pass
a lie detector test--Zarif, their negotiator, could pass a lie
detector test, that they were never involved in any previous
military dimensions because of the way Iran works, things are
separated. So that somehow gives our negotiators confidence,
and what it does for us is give us great concerns.
Dr. Clawson's testimony is going to state in just a minute
that they have already passed a budget with lower petroleum
prices, and they are willing to live with that. So I know that
we have inflicted some pain, but the fact is they are willing
to live with that pain because this program is so important to
them.
So we have concerns. As a matter of fact, as Joe Donnelly
mentioned, we were in the Middle East last week, and the
concerns are that Iran is here and the United States and its
friends have been here, and during the negotiations most of the
movement has been in the direction of Iran, and that is what
everyone is concerned about.
Your boss, Secretary Kerry, has been before us and told us
that this has to pass muster with Congress, a final deal.
Sanctions is about pushing toward a deal, but we would like for
it to pass muster. You just said in testimony here with Senator
Brown just a minute ago that it should pass muster. And the way
we pass muster around here is we vote. We do not sit around and
shoot the breeze at lunch. We vote.
So what I have been pushing for--and I think numbers of
people have alluded to it--and others have been pushing for is
that if there is a final deal, we vote. Do you support that
notion?
Mr. Blinken. Senator, as I mentioned earlier, we believe
Congress will have to vote at the end of any deal to eliminate
the sanctions that would be part of any----
Senator Corker. OK. Let me--since we have had this round
before in Foreign Relations, I am going to say to the other
Members what they wish to do is suspend, suspend for a long
time, like probably beyond the time the President is here. What
that means is the whole regime falls apart. If you suspend for
that long, it is over.
What we would like to do is vote. As Senator Kaine
mentioned last week, if we are going to have to vote eventually
on a final lifting of negotiations--of sanctions, and since we
know Iran is perfectly happy with the suspension because they
know the whole regime will fall apart once you suspend it,
would it not be better if we just voted on the front end so
that we could say yes or no on the front end? I do not know why
you would object to that if, in fact, we have to vote a year
and a half from now, 2 years from now, anyway?
Mr. Blinken. Senator, I think there are a few issues at
play. One is an issue, as we discussed last week in the Foreign
Relations Committee, of the classic executive-legislative
prerogatives. So any executive branch, Republican, Democrat,
whoever is running it, will want to hold on to the prerogative
of being able to negotiate nonlegally binding accords such as
this one, as many Administrations have, and not have it voted
up or down by Congress. That is one issue which we would have
to address.
But substantively, to your point, because I think it is
critical, you know, if Congress had been asked to vote on the
interim agreement within a month or so of its conclusion, I
suspect that many Members who today agree that that agreement
has produced real results and has advanced our security might
in the first instance, because of the criticism the agreement
received, have voted it down, and then we would be in a
materially worse off place.
So we think that, first, being able to test any agreement
that we reach to make sure that Iran is meeting its commitments
and doing so over an extended period of time before eliminating
the final leverage, the critical leverage that comes with
actually terminating sanctions, we think that would be a
critical component built into the agreement. But I think Under
Secretary Cohen can address the question that you raise,
because it is an important question, about would the regime
under suspension in effect fall apart.
Mr. Cohen. I think it is instructive to look at what
happened to the sanctions regime during the Joint Plan of
Action, where we suspended some sanctions and continued to
enforce the sanctions that remained in place. That is
essentially the same model that is being conceived if there
were to be a comprehensive agreement here.
The sanctions did not fall apart. It did not deteriorate,
the architecture did not collapse. And I think there are
important reasons for that, most of which I would rather go
into in closed session.
Senator Corker. Let us do that because I am out of time.
Mr. Cohen. OK. But I think the critical point is with
suspension of sanctions, with future termination, for all the
reasons that Secretary Blinken said, it is important for the
negotiations and for the deal. I think it is also important
that this Committee not think that upon suspension the entire
sanctions architecture collapses. That has not been our
experience, and I think we have reason to believe that that
will not happen.
Senator Corker. I would just respectfully say in closing
that if it is perceived by the world that we have reached a
deal that this Administration and the P5+1 have agreed is
satisfactory, you will not hold, the sanctions regime will not
hold. It will be a totally different dynamic where all of a
sudden Iran is no longer a rogue state but they have now
reached a final agreement with the P5+1.
So I would respectfully say that we do need to vote on any
final deal. We vote on civil deals. And I would say actually
since it appears we may be voting on sanctions immediately
after March 24th, maybe that is a place holder for Congress to
even weigh in on whether they think, if a deal is reached, it
is satisfactory or not. But I appreciate your testimony.
Chairman Shelby. Senator Menendez.
Senator Menendez. Well, thank you, Mr. Chairman.
Look, for 20 years, when I was in the House of
Representatives, I had been working on the issue of Iran when
people were not paying attention. And no one wants the
President to succeed more on achieving an agreement than I do.
However, it is not just any agreement. It has to be an
agreement that significantly moves Iran in a different
direction.
Now, Secretary Blinken, for the purposes of our colleagues
here who do not sit on the Senate Foreign Relations Committee,
last week under testimony you said, in response to my
questions, that, look, this is no longer about dismantling
Iran's nuclear infrastructure; this is about getting at best,
or maybe better, a 1-year alarm bell. Is that a fair statement?
Mr. Blinken. Yes, Senator. The critical test is whether we
reach an agreement that makes sure that it would take them at
least 1 year to produce enough fissile material for one nuclear
weapon.
Senator Menendez. So we get an alarm bell, but we do not
dismantle Iran's illicit nuclear infrastructure. And I say
``illicit'' not just by U.S. standards but by international
standards of Security Council resolutions.
So let me just say, you spent a lot of time on perceptions,
and last week I made a statement that I think was not taken in
full context. The context is the more that I hear these
arguments, the more concerned I am that we feed into the
narrative there that Iran is the victim when Iran has original
sin here by having an illicit nuclear program.
But let me talk to you about perceptions. You talked
about--you spent all of your testimony talking about Iran's
perceptions. Well, let me tell you what some of us perceive
here in the United States of America.
Number one is you see that the Iranians have a way to cheat
and technically they are not in the Joint Plan of Action. So
they cheated, and we, the United States, complained to the U.N.
Security Council about violations of Iran trying to buy
technology--for what? For the Arak nuclear reactor.
They cheated when they fueled one of their centrifuges.
They cheated when you, Mr. Cohen, last week in testimony said
that, among the 100 times that you have sanctioned different
entities, some of those times Iran was complicit with those who
you sanctioned. So they are cheating in the midst of our
negotiations.
Now, in addition to that--we talk about the Congress
forbearing--well, right now in Tehran there is legislation
pending to deploy centrifuges that can enrich uranium more
efficiently than ever to increase the production of a form of
nuclear fuel that is just shy--just shy--of bomb-grade
material.
The Ayatollah has been talking about a resistance economy,
and last week, the person whom we have got a lot of faith in,
the Iranian Foreign Minister, Zarif, said at the World Economic
Forum that the global drop in the price of oil makes Iran less
likely to agree to concessions on their nuclear program. Less
likely to agree to concessions.
So I do not know about you, but all of that put together,
and so much more, says to me my perception here in the United
States of America is that your aspirations, which I share, but
I have mine dosed in a lot of reality because I do not want
another North Korea.
Now, what you are really telling us, when I hear your
worries about what the Iranian perception is that, in fact,
they are unlikely to make a deal, because if I, the Ayatollah,
who is going to make this ultimate decision, think that a deal
is good for me and my regime to stay in place, I am going to
make it regardless of what the noise or the action is over
here, especially action that would not take place until after
June when you are supposed to have a deal fully consummated.
Now, that is not going to stop me from making a deal that I
otherwise want to make. It is just counterintuitive.
So, look, I think you need to be looking at what Iran is
doing right now, and I will just close by saying, you know,
Iran can cheat, but we do not worry about that in the context
of, you know, unsettling the Joint Plan of Action because
technically it is not within it. But it is great if you can
cheat outside of the Joint Plan of Action and get away with it.
I am sure if we heard from the Saudis, the Emiratis, the
Israelis, and others that they would have a different view than
the Ambassadors that you have mentioned. I know that we have
heard many times before the Senate Foreign Relations Committee
when I was a member and when I chaired it, and even most
recently, that, in fact, the world will come to an end, do not
have sanctions, you are just going to split our coalition, you
are going to drive the Iranians. And now the Administration
heralds it as the singular reason why, in fact, the Iranians
are finally coming to a negotiation.
And just about every sanction that we have passed
legislatively has needed 6 months to ultimately be invoked,
and, of course, more time to feel a consequence. There have
been one or two that were done more quickly, but
overwhelmingly, they needed 6 months. So the time to implement
any sanctions, assuming a deal does not work, is going to take
a lead time of 6 months. Well, testimony before the Senate
Foreign Relations Committee indicates that the Iranian ability
to pass the nuclear threshold is well below the 6 months, so
those sanctions are inconsequential. And that is why some of us
feel that the prospective nature of something that would not
affect a deal that the Ayatollah wants to make is a guarantee
that if they do not make it, we do not have the only option
being, my God, they are going to cross the threshold. We either
have to have a military strike or accept a nuclear-armed Iran.
And that is not a choice that we want to have.
Thank you.
Senator Corker. [Presiding.] Senator Vitter.
Mr. Blinken. Could I just briefly address the Senator's
comments?
Senator Corker. Sure.
Mr. Blinken. Very quickly, because I think----
Senator Menendez. Mr. Chairman, if he does, I want to be
able to respond.
Mr. Blinken. I will be very brief, because I think you
raise some important points, Senator.
First, in terms of what we are concerned about, we are most
concerned about what our partners think, not what Iran thinks.
That is what we are most focused on in terms of the possibility
of additional legislation now.
In terms of what Iran thinks, though, here is what our
assessment is. I mentioned earlier that we sometimes have a
tendency, all of us, to look at Iran as if it is some kind of
monolith devoid of politics, when, in fact, the politics are
incredibly intense. There are different groups. There are
different camps. There are lots of people who do not want an
agreement under any terms. And there are some people who would
like to try to get an agreement not because they like us, not
because they want to be nice to the United States, but because
they think it is in their self-interest. They think that
everything that we have achieved in putting this enormous
pressure on them is something that they need to move beyond if
the country is going to progress. They are more pragmatic, even
if they are not nice guys.
In thinking about how some of these things play in Iran,
the reason we think about that at all is because we want to
make sure that those who are in favor of trying pragmatically
to reach an agreement that meets our needs and interests, that
they are reinforced, and that those who are against an
agreement under any circumstances are not reinforced. That is
why this question also matters in terms of Iran, not because we
care in a sense about what they think, but because we see how
this evolves. We do not want the hands of the hard hardliners
to be reinforced in this process, making a deal less likely.
In terms of cheating, you are absolutely right that, first
of all, there have been instances where we believe they were
violating the interim agreement. We took it to the mechanism
that was put in place to litigate these things, and when that
happened, Iran stopped what it was doing. For example, on the
IR5s, there was a difference of opinion. We carried the day.
You are exactly right that outside of the interim agreement
they are doing things in terms of procurement that we obviously
oppose, which is exactly why during the agreement we have
sanctioned more than 40 persons and entities who are trying to
procure for the Iranian program. So we have been very vigilant
about that.
Thank you.
Chairman Shelby. [Presiding.] Senator Vitter?
Senator Vitter. Thank you, Mr. Chairman.
Mr. Secretary, Secretary Blinken, the State Department
still considers Iran the world's leading state sponsor of
terrorism, correct?
Mr. Blinken. If not the leading, certainly one of the
leading.
Senator Vitter. I think it is the leading, according to the
State Department. That has not changed throughout this process,
has it?
Mr. Blinken. Right, correct.
Senator Vitter. You would not expect it to change even if
there were positive results of this negotiation from your point
of view, would you?
Mr. Blinken. I think that is unlikely.
Senator Vitter. Let me go back to one of Senator Menendez's
main points. Right now the goal of the Administration in this
negotiation has essentially been dumbed down to a year warning
flag, not dismantling the capability, not taking that away, but
a year warning flag. Is that fair to say?
Mr. Blinken. I would dispute the characterization of being
``dumbed down.'' We have been----
Senator Vitter. At the start of this process, that was not
the goal, was it?
Mr. Blinken. The goal was to do two things. The goal was to
make sure that the pathways that Iran has to a bomb--a
plutonium path, a uranium path, and a covert path--were
effectively cutoff. And to do that--and we have been at this
for quite a while--we determined that making sure under any
agreement that it would take them at least 1 year to produce
enough fissile material for one bomb would answer that need.
And it is worth pointing out two things.
One, I think most experts believe that the idea that any
country thinking about doing so would actually break out for
one bomb's worth of material is pretty unlikely. They would
tend to want to accumulate four or five bombs' worth. We have
been very conservative about that, and that is very important.
Second, as you know, the fissile material is not the only
piece of this. Actually having a weapon, weaponization, is
critical, and then having the means to deliver it. The reason
the fissile material piece is what we have been focused on is
it is the most visible thing. It is the thing that we can see,
that we can verify, and that is the best way to give us the
assurance we need that Iran would not pose a threat with a
nuclear program.
Senator Vitter. Mr. Secretary, in fact, at the very
beginning of this process and this concept of negotiation, did
the Administration talk about dismantling the capability, not
having a year warning flag? In fact--take the words ``dumbed
down'' out of it. In fact, has not that even aspirational goal
moved enormously?
Mr. Blinken. Senator, we can discuss in a different setting
some of the details of where we are. I think what is critical
is all of these pieces have to fit together, and you cannot
judge one of these elements in isolation. So, for example, at
different stages of negotiations, we may have been looking to
do one thing in a particular area. That may change as we do
something else in another area. Let me give you a concrete
example just to be illustrative without getting into any
detail.
The question of the number of centrifuges that Iran might
retain in an agreement is an important one because it goes to
its ability to produce enough fissile material for a bomb in a
certain period of time. But it is not the only element. The
type of centrifuge, the configuration of the centrifuges, the
stockpile--all of those things together----
Senator Vitter. I understand what----
Mr. Blinken. So that is why you have to--I think you have
to----
Senator Vitter. My time is being eaten up, so let me expand
and move on. Who on our side in terms of the U.S. Government is
going to make the judgment and the calculation about whether we
have a year warning flag?
Mr. Blinken. We have extraordinary expertise in this
Government--scientists, engineers who work for the intelligence
community, who work for the Energy Department, who work for the
State Department----
Senator Vitter. And I will be the first to acknowledge that
extraordinary expertise, but let me just ask you: Has that type
of extraordinary expertise, including in the intelligence
community, ever been wrong about these sorts of timetables
before?
Mr. Blinken. I imagine that there have been----
Senator Vitter. Well, you do not have to imagine. There is
a historical record. Have they been wrong about these types of
timetables before?
Mr. Blinken. I would say that one of the things that we
have done with the time that we have had during these
negotiations is to bear--at least in my judgment and my
experience; I cannot speak to others' experience--in my
experience, to bear down in an extraordinary way on the science
and the technologies. But it is not just us. Our partners are
critical parts of this, their scientists, their experts, not
just the P5+1. We have an active, vigorous exchange with
Israel, for example, their scientists, their intelligence
community, all of us together.
Senator Vitter. Let me just give you my conclusion, which
is that all of these folks are very smart and very capable, and
yet given the technical issues involved and given the lack of
information involved, it is not like we have full access to
everything we want. Our intelligence community and others have
been wildly wrong before in similar judgments. So I think that
is the historical record. I just want to point that out.
A final question. There are recently foreign press reports
about Iran's continuing effort to buy S-300 missiles from
Russia, which are air defense missiles, and how that is--after
it was essentially dead and in the deep freeze because of the
sanctions regime, that effort is now fully underway again.
Where do you think that is? And is it not moving forward to
some extent because Russia and others see this sanctions regime
going away?
Mr. Blinken. Senator, this is something that we are
extraordinarily vigilant about. We have seen over the past
couple of years various reports of different kinds of deals,
including the one you cited, including oil deals involving
Russia. I think if anything is motivating Russia right now to
be looking at some of these things--and I should say we have--
to our knowledge, this has not gone forward, has not been
finalized, is not happening as we speak. I think what is
motivating them, if anything, is the difference that they have
with us over Ukraine and the extraordinary pressure that we
have imposed on them over their actions in Ukraine. I think
they are looking for other places to do business and other
places to show that they are unhappy with us. But we have not
seen this before. I don't know. Under Secretary Cohen may have
more on that.
Senator Vitter. Thank you. Thank you, Mr. Chairman.
Chairman Shelby. Senator Merkley.
Senator Merkley. Thank you, Mr. Chair.
Deputy Secretary Blinken, at what point do the extensions
become counterproductive in that they essentially undermine any
compulsion for the Iranian negotiators to reach an agreement?
Mr. Blinken. I would say that, to date at least, precisely
because we were able with the interim agreement to freeze the
program in key respects, to roll it back in some others, and to
get these enhanced inspections and access, that it has
manifestly been a good thing for our security and the security
of our partners going forward. And in exchange, as you heard
earlier, the limited amount of relief that they have secured
has been dwarfed by the remaining--almost the totality of the
sanctions regime.
So I think further extensions, were there to be any--and,
again, that is not at all our focus, our intent. We are trying
to drive this to a final agreement on the key elements by the
end of March and then work on the technical details between the
end of March and June. That is what we are focused on. I think
it would--answering your question would depend entirely, or
mostly at least, on the terms of any such extensions. If it got
to the point where Iran was getting more and more in terms of
relief under any kind of extension, I think you would have to
answer the--you know, that question might be answered
differently.
So it really depends on the details, but our focus now is
not extending anything. It is trying to bring this to a
conclusion and making a determination, if we are not able to do
that, that this process will have to come to an end because
Iran is not serious about reaching an agreement.
The $64,000 question is whether Iran can say yes to an
agreement that protects our security interests and those of our
partners. That is the answer we are still looking for.
Senator Merkley. Can you picture a scenario a few months
from now in which the United States concludes that it has not
made progress, it is not going to make progress, that it
essentially ends the negotiations, and holds the coalition
together?
Mr. Blinken. Yes, I can, and I think if during these
negotiations it is demonstrated not just to us but to our
partners who are negotiating and then our partners beyond the
negotiations that Iran is simply unwilling or unable to make an
agreement, then under those circumstances I believe that we
will be in a position not only to sustain the existing
sanctions regime, but to impose additional sanctions, including
the sanctions being contemplated in Congress. But that is why
it is so critical that we retain the high ground, that we do
not create any excuses for the Iranians to divide and conquer,
as they have done in the past, that we remain united as a
group, as a coalition, that Iran remains the country isolated
by the international community over its nuclear program, and
that the United States does not get into a dispute with its
partners over whether we have somehow violated our own
commitments in terms of imposing new sanctions.
Senator Merkley. You noted that there are many different
elements inside Iran, and one of those is the IRGC, and I
believe that at least a portion of the IRGC has benefited by
controlling smuggling during the sanctions regime. What degree
does that situation create a force within Iran that is
influential in trying to block any deal from ever being
completed?
Mr. Cohen. Senator, you are exactly right. I think the IRGC
has tried to take advantage of the existing sanctions and their
control over important aspects of the Iranian economy to
benefit themselves. Frankly, that is one of the reasons why it
would be beneficial to reach a comprehensive agreement with
Iran, because it would ultimately impair the IRGC's
stranglehold on certain aspects of the economy.
In terms of whether they are a blocking mechanism within
Iran on reaching a deal, I would echo what Secretary Blinken
said, which is there are politics in Iran, and I think our
sense is the IRGC tends to be on the side of those who are less
inclined toward a nuclear deal. But I think it is a complex
question, and I think the last thing we want to do is to give
fuel to the IRGC and their allies within Iran to undermine the
prospects of reaching an ultimate arrangement here.
Senator Merkley. Thank you very much.
Chairman Shelby. Senator Toomey.
Senator Toomey. Thank you, Mr. Chairman.
Secretary Blinken, I think you have already addressed this
somewhat, but I want to be very clear. So, objectively
speaking, would the prospective, contingent, trigger-based
sanctions of the type of the Kirk-Menendez legislation, would
passage of that and the President signing it into law, would
that be a violation of the JPOA?
Mr. Blinken. I think we would have to look very carefully
at exactly how the final product was written and passed. So,
for example, if a final product actually imposed additional
sanctions, but then they were, in effect, suspended and then
applied, that would be----
Senator Toomey. OK. I do not want to get too deep into
hypotheticals that nobody has considered, right? I mean, what
we are talking about is sanctions that would go into effect if
and only if the Iranians choose to ensure there is no deal at
that point in time. My understanding is that would not be a
violation of the JPOA.
Mr. Blinken. Again, I do think it depends on exactly how it
is written if you are talking about a technical--but, again, it
is not the question--the question really goes to how would this
be perceived, how would it be seen, would it cause divisions
among us and our partners?
Senator Toomey. Let me address this, because this goes to
the point that Senator Menendez was making, and I share his
concerns very much, and maybe I can put it in a different way.
So if the United States were to take this measure, which
objectively is not a violation of the JPOA, and the Iranians
decide nevertheless they are going to walk away from the table,
that would strongly suggest to some of us that they do not want
an agreement and they are looking for an excuse.
And so one of the things that concerns me is what I
perceive to be an apparent asymmetry in motivation here. We are
supposed to avoid even offending Iranian sensibilities with
legislation that is not even a violation of our agreement.
Meanwhile, they blatantly violate the agreement, and they
continue their rampaged through the Middle East. They continue
to support Hezbollah, prop up Assad, expand their footprint in
Syria and Iraq, last weekend knock over a friendly government
in Yemen, and we are not supposed to draw any inferences from
their behavior, their willingness to defend us?
So my concern is when you look at their behavior, you look
at this apparent asymmetry and motivation, and then you look at
the fact that we have moved the goalpost toward them--you know,
we started off talking about eliminating enrichment capability.
Now we are talking about just enough so that there is a 1-year
heads up. It makes some of us worry about what kind of deal we
are going to end up with. And I think that is a big part of the
concern.
Mr. Blinken. Senator, I think you are exactly right that
there are some in Iran who do not want an agreement, and the
last thing that we want to do in the course of these
negotiations is to strengthen their hand and weaken the hand of
those who are looking to get an agreement, again, not because
they like us or want to be nice to us, but because they have
determined it is in Iran's self-interest.
And so in the event there was a dispute over whether new
sanctions had been imposed or not or we had violated our
obligations under the interim agreement, those in Iran who do
not want an agreement would say, ``See, we told you. You cannot
trust the United States. Walk away.'' Or, ``See, we told you.
You have to drive for harder terms at the table, terms that''--
--
Senator Toomey. I get all that, but----
Mr. Blinken. That is the danger.
Senator Toomey. Like any society, there are complexities,
and there are competing interests, and there are differences of
opinions. But in this one, unusually, the final power is
concentrated in one individual who really at the end of the day
probably gets to make this call.
Let me ask you another question if I could. I think if I
remember correctly, you stated that it is your view and it is
the view of the State Department that Iran has no right to
enrich uranium. Isn't it also true that they have no need?
Isn't it also true that if all they want is peaceful ability to
generate electricity, they can purchase all the uranium that
they need for that purpose?
Mr. Blinken. Yes. We have said to them repeatedly almost
exactly that, which is, if you want to have a civil program,
you can certainly purchase that on the market.
Senator Toomey. Right.
Mr. Blinken. You are right about that. Here is what they
say--and I am not saying that they are right or that we have--
just so you know what they claim. And, by the way, it is also
highly suspicious that a country that is so bountiful in oil
resources would want this type of nuclear program.
Senator Toomey. Absolutely.
Mr. Blinken. That certainly feeds our deep suspicion and
lack of confidence. So I think you are right about that.
Here is what they say: They claim that they do want to have
a civil nuclear energy program so that they can devote oil to
exports--that is one argument that they make--and remain energy
self-sufficient.
They also claim that they are preparing for post-carbon
days.
And, finally, in terms of getting it from other countries,
they claim that in the past, when they have done such
arrangements, the commitments that other countries have made
were not kept.
Those are the kinds of arguments we hear. But it is
precisely because we are highly suspicious of their
motivations, it is precisely because we know they had a program
to weaponize at least until 2003, which we believe now ended
then, it is precisely because of all of that that any agreement
we reach has to give us the confident we need to make sure
that, as a practical matter, it will be useful for peaceful
purposes.
Senator Toomey. My time has run out, so I will stop. But it
is precisely for those reasons that I think that it is vitally
important that they not have the ability to enrich, the last
point being that, as I know you are very well aware, the
capability of enrichment, even at relatively low levels, is a
short step from the capability to enrich to a weapons-grade
level. And that is what I am concerned about.
Thank you, Mr. Chairman.
Chairman Shelby. Senator Warren.
Senator Warren. Thank you, Mr. Chairman.
As I mentioned earlier, we are all committed to a common
goal: prevent Iran from developing a nuclear weapon. Right now,
I believe our ongoing negotiations with Iran are the best hope
for achieving that goal, and they should be our first priority,
since undermining those negotiations risks escalation and risks
the possibility of war.
Now, Congress would gladly give our negotiators more
leverage in these talks, but the President has repeatedly
stated that if Iran violates the interim deal or if the talks
fall apart, he will immediately call for new sanctions. And we
know that would be ready to add more immediately.
So, Deputy Secretary Blinken, I just want to be clear on
this point. If Congress passes another sanctions bill now
during ongoing negotiations, will that give our negotiators any
new leverage?
Mr. Blinken. In our judgment, no.
Senator Warren. Thank you. I agree, and I just do not see
the upside to passing a bill now. So let us talk about the
downside.
Deputy Secretary, let us be clear on this one. Would
passing a sanctions bill now strengthen or weaken hardliners
inside the Iranian Government who are hoping to blow up the
negotiations?
Mr. Blinken. We would be concerned that the passage of new
sanctions now would reinforce the hand of hardliners and weaken
the hand of more pragmatic elements who are trying to get to an
agreement.
Senator Warren. Thank you.
We also need to consider the impact of a sanctions bill on
our international partners, as you have mentioned earlier. Two
experts and former Treasury officials wrote in the New York
Times that it was the cooperation of our partners all around
the world ``rather than the severity of American sanctions
alone that delivered results'' in the negotiations with Iran.
But just recently, the foreign ministers of France,
Britain, Germany, and the European Union all wrote that the new
American sanctions ``might also fracture the international
coalition that has made sanctions so effective so far.''
So, Under Secretary, if Congress passed new sanctions
legislation now, how would that affect the willingness of our
international partners to hang together to enforce the current
sanctions?
Mr. Cohen. Well, I think that what the foreign ministers
said in that piece is a real concern, that their willingness to
hang with us, to voluntarily work with us to impose sanctions,
could be compromised. And it is a risk that is not worth taking
since it does not provide us additional leverage at the
negotiating table.
Senator Warren. All right. And, last, if diplomacy fails,
we will have to move to other options, because all of us agree
that an Iran nuclear weapon is unacceptable. So let us talk
about what happens if the negotiations fail.
If the United States had passed new sanctions legislation
before that happened, would it be easier or harder for us to
maintain an international coalition to work together to keep
Iran from getting a nuclear weapon?
Mr. Blinken. In our judgment, it could well be harder. It
would certainly run the risk of muddying the waters and
creating confusion among the coalition, and, in effect, we
would end up arguing amongst ourselves instead of keeping the
focus on Iran.
Senator Warren. All right. So thank you.
We have every reason to be skeptical about the Iranian
Government, and I think that has been made clear today. But our
number one goal is to prevent a nuclear-armed Iran. If new
legislation gives us no extra leverage and it increases the
risk that the negotiations will blow up and it makes it harder
for us to hold together an international coalition to keep Iran
from getting a nuclear weapon, then I just cannot support it.
Thank you, Mr. Chairman.
Chairman Shelby. Thank you.
Senator Cotton--Senator Sasse. I am sorry.
Senator Sasse. Tom is taller, but he is also younger.
Chairman Shelby. But you were first.
Senator Sasse. Thank you, Mr. Chairman.
Secretary Blinken, could you help us understand the
evolution of the Administration's position on sanctions going
back to 2011, please?
Mr. Blinken. Actually, I am happy to do that. I think Under
Secretary Cohen could do that as well. If it is all right,
maybe I will let him address that.
Senator Sasse. Sure.
Mr. Cohen. This Administration has been strongly supportive
of sanctions going back to 2011 and, frankly, back to the
beginning of this Administration. We have worked closely with
Congress throughout. We have worked on our own to intensify the
sanctions. I think it is actually important to set the record
straight on this.
If you look at the legislation that has been enacted over
this Administration, beginning with CISADA in 2011--this was
the legislation that said to banks around the world you can do
business with the United States or you can do business with
Iran, but you cannot do both. That was legislation that the
Administration worked very closely with Congress in devising
and enacting.
The oil provisions that required those who were purchasing
oil from Iran to reduce significantly the amount of oil that
they were purchasing or face being cutoff from the United
States' financial system, again, we worked closely--after an
initial version of that provision was adopted, we worked very
closely with Members of this Committee and with leadership to
include provisions in that legislation that would enhance our
ability to hold together the international coalition.
And then, finally, I think what has been one of the most
powerful sanctions that Congress legislated, which was the
sanction that required when a country buys oil from Iran, that
it goes into restricted accounts and can only be used for
bilateral trade and that money cannot be moved around the
world, that was a provision that this Administration came up
with and provided to Congress to enact.
So we have been foursquare behind intensifying sanctions
legislatively. We have adopted more than a dozen executive
orders. We have imposed sanctions on dozens and dozens and
dozens of individuals and entities who have been involved in
sanctions violation. So the evolution of our sanctions pressure
has been to intensify, intensify, intensify, to drive Iran to
the negotiating table. That worked. It got them there because
it had the effect on their economy.
What we are seeing now is that just because some is good
does not mean that more is better. We got them to the
negotiating table. They are there. They are negotiating in a
substantive way. The idea right now is to see if we can close
this deal and not to try and think we can force them to cry
``Uncle'' through additional sanctions.
Senator Sasse. But isn't it also the case, as Senator
Menendez mentioned, there have been multiple times when the
Administration has made an argument much akin to what we are
hearing from you today. Subsequently, when the sky did not fall
because of certain sanctions that the Administration did not
request, you have later agreed that they were useful in driving
the Iranians to the negotiating table.
Mr. Cohen. And I think what is critical to bear in mind is
that what we have done is we have worked with Congress in these
sanctions to ensure that as the sanctions are enacted and as
they are applied, we do it in a way to hold together the
international coalition. There is a risk that I think is one
that this Congress has been attentive to, needs to be attentive
to, that we fracture the international coalition. It is not
worth it to pass a piece of legislation that on its face looks
like it will intensify sanctions if, in fact, it fractures the
coalition. And so we have worked very closely with Congress in
devising the sanctions and then in implementing the sanctions
to hold together the coalition.
Senator Sasse. And I have appreciated both of your
testimony today about the reality of internal politics in Iran
and the way that pragmatists may suffer in the face of these
sanctions. I think you have made an argument there, but in the
interest of time, I will not pursue the question I would like
to ask about why our allies would not also be able to see that
conditional, prospective sanctions are being used apparently as
an excuse rather than as a reality.
But just to pivot in my last minute, could you explain to
the American people how--in your testimony, Secretary Blinken,
at the beginning, you said that you want to see the Iranians
limited to exclusively peaceful purposes. How do you reconcile
that with the exchange you had with Senator Toomey?
Mr. Blinken. Thank you, Senator. This gets down to a
fundamental question, which is, does any program that Iran has
at the end of this--at the end of any agreement, does it allow
it as a practical matter to break out to get enough material
for a nuclear weapon or to try and develop it covertly? And
what we are working to do in this Administration is to cutoff
every single one of those pathways as a practical matter.
In absolute terms, if they are enriching, does that mean
that they could not enrich enough to get a weapon? Well, they
could start to do that. But provided you have the access and
the monitoring and the transparency to see it and then provided
you have the time to do something about it, either impose
additional sanctions to stop them or, if necessary, take
military action, then as a practical matter their program will
have to be for peaceful purposes, because if they try to do
otherwise, they will be stopped. That is the test. So any
agreement has to pass exactly that test.
Senator Sasse. It just does not seem to be the same as a
dismantling goal, which is where we began.
Mr. Blinken. Yes, so, you know, we talk about enrichment
and why do they need to enrich, why should we allow them. There
is no right to enrich. We have been very clear about that. But
as a practical matter, should they be left with any enrichment?
And the problem is this: They have mastered the fuel cycle,
whether we like it or not. We cannot bomb that away. We cannot
sanction that away. We cannot argue that away. They have that
knowledge.
The real question is not whether they have any enrichment
capacity. The real question is whether it is so limited, so
constrained, so confined, so transparent, that as a practical
matter they cannot develop enough fissile material for a bomb
without us having the time to see it and to do something about
it. That is the practical test.
Now, in an ideal world, would we want them to have zero
enrichment? Sure. Is that something they will ever agree to? I
think the answer is probably not. And, second, our partners are
unlikely to stick around in terms of implementing the sanctions
regime if that has to be the bottom-line test.
So we are focused on what is achievable in a way that
materially answers our security concerns and those of our
partners. That is what we are focused on.
Senator Sasse. Thanks for the time.
Chairman Shelby. Thank you, Senator Sasse.
Senator Heitkamp?
Senator Heitkamp. Thank you, Mr. Chairman.
I have kind of three areas, and I do not want to be too
argumentative, so I just want maybe a yes and no in following
up on Senator Corker's discussion with you. Just taking
yourself out of this for just a moment and just looking at
process, tell me what kind of agreement you think is stronger
and maybe more permanent, an agreement that is agreed to by the
President of the United States with a divided Congress, or an
agreement that has been approved by the President of the United
States with the majority of Congress approving that agreement.
Mr. Blinken. The latter.
Senator Heitkamp. Correct. You have spent a lot of time
talking about the fragility or the internal politics of Iran,
and I think I could make a pretty good argument that that tells
me that the current sanctions need to be increased, because if
you do not have a coalition around--if it is so fragile that
simply a discussion or sanctions as Senator Menendez outlined,
which would not take effect for a longer period of time, could,
in fact, blow up the deal, then perhaps there is not enough
political will within Iran to actually do a deal and a
sustainable deal. And, so, my question is, as you are talking
about this, what is the Iranian process for approval of an
agreement?
Mr. Blinken. It is not entirely clear whether, for example,
their Majlis, their parliament, whether it would, and in what
fashion or at what point it might have a say. But, here is the
bottom line, and this was alluded to earlier, I think, by
Senator Toomey. The Supreme Leader remains the first among
equals. At the end of the day, he is the critical person in
terms of blessing or rejecting a deal. But, he is not alone and
he is susceptible to different groups that are pressuring him
in different ways, some folks who do not want an agreement
under any circumstances, others who believe it is necessary in
order to help get Iran out from under the burden of sanctions
and to help the country progress.
There is a huge fight going on in Iran over exactly that.
We see it every single day. Foreign Minister Zarif was called
before their parliament because he took a walk with Secretary
Kerry. So, there are folks who are trying desperately to make
sure nothing happens, so----
Senator Heitkamp. But to get back----
Mr. Blinken.----the point being that the process----
Senator Heitkamp. I get what you are saying, Deputy
Secretary, but would that not argue that this is
extraordinarily difficult negotiations, because negotiations
when people can exploit divisions on either side----
Mr. Blinken. Absolutely.
Senator Heitkamp.----make it extraordinarily difficult----
Mr. Blinken. Absolutely.
Senator Heitkamp.----and there has not been--you could
argue there has not been enough economic pressure for the
Ayatollah or for Iran writ large, not just the government and
the government you are negotiating with, to basically make a
firm commitment to resolving this issue in this process. And, I
will just leave it up----
Mr. Blinken. I would say that they actually made a
commitment--I am sorry, Senator--they have made an agreement
under the interim agreement to take certain----
Senator Heitkamp. Who made an agreement?
Mr. Blinken. The government of Iran.
Senator Heitkamp. Yes.
Mr. Blinken. And, they made an agreement and they have kept
to it. Now, on the--they have tried outside of the agreement,
as has been alluded to, every single day to do all sorts of
things to advance their program. We remain very vigilant. But,
in terms of the agreement that they reached and they were able
to reach as a government, the IEA has concluded on a regular
basis that they have made good on those commitments.
So, while we come into this with tremendous skepticism and
certainly no faith in their good faith, the test is whether the
agreement is tight enough, strong enough, transparent enough
that if they try to get around it in some fashion, we will know
it, we will see it, we will do something about it, and their
knowledge of that will hold them to the agreement.
Senator Heitkamp. But, logically, the problem that at least
I am having here is that it seems like we are talking about two
different arguments. One is they are committed to this process,
ready to go, and we could not possibly do anything here because
it would upset that commitment. So, how strong is the
commitment when we are looking at pretty modest, in my opinion,
as we look forward, modest increases in sanctions?
And, so, I want to get with, with Secretary Cohen, I want
to get to another point, which is the oil sanctions. Can you
just tell me--and correct me if I am wrong--the oil sanctions
are based on per barrel amounts and not dollar amounts, or is
it the other way around?
Mr. Cohen. It is per barrel amounts, yes.
Senator Heitkamp. It is per barrel amounts?
Mr. Cohen. Well----
Senator Heitkamp. Be careful.
Mr. Cohen.----what we have--what the sanctions require is
that importers significantly reduce the amount of oil they are
importing from Iran. It is volume, not dollars.
Senator Heitkamp. OK. That is an important point, because
if it were dollars, obviously, in a low dollar environment,
Iran would not only be happy to have a dollar commitment,
because they could move into markets that they had not had
already, or low dollar value of oil.
Can you explain to me your judgment on what low oil prices
have done to the oil sanctions, and I will leave it at that
because I am out of time.
Mr. Cohen. The drop in the price of oil, the 50 percent
drop in about the last 6 months, has had a significant impact
on Iran's budget process. They have--the way they budget is
based on how much oil they are selling and what they think the
value of that oil is. It is immediately brought into, by a
formula into their budgeting process. They have been forced
over the last several months to shrink their budget, restrict
their spending, increase taxes, not allocate funds to their,
essentially, their rainy day fund, because the drop in oil
price has reduced the amount that they are able to have in
their budget.
So, it has, in effect, imposed another sanction on the
Iranians. We calculate it to be worth about $11 billion in lost
revenue to Iran during the course of this 7-month period of the
extension, from June--from November to June.
Senator Heitkamp. Thank you, Mr. Chairman.
Chairman Shelby. Senator Cotton.
Senator Cotton. Mr. Blinken, 15 months ago, Secretary Kerry
said that we could reach a deal with Iran in 3 to 6 months.
What has happened?
Mr. Blinken. I think, Senator, what has happened is that we
have had, as you know, these very intense negotiations,
multiple rounds of negotiations. In the course of those
negotiations--this is incredibly, as you know, incredibly
complex, and what has happened in the course of those
negotiations is that on a number of issues, Iran has actually
moved and gotten closer to where they need to be in order for
us to make an agreement. In other areas, we have not seen
sufficient movement. Our judgment has been that this has
progressed enough, that they have demonstrated enough
seriousness of purpose to warrant continuing it. Meanwhile----
Senator Cotton. All right. So, what was----
Mr. Blinken.----the program was frozen.
Senator Cotton. Secretary Kerry obviously miscalculated
when he said 15 months ago that we could reach a deal in 3 to 6
months. What was the main miscalculation?
Mr. Blinken. I do not think, Senator, there was a
miscalculation. I think what we built in, as you know, to the
interim agreement was the possibility of extending it, and the
extension would be based on a determination that we made that
we had made enough progress, we could see the possibility of
getting to ``yes,'' but we simply needed more time to do that
and to test the proposition. That is exactly where we are now.
Senator Cotton. Do you expect that you will reach an
agreement by March 24?
Mr. Blinken. I think the President said it was--how did he
put it--less than 50-50.
Senator Cotton. If you do not reach an agreement by March
24, will you walk away from the negotiations?
Mr. Blinken. I think it depends entirely on exactly the
details of where we are. So, as I said earlier, for example, if
we conclude by March 24, the end of March, that we have not
reached an agreement on the basic elements of a deal and that
Iran is simply incapable or unwilling to get there, then, yes,
I think we will have to conclude that this process needs to
come to an end. If, on the other hand, we see that we have
agreement on virtually all the elements but not every single
one, then we may take some more time. And, indeed, remember, we
have until June under the extension to see if we can get to
yes. So, I think it really depends on the details.
Senator Cotton. I mean, what possible action or lack of
action by Iran could at this point cause the U.S. Government to
walk away from these negotiations?
Mr. Blinken. I think two things, Senator. First, if there
were gross violations of the interim agreement, that would be a
serious cause.
Second, if we come to the conclusion, based on these
intensive ongoing negotiations--literally, as we sit here, they
are ongoing--that they are simply not going to get to yes, that
they cannot do it or they will not do it, that would cause us
to say this process has come----
Senator Cotton. Was Iran's announcement that it is
proceeding with two nuclear reactors a violation of the JPOA?
Mr. Blinken. No. These are--as you know, it has a light-
water reactor at Bushehr. It is allowed to have light-water
reactors, which are proliferation resistant. There is no
violation under the interim agreement or under the U.N.
Security Council resolution for doing that.
Senator Cotton. I mean, would you consider that a
provocative, unhelpful act in the middle of sensitive
negotiations?
Mr. Blinken. Oh, sure. I think these kinds of
announcements, absolutely, are trying to----
Senator Cotton. Would you consider the proceedings against
Jason Rezaian, the Washington Post reporter being held, an
ongoing--or, during the middle of these ongoing negotiations, a
provocative act?
Mr. Blinken. Absolutely. Senator, the Americans who are
detained illegally, erroneously, wrongly by Iran need to be
released irrespective of these negotiations----
Senator Cotton. Would you----
Mr. Blinken.----whether they succeed or fail, including
Jason Rezaian.
Senator Cotton.----consider the presence of a senior IRGC
general with Hezbollah in Quneitra Province on the edge of the
Golan Heights a provocative act?
Mr. Blinken. Oh, absolutely. I mean, as you know and as
others have said, Iran does things every single day in many
parts of the region, and indeed beyond, that are highly
objectionable to us and to most of our partners and that go to
our security, which is exactly why, even as we have been
working on this deal, we have been extraordinarily vigilant in
cracking down on their efforts to procure for their weapons of
mass destruction program, cracking down on their support for
terrorism, building up the capacity of our allies and partners
in the region to defend themselves against Iranian aggression.
Absolutely.
Senator Cotton. So, why is it that Iran can initially
undertake needlessly provocative acts toward the United States
and our partners, yet we are supposed to just simply look the
other way while this Congress, considering legislation that
clearly would not violate the JPOA, is supposed to consider the
delicate sensibilities of so-called moderates in Tehran?
Mr. Blinken. What we try to do, Senator, is, in effect,
wall off the nuclear negotiations and try and see if we can
reach an agreement, because if we do--if we do, and again, as
you said earlier----
Senator Cotton. Well, I just----
Mr. Blinken. No, let me just emphasize this point, if I
could. If we do, and if we, as a practical matter, eliminate
their ability to develop a nuclear weapon, that is actually,
over time, going to make it a little bit less likely that the
kinds of provocative actions that you rightly cite, they
continue to take, because they will not have the cover of that
program to do it. So, we believe that even in these other
areas, there is a chance that an agreement makes us better off
than we are today----
Senator Cotton. Right----
Mr. Blinken.----but the point----
Senator Cotton. I know that we have tried to wall off the
nuclear negotiations. Iran has not. Ayatollah Khamenei has not.
Kasseem Zamani [phonetic] has not.
Mr. Blinken. We have not been sitting idly by. We continue
to enforce vigorously the sanctions in all of these different
areas, including the ones that are not part of the interim
agreement. We continue to reinforce----
Senator Cotton. But, in the meantime, Iran now controls or
has dominant influence in five capitals in the Middle East.
Mr. Blinken. So, I think, you know, I would be happy to
have this discussion about where Iran is or where it is not,
but here is the thing. The people who are engaged in trying to
negotiate this agreement, who, again, are not friendly to us,
it is not that they like us, it is just that they are more
pragmatic about where Iran needs to go if it is going to have a
successful future----
Senator Cotton. But why would they stop----
Mr. Blinken. Our goal is to----
Senator Cotton.----if they are getting everything in slow
motion that they would like in an end deal anyway?
Mr. Blinken. Because they have, as we discussed, they have
internal politics that are incredibly challenging. And,
anything that we do that reinforces the hands of those who
absolutely do not want to deal under any circumstances is going
to weaken their hand and make it less likely that we get to an
agreement that advances our own national security interests.
Senator Cotton. My time has expired, Mr. Chairman.
Chairman Shelby. Senator Donnelly.
Senator Donnelly. Thank you, Mr. Chairman, and I thank the
witnesses.
You know, I am hopeful we can get to a good deal, but the
question is, what is a good deal for the United States? So,
when we look at what is our goal in negotiation, is our goal
the 1-year break-out time you mentioned, or is it the practical
needs for Iran to have a domestic energy program.
Mr. Blinken. Thank you, Senator. The way we have thought
about this consistently from the start is that Iran has
basically four ways it can get to enough fissile material for a
nuclear weapon. It can do that through a uranium enrichment
program, which it has at Natanz and Fordow. Fordow is
particularly challenging. That is the site that is buried, and
that is where they were producing, before we stopped them, 20
percent. And, you will remember, for example, when Prime
Minister Netanyahu came before the United Nations a couple
years ago and he held up a picture of a bomb that was being
filled to a red line.
Senator Donnelly. Right.
Mr. Blinken. That was the 20 percent. We stopped that. We
have eliminated that stockpile. Any agreement has to deal with
that definitively.
You have to also deal with the pathway at Natanz, which is
not 20 percent, but a larger and larger number of centrifuges
and a bigger nuclear stockpile.
Senator Donnelly. But, will----
Mr. Blinken. And, then, Iraq--excuse me, the plutonium
process is another pathway, and the COBER [phonetic] is
another. The test of any deal is whether, as a practical
matter, we have been able to cutoff those pathways and give
ourselves enough time if they try and get back on them----
Senator Donnelly. Well, let me get back to my definition of
practical needs to run a domestic energy program. How many
centrifuges do they need to do that?
Mr. Blinken. It depends entirely on the size of their
domestic program. They could make an argument that if they
wanted to have an expansive civil nuclear power program, which,
again, we think they do not need----
Senator Donnelly. Well, what is your view of how many
centrifuges are needed to run a domestic energy program for
Iran?
Mr. Blinken. It depends on the size of the program.
Senator Donnelly. So, you are not going to give me an
answer as to what you think?
Mr. Blinken. No. I think, again, what is critical is--the
centrifuges are a critical component of their ability to enrich
uranium in a certain period of time that would be a real
problem for us, that would get below that 1-year threshold I
talked about. But, the other elements that are critical are the
types of centrifuges, the configuration of the centrifuges, the
amount of the stockpile. You have to put all of those elements
together----
Senator Donnelly. No, I understand there are many elements
to this.
Mr. Blinken.----and depending on that----
Senator Donnelly. But, there is also is it a 1-year
breakout or is it a domestic energy program, and when I was in
the Middle East last week seeing some of our Arab friends, they
said, look, the only thing that we want, we expect out of this,
is just enough to meet practical needs. They did not talk about
a 1-year breakout. They talked about practical needs. And, in
their mind, they talked about a number of centrifuges in the
hundreds. Is that the kind of parameters that we are talking
about now?
Mr. Blinken. I would be happy, Senator, in a----
Senator Donnelly. In a closed session? OK.
Mr. Blinken. Happy to do that.
Senator Donnelly. Well, let me ask you, in addition to
that, that around the edges, Iran--the reports are that they
continue to keep moving forward and that as we look at this, as
time goes on, month after month after month, they continue to
keep working around the edges. And, you know, it has been asked
by others here, also, by the end of June, we will have been at
this a year and a half. We want to succeed and we want to
succeed in a way that our partners and friends, not only the
P5+1, but our friends in the Middle East look at and say, it
makes sense. So, is that, as you look at it--and this is
following up on Senator Merkley's question--the end of the
line, or--and I know you keep saying, hey, if we find a couple
things, we can keep going. Is there an end to this?
Mr. Blinken. Yes, I think there is an end to it. If we make
a determination that they are, as I said, unwilling or unable
to get to an agreement that meets the national security needs
of the United States and our partners, then there is clearly
going to be an end to the process. And, as I said, our goal is
to see if we can reach an understanding on the basic elements
of a deal by the end of March. I think we will have a pretty
good picture by then about whether they are actually able to
get to ``yes.'' That really is the big question. We have seen
enough movement, enough progress, enough seriousness of purpose
to warrant continuing, especially because the core pathways to
a bomb have been--to enough fissile material for a bomb--have,
in effect, been frozen under the interim agreement.
Senator Donnelly. Let me ask one more question, because I
am almost out of time, and it is this. Following up on Senator
Cotton's comments in regards to Iranian soldiers in the Golan
Heights, one action after another after another, and that is
what is so concerning to our friends in the Middle East, is to
see almost them being surrounded in this process. And, so, we
see that throughout these negotiations. And yet, on the other
side, we are told, look, if we talk about potential sanctions
at some future point, they will be highly offended and walk
away. These are grown-ups, as well. Why are we so afraid of--it
seems to me if you want an excuse, you can find an excuse. If
you want a deal, you can make a deal. And, we are still at the
table plugging away, despite seeing one event after another. It
seems to me what we are simply saying is we will basically do
anything to not provide them with any excuse.
Mr. Blinken. I would say, Senator, just two things, very
quickly. First of all--and I appreciate very much the trip that
you took with some of your colleagues--the security of our
partners is paramount to us, so that is exactly why, when Iran
has been acting out and acting aggressively----
Senator Donnelly. And, not to interrupt you----
Mr. Blinken. Please.
Senator Donnelly.----but just to say, and they are
extraordinarily concerned.
Mr. Blinken. Well, one of the things that we have done over
the duration of this Administration is to significantly
increase their own capacity to deal with aggression from Iran.
One of the things that is, as you probably heard when you were
there, that we have done is we have significantly, for example,
enhanced ballistic missile defense cooperation, including
through a Gulf-wide cooperative system. We have designated the
Gulf Cooperation Council as eligible for foreign military
sales. They can buy weapons as an entity. We have, as you know,
significant weapons sales to them. And, of course, we have a
sustained program of consultations, security dialogs, planning,
exercises. All of that goes to reinforcing their security. But,
at the end of the day, all of this comes down to, I think, the
question, as compared to what?
Senator Donnelly. Right.
Mr. Blinken. So, that is really what we have to--I think,
the question we have to answer. Now, if we could sustain in
perpetuity, under any circumstances, the most draconian
sanctions regime that we have been able to implement, that is
an important element. But, the question we have to ask
ourselves is, can we sustain it, and what would go into
sustaining it or not sustaining it? Is military action the best
alternative if we cannot sustain it? That is another question.
So, none of these things, and this agreement, if we are to
reach it, you cannot see it in isolation. You have to ask
yourself, compared to what, and then you rightly have to ask,
what is the substance of the agreement.
Senator Donnelly. And, I know my time is up, Mr. Chairman.
I just want to make one other comment, which is this, and I am
sure you realize that if this agreement does not hit something
close to practical needs, you may well have a regional arms
race on your hands in the Middle East.
Mr. Blinken. You know, Senator, I think where we would
certainly have an arms race is if Iran gets a nuclear weapon,
which is exactly--one of the reasons we are fundamentally
determined that that not happen. But, I have to say, I do not
think anyone is going to emulate what Iran has done and say
that, oh, if they are allowed, for example, to have some
limited, very constrained enrichment, we should get it, too,
because Iran has just gone through and continues to go through
isolation, economic pressure, pariah status, and any agreement
that we would reach with them would have to have such far-
reaching and intrusive access, inspection, and monitoring that
no other country is subject to or would be subject to that I
certainly do not think it would set a model for anyone to spark
an arms race.
Senator Donnelly. Well, I simply pass on to you
conversations that occur.
Mr. Blinken. I appreciate that. Thank you.
Chairman Shelby. Thank you, Senator Donnelly.
A couple of observations here. It seems to me, and I hope I
am wrong, that the Administration seems to be chasing this
deal, in other words, wanting a deal perhaps more than Iran
wants a deal. We do not know that. Perhaps you cannot answer
that.
And, what begs the question around here, and we hear it all
the time, is the Administration, is the Obama administration's
policy at this point to slow down the ability of Iran to obtain
nuclear weapons, or, on the other hand, is it to eliminate
Iran's ability to have nuclear weapons? I think there are two
different questions here. And, the phrase is batted around a
lot by this Administration and others that it is unacceptable--
whatever that means--for Iran to have nuclear weapons, yet they
are headed down that road to build nuclear weapons, maybe
slowly, as Senator Cotton says, or protracted, as I use the
word.
But, I think we have to realize, for the most part, that
whether or not Iran obtains nuclear weapons, and they were to
be in a position to use them could be an existential question
for our ally Israel.
So, we cannot answer all those questions today, but I
appreciate the panel today. I hope that we are able to work
together. But, I hope that you will not just chase a deal that
we know from history is not smart. Thank you.
Mr. Blinken. Thank you very much, Mr. Chairman.
Chairman Shelby. Thank you both.
Mr. Blinken. I just want to reassure you, we are not
chasing any deals. In fact, if we had been chasing a deal, we
could have taken a deal months ago. It is precisely because we
have been very clear that no deal is far preferable to a bad
deal, we are not going to take one. So, I just want to reassure
you on that point.
Chairman Shelby. I think if you get a bad deal, you are
going to have a real volcanic eruption from the Congress, and I
think the people at the State Department know that.
Mr. Blinken. Thank you, sir.
Chairman Shelby. I hope so. Thank you.
I want to call up our second panel. They have been very
patient today. On the second panel today's witnesses are Dr.
Mark Dubowitz, Director, Center on Sanctions and Illicit
Finance, Foundation for the Defense of Democracies, and Dr.
Patrick Clawson, Director of Research, the Washington Institute
for Near East Policy.
Gentlemen, you have been, as I said, very patient here
today. You have heard a lot of this testimony. You have heard a
lot of questions and other observations from me and other
Members of the Senate Banking Committee. Your written testimony
will be made part of this hearing record, which is very
important, and I wish you would sum up what you want to say,
although we have lost a lot of Members from the Committee, as
quickly as possible. Make your points. Thank you.
Which one of you want to go first? Mr. Clawson? OK.
STATEMENT OF PATRICK CLAWSON, Ph.D., DIRECTOR OF RESEARCH,
WASHINGTON INSTITUTE FOR NEAR EAST STUDIES
Mr. Clawson. Thank you very much, Mr. Chairman. Thank you
very much for submitting my statement in the record.
Over time, Iran adapts to any level of sanctions, and the
Iranian authorities have repeatedly persuaded themselves that
the United States is sanctioned out. There is nothing more we
can do. And, so, continuously adopting new sanctions is the
best way that sanctions can affect Iran's leaders to resolve a
nuclear impasse.
As Senator Corker referred to, I explained in my statement
that Iran's new budget shows that the authorities have decided
that their Plan A is that there will not be a deal, and they
have come up with a budget which fits that situation, and they
have taken a lot of very tough measures. In the last few years,
Iranian government employees have seen their real salaries
reduced by more than 30 percent and the government proposes
slashing it even more this next year.
But, they are preparing themselves to take steps that go
much further than anything that the International Monetary Fund
has proposed, that the Greeks take in their situation, and we
know that the Greeks did not like it, but the Iranian leaders
have decided that this is a political necessity for them. And,
so, they are, in fact, going to take the steps that will adjust
to a $40 per barrel oil, and I will outline what some of those
are.
I mean, for instance, by reducing the value of their
currency, the Rial, relative to the dollar, they will generate
more local currency from each dollar of oil sold, and that
would make a big difference. And, as we heard Under Secretary
Cohen say, they can suspend their payments into the rainy day
fund, the National Development Fund of Iran, and that will get
them down pretty much to where they need for $40 a barrel oil--
--
Chairman Shelby. Is time on their side?
Mr. Clawson. They think that we do not have any--there is
nothing more that we can do, and so long as they think there is
nothing more that we can do, they think that time, in fact, is
going to be on their side. And, the genius of the Obama
administration in its early years----
Chairman Shelby. Is the question what we could do or what
we will do?
Mr. Clawson. Fair enough. But, in the early years of the
Obama administration, there were constantly additional measures
being introduced all the time, and so we were able to persuade
the Iranian leaders that if you think it is bad now, just wait.
It is going to get worse and worse and worse. And, when we have
been on this now more than a year where we have not really done
that much more, the Iranian leaders think we have reached as
far as we can go and that they have adjusted to what we have
done, including they think that we conspired with the Saudis to
reduce the price of oil. They think we have thrown everything
we can at them. And, so, they do not think that we can do more.
And, under these circumstances, the Supreme Leader
Ayatollah Khamenei, his attitude is he does not care that much
about the suffering of the Iranian people anyway and he thinks
it is not so bad if Iran is reducing its reliance on oil and
going toward a resistance economy. So, we have got a real
problem trying to impress him with our actions, and I think the
only way we can do it is if we show that we can continue to
make things worse for Iran.
And, so----
Chairman Shelby. Is that how you really bring him to the
table?
Mr. Clawson. We have to show that we can make things worse
for them economically, politically, militarily, in a variety of
ways. My colleague, Dennis Ross, had a piece yesterday saying
we ought to be pressuring them politically on issues like those
that Senator Cotton was raising about their presence on the
Golan and about their activities in Syria and their activities
in Iraq. We have to find various ways to press them. Here,
today, we are talking about sanctions. There are other means to
press them, too.
I think it is great, for instance, that the price of oil
has declined. I think we should take credit for that, even if
we do not deserve it. If I can get credit for the sun rising in
the east, I will be happy to take it. So, I would like to be
able to say to the Iranians, it is bad today. It is going to
get worse tomorrow. That is the best way to impress them
politically.
Chairman Shelby. Thank you.
Mr. Dubowitz.
STATEMENT OF MARK DUBOWITZ, EXECUTIVE DIRECTOR, FOUNDATION FOR
DEFENSE OF DEMOCRACIES
Mr. Dubowitz. Chairman Shelby, Ranking Member Brown,
Members of the Committee, thank you very much for asking me to
testify.
I first want to honor my good friend, Alberto Nisman, who
courageously led a decade-long investigation of Iranian terror
networks throughout Latin America and the United States and
revealed how the Supreme Leader uses terrorism as an instrument
of foreign policy. As we negotiate a comprehensive nuclear deal
with Iran, we would be remiss if we did not heed the lessons
from Alberto's exhaustive work and ask questions about whether
Tehran's negotiating tactics are simply aimed at expanding
Iranian power.
The regime's use of terror in Iraq, Syria, Yemen, Lebanon,
Gaza, Golan, and elsewhere has strengthened its regional
dominance. Facing insufficient push-back from the Obama
administration, this Iranian offensive has increased the
Supreme Leader's nuclear negotiating leverage. Nuclear
negotiations are entering the sixth year for the United States
and the 12th year for the Europeans, yet Western leverage has
diminished as the Administration has lowered its nuclear
demands to accommodate Iranian red lines and provided a
financial lifeline, which stabilized Iran's economy and reduced
the regime's fears of an economic crisis, and that is the key
point, reduce the regime's fears of economic collapse.
Now, as we heard, Congress has imposed many of the most
impactful sanctions over the objections of the Administration.
The White House raised many of the same arguments against those
Congressional sanctions as we heard today. Let me briefly
respond to their arguments against deadline-triggered
sanctions.
First of all, the JPOA has not halted Iran's nuclear
program. Glenn Kessler of the Washington Post actually gave the
President ``three Pinocchios'' for his State of the Union
Address where he made such a claim. Following a strategy
pursued by then-chief nuclear negotiator Hassan Rouhani between
2003 and 2005, Tehran has masterfully suspended only reversible
aspects of the program that it has not perfected while
retaining the freedom to work on aspects it has not yet
mastered. These include the military dimensions of Iran's
program, the development of long-range ballistic missiles
capable of carrying a nuclear warhead, the testing of advanced
centrifuges, and the accumulation of more nuclear material
easily reversible from oxide form. Again, those stockpiles are
accumulating. It is not correct to say they are diminishing.
Number two, the JPOA does not prohibit passage of sanctions
to be imposed after the expiration of the deadline in the
agreement. We have heard testimony to that effect. The
President's hands are not tied. He has got multiple 30-day
waivers that he can use.
Number three, the Iranian threat to walk away from the
negotiations if deadline-triggered sanctions are imposed is, in
fact, counter-historical. Despite escalating sanctions, Iran
has remained at or returned to the negotiating table over the
past decade using talks to legitimize its nuclear weapons
program and to avoid a U.S.-led financial and trade embargo.
Indeed, if Tehran terminated the talks, such a move could
trigger a complete embargo that could cripple its economy and
put the regime's survival in question. This is something that
Congress should contemplate. An Iranian walk-away would also
raise questions about a future deal's durability. And, any
acquiescence to this threat now would hand Iran effective veto
power over the actions of American lawmakers or the next U.S.
President.
Number four, we are a superpower, and as a superpower, the
United States has escalation dominance through economic,
military, cyber, and covert action means to respond to an
Iranian attempt to restart and expand its nuclear program. Now,
Iran knows this and has historically escalated its nuclear
activities cautiously and incrementally so as not to invite a
military response or to trigger crippling sanctions.
Number five, the introduction of deadline-triggered
sanctions may increase tensions in the P5+1, but it will not do
material damage to the international coalition. Do we really
believe that the international coalition is as fragile as Under
Secretary Cohen and Deputy Secretary Blinken have suggested?
The Administration did assess correctly that Moscow would not
leave the P5+1 talks despite Ukraine-related sanctions. So, I
ask you, would Vladimir Putin now leave the talks over
deadline-triggered sanctions on Iran when he did not after
Washington imposed sanctions on his own country? Russia, China,
and the Europeans are concerned about a nuclear armed Iran, and
they see the negotiations as a way to protect their own
interests.
Number six, deadline-triggered sanctions will undercut, not
empower, the hard-liners in Iran. Thanks to the JPOA, Iranian
hard-liners no longer fear the collapse of their economy, and
they have financially benefited from sanctions relief. They
preserved essential elements of their military-nuclear program
and the freedom to advance those parts that they have not
mastered. They are on the march regionally. The goal of
deadline-triggered sanctions is to convince these hard-liners
that continued nuclear intransigence will be met with massive
and escalating pressure.
Number seven, new sanctions are needed despite the fall in
oil prices. Between 2010 and 2013, Iran experienced a
sanctions-induced shock to its economy. It has lived for 2
years without full access to its overseas oil revenues. This,
in fact, has blunted the impact of falling oil prices. It is
the de-escalation of sanctions pressure that has enabled a
modest economic recovery, projected to continue despite these
lower oil prices.
And, finally, increased economic pressure on Iran will
diminish the chances of war. As the Administration
acknowledges, sanctions are the reason Iran is negotiating, but
Iran today can advance its nuclear program in critical areas.
It can build greater economic resiliency and extend its
regional dominance. Without enhanced pressure now, a future
U.S. President actually may be left with insufficient economic
leverage to respond to Iranian nuclear intransigence and may be
forced to resort to military action.
In conclusion, deadline-triggered sanctions strengthen U.S.
negotiating leverage and actually may increase the likelihood
of peaceful nuclear compromise.
Thank you for inviting me to testify.
Chairman Shelby. I have a few questions, and I will try to
be brief, but both of you are well into this subject.
Dr. Clawson, would you support new sanctions that would
take effect only if no final nuclear agreement is reached, or
what is your view here?
Mr. Clawson. My great concern is that the talks will be
extended indefinitely and that----
Chairman Shelby. Protracted talks sometimes lead nowhere,
do they?
Mr. Clawson. Well, one of the subjects that we cover at my
Institute is the Israeli-Palestinian talks, which are now
entering more than 20 years, and some people might think they
have not been so productive in the recent years, but nobody
wants to call them off. And, I, frankly, do not think anyone is
going to want to call off the nuclear negotiations with Iran,
so I suspect----
Chairman Shelby. Is that a----
Mr. Clawson.----they will go on forever.
Chairman Shelby.----these protracted talks, just on and on,
kind of be a figment of our imagination?
Mr. Clawson. It is a feature of the Middle East.
Chairman Shelby. OK. And, sometimes, maybe it is real, not
just our imagination.
Dr. Clawson, you have spoken about Iran's adaptation to the
existing sanctions regime, both of you have. If we are basing
our negotiating leverage on existing sanctions, which are not
as effective, as we all know, as they used to be, is it not
likely that an acceptable agreement will be harder to reach
unless we leverage new sanctions as an incentive? In other
words, Iran has got to have a reason to stay at the table, no?
Mr. Clawson. Absolutely, sir. We need to find some way to
get more leverage, and I listened to the distinguished
administrative spokesmen earlier. They were saying, ``We have
got lots of leverage.'' Well, if we have got lots of leverage,
why do we not have a deal?
Chairman Shelby. Mm-hmm.
Mr. Clawson. And, I would think that the more leverage we
have, the better deal we could get, and so we need to find more
ways for leverage. If they do not think that sanctions are the
right way to get leverage, I would be interested in hearing
what proposals they have for how to get more leverage in these
discussions.
Chairman Shelby. Mr. Dubowitz, the bill this Committee is
considering now would only impose additional sanctions if no
deal is reached by the current deadline. Even then, the bill
would still permit the President to use as many consecutive 30-
day waivers as he likes to delay sanctions. That is my reading
of the bill. Some argue that this is a problem because the
waiver requires certification that Iran is not cheating on its
obligations on the Joint Plan of Action.
My question: If the Obama administration thinks this
certification is too onerous in the proposed bill, does that
not mean it expects Iran to cheat? In other words, I would
assume they would cheat. They have cheated in the past. If so,
how can Congress have any confidence in a final agreement, I
guess is my bottom line.
Mr. Dubowitz. So, Chairman Shelby, that is exactly right. I
mean, Iran has been cheating on its nuclear program for
decades. So, the assumption that Iran is going to stop cheating
is, I think, in the area of fantasy. The problem is that when
Iran cheats, they cheat incrementally. The sum total of their
incremental cheating is always egregious, but they are very
legalistic about how they interpret agreements. They exploit
ambiguities and loopholes. And, they cheat incrementally, and
they have done that through the life of the JPOA, and cheating
with them becomes in the eye of the beholder.
And, it is often the case that when you negotiate an
agreement, you become the biggest defender of the agreement
that you negotiated and you do not want that agreement
undercut, despite evidence that suggests it is being violated,
and I think we have seen evidence of that during the JPOA
process.
I would say one more thing, and I just want to echo what
Dr. Clawson said. I think the Administration's Plan B is to
perpetually roll over the JPOA until the end of the Obama
administration. I think that is one of the major reasons that
they do not like the sanctions bill, because this sanctions
bill says deadlines are deadlines, and I believe that the
Administration assumes that if they do not get an agreement by
June of this year, then they will make the argument and lay the
predicate to continue rolling over the JPOA agreement. It is
echoed by Administration officials, including the President,
who say that JPOA has halted or frozen Iran's nuclear program.
Well, if that were true, then it would be a great
agreement. The problem is, it is not true, and I think it is
worth----
Chairman Shelby. And we all know it, too, do we not?
Mr. Dubowitz. Well, again, I would--worth underscoring
Glenn Kessler, of the Fact Checker blog at the Washington Post,
gave it ``three Pinocchios'' because that is a grossly
misleading statement for a program that continues to advance in
areas that the Iranians have not mastered and perfected.
Chairman Shelby. The U.S. nuclear cooperation agreements
with friendly nations, like those under the Atomic Energy Act,
require consultation periods of up to 90 continuous session
days of Congress. Some argue that a period of even 30
continuous days for Congress to evaluate a nuclear deal with
Iran is pretty long. If longer delays are routine for the
nuclear cooperation agreements with friendly governments,
should Congress ask for a much shorter period for a nuclear
deal with a rogue proliferator like Iran? In other words, we
are not dealing with the British or the French or some of our
other allies. Looking at Iran's history, what are your thoughts
here?
Mr. Dubowitz. Well, again, I was struck by Senator Corker's
statement that Congress has played a role in 27 nuclear 123
Agreements, many of those with allies.
Chairman Shelby. Mm-hmm.
Mr. Dubowitz. And, again, if Congress has played a role in
nuclear agreements with allies, if we have had a 90-day period
to consider these agreements on the Hill with respect to
nuclear agreements, peaceful nuclear agreements with allies, I
find it quite remarkable that there are some who are claiming
that a nuclear agreement with a leading state sponsor of
terrorism, that continues to--that has killed thousands of
Americans, that has engaged in nuclear mendacity, and that is a
repressive regime, that that agreement, A, should not get a
fair hearing on the Hill, a vote, and B, that agreement should
not at least sit for 30 legislative days so that Congress can
actually do a serious consideration of the merits of that deal.
Chairman Shelby. Who wants a deal here the most, us, the
United States and our allies, or Iran, at the moment? What are
your feelings, Dr. Clawson?
Mr. Clawson. We certainly have effectively persuaded the
Iranian leaders that we want the deal more than they do, and
that, as a result----
Chairman Shelby. So, in a sense, we are chasing the deal,
are we not?
Mr. Clawson. Sir, and that is one of the main reasons we
are not catching the deal----
Chairman Shelby. Mm-hmm.
Mr. Clawson.----is because the Iranian leaders keep
thinking that they are going to get better and better terms
from us, and so, therefore, I mean, why agree to something if
you just wait another 6 months and get something additional?
So, Iran's leaders--one of the biggest barriers to reaching a
deal is that Iran's leaders think we want a deal so badly that
all they have to do is wait and we will agree to more
concessions.
Chairman Shelby. Do you agree with that, sir?
Mr. Dubowitz. I do. I mean, the blizzard of economic
statistics that you heard today, I think it actually obfuscates
one major point, and that is that Iran a year and a half ago
was on the verge of economic collapse as a result of the
escalation of sanctions. As the result of a decision to de-
escalate the sanctions, and to provide direct sanctions relief,
the Iranian economy that was on its back is now on its knees,
and is getting up to its feet. Now, it may be getting up to its
feet more slowly as a result of the drop in oil prices, but the
economy has stabilized. GDP is still projected to be positive.
The inflation rate has dropped in half.
And, so, that is the real way to assess sanctions and
sanctions relief: Is the Iranian economy on the verge of
collapse today? It is not. The Supreme Leader has now a
stabilizing economy with moderate, albeit fragile, growth. And,
he and the hard-liners and the Revolutionary Guards are not
feeling a threat to their economy and a threat to the survival
of the regime. Without that kind of threat, why would they
negotiate? Why would they compromise? And, as Patrick said, why
would they agree to a deal now and give up the prospect of
future concessions when they see a track record of the
Administration lowering its nuclear demands as time goes on?
Chairman Shelby. Senator Sasse.
Senator Sasse. Thank you, Mr. Chairman. Thank you both for
being here.
You heard the Administration lay out their argument about
internal Iranian politics and how alleged moderates or
pragmatists would be weakened by the passage of even
conditional prospective sanctions. You obviously disagree with
that. Could you respond by explaining in a little more detail
your view of internal Iranian politics.
Mr. Clawson. Well, Iran's Supreme Leader is quite a clever
politician, and so the approach he has taken to these
negotiations and to past nuclear agreements has been to say,
``Well, I do not approve of them, I do not like them, but I am
not going to stand in the way.'' And, that puts him in a
position where, if the deal turns out to work out pretty well,
he can claim credit. He did not stand in the way. But, on the
other hand, if things do not work out well, he can say, ``Well,
I told you it was not going to work.'' And Khamenei, he has a
long history of undercutting new Iranian presidents. The last
three presidents, he has only allowed to have about 2 years
before he started centralizing power into his own hands and
stopped them with their own initiatives.
So, I, frankly, think it is going to be very hard for
President Rouhani to be able to keep these negotiations going
very much longer on his side after this summer, and he is going
to feel the criticism from the Supreme Leader harder and
harder. So, I wish the Obama administration luck in their
strategy of playing out these talks for the next 2 years. I am
not sure that is going to work. I do not think the Supreme
Leader is going to cooperate. But, in many ways, what the
Supreme Leader does is use these different factions as a way to
help him be able to claim credit no matter what happens and to
avoid blame no matter what happens.
Senator Sasse. So, to be a little too blunt, I share your
pessimistic view, but I think what I heard, and I just want to
make sure I hear it correctly, we are negotiating with a party
that does not actually have the power to conclude any kind of
deal that we would actually want.
Mr. Clawson. It is a clear way of negotiating, is to send
forward somebody who clearly wants a deal, but you are not sure
he is going to actually be able to implement it. And, indeed,
Senator, it gets worse, because what Khomeini did the last time
there was a nuclear deal--back in 2003--was, he let the deal go
ahead, waited until Iran had gotten a lot of the benefits, the
sanctions momentum had fallen apart, and then he walked away
from the deal. So, Khamenei could allow the deal to go into
effect, then wait 2 years and announce that the West has not
delivered what it has promised and so Iran is going to tear it
all up. And, it will be really hard for us to reconstruct the
sanctions regime if we have dismantled it over that 2-year
period.
Senator Sasse. Right. Mr. Dubowitz.
Mr. Dubowitz. Well, I agree with that, and I would go
further. I mean, I think Mohammad Zarif, who is the chief
nuclear negotiator and the Iranian Foreign Minister, has
created a, almost a Zarif distortion field, where when you are
in his field, you actually believe that Zarif represents the
Iranian regime. And, Zarif is a very good negotiator. So, even
if he is committed to a nuclear deal, he has used the threat of
blackmail, because he is the one who has said, ``I will walk
away from the table,'' in order to handcuff us, in order for us
to be in a position where we are not willing to ratchet up the
pressure.
And, I would say that my assessment of the interfactional
disputes within Iran, I would say that there are three camps.
There is the Rouhani-Zarif camp, who may be pragmatic, who may
want a nuclear weapon but have a different strategy to achieve
it, a much more tactical, incremental strategy of creating the
right political climate to get what they want. I think there
are the hard-liners who do not want a nuclear deal under any
circumstances.
And, then I think there is a middle group, who want a deal
on their terms, on Iran's terms, and are prepared to wait to
get those terms. And, I think that these deadline-triggered
sanctions are designed to put pressure on that middle group,
that middle group, and put them to a choice between compromise
or economic collapse, and I think that is what we have to aim
at. We have to stop talking about only two groups, the
pragmatists and the hard-liners. There is a third group and
they are hard-liners in the sense that they want a deal on
Iranian terms, but they are also pragmatic in the sense that if
we are willing to precipitate an economic collapse that
challenges their political survival, we may be able to break
their nuclear will.
Senator Sasse. That was helpful. And, do you believe the
Administration's view that our coalition is so fragile that
regardless of what is actually happening in internal Iranian
politics, they will be able to use it as an excuse and our
allies will have also believed the U.S. precipitated this
outcome?
Mr. Dubowitz. I am very concerned to hear that from the
Administration, because if our coalition is so fragile right
now, then I am very concerned about what our coalition will
look like after a deal, when Iran starts cheating on an
agreement and countries have already started going back into
Iran and sinking billions of dollars into that economy, because
at that point, we will be hearing the same argument. The
Iranians have violated the agreement, but we cannot call them
on that violation because the reality is we are not going to be
able to meaningfully snap back the sanctions.
You heard from Deputy Secretary Blinken this notion that we
will snap back sanctions. We can legally snap back sanctions
very easily by reimposing them in law. But, practically
speaking, once you have changed the market dynamic, once you
have gotten companies more willing to go back into Iran, once
domestic lobbies in European capitals and elsewhere are
lobbying against snap-backs or against reimposing sanctions,
that international coalition becomes much more difficult to
keep together.
So, if it is really that fragile before an agreement, I am
very concerned about what that coalition will look like after
agreement. My sense is that it is not that fragile. The
Europeans will hold with us. The Russians have held with us,
despite imposing sanctions on their own country. And, the
Chinese are there because they want--they do not want to see a
nuclear armed Iran and they do not want to see the impact that
will have on oil prices and on their energy dependent economy.
Senator Sasse. My time has expired. Thank you, Mr.
Chairman.
Chairman Shelby. Senator Cotton.
Senator Cotton. During the first panel, I asked Deputy
Secretary Blinken under what conditions the United States might
walk away from the negotiations, be it in March or June, and he
gave a rather abstract, high level answer. Can either of you
envision circumstances in which the U.S. Government will walk
away from these negotiations?
Mr. Clawson. In a word, no. I think the history of the
Israeli-Palestinian negotiations illustrates what happens when
these kinds of negotiations hit a brick wall, which is to say
everybody says, well, that proves why we have to just climb
harder to get over that wall.
And, by the way, sir, if, in fact, somebody walked away
from the negotiations, arguably, that would be the basis for
progress, because sometimes the best negotiations have happened
when the negotiations have been suspended, because it is a lot
easier, in fact, for the two sides to have those quiet side
talks without the glare of international publicity and it is
quiet side talks where the most progress has taken place.
Senator Cotton. Yes. We conduct diplomacy to protect our
interests, not we have an interest in our diplomacy.
Mr. Clawson. Look, the--one of the interests that we have
is, of course, appearing reasonable to the rest of the world.
And, arguably, one of the reasons we would continue the
diplomacy with Iran is not because we thought there was a
snowball's chance in hell of reaching an agreement, but because
we wanted to look reasonable to the rest of the world, and that
would be a powerful argument made inside the Administration.
Senator Cotton. Mr. Dubowitz.
Mr. Dubowitz. Well, I think the Iranian negotiating
strategy all along has been to turn the interim agreement into
the final agreement. I think that that has been their strategy
all along. I think it is a strategy that they employed between
2003 and 2005, which, again, is to make temporary concessions
on reversible aspects of their program that they have perfected
and mastered in exchange for time to work on those elements of
the nuclear program that they have not mastered.
So, today, we believe they have not mastered the
development of long-range ballistic missiles capable of
carrying a warhead. We believe that they have not mastered the
other military dimensions of the program. We believe they have
not mastered the operation of advanced centrifuges capable of
enriching uranium to weapons grade much more quickly, and,
therefore, requiring smaller numbers, thereby facilitating a
clandestine breakout. These are areas that we believe they have
not mastered, which, by the way, happen to be the exact areas
that are not adequately covered by the JPOA, or not even
covered by the JPOA in some cases.
So, those are the elements of the program they continue to
move along that are not covered by the JPOA. And, in return,
they did not get small, direct, reversible sanctions relief.
What they got was an economy that is no longer collapsing, that
is now stabilizing, and is projected to grow. So, from Iran's
perspective, they have walked out of this interim agreement
getting exactly what they want. Now, if they can turn the
interim agreement into the final agreement, then they have
exactly what they want, because then they can get a bomb and a
growing economy and regional dominance altogether.
Senator Cotton. So, hard to imagine our Government walking
away. Another argument that we have heard is imposing even
conditional prospective sanctions at some point in the future
would be misperceived by Iran. Does Ayatollah Khamenei and his
key counselors have such an unsophisticated understanding of
American law that they cannot understand the difference between
immediate and prospective conditional sanctions?
Mr. Clawson. Unfortunately, they have an extraordinarily
poor understanding of American society and they have repeatedly
miscalculated what we would do. And, so, I would assume
ignorance on their part when it comes to American procedures
and how the American system is working, I mean, these
breathtakingly stupid statements that they will make on a
regular basis and sincerely believe about American motivations
and American actions.
Senator Cotton. Mr. Dubowitz.
Mr. Dubowitz. Again, it is hard to know exactly what they
understand. I think Zarif and Rouhani understand the
difference. They understand the difference between deadline-
triggered sanctions and sanctions that we are going to drop on
you right today. So, I think that it is an important
distinction. It is important for our Administration to make it
very clear to the Iranians and to our allies that this is not a
violation of the JPOA. And, I think, again, it is important for
our Administration to make it very clear that we have a strong
and vibrant international coalition that can withstand
prospective sanctions.
And, I think the Administration's arguments are helping
Iran. I understand the temptation the Administration has to use
these arguments because it disagrees with the approach that is
taken by Congress. But, in making these arguments, these
arguments run the risk of backfiring on the Administration,
being used against the Administration by the Iranians today or
at a later stage, and I think it is undercutting our
negotiating leverage and it is making it less likely that we
are going to see a comprehensive agreement.
Senator Cotton. Well----
Mr. Clawson. If I may add to that just very quickly, you
saw that the Administration witnesses were much more quick to
explain why the Iranians think the way they do than it is to
put forward the American arguments as to why they are wrong.
Senator Cotton. Yes.
Mr. Clawson. And, so, what we have seen repeatedly is the
Administration to say, ``oh, the Iranians might think this,''
instead of saying, ``the Iranians might wrongly think this.''
So, rather than ``they incorrectly perceive this,'' they say,
``the Iranians might think this.''
Senator Cotton. Well, given that, would it be fair to say
that perhaps the Administration opposes conditional prospective
sanctions, not because they fear Iran does not want a deadline,
but because they do not want a deadline?
Mr. Clawson. I think the Administration does not want a
deadline.
Senator Cotton. Mr. Dubowitz.
Mr. Dubowitz. Absolutely. I mean, if your goal--if your
Plan B--knowing what they know now, I think the Administration,
if they were to take a really hard, honest look at these
negotiations, has probably assessed that they are not going to
get a full comprehensive agreement. So, if they are looking at
a Plan B, I think their Plan B today is, well, at least we can
just perpetually roll over the interim agreement, and we can do
it for 2 years and then this will be the next Administration's
problem. I think with that in mind, they do not want a piece of
legislation with deadline-triggered sanctions, which in any way
would block that rollover.
Now, again, the rollover--and, why do I think this? Because
the President of the United States in his State of the Union
Address said the interim agreement halted Iran's nuclear
program. Well, if that is true, if it did halt the program,
then we should all want a rollover of the interim agreement.
But, if we--as I have said and others have said, this has not
been a halted program. It has been a program that essentially
has provided the Iranians with the opportunity to move down
multiple pathways, particularly the military nuclear pathways
of the program that they have not mastered, in exchange for
temporary reversible concessions on technical elements that
they have mastered. Then, I think that we do not want the
interim agreement to become the final agreement and I hope the
Administration does not, either.
Senator Cotton. Thank you both for your time and efforts.
Chairman Shelby. One last observation, perhaps a question.
I know your time is valuable and it is getting late. March 24,
you know, you have heard that date bandied around here, the
Administration is saying to Congress, do not do anything until
then. You will upset the negotiations and so forth. What is
your judgment--and I am sure you do not know for sure--of the
prospects for us reaching a strong agreement, a good one, with
Iran, where they would forsake nuclear weapons, basically, by
March 24?
Mr. Clawson. Iran is not going to forsake the pursuit of
nuclear weapons capability.
Chairman Shelby. Yes.
Mr. Clawson. They might agree to park it for a while----
Chairman Shelby. OK.
Mr. Clawson.----and let it wait for a period of time. But,
they are not going to forsake it. That is not going to happen.
Chairman Shelby. It is just a slow walk, is it not?
Mr. Clawson. Well, if there is an agreement before March
24, then I suspect both sides will pretend it is a big
agreement when, actually, it is going to be a very tiny one.
And, so, we may pretend to reach an agreement, but we are not
going to reach a real agreement.
Chairman Shelby. Do you agree with that, Mr. Dubowitz?
Mr. Dubowitz. Well, I do agree with that assessment. I
mean, I think the only way we get a deal by March 24, with the
technical details to be worked out by June, is if the
Administration continues to lower its nuclear demands. I think
if the Administration does, we will see a deal. But, we have
effectively gone from a previous position of dismantle and
disclose, right, dismantle the program and disclose the
possible military dimensions of Iran's program, to where we are
today, which is disconnect, defer, and discuss.
Chairman Shelby. So, if this Administration ultimately
wants a deal more than Iran, it is not going to be a good deal.
Mr. Dubowitz. Well, I think, by definition. I mean, I hope
that is not the case. I hope the Administration continues----
Chairman Shelby. I do, too.
Mr. Dubowitz.----to hold the line. But, I feel the
Administration--they deserve some credit. They have come up
with lots of creative proposals to try and accommodate Ali
Khamenei's red lines. But, the problem is that Ali Khamenei, he
is keeping to his red lines. He is not moving those red lines.
In fact, he is demanding that those red lines, in fact, be even
brighter in escalating the capacity of the program. And, the
Administration has tried to figure out a technical way to
accommodate those red lines. But, again, at some point, we
exhaust our creativity. We have to acknowledge that there is no
zone of possible agreement with the Supreme Leader of Iran.
Mr. Clawson. Sir, it is even worse. So long as we keep
saying that that is the only rug we want and it is a beautiful
rug and it is a magnificent rug and we have really got to have
that rug, the more the price goes up.
Chairman Shelby. And, they know we want that rug, right?
Mr. Clawson. We keep telling them they want that rug.
Mr. Dubowitz. Well, it is worse than that----
Mr. Clawson. The price goes up, and so we will not reach a
deal.
Mr. Dubowitz. Right. It is worse than we tell them that we
want the----
Chairman Shelby. We had better stay out of the bazaar, had
we not? Thank you very much.
Mr. Clawson. Thank you.
Mr. Dubowitz. Thank you.
Chairman Shelby. The Committee is adjourned. [Whereupon, at
1:17 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF SENATOR MARK KIRK
With Iran's nuclear threat continuing to grow with each passing
day, I am grateful that the Senate Banking Committee today is holding a
hearing to examine the effects of sanctions relief on Iran's economy,
to assess the state of nuclear negotiations with Iran, and to hear
views from the Administration and experts on the strategic necessity of
additional Iran sanctions. Chairman Shelby, I thank you for your
leadership, and for your willingness to prioritize this important
issue.
Time is not on our side when it comes to stopping the clock on
Iran's nuclear bomb. In April of last year, Secretary of State John
Kerry warned the Senate that Iran is technically ``two months'' away
from a nuclear breakout. Yet, on July 18, 2014, the Administration
decided to extend nuclear negotiations for another 4 months. Moreover,
on November 24, 2014, the Administration granted Iran's nuclear program
yet another extension, this time for 7 months.
While the Administration has now set a deadline of June 30, 2015,
for a final nuclear deal with Iran, it's far from certain that Iran
will sign a comprehensive agreement before July, let alone agree to a
``good deal'' that can dismantle the Iranian terror state's nuclear
bomb-making capabilities and can ensure that our children never witness
an Iranian-sparked nuclear war in the Middle East.
What is clear, however, is that Iran's economy continues to benefit
significantly from the interim nuclear deal's package of sanctions
relief. On December 10, 2013, days after the Administration first
announced the interim nuclear deal with Iran, Under Secretary of the
Treasury for Terrorism and Financial Intelligence David S. Cohen wrote
in the Wall Street Journal that ``the relief package in this interim
deal is economically insignificant to Iran.'' Cohen added: ``Iran will
be even deeper in the hole 6 months from now, when the deal expires,
than it is today.''
But more than 12 months after Under Secretary Cohen wrote those
words, we see now that Iran is far from being ``deeper in the hole.''
On December 24, 2014, Iranian President Hassan Rouhani bragged publicly
that Iran's economy had benefited greatly from the interim deal's
sanctions relief package. ``The country's economic growth was minus 6.8
percent 2 years ago, but the statistics issued by the Central Bank last
night showed a 4-percent positive growth during the 6 months of the
current [Iranian] year,'' Rouhani said in a speech. ``We have now
finally managed to reduce the 40 percent inflation down to 17
percent.''
Even if Rouhani is exaggerating Iran's 4-percent growth rate over
the last 6 months, it's obvious that Iran's economy is growing rapidly.
In fact, the International Monetary Fund (IMF) is projecting that
Iran's economy will grow by 2.2 percent in 2015. In the United States,
we would call a 2.2 percent growth rate a ``recovery'' and 4-percent
growth over the last 6 months an ``economic boom.''
It is precisely because the interim deal's sanctions relief package
is economically significant to Iran that we are no closer to a ``good
deal.'' It is obvious that, without the threat of significant pressure
and significant consequences, Iranian Supreme Leader Ali Khamenei will
not make any significant concessions to decisively end Iran's nuclear
threat.
Mindful of President Obama's own admonition that ``no deal is
better than a bad deal'' with Iran, Senator Bob Menendez and I are
therefore working to introduce very soon bipartisan legislation that
will lay down, as a Sense of Congress, parameters for what constitutes
a ``good deal'' with Iran, impose a series of crippling sanctions
measures if Iran fails to agree to a comprehensive agreement by June
30, 2015, and create the time and space for Congress to review any new
agreement with Iran and ensure that we have a ``good deal.''
Even the President conceded in the 2014 State of the Union that
sanctions laws passed by the U.S. Congress with bipartisan veto-proof
majorities forced Iran back to the negotiating table. It's time for
Congress to act once again.
I look forward to working with Senator Menendez, Chairman Shelby,
and other Members of this Committee to build a bipartisan veto-proof
majority to enact the Kirk-Menendez Iran legislation to decisively end
Iran's nuclear threat once and for all.
______
PREPARED STATEMENT OF SENATOR BEN SASSE
Thank you, Mr. Chairman, for calling this hearing and making the
Strategic Necessity of Iran Sanctions your first priority as Chairman.
I look forward to serving on this Committee and constructively
addressing the many important issues within its jurisdiction.
I believe timing is absolutely critical on the issue of Iran
Sanctions in particular and my hope is that today's hearing will be a
good first step toward improving the outlook for our ongoing
negotiations with Iran and successfully pursing our interests in the
region.
I commend Senators Kirk and Menendez for their leadership on this
issue and was pleased to add my support to their legislation.
First, we must bear in mind that preventing Iran from developing a
nuclear weapon is one of the many national security issues the United
States faces when crafting policies on Iran.
The regime supports terrorism and terrorist groups throughout the
Middle East, promotes sectarian violence where doing so serves its
interests, and brutally represses its own people.
As my colleagues know, Iran was first placed on the list of state
sponsors of terrorism 30 years ago last year and continues to provide
training, weapons, and funding to terrorist groups throughout the
Middle East.
Second, the regime's radical theocratic ideology targets
Christians, Jews, Baha'i and other religious minorities and subjects
them to torture and death because of their religious beliefs.
Deputy Secretary Blinken's submitted testimony appropriately
mentions Saeed Abedina, an American pastor who remains in an Iranian
prison, and there are many others who are similarly detained or
missing.
According to the United State Commission on International Religious
Freedom's Annual Report 2014, the Iranian regime has arrested 400
Christians since 2010. The Report further noted that as of February
2014, at least 40 Christians were imprisoned, detained, or awaiting
trial in Iran because of their religious beliefs and practices.
I'm describing a regime that tortures and kills people because of
their religion--inside its own borders--and if permitted, will
systematically exercise the same intolerance--and worse--beyond them.
With respect to economic sanctions and their relationship to
ongoing negotiations with Iran, I think the issue that faces us is
rather straightforward, and I'm going to be blunt:
I'm deeply concerned that the U.S. leverage in the negotiations
over Iran's nuclear weapons program is decreasing while the Iranian
posture is growing stronger.
Worse still is the impression that with the passage of time, and
with each succeeding extension and missed deadline, the United States
grows more willing to accept an agreement with terms that are corrosive
to U.S. interests.
Our job today, therefore--in this hearing, and moving forward with
legislation--is to examine how Congress can change, for the better, the
trajectory of the negotiations.
I support strong sanctions because sanctions--in the case of Iran--
make diplomatic efforts effective, and Congress must do everything that
it can to equip our negotiators with the tools necessary to maximize
what is achievable through ongoing talks and forthcoming agreements.
Economic sanctions are never the only tool, but they can be a very
powerful motivator, as the history of negotiations with the Iranians
demonstrates.
Thank you, Mr. Chairman.
______
PREPARED STATEMENT OF SENATOR MIKE ROUNDS
Mr. Chairman, Ranking Member Brown, and distinguished Members of
the panel. I welcome the opportunity to participate in this hearing.
The history of sanctions on Iran is long and complicated and one in
which this Committee has participated for two decades. As Governor of
South Dakota in 2010, I joined our Legislature's efforts toward this
end when I signed a Divestment bill directing our State's pension fund
to divest itself from companies doing business in Iran. Yet, for too
many years, the United States has been alone in the effort to try and
end Iran's nuclear program. Only recently has the wider international
community embraced the idea of enacting economic sanctions against Iran
to do the same. While we are negotiating with Iran, we must be clear:
Iran cannot be allowed to obtain nuclear weapons. This is unacceptable.
In 2012 and 2013 however, the United States and our allies, the
P5+1, offered Iran significant sanctions relief in exchange for
Tehran's termination of limited specific nuclear-related activity and
its commitment to transparency. After initially refusing to accept the
offer, Iran accepted the November 2013 Joint Plan of Action. November
24, 2014, the P5+1 granted another 7-month extension of the current
talks with Iran providing them with an additional access to $700
million a month in their sequestered oil revenues held in foreign
accounts.
Iran came to these negotiations with the P5+1 in large measure
because U.S.-led sanctions were beginning to cripple the Iranian
economy. Yet sanctions relief given to Iran as a result of these
negotiations has reduced the pressure on them to negotiate in good
faith. We have been lenient with Iran in these negotiations. More must
be done.
During the negotiations, Iran rejected the P5+1 offers and stuck to
their hardline positions. ``The centrifuges are spinning and will never
stop,'' Iranian President Hassan Rouhani said on state television after
the extension was announced in November 2014.
Iranian Foreign Minister Javad Zarif, the man with whom Secretary
of State Kerry is negotiating said, ``I'm confident that any final deal
will have a serious and not a token Iranian enrichment program coupled
with removal of sanctions.''
Despite comments like this, some will advocate easing the pressure
on Iran to give it room to negotiate. I disagree. Iran's history of
negotiations with the allies shows that when you give them an inch,
they take a mile. Any sign of weakness on our part emboldens Iran.
Iran will not negotiate in good faith until the United States and
its allies make it clear through strong action that if they do not
agree to suspend their program leading to nuclear weapons, punishing
economic sanctions will be re-imposed. These sanctions should be
prospective and come into effect only if Iran does not agree to a deal.
Without renewed pressure, Iran is unlikely to modify its course. It
will continue its efforts to circumvent sanctions, divide the
international coalition and continue advancing its nuclear program.
Furthermore, the President should have the power to conclude this
agreement with Iran provided that a majority of the Senate and a
majority of the House concurs with the agreement.
I look forward to the work of this Committee on this and all the
other issues that come before it and I am grateful for the opportunity
to contribute.
Thank you Mr. Chairman.
______
PREPARED STATEMENT OF ANTONY BLINKEN
Deputy Secretary of State, Department of State
January 27, 2015
Good morning, Chairman Shelby, Ranking Member Brown and Senators. I
appreciate the opportunity to discuss with you the status of
negotiations related to Iran's nuclear program.
It is appropriate that we are gathered here today for what will be
this Committee's first hearing this year and its first hearing under
the new 114th Congress to discuss Iran's nuclear program. The challenge
posed by Iran's nuclear program has long been one of our country's
foremost national security priorities, and it has been a primary focus
of both the Congress and the Administration. The international
community shares our serious concerns about Iran's nuclear program.
Together with our partners in the P5+1 and the EU we have been unified
in pursuing a comprehensive solution that lays these concerns to rest--
consistent with the President's firm commitment to prevent Iran from
acquiring a nuclear weapon.
It was with that challenge in mind that Secretary Kerry and our
lead negotiator Under Secretary Sherman traveled to Geneva earlier this
month as part of our latest efforts to reach a long-term comprehensive
plan of action with Iran that would verifiably ensure Iran's nuclear
program will be exclusively peaceful going forward.
Today I plan to update you on our goals for and the status of the
negotiations. There are, of course, some details that I will not be
able to discuss in an unclassified setting--the negotiations are
ongoing and cannot be conducted in public. But I will give you as much
detail as I can in this setting because we all understand the vital
role Congress and this Committee play in shaping U.S. policy toward
Iran. We remain committed to continue--and when necessary, to expand--
regular consultations. We all have the same goal--to make the world a
safer place by resolving the international community's concerns with
Iran's nuclear program.
We continue to believe that the best way to do that is to negotiate
a comprehensive plan of action that, when implemented, will ensure
that, as a practical matter, Iran cannot acquire a nuclear weapon and
that Iran's nuclear program is exclusively peaceful.
Any comprehensive deal must effectively cutoff the four pathways
Iran could take to obtain enough fissile material for a nuclear weapon:
two uranium pathways, through its activities at Natanz and Fordow; a
plutonium pathway, through the Arak heavy water reactor; and a
potential covert pathway. It must include tight constraints and strict
curbs on Iran's nuclear program. And finally, it must require robust
monitoring and transparency measures to maximize the international
community's ability to detect quickly any attempt by Iran to break out
overtly or covertly.
In exchange, the international community would provide Iran with
phased sanctions relief tied to verifiable actions on its part. Such
relief would be structured to be easily reversed so that sanctions
could be quickly re-imposed if Iran were to violate its commitments.
We never expected this to be an easy process, and so far those
expectations have proved correct. It is also a process that cannot be
rushed. After 35 years without diplomatic relations, and after more
than 10 years of attempts to put a halt to Iran's proliferation of
sensitive nuclear activities, we are now trying to see if we can work
through a multitude of complicated issues in order for us and the
international community to be assured of the exclusively peaceful
nature of Iran's nuclear program.
Our goal is to conclude the major elements of the deal by the end
of March and then to complete the technical details by June.
The most recent discussions were serious, useful, and businesslike.
We have made progress on some issues but gaps remain on others. I, or
our lead negotiator, Under Secretary of State Wendy Sherman, would be
happy to provide further information in a classified setting.
Overall, however, we assess that we still have a credible chance of
reaching a deal that is in the best interest of America's security, as
well as the security of our allies. If Iran's leaders choose not to
move forward, we will work with Congress to increase pressure. But
while we remain engaged in these negotiations, it is important to
demonstrate to our partners as well as to Iran that Washington is
united in support of a comprehensive solution that would ensure that
Iran does not acquire a nuclear weapon, and that its nuclear program is
exclusively peaceful. I know this is a goal we all share.
The U.S. Congress has played a vital role in getting us to where we
are today and will undoubtedly play an important role going forward.
Sanctions were instrumental in bringing Iran to the table. But Iran's
program continued until negotiations made the Joint Plan of Action
(JPOA) possible. Sanctions did not stop the advance of Iran's nuclear
program. Negotiations did, and it is in our interest not to deny
ourselves the chance to achieve a long-term, comprehensive solution
that would prevent Iran from acquiring a nuclear weapon.
Let me talk about that progress we have achieved so far.
Before the JPOA, despite an unprecedented sanctions regime, Iran's
nuclear program was rushing toward larger enriched uranium stockpiles,
greater enrichment capacity, the production of plutonium that could be
used in a nuclear weapon, and ever shorter breakout time. Today, as the
result of the constraints in the JPOA, Iran has halted progress on its
nuclear program and it has rolled it back in key areas for the first
time in a decade, and it has allowed us to have greater insight and
visibility through more intrusive and more frequent inspections.
Before the JPOA, Iran had about 200 kilograms of 20 percent
enriched uranium in a form that could be quickly enriched into a
weapons-grade level. It produced much of that material at the Fordow
facility, buried deep underground. Today, Iran has no such 20 percent
enriched uranium--zero, none. It has diluted or converted every ounce,
suspended all uranium enrichment above 5 percent and removed the
connections among centrifuges at Fordow that allowed them to produce 20
percent enriched uranium.
Before the JPOA, Iran was making progress on the Arak reactor,
which, if it had become operational, and together with a reprocessing
facility, would have provided Iran with a plutonium path to a nuclear
weapon. Once fueled, the Arak facility would be challenging to deal
with militarily. Today, Arak is frozen in place.
Before the JPOA, Iran was enriching uranium with roughly 10,000
centrifuges and had another roughly 9,000 installed centrifuges ready
to bring into operation. The JPOA froze Iran's enrichment capacity and
those 9,000 additional centrifuges are still not operating.
Before the JPOA, inspectors had less frequent access to Iran's
nuclear facilities. Today, the JPOA has enabled IAEA inspectors to have
daily access to Iran's enrichment facilities and a far deeper
understanding of Iran's nuclear program. They have been able to learn
things about Iran's centrifuge production, uranium mines, and other
facilities that are important to monitoring Iran's program going
forward and to detecting any attempts to break out. And the IAEA has
consistently reported that Iran has lived up to its commitments under
the JPOA.
Just as we have asked Iran to uphold its commitments under the
JPOA, we have lived up to our commitment of providing Iran with limited
relief--about $14 to $15 billion from the start of the JPOA through
this June. But that relief is dwarfed by the vast amounts denied to
Iran under the existing sanctions regime. For example, in 2014 alone,
oil sanctions deprived Iran of more than $40 billion in oil revenue--
well over twice the estimated value of the relief under the JPOA. And
what oil revenues Iran is allowed to generate go into heavily
restricted accounts that now encumber more than $100 billion dollars.
Virtually the entire sanctions architecture remains in place. Indeed,
throughout the existence of the JPOA, sanctions pressure on Iran has
not decreased--it has increased.
Congress is now considering legislation to impose additional
sanctions on Iran, to be triggered by the failure of negotiations. I
know that the intent of this legislation is to further increase
pressure on Iran and, in so doing, to strengthen the hand of our
negotiators to reach a comprehensive settlement. While the
Administration appreciates that intent, it is our considered judgment
and strongly held view that new sanctions, at this time, are
unnecessary and, far from enhancing the prospects for successful
negotiations, risk fatally undermining our diplomacy and unraveling the
sanctions regime so many in this body have worked so hard to establish.
New sanctions are unnecessary because, as I noted a moment ago,
Iran already is under acute pressure from the application of the
existing sanctions regime. In recent months, that pressure has only
grown stronger with the dramatic drop in oil prices.
Should Iran refuse a reasonable deal or cheat on its current
commitments under the JPOA, the Senate and House could impose
additional measures in a matter of hours. The Administration would
strongly support such action. Iran is well aware that an even sharper
Sword of Damocles hangs over its head. It needs no further motivation.
So new sanctions are not necessary. And their passage now would put
at risk the possibility of getting a final deal over the next several
months. Let me explain why.
As part of the JPOA we also committed, within the bounds of our
system, not to impose new nuclear-related sanctions while the JPOA is
in effect. Absent a breach by Iran, any new sanctions enacted by
Congress would be viewed by Iran and the international community as the
United States breaking out of the understandings of the JPOA. This
includes ``trigger'' legislation that would tie the actual
implementation of new sanctions to the failure to reach a final
arrangement. Even if such sanctions are not, arguably, a technical
violation of the JPOA, we believe they would be perceived as such by
Iran and many of our partners around the world. This could produce one
of several serious unintended consequences that, far from enhancing
America's security, would undermine it.
First, the passage of new sanctions could provoke Iran to walk away
from the negotiating table, violate the JPOA and start moving its
nuclear program forward again. Instead of keeping its uranium
enrichment at under 5 percent, as it has since the JPOA was signed,
Iran could start enriching again at 20 percent, or even higher. Instead
of capping its stockpile of roughly 4 percent low enriched uranium at
pre-JPOA levels, Iran could grow it rapidly. Instead of suspending
substantive work on the Arak heavy water reactor, Iran could restart
its efforts to bring this reactor on line. Instead of providing
unprecedented access to international inspectors at its nuclear
facilities, it could curtail/reduce IAEA access, inhibiting our ability
to detect a breakout attempt. Instead of limiting work on advanced
centrifuges, it could resume its efforts to increase and significantly
improve its nuclear capabilities in a relatively short timeframe.
Second, even if Iran does not walk away or promptly returns to the
table, its negotiators are likely to adopt more extreme positions in
response, making a final deal even more difficult if not impossible to
achieve.
Third, if our international partners believe that the United States
has acted prematurely by adding new sanctions now in the absence of a
provocation or a violation by Iran--as most countries surely would--
their willingness to enforce the exiting sanctions regime or to add to
it in the event negotiations fail will wane. Their support is crucial.
Without it, the sanctions regime would be dramatically diluted. Up
until now, we've kept other countries on board--despite it being
against their economic interest--in large part because we've
demonstrated we are serious about trying to reach a diplomatic
solution. If they lose that conviction, the United States, not Iran,
would be isolated, the sanctions regime would collapse and Iran could
turn on everything it turned off under the JPOA without fear of
effective, international sanctions pressure in response.
We can debate whether any or all of these things would happen. What
I can tell you today is that those who are best placed to know--the
diplomatic professionals who have been leading these negotiations and
dealing directly with the Iranians and our international partners for
the past several years--believe that the risks are real, serious and
totally unnecessary. That is their best judgment. Why run those risks
and jeopardize the prospects for a deal that will either come
together--or not--over the next 2 months? Why not be patient for a few
more months to fully test diplomacy? There is nothing to be gained--and
everything to be lost--by acting precipitously.
That judgment is shared by our closest allies. Just 2 weeks ago,
Prime Minister Cameron could not have been clearer: `` . . . It is the
opinion of the United Kingdom that further sanctions or further threat
of sanctions at this point won't actually help to bring the talks to a
successful conclusion and they could fracture the international unity .
. . which has been so valuable in presenting a united front to Iran.''
So we must continue to work together. We have briefed Congress
extensively and frequently on Iran talks over the past year. We have
had, and will continue to have, extensive discussions with Congress
about the status of the P5+1 negotiations. We will continue to keep
Congress fully informed about these negotiations through a combination
of open hearings and closed briefings. I look forward to continuing
that conversation with all of you and your colleagues today, and in the
remaining months.
Before I finish, I want to emphasize that, even as we engage Iran
on the nuclear issue and continue to apply pressure under the existing
sanctions regime, we also continue to hold it accountable for its
actions on other fronts. We continue to insist that Iran release Saeed
Abedini, Amir Hekmati, and Jason Rezaian from detention so they can
come home to their families. Likewise, we continue to call on Iran to
work cooperatively with us so that we can find Robert Levinson and
bring him home. This March will unfortunately mark 8 years since his
disappearance on Iran's Kish Island. Secretary Kerry and Under
Secretary Sherman have spoken to Iran about our concerns for the fate
of these U.S. citizens as recently as last week, and will continue to
do so until all of them are back home.
We also continue to raise our voice in support of the talented and
brave Iranian people, and support their desire for greater respect for
universal human rights and the rule of law. We have spoken up clearly
and consistently against human rights violations in Iran and have
called on the Iranian government to guarantee the rights and freedoms
of its citizens. We have done this in reports requested by this
legislative body, such as the Human Rights Report, through statements
on individual cases where our voice can support those inside Iran, and
via international organizations, such as our work to support the
mandate of the U.N. Special Rapporteur on human rights in Iran. We have
also used our Virtual Embassy Tehran online platform to promote freedom
of expression and respect for human rights, and our programming to
support the rights of average citizens in Iran. Regardless of the
outcome of ongoing nuclear negotiations with Iran, we will not relax
our efforts to hold Iran accountable for its human rights violations.
We will also continue to confront Iran's destabilizing activities,
promotion of sectarian divisions, and support for nonstate actors and
terrorists throughout the Middle East. Our positions on Palestinian
terrorist groups, such as Hamas and the Palestinian Islamic Jihad, and
Lebanese Hezbollah, for example, have in no way changed--and will not
change. We have very clearly and consistently spoken out against these
designated foreign terrorist organizations, as well as Iran's support
for them. And we will continue to find ways to support those in the
region who are working to counter the destabilizing actions of these
groups--including building partner capacity--as we simultaneously
reinforce the robust regional security architecture we've already
built. Similarly, we have called out Iran for its support of the brutal
regime of Bashar al-Asad in Syria. We hope that Iran soon recognizes
that there is much more to be gained through constructive engagement in
the region and promotion of inclusivity than through disruptive
policies.
The challenges posed by Iran are numerous and complicated. We have
confronted them, and will continue to do so. On the challenge of Iran's
nuclear program, we face a historic opportunity to resolve this concern
through clear eyed, principled and disciplined diplomacy. We do not yet
know if diplomacy will be successful--as the President has stated the
chances are probably less than 50-50--but it is of the utmost
importance that we give it every opportunity to succeed.
Thank you.
______
PREPARED STATEMENT OF DAVID S. COHEN
Under Secretary for Terrorism and Financial Intelligence
Department of the Treasury
January 27, 2015
Good morning. Chairman Shelby, Ranking Member Brown, and
distinguished Members of the Committee: Thank you for the invitation to
appear before you to discuss the state of sanctions on Iran, and
whether our efforts to achieve a diplomatic solution to one of the most
difficult and enduring national security problems that we face--Iran's
nuclear program--would be advanced if Congress were to enact new
sanctions legislation at this time.
I will focus my testimony today on the robust international
sanctions regime that helped bring Iran to the negotiating table, the
intense pressure that sanctions continue to place on the Iranian
economy, and our continued vigorous enforcement of those sanctions over
the course of the Joint Plan of Action (JPOA). And I will explain why
new sanctions legislation now--even if implementation were delayed--
would more likely hinder, rather than advance, the prospects for a
diplomatic solution that verifiably prevents Iran from obtaining a
nuclear weapon.
At the outset, let me reiterate that no issue is of greater concern
or urgency to the United States, and no issue occupies more of the time
and attention of my team at the Department of the Treasury, than
ensuring that Iran does not acquire a nuclear weapon. Iran in
possession of a nuclear weapon would directly threaten U.S. and
international security, increase the risk of nuclear terrorism,
undermine the global nonproliferation regime, and risk setting off an
arms race in the Middle East. From the outset of his Administration,
President Obama has made clear that we will do everything in our power
to prevent Iran from obtaining a nuclear weapon.
For us at Treasury, that has meant working within the
Administration, with Congress, and with partners around the world to
impose the most effective set of financial and economic sanctions in
history. The sanctions have impeded Iran's ability to acquire material
for its nuclear program, isolated it from the international financial
system, drastically slashed its oil exports, deprived it of access to a
sizable portion of its oil revenues and foreign reserves, and severely
constrained its overall economy.
In many respects, the global sanctions regime has achieved exactly
what it was designed to do: encourage Iran to come to the negotiating
table, not to posture, pontificate, and procrastinate, but to engage in
serious diplomacy over its nuclear program. Iran is negotiating because
it knows that relief from the sanctions can come only in exchange for
taking concrete and verifiable steps that will guarantee that it cannot
produce a nuclear weapon.
As this Committee knows, those negotiations are ongoing. They began
when we negotiated the JPOA, which was reached on November 2013. In
November 2014, the P5+1 and Iran decided to extend the talks for
another 7 months. We agreed to the extension because our negotiators
have made meaningful progress, and because it takes time to conduct the
highly technical deliberations necessary to get a comprehensive
solution that will cutoff each of Iran's possible pathways to a nuclear
weapon.
We may ultimately reach a comprehensive solution; we may not. The
President last week reiterated that the chances that we get a deal are
probably less than 50 percent. But we, like you, are committed to
testing fully the diplomatic path.
That is why we have continued to maintain throughout the JPOA
period the intense financial and economic pressure that brought Iran to
the table in the first place. And that is also why we must give our
negotiators the time and space they need to pursue the possibility of a
comprehensive solution, without undercutting their efforts, fracturing
the coalition, or, with the best of intentions, sending mixed signals
about the interest of the United States in a diplomatic resolution.
The International Sanctions Regime Remains Robust and Vigorously
Enforced
When Iran and the P5+1 concluded the JPOA in November 2013, Iran
committed to halt progress on its nuclear program, roll it back in
important respects, and provide unprecedented access to and inspections
of its enrichment facilities. In exchange, Iran received limited,
targeted, and reversible relief from some nuclear-related sanctions.
Importantly, the JPOA left in place the full architecture of our
financial, banking, oil, and trade sanctions; our sanctions focused on
Iran's support for terrorism and its violation of human rights; and our
own domestic embargo.
I'd like briefly to review the breadth of that sanctions
architecture--painstakingly designed by the Administration, Congress,
and our international partners over many years--because it provides an
important backdrop to any discussion of imposing additional sanctions.
First, Iran remains subject to sweeping sanctions by the United States
and our allies on its financial and banking sectors:
Iran continues to be almost completely isolated from the
international financial system, with its most significant
private and state-owned banks, including its central bank,
subject to U.S. sanctions and cutoff from international payment
messaging systems.
Any foreign bank that transacts with designated Iranian
banks--or with most other designated Iranian individuals or
entities--can lose access to the U.S. financial system. That
means losing the ability to facilitate transactions in the
dollar, a death penalty for any international bank.
It remains sanctionable to provide physical U.S. dollar
banknotes to the Iranian government.
Second, our sanctions have targeted Iran's key economic engine, its
energy sector:
Our sanctions have drastically driven down Iran's oil
exports. In 2012, Iran was exporting approximately 2.5 million
barrels of oil a day to some 20 countries; today, it exports
only around 1.1 million barrels, and only to six countries.
Under the JPOA, moreover, Iran's six remaining oil customers
may not exceed their current purchase levels.
Additionally, payment for oil purchased from Iran by these
six countries must be paid into accounts that can be used only
to facilitate humanitarian transactions or bilateral trade
between the importing country and Iran. With the exception of
funds released under the JPOA, this Iranian oil revenue can
neither be brought back to Iran nor transferred to third
countries. And because the accounts into which Iran receives
oil revenue already hold more funds than Iran spends on
bilateral or humanitarian trade, the effective value of those
oil sales to Iran is far less than 100 cents on the dollar.
We also have broad authorities targeting the provision of
goods and services to the Iranian energy sector or investment
in that sector. Any entity that is itself part of Iran's energy
sector is subject to sanctions.
Because Iran cannot access Western technology and services,
and because it has been forced to sharply cut its oil exports,
we have also seen a significant decline in its production of
oil. Independent experts report that Iran produced fewer than
2.8 million barrels a day in December, down from almost 3.6
million barrels a day in 2011.
Third, there are sanctions on other important sectors of the Iranian
economy. We have broad tools that target Iran's petrochemical,
insurance, ports, shipping, and shipbuilding sectors, as well as its
trade in certain crucial metals and industrial materials.
Fourth, beyond these sector-focused sanctions, we have a range of other
sanctions authorities that we use to intensify the pressure on the
Iranian regime.
It is sanctionable to act on behalf of the Government of
Iran, as well as to provide the Government of Iran or the
Iranian individuals and entities on OFAC's sanctions list with
financial, material, or technological support.
Under our counter-terrorism, counter-proliferation, human
rights, and other Iran-related authorities, we have imposed
sanctions on more than 700 Iran-related individuals and
entities, almost 15 percent of which have been designated since
the signing of the JPOA. And importantly, anyone who conducts
business with these individuals or entities, or any other
designated Iranian entity, is at risk of being targeted for
sanctions.
Last but not least, broad limitations on U.S. trade with Iran remain in
place, meaning that Iran continues to be shut out of the world's
largest and most vibrant economy and remains unable to access the U.S.
financial system.
These sanctions are not just words on the books--we vigorously
enforce them. Over the course of the JPOA, we have repeatedly
reaffirmed the point, in word and deed, that Iran is not open for
business.
Since the signing of the JPOA, the United States has sanctioned
nearly 100 individuals and entities that were helping Iran evade our
sanctions, aiding Iranian nuclear and missile proliferation, supporting
Iranian-sponsored terrorism, or carrying out Iran-related human rights
abuses. Nine of those designations came less than a month ago, on
December 30, including sanctions on six individuals and one entity that
were working with the Iranian government to obtain U.S. dollars. We
have also imposed more than $350 million in penalties on those who have
violated the sanctions. These targeting and enforcement efforts will
continue throughout the course of the JPOA extension.
We have also engaged extensively with foreign governments and
companies to make clear the limited scope of the JPOA's sanctions
relief and our continued vigilance against any breaches of our
sanctions. These outreach efforts, while quieter than enforcement
actions, are equally critical to our efforts to pressure Iran.
And as we sit here, members of my staff are poring over reams of
financial intelligence searching for signs of sanctions evasion,
working with banks and businesses to help them better comply with
sanctions, and engaging directly with foreign governments, foreign
regulators, foreign businesses, and individuals around the world to
make certain that they understand the consequences of violating our
sanctions. And although I will depart the Treasury Department in a few
weeks, everyone should rest assured that vigorous enforcement of our
sanctions will continue unabated.
Through all of these efforts, we make it abundantly clear to Iran
that its only hope for real relief from sanctions is to enter into a
comprehensive arrangement that guarantees that it cannot produce a
nuclear weapon.
The State of the Iranian Economy
In light of the extensive sanctions that remain firmly in place and
are being vigorously enforced, it should come as no surprise that the
Iranian economy remains in a deep hole.
When I testified before the Senate Foreign Relations Committee in
July, I suggested three metrics by which to judge Iran's economic
distress--its oil revenues, the value of its currency, and its foreign
reserves. By all three measures, Iran continues to be worse off today
than it was when it entered into the JPOA.
Revenues: The overall health of the Iranian economy and the Iranian
government's balance sheet depend heavily on oil revenues, and our
sanctions have cut deeply into those revenues. As I noted earlier, our
sanctions have caused Iran's oil exports to drop almost 60 percent,
from approximately 2.5 million barrels per day in 2012 to approximately
1.1 million today. Because of this dramatic decline in sales, in 2014
alone our oil sanctions deprived Iran of over $40 billion, which is
well over twice the total estimated value to Iran of the limited
sanctions relief in the JPOA--and that is money Iran can never recover,
because it represents sales that were not made. Altogether, since 2012,
our oil sanctions have denied Iran access to more than $200 billion in
lost exports and funds it cannot freely use.
Furthermore, for the 7-month period of the JPOA extension, from
December 2014 to June 2015, we estimate that Iran will be forced to
endure another $15 billion in lost sales. Moreover, of the estimated
$12 billion that Iran may continue to earn in oil revenue during this
JPOA extension, our sanctions mean that Iran will only be able to
access a limited amount of this revenue, since much of it will remain
restricted in overseas accounts.
Meanwhile, the current sustained decline in oil prices is, in the
words of Iranian officials, imposing an additional set of sanctions on
Iran. Over the past year, the average price of a barrel of oil has
dropped by more than 50 percent; it is trading today at slightly under
$50 per barrel. If oil prices remain at current levels, Iran will lose
an additional $11 billion in oil revenue from what it was expecting to
take in during this most recent 7-month extension of the JPOA.
All of this is creating havoc with Iran's budget. For its current
fiscal year (March 2014 to March 2015), Iran assumed that oil would
sell for $100 per barrel. It has not, which has cut into its revenues
for this year. And next year will be even bleaker.
In December, President Rouhani proposed a budget for the coming
fiscal year that assumed oil would sell for $72 per barrel and that
included proposals to cancel subsidies, raise taxes, reduce
contributions to its sovereign wealth fund, and scrap projects. But
that draft budget already has proved overly optimistic, and just last
week, the Iranian Finance and Economy Minister revealed that Iran is
revising downward its budget because it is now assuming a price of $40
per barrel. This will likely result in more spending cuts, fewer
services, and higher taxes.
Rial: Iran's currency, the rial, has depreciated by about 56
percent since January 2012, including a decline of about 16 percent
just since November 2013, when the JPOA was signed. This makes imported
goods more expensive, disrupts plans for investment in Iran, causes the
general inflation rate to rise, and hurts the Iranian economy by
causing significant uncertainty about future prices.
Reserves: The vast majority of Iran's approximately $100 billion in
foreign currency reserves remain inaccessible or restricted by
sanctions. Iran can use most of this money only to pay for permissible
bilateral trade between the six remaining oil importing countries and
Iran, as well as for humanitarian purposes. Without hard currency
reserves, Iran is limited in its ability to intervene in its currency
market to stabilize the rial, and it also becomes more difficult to
conduct foreign trade.
If you take a step back and look at Iran's broader economy, the
picture is no less dismal. Despite some signs of an uptick in Iran's
GDP, Iran's economy is performing far below its potential. Iran's GDP
shrank by roughly 9 percent in the 2 years ending in March 2014, and
its economy today is 15 to 20 percent smaller than what it would be had
it remained on its pre-2012 growth trajectory. Moreover, at 17 percent,
Iran's inflation rate is one of the highest in the world.
The dire predictions we heard that the limited sanctions relief in
the JPOA would lead to a collapse of the sanctions regime and reduce
pressure on Iran clearly have not materialized. The sanctions structure
has held up just fine. We estimate that the total value to Iran of the
JPOA sanctions relief, which comes largely from enabling Iran to access
some of its own restricted oil revenues held overseas, will add up to
approximately $14 to $15 billion by June 2015. This relief pales in
comparison to the significant revenues that Iran has forgone as a
result of sanctions, and it cannot make up for Iran's systemic economic
weaknesses and imbalances.
Put simply, Iran's economy is significantly impaired, and it will
remain that way as long as our sanctions are in place--and Iran's
leaders know this. Thanks to cooperation on the international stage
between the United States and its allies, and the joint work of
Congress and this Administration, Iran is negotiating with its back
against the wall. So long as we continue to maintain our current
pressure on Iran--and we are committed to doing just that--its leaders
have every incentive to come to a comprehensive solution and resolve
this issue peacefully.
Additional Sanctions Legislation Now Is Unnecessary and Potentially
Harmful
Because of the scope and intensity of the sanctions Iran currently
is subject to, and because of the economic pressure those sanctions
continue to apply, we believe that new sanctions are not needed at this
time. To the contrary, new sanctions at this time--even with a delayed
trigger--are more likely to undermine, rather than enhance, the chances
of achieving a comprehensive solution, and are more likely to reduce,
rather than increase, the chances of sustaining and increasing pressure
on Iran if the negotiations fail.
In our efforts to prevent Iran from obtaining a nuclear weapon,
sanctions were never an end in themselves. Sanctions alone were never
going to stop Iran from installing centrifuges or enriching uranium.
Instead, sanctions always were intended principally as a means to
persuade Iran to negotiate in earnest.
And that has worked. We now have a situation in which Iran is
engaged in a serious negotiation with the P5+1, while progress on its
nuclear program is frozen, certain aspects of the program have been
rolled back, and we have unprecedented insight into its nuclear
activities. And, furthermore, its economy remains under enormous
pressure, in large measure because we have been able to hold together
the international coalition that has joined us in imposing crippling
sanctions.
Enacting additional sanctions legislation at this point threatens
to unravel this situation. In our judgment--a judgment that is shared
by our international partners--new sanctions legislation now is
substantially more likely to impede progress at the negotiating table
than to induce Iran to offer additional concessions.
Moreover, if Congress enacts new sanctions now and the negotiations
ultimately prove unsuccessful, our international partners may hold us,
not Iran, responsible for the breakdown in the talks. While it is
difficult to predict exactly what would then unfold, it is quite
possible that some current members of the international sanctions
coalition--whose companies are eager to resume business with Iran, but
have been held off--would reevaluate their cooperation with us on
pressuring Iran, making it more difficult to maintain existing
pressure. If overall support for the sanctions regime declined, it also
would make it more difficult to intensify sanctions pressure. Finally,
if a breakdown in talks led to the demise of the JPOA, we would lose
the additional insight into Iran's nuclear program and restrictions on
development that the JPOA has given us.
In our view, these risks make new sanctions legislation inadvisable
at this moment. But even putting aside the risks, we see no compelling
reason to impose new sanctions now, considering the extent to which
Iran already faces substantial financial and economic pressure.
This conclusion is reinforced, moreover, by the fact that this
Congress and this Administration would move quickly to enact new
sanctions if Iran were to walk away from the talks or if we concluded
that a comprehensive deal was no longer within reach. As the President
said just last Friday, ``if Iran ends up ultimately not being able to
say yes, if they cannot provide us the kind of assurances that would
lead [us] to conclude that they are not obtaining a nuclear weapon,
then we're going to have to explore other options,'' including new
sanctions legislation. As has been the case with prior sanctions
legislation, that legislation could go into effect in a matter of days.
The Iranians know this, just as they know that the President has
``consistently said [that] we leave all options on the table.''
Make no mistake: This Administration understands and embraces the
power of sanctions. Sanctions are a key component of many of our most
important national security initiatives, from our efforts to prevent
Iran from obtaining a nuclear weapon to our efforts to degrade and
ultimately destroy the Islamic State in Iraq and Levant. We are not
sanctions doubters.
But neither do we believe that layering on additional sanctions is
always the right move. Sanctions are one tool in our toolkit, as is
diplomacy, as is military action, as are the myriad other ways that we
project U.S. power to advance our interests, protect our allies, and
defend ourselves. If diplomacy does not succeed, as the President said,
he ``will be the first one to come to Congress and say we need to
tighten the screws.'' But in our view, now is the time to give
diplomacy every chance to succeed, not to create a new sanctions tool.
Conclusion
In closing, I want to assure this Committee that as we seek a
comprehensive solution with Iran, the Treasury Department, like the
rest of this Administration, is fully committed to maintaining intense
financial and economic pressure on Iran. We have not, and we will not,
let up one iota in our sanctions enforcement efforts, and we will
continue to take action against anyone, anywhere, who violates or
attempts to violate our sanctions.
Thank you.
______
PREPARED STATEMENT OF PATRICK CLAWSON, Ph.D.
Director of Research
The Washington Institute for Near East Studies
January 27, 2015
Iran Adapts to Sanctions in the Absence of New Measures
Over time, Iran adapts to any level of sanctions. And Iranian
authorities have repeatedly persuaded themselves that the United States
is ``sanctioned out,'' i.e., that Washington cannot step up the
pressure. Continuously adopting new measures is the best way sanctions
can effectively move Iran's leaders to resolve the nuclear impasse.
Iran's Plan A is No Nuclear Deal
Iran's new budget shows that the authorities see no urgent need for
relief from the current sanctions. They correctly feel that they have
learned to live with those sanctions. The 2015/16 budget submitted to
the Majlis by President Hassan Rouhani is based on 1.3 million barrels
a day in oil exports, only slightly above the average level in 2014--a
rise which is consistent with the Joint Plan of Action as interpreted
by the Administration, in that Iran expects to increase its exports of
oil condensates which the Administration does not consider to be crude
oil. Iran's proposed 2015/16 budget also does not assume any sharp
pickup in economic activity, such as some have forecast would occur in
the aftermath of a nuclear deal.
Instead of assuming sanctions relief, the new budget proposes a
range of painful measures to live with the existing situation, such as
increased taxes and continuing erosion of both government salaries and
the monthly payment to families introduced when subsidies were slashed
in 2011. These will be painful measures, hitting hard at Iran's middle
and lower classes. They would come on top of several years of
impressive adjustments which go far beyond anything the International
Monetary Fund has recommended to hard-hit countries like Greece. In
effect, the 2015/16 budget continues the path of recent policy: do what
is needed to reduce vulnerability to external pressure, even if that
imposes great pain.
And the budget-balancing measures are not paper solutions like
those favored by former president Mahmoud Ahmadinejad. Instead, the
Rouhani government has been implementing real steps to improve tax
collection and has announced plans to increase tax rates. It has also
been getting tougher about those (mostly industrial firms) not paying
the higher electricity and natural gas rates adopted in 2012. Another
sign that the budget is a serious document is that rather than
unrealistically underestimating spending, the government has left room
for priority expenditure increases, which in this case means
dramatically higher spending for the military and intelligence
apparatus.
The budget made what seemed when it was proposed in early December
the conservative assumption that the price of oil in April 2015 to
March 2016 would average $72 per barrel oil. For 474 million barrels of
oil exports (1.3 million barrels a day), that would generate $34
billion. When the price of oil declines, that hits Iran's budget hard.
That is true irrespective of sanctions which complicate Iran's access
to its oil export earnings. Those sanctions impact how Iran manages its
foreign exchange, which is an entirely different manner from budget
revenue. When the National Iranian Oil Company (NIOC) sells oil abroad,
it earns dollars which it then hands over to the Central Bank of Iran
(CBI) in return for Iranian rials. The CBI faces the challenge of how
to manage those dollars, that is, how to ensure that Iranians wishing
to import goods have access to the dollars they need. Meanwhile, NIOC
takes the rials provided by CBI and, as provided by law, deducts 14.5
percent for its expenses, and hands the rest to the government. The
government, by law, deposits 20 percent of the total export earnings in
the National Development Fund of Iran (NDFI), directs 2 percent to the
provinces, and uses 63.5 percent for the budget. Under that formula,
the budget's share of 1.3 million barrels a day at $72 a barrel is
$21.7 billion.
Faced with the oil price decline, Iran is preparing to take
additional measures. On January 15, Economic and Finance Minister Ali
Tayeb Nia announced that a revised budget would be based on $40 per
barrel oil--which is well below what the U.S. Department of Energy and
most observers predict will be the average price in the period April
2015-March 2016. Iran has many alternatives available for adjusting to
such a price level. Besides reducing expenditures and raising taxes,
the two most obvious are:
Suspending payments into the NDFI. The NDFI is partly a rainy day
fund, which was the explicit purpose of its predecessor, the now
effectively defunct Oil Stabilization Fund (the NDFI is also partly a
reserve fund for the post-oil future). If the government suspended
payments into the NDFI, then in order to produce budget revenue of
$21.7 billion, NIOC would have to sell only $26 billion in oil, which
means an oil price of $55.
Depreciating the currency, which would generate more Iranian rials
for each dollar of oil exports. The Rouhani government has kept the
dollar/rial rate more or less constant. That is inappropriate given
that Iran's high inflation rate drives up costs for Iranian producers.
A constant exchange rate makes domestic products more expensive
relative to imports and makes exporting less attractive. A better
policy would be to let the rial depreciate in line with inflation. The
budget assumes a very modest decline in the exchange rate to IR28,500
per dollar compared to IR26,500 now. At that level, the $21.7 billion
in oil export revenue for the budget produces IR618 trillion.\1\ If
instead the exchange rate declined to reflect the inflation of the last
2 years, the rate would be at least IR40,000 per dollar. That would
stimulate production in Iran, both for exports and to replace imports.
It would also generate the IR618 trillion for the budget from $15.5
billion, which would be the equivalent of an oil price of $52 per
barrel if the government continues payments into the NDFI or $39 if it
suspends those payments. In the likely situation that the oil price
were higher than $52 (or $39), then the government would have room to
increase spending a bit to accommodate the higher prices post-
depreciation.
---------------------------------------------------------------------------
\1\ Among the many complications in analyzing Iran's budget, the
oil and gas revenue figure it shows is partly from sales at home. So
not all of the projected IR711 trillion comes from oil exports.
---------------------------------------------------------------------------
In addition, the government could draw down the balance in the
NDFI, though it is not clear how much remains in that account. Or it
could simply borrow more at home (it claims the current budget is
balanced, but that is by using creative accounting). Iran's government
has much room to borrow. Iran's government debt is low. Rouhani's
finance minister, in his complaints about what a terrible situation he
inherited, has claimed that the government debt was run up to 25
percent of GDP, which is probably an exaggeration, but even if true is
only a third of the U.S. level. Vast sums sit in the various public
pension plans, all of which have been and could be again drawn on to
fund government programs (usually off-budget programs). And if that is
not enough, Tehran can rely on the banking system--almost all
government-owned--to carry out what is in reality government spending
loans, much as the Ahmadinejad administration did with the massive Mehr
social housing program.
So Iran can finance its government despite sanctions and low oil
prices. It can also generate the foreign exchange it needs to pay for
imports, so long as it can access that foreign exchange. The last year
for which we have solid numbers, thanks to the International Monetary
Fund, is 2013/14. In that year, non-oil exports of goods and services
generated $46 billion, when imports of goods and services were $73
billion. That left a gap of $27 billion, while Iran's foreign exchange
reserves at the start of the year were $104 billion. With modest oil
exports, Iran was able to increase its reserves in 2013/14. Iran's
statistics for what is happening in 2014/15 show that non-oil exports
are up, imports are down, and reserves are up--all of which fits well
with what we know about how Iran's economy is performing. So Iran has
less and less need for oil export earnings to pay for imports. And if
Iran can export 474 million barrels of oil even at a price as low as
$40 per barrel, that would produce $19 billion, which--if available for
Iran to use--would probably be close to enough to fill the gap between
imports and non-oil exports. Or looked at another way, Iran's reserves
are enough to fill that gap for about 5 years even without any oil
exports, if Iran has access to those reserves.
Of course, the foreign exchange problem Iran faces is that it has
only limited access to its oil export proceeds and to its foreign
exchange reserves, thanks to restrictions by the United States and its
allies on Iran's access to international financial markets. Iran's
excellent trade balance and substantial reserves show how the
restrictions on its access to financial markets are the most effective
pressure point on the Iranian economy. Those restrictions have remained
effective only because new measures are continuously being taken--both
enforcement steps aimed at new shadow entities and extension measures
blocking channels Iran is using to evade restrictions on the usual
paths for financial transactions. Iran has shown great creativity at
evading financial restrictions. Standing still means falling behind:
constantly taking new steps is the only way to keep up with Iran's
latest evasions.
Resistance Economy?
Convincing Supreme Leader Ali Khamenei to pay attention to
sanctions is not easy. He does not care much about the economic well-
being of Iranians, especially when his closest supporters are doing
well. That is part of the reason he has supported tough adjustment
measures, despite the pain they inflict on the lower and middle
classes. But he firmly believes that Iran would be better advised to
adopt what he calls a ``resistance economy.''
Khamenei's call for a ``resistance economy'' is mostly nonsense but
partly good advice. The nonsense is that Iran should, or can, cut
itself off from the world economy. The pursuit of self-sufficiency has
led into one dead-end after another. High barriers to imports has
protected inefficient Iranian producers, raising prices for consumers
and creating opportunities for corruption by those who can use
political ties to get imported goods at a fraction of the price at
which those goods are selling on the local market. Those who benefits
from the barriers to imports form an important, politically well-
connected group which are scared at the prospect of Iran opening up to
the world. They fear that lessened political tensions with the West
will mean a more open economy in which they will do poorly. Because of
the political strength of this group, it is not easy to make sanctions
painful enough to overcome hardline objections to resolving the nuclear
impasse.
The good advice in Khamenei's call for a ``resistance economy'' is
his call for Iran to rely less on oil income. Iran is richly endowed
with many resources, not least its talented and increasingly well-
educated work force. To a considerable extent, Iran used the last
decade's oil windfall to expand its non-oil economy, including
substantial export-oriented activities from iron mining to high-value
fruit agriculture, petrochemicals, and light industry. Iran now has a
better-rounded middle-income economy in which oil is important but by
no means all-important, with oil's role dropping by the year. That is a
sound economic policy for many reasons: it creates jobs, it makes the
economy less vulnerable to oil price swings, it rewards productive
economic activity instead of influence-peddling, and it makes Tehran
less and less vulnerable to oil-centered economic sanctions. Of course,
the transition has only gone part-way: government revenue and export
earnings are still oil-intensive, and oil income still fuels breath-
taking corruption. But the Islamic Republic looks more and more like
the Shah's economy: a vibrant non-oil economy with oil providing the
lubrication for a corrupt government bent on regional domination.
The ``resistance economy'' strategy--both the parts that hurts
Iran's economic development and the parts that help it--reduces the
impact sanctions have on the thinking of Iran's leaders. That fact
should cause us to redouble our efforts, not to give up.
Ratchet Up the Pressure
Sanctions are more likely to have impact, both on Iran's economy
and more importantly on its political leadership if they continuously
get tougher. We need to convince Iran's leaders that the longer the
nuclear impasse persists, the worse the pain will be.
Like many of us, Iran's leaders are naturally optimistic.
Frequently, they have thought that the United States was ``sanctioned
out,'' that there were no new measures that Washington could apply on
Tehran. The early Obama administration well understood how constant
tightening of sanctions sent a clear message that the nuclear impasse
would get costlier and costlier. Their approach was to use three
simultaneous avenues for tightening sanctions:
First and foremost was tougher enforcement of the measures
nominally in place. The Obama administration continued and intensified
the Bush-era initiatives to vigorously pursue financial institutions
which were ignoring U.S. sanctions regulations. The resulting billions
of dollars in fines collected from banks has had a dramatic impact on
the attitudes in the financial community, which have decided that
transactions with Iran are not worth the risk.
In addition, the Obama team pushed hard for allies to step up their
sanctions on Iran, helped by the outrageous rhetoric from the
Ahmadinejad administration. The careful incorporation into the 2010
U.N. Security Council Resolution 1929, building on the 2008 Resolution
1803, of language about ``exercising vigilance'' about a range of
Iranian activities provided a way to present the complementary measures
by allies, especially the European Union (EU), as being within the
framework of Security Council actions, something important for many of
those allies. The quiet support from many other governments to U.S.
restrictions on financial transactions strongly influenced financial
institutions to fall in line with those restrictions rather than to
complain about U.S. perceived extraterritorial action.
And new sanctions were adopted that built on and extended existing
sanctions. Repeatedly, the Administration complained about new
sanctions measures being considered by Congress only to proclaim,
months after similar measures were enacted into law, that such steps
had been important contributions to Iran's leaders' reconsideration of
their previous stance.
We can debate the relative contribution of each of these
approaches. In any case, the end result was to shock Iran's leaders at
our ability to turn up the heat, as well as to feed popular discontent
with a hardline nuclear stance perceived correctly as standing in the
way of Iran taking advantage of the many opportunities that greater
integration into the world economy offers it.
Our challenge now is to find a new mix of policies that will once
again shock the Iranian leaders. A powerful assist to this end has come
from an unexpected direction, namely, the ample supply conditions in
world oil markets. To a person, Iranian leaders are convinced that the
recent oil price decline has been a deliberate Saudi-American plot to
harm the Islamic Republic. Saudi Oil Minister Naimi's several
interviews proclaiming that oil prices may have to go much lower and
stay there for a prolonged period, irrespective of the impact on Iran
among others, is read as proof of the political motivations behind the
price decline. Khamenei's extended January 24 remarks on how the oil
price decline was an American-sponsored plot against the Islamic
Republic drew his usual policy recommendation: ``blows will be met with
blows.''
The historical analogy which resonates with the current generation
of Iranian leaders is the 1986 price collapse (when the Dubai spot
crude price fell from $27.53 per barrel in 1985 to $13.10 in 1986 and
stayed at about that level for years). The resulting loss of revenue
was a central element in Iran's decision that it could not afford to
pursue the war with Iraq, which had to be abandoned with little show
for 150,000 Iranian dead. Iranian leaders have always thought that the
Saudi decision to step up oil production from 3.6 million barrels per
day in 1985 to 5.2 million in 1986, which was the main reason for the
price collapse, was aimed at the Islamic Republic, as part of the
multifaceted Saudi effort to stave off Iran's battlefield successes
against Iraq.
It is no secret that the Saudi leadership wants to see Iran pressed
harder, both to resolve the nuclear impasse and to pull back from
Iran's active role supporting Shia fighters in Syria, Iraq, and Yemen
(and the Saudis would add, Bahrain). That fact and their reading of the
1980s history only contributes to the Iranian leaders' conviction that
the Saudis are doing what they would do were they in the Saudis' shoes,
namely, driving oil prices lower to press Iran. We may doubt that this
is an accurate reading, but both in public and in discussion with
Tehran, the U.S. Government should hint that low oil prices are part of
Washington's plan. Since people in the Middle East are often ready to
see the United States as all-powerful, we should find ways to make that
work to our advantage. If we can get credit for the sun rising in the
east, take it.
Just as the years of high oil income were a good time to shock Iran
by showing the high price it paid for not being able to export much of
its oil, now is a good time to shock Iran by showing that since the
world economy does not need their oil, we are prepared to take tougher
measures against Iran unless the nuclear impasse is resolved. The
impact of the last rounds of sanctions has faded; a new round is needed
to show that the United States is not ``sanctioned out.'' My intent
today is not to address what should be the character of that new round
of sanctions; my role instead is to point out why it is needed.
Patrick Clawson is Director of Research at The Washington Institute
for Near East Studies. He was formerly a senior economist at the
International Monetary Fund and the World Bank. He is the author or
editor of 30 monographs and books about Iran. He was the recipient of
the Middle East Studies Association's Pourshariati Award for best book
about Iran in 2014.
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RESPONSE TO WRITTEN QUESTIONS OF SENATOR SHELBY FROM ANTONY
BLINKEN
Q.1.a. In your testimony you declared that any deal with Iran
must address not only centrifuge research and development and
the possible military dimensions issues but also Iran's
possession of ``missiles capable of mating a nuclear weapon to
a missile.'' You also acknowledged that no agreement with Iran
can be acceptable unless it constrains Iranian missile
development and centrifuge research and development (R&D), and
unless it resolves all questions about weaponization work.
These three areas of concern, however, are unaddressed by the
Joint Plan of Action (JPOA) and Iran apparently continues to
work in all three areas, according to U.S. Government
statements, including the imposition of penalties against
Iranian entities in 2014 for weaponization-related procurement.
How much progress has Iran made on these three fronts
during the course of the JPOA so far?
A.1.a. The Joint Plan of Action (JPOA) has proven successful in
halting the advance of Iran's nuclear program and rolling it
back in key respects as we seek to achieve a long-term
comprehensive solution which prevents Iran from acquiring a
nuclear weapon and ensures that its nuclear program is
exclusively peaceful. Iran has provided the International
Atomic Energy Agency (IAEA) with enhanced transparency and
intrusive monitoring of its nuclear program, and the IAEA has
verified Iran's fulfillment of its nuclear-related commitments
under the JPOA. While the JPOA begins to address some of our
most urgent concerns regarding Iran's nuclear program, there
are many issues Iran must address as part of a long-term
comprehensive solution. We have been clear that a comprehensive
solution must cutoff all of Iran's pathways to a nuclear weapon
and such a deal will involve a variety of constraints and
extensive monitoring measures to ensure the exclusively
peaceful nature of Iran's nuclear program.
Q.1.b. What additional advances can Iran make if the JPOA is
extended again on its present terms?
A.1.b. The JPOA has created time and space for the negotiation
of a comprehensive solution that would prevent Iran from
acquiring a nuclear weapon and ensures that its nuclear program
is exclusively peaceful. Still, we won't go on negotiating
forever, and it would be very difficult to extend these
negotiations past the end of June, if we do not see the outline
of a political framework agreement by the end of March. As the
President has said, a further extension would not be useful if
Iran has not agreed to the basic formulation and the bottom
line that the world requires to have confidence that Iran is
not pursuing a nuclear weapon.
Q.2.a.-b. You testified that Iran has ``tried outside of the
agreement . . . every single day to do all sorts of things to
advance their program.'' You also said that the United States
works diligently at ``cracking down on their [Iranian] efforts
to procure for their weapons of mass destruction program.'' As
recently as last August, Departments of State and Treasury
designated Iranian entities for WMD-related procurement.
How can you reconcile the Administration's statement that
Iran's nuclear weapons work stopped in 2003 with Iran's recent
efforts to purchase equipment for nuclear weapons?
How can you reconcile the 2007 U.S. National Intelligence
Estimate on Iran declaration that in 2003 ``Tehran halted its
nuclear weapons program'' with Iran's recent efforts to
purchase equipment for nuclear weapons?
A.2.a.-b. Our diplomatic efforts thus far have proven
successful in temporarily halting the advance of Iran's nuclear
program and rolling it back in key respects as part of the
Joint Plan of Action (JPOA). Iran's illicit procurement
activities have not allowed it to circumvent the limits in
place on its nuclear program under the JPOA. Nonetheless, we
remain concerned about Iran's ongoing illicit procurement
activities and continue to work with partners to stop shipments
destined for Iran's nuclear program and ballistic missile
program. Furthermore, we continue to impose sanctions against
entities engaged in such activities and to press states to
robustly enforce relevant United Nations Security Council
(UNSC) sanctions.
We know there are many more steps beyond those in the JPOA
Iran needs to take to resolve the international community's
concerns regarding its nuclear program, which is why we are
working toward a comprehensive solution which will ensure that
Iran cannot acquire a nuclear weapon and that Iran's nuclear
program is exclusively peaceful. We can discuss Iran's
procurement efforts in more detail in a classified setting, but
Iran's procurement efforts do not contradict either the
Administration's statements on the Iranian nuclear program nor
the 2007 National Intelligence Estimate. We would refer you to
the Office of the Director of National Intelligence for an
assessment of Iran's nuclear capabilities and intentions.
Q.2.c. How can you assure the U.S. Congress that the
Administration can negotiate a solid deal with Iran if Iran
continues to prepare itself for nuclear weaponization even
during the negotiations?
A.2.c. We have long said that any deal will not be based on
trust. This is why we are seeking a durable and verifiable
deal. We have also been clear that any deal must include
initial suspension of sanctions--vice termination--so that we
can quickly snap them back into place should Iran violate its
commitments. A comprehensive deal would commit Iran to enhanced
transparency and monitoring measures, including ratifying the
IAEA Additional Protocol (AP), to verify the exclusively
peaceful nature of its nuclear program and to quickly detect
any attempts by Iran to break out. Implementing the AP would
provide the IAEA with expanded access to sites and facilities
in Iran and impose additional reporting requirements on Iran's
nuclear program.
How exactly the transparency and monitoring framework will
look beyond the AP is still under negotiation. We continue to
place a high priority on rigorous monitoring measures in order
to detect any violation of a comprehensive deal promptly and
retain an ability to snap sanctions back in place should
violations occur. In addition, we are pressing Iran to fully
cooperate with the IAEA to address all outstanding issues,
particularly those that give rise to concerns regarding the
possible military dimensions (PMD) of Iran's nuclear program.
This includes providing access to facilities, individuals, and
documents requested by the IAEA. We believe a comprehensive
deal should facilitate the IAEA's investigation of PMD and
ensure there are no ongoing weaponization activities. This is
one of the issues we are working to address in the
negotiations.
Q.3. The International Atomic Energy Agency (IAEA) admitted
years ago that in order to have reasonable confidence about the
absence of undeclared nuclear activities in Iran, the IAEA
requires legal authorities that go beyond those of the IAEA
Additional Protocol. Would you agree with the IAEA's conclusion
that the Additional Protocol is inadequate, and if so, how?
A.3. International Atomic Energy Agency (IAEA) officials have
stated repeatedly since the approval of the Model Additional
Protocol (AP) in 1997 that APs are essential to ensure that the
IAEA can detect undeclared nuclear activities in a state. That
is why, without implementation of the AP, the IAEA does not
provide a conclusion about the absence of such undeclared
activities. The United States believes that the combination of
an IAEA comprehensive safeguards agreement (CSA) and an AP has
become the international standard for safeguards and
verification under the Nuclear Non-Proliferation Treaty.
A comprehensive deal would commit Iran to enhanced
transparency and monitoring measures, including ratifying the
AP, to verify the exclusively peaceful nature of its nuclear
program and to quickly detect any attempts by Iran to break
out. Implementing the AP would provide the IAEA with expanded
access to sites and facilities in Iran and impose additional
reporting requirements on Iran's nuclear program. However,
given Iran's past behavior, we are seeking enhanced
transparency and monitoring measures beyond the AP.
How exactly the transparency and monitoring framework will
look beyond the AP is still under negotiation. We continue to
place a high priority on rigorous monitoring measures in order
to detect any violation of a comprehensive deal promptly and
retain an ability to snap sanctions back in place should
violations occur. Our team continues to work toward a package
that will best achieve our goals of preventing Iran from
acquiring a nuclear weapon and ensuring that Iran's nuclear
program is used for exclusively peaceful purposes.
------
RESPONSE TO WRITTEN QUESTIONS OF SENATOR BROWN FROM ANTONY
BLINKEN
Q.1. Breakout time is the amount of time Iran would need to
create enough weapons-grade uranium for a single nuclear
weapon, if it failed to observe an agreement. While many
overlook the fact that considerable additional time would be
needed to actually fabricate a nuclear weapon, break-out
capacity is widely accepted as the ``long pole in the tent'' of
making a nuclear weapon. By focusing on breakout time the
agreement would give the international community a year or more
to react.
Are you confident that any agreement to which the United
States is a party will provide us and our allies sufficient
time to respond, including militarily if necessary and a last
resort, Iran makes an overt or covert breakout move toward a
weapon?
A.1. A comprehensive deal would commit Iran to enhanced
transparency and monitoring measures to verify the exclusively
peaceful nature of its nuclear program and to quickly detect
any attempts by Iran to break out. We continue to place a high
priority on rigorous monitoring measures in order to detect
violations promptly and retain an ability to snap sanctions
back in place should violations occur.
We are confident that the United States would have
sufficient time to respond to an Iranian breakout effort,
should Iran take a decision to do so. Should Iran take such a
decision, the President has been clear that the United States
will do what it must to prevent Iran from acquiring a nuclear
weapon.
Q.2. The President noted recently that we have frozen Iran's
nuclear program, rolled back stockpiles of material already
accumulated, and been provided unprecedented insight into their
activities. And he said that was not just our assessment, but
the assessment of intelligence agencies worldwide, including in
Israel.
I know we'll hear about verification in greater detail in
upcoming classified briefings, but can you describe generally
how the United States is ensuring that Iran is complying with
the terms of the Joint Plan of Action, and describe the
different verification and monitoring roles, both now and under
a comprehensive deal, played by the State Department, the U.S.
intelligence community, the IAEA, and others?
A.2. As a result of the Joint Plan of Action (JPOA), Iran's
nuclear program is more constrained and transparent than it has
been in years. In particular, a significant benefit of the JPOA
is that the International Atomic Energy Agency (IAEA) has
obtained greater access into and information on Iran's nuclear
program. The IAEA is playing the essential role in verifying
Iran's fulfillment of its nuclear-related commitments under the
JPOA, consistent with its ongoing monitoring and verification
role in Iran pursuant to the Nuclear Non-Proliferation Treaty.
The IAEA has confirmed that Iran is fulfilling its nuclear-
related commitments under the JPOA. We have complete confidence
in the ability of the IAEA and its cadre of professional
inspectors to continue in its enhanced verification role under
the JPOA.
A comprehensive deal would commit Iran to enhanced
transparency and monitoring measures, including ratifying the
IAEA Additional Protocol (AP), to verify the exclusively
peaceful nature of its nuclear program and to quickly detect
any attempts by Iran to break out. Implementing the AP would
provide the IAEA with expanded access to sites and facilities
in Iran and impose additional reporting requirements on Iran's
nuclear program. How exactly the transparency and monitoring
framework will look beyond the AP is still under negotiation.
We continue to place a high priority on rigorous monitoring
measures in order to detect any violation of a comprehensive
deal promptly and retain an ability to snap sanctions back in
place should violations occur.
We would refer you to the Office of the Director of
National Intelligence for a more detailed assessment of our
capabilities to detect undeclared nuclear facilities in Iran
and the Intelligence Community's prospective role in verifying
a comprehensive deal.
Q.3. I know this debate is ultimately less about the details of
this bill than about whether to pass a bill at all while
negotiations are ongoing. Even so, the legislation we'll be
considering this week requires that any new sanctions relief
provided for in a final agreement could not be given by the
United States for a period of at least 30 consecutive
legislative days--which could, if a deal is finalized in late
June, stretch for over 2 months, beyond mid-September. What do
you see as the major risks of that approach, which would likely
violate any long-term agreement, and how do you think our
allies and Iran would react if such a temporary prohibition
against new sanctions relief were in place?
A.3. Our ability to offer timely sanctions relief is critical
to getting Iran to take the nuclear steps necessary to assure
the international community that its nuclear program is
exclusively peaceful (including through implementation of
stringent transparency and verification measures). Legislation
that would require an affirmative vote to approve a
comprehensive deal would likely have a profoundly negative
impact on the ongoing negotiations--emboldening Iranian hard-
liners, inviting a counter-productive response from the Iranian
majiles. Such legislation would differentiate the U.S. position
from our allies in the negotiations, and once again call into
question our ability to negotiate this deal.
Moreover, if congressional action is perceived as
preventing us from implementing a deal, it will create
divisions within the international community, putting at risk
the very international cooperation that has been essential to
our ability to pressure Iran. In addition, it would potentially
make it difficult to secure international cooperation for
additional sanctions in the future if Iran failed to make the
necessary concessions in the negotiations or failed to comply
with a comprehensive deal.
------
RESPONSE TO WRITTEN QUESTIONS OF SENATOR KIRK FROM ANTONY
BLINKEN
Q.1. Under Secretary Cohen wrote in the Wall Street Journal in
December 10, 2013, that ``the relief package in this interim
deal is economically insignificant to Iran,'' adding: ``Iran
will be even deeper in the hole 6 months from now, when the
deal expires, than it is today.''
Twelve months later, Iran is far from being ``deeper in the
hole.'' On December 24, 2014, Iranian President Hassan Rouhani
publicly announced that Iran's economy is benefiting greatly
from the interim deal's sanctions relief package. ``The
country's economic growth was minus 6.8 percent 2 years ago,
but the statistics issued by the Central Bank last night showed
a 4-percent positive growth during the 6 months of the current
[Iranian] year,'' Rouhani said in a speech, adding: ``We have
now finally managed to reduce the 40 percent inflation down to
17 percent.''
Even if Rouhani is exaggerating about Iran's 4-percent
growth rate in the last 6 months, the International Monetary
Fund is projecting that Iran's economy will grow by 2.2 percent
in 2015.
Do you still claim today that the interim deal's sanctions
relief package is ``economically insignificant to Iran''? In
the United States, we'd call Iran's 2.2 percent growth rate a
``recovery'' and Iran's alleged 4 percent growth in the last 6
months an ``economic boom.''
A.1. Contrary to some reports, Iran has not received
significant economic benefit from the Joint Plan of Action
(JPOA).
The JPOA is structured so that the overwhelming majority of
sanctions--including the key oil, banking, and financial
sanctions architecture--remain firmly in place. As a result of
our sanctions, exacerbated by the recent drop in oil prices,
Iran's economy remains under intense and sustained pressure.
Throughout the JPOA period, we have sanctioned almost 100
entities and levied $350 million in civil penalties against
companies for doing business with Iran in violation of our
sanctions.
The total value to Iran of the JPOA--which we estimate
could be up to approximately $14 billion to $15 billion through
June 2015--pales in comparison to the amount of revenue Iran
has lost from the sanctions currently in place and years of GDP
contraction.
In 2014, our oil sanctions alone deprived Iran of over $40
billion in oil revenue--at least four times the value of the
JPOA during that period. The vast majority of Iran's
approximately $100 billion in foreign exchange holdings still
remain inaccessible or restricted by sanctions.
While the Iranian economy grew at a rate of around 2
percent between March and September 2014, this growth occurred
after 2 years of painful GDP contraction. Iran's economy is 25
percent smaller today than what it would have been had it
remained on its pre-2011 growth trajectory, and low investment
and investor wariness will limit a potential recovery.
Q.2. Is it the Administration's position that Iran's recent
economic growth, driven in no small part by the interim deal's
sanctions relief package, has actually strengthened, not
weakened, our hand in negotiations--that it's actually made
Iran's ultimate decider, Supreme Leader Ali Khamenei, more
likely, not less, to make significant concessions to the West
on eliminating Iran's uranium enrichment program, completely
dismantling the Arak heavy water reactor that former
Administration official Bob Einhorn dubbed ``plutonium-bomb
factory,'' and on coming completely clean about the Iranian
nuclear program's military dimensions?
A.2. The efforts of Congress and the Administration to impose
stringent and comprehensive sanctions have imposed significant
economic pain on Iran and have been critical in bringing Iran
to the negotiating table.
Our ability to provide relief from these economic sanctions
is critical to providing Iran with an incentive to take the
nuclear steps necessary to assure the international community
that its nuclear program is exclusively peaceful.
That said, we do not assess Iran's economic improvements
during the last year were a result of the Joint Plan of Action.
Despite nascent signs of improvement, brought about largely by
improved economic management, Iran's economy will remain far
below its potential in the coming year.
The Joint Plan of Action is structured so that the
overwhelming majority of sanctions--including the key oil,
banking, and financial sanctions architecture--remain firmly in
place. As a result of our sanctions, exacerbated by the recent
drop in oil prices, Iran's economy remains under intense and
sustained pressure.
The total value to Iran of the JPOA--which we estimate
could be up to approximately $14 billion to $15 billion through
June 2015--cannot make up for Iran's systemic economic
weaknesses and imbalances, which include lack of economic
diversification, a suppressed manufacturing base, pervasive
unemployment and underemployment, and approximately 16 percent
inflation. The Administration is committed to ensuring that
Iran remains under powerful economic pressure as we continue
negotiations.
Q.3. When Secretary of State John Kerry announced a 7-month
extension for the nuclear talks with Iran on November 24, 2014,
he also announced a March 24, 2015, deadline for a ``political
agreement'' with Iran.
Will the ``political agreement'' with Iran due on March 24,
2015, be a written agreement? I request that any answer you
give begin with a ``yes'' or a ``no.''
A.3. The Administration is committed to sharing the details and
technical documents related to a long-term comprehensive deal
with Congress. If we successfully negotiate a framework by the
end of March, and a final deal by the end of June, we expect a
robust debate in Congress. We will aggressively seek public and
congressional support for a deal if we reach one because we
believe a good deal is far better than the alternatives
available to the United States. Because we do not have a deal
yet, it would be premature to speculate what form it would
take.
------
RESPONSE TO WRITTEN QUESTIONS OF SENATOR TESTER FROM ANTONY
BLINKEN
Q.1. Could you lay out the broader national security
consequences of Congress passing new sanctions--even with a so-
called ``trigger''--beyond the P5+ 1 negotiations with Iran?
What regional consequences would such legislation have on U.S.
efforts to combat the Islamic State of Iraq and the Levant
(ISIL) in the region, should it pass with a veto-proof
majority? What further implications for the United States and
our coalition partners in the region would the passage of such
sanctions legislation have?
A.1. Any new sanctions--including trigger sanctions--would be
inconsistent with our commitments under the Joint Plan of
Action (JPOA). New sanctions could undermine our sanctions
coalition, create tensions within the P5+ 1, and provoke Iran
into walking away from the negotiating table while blaming the
failure on us. Moreover, our ability to follow through on our
commitments will have longstanding implications well beyond P5+
1 negotiations with Iran. If any Administration--Democrat or
Republican--does not have the ability to conclude agreements
that advance our national security interests, this will
undermine our ability to implement all aspects of our foreign
policy, including undermining our credibility with our partners
in the region who are working with us to combat ISIL.
Q.2. What gives the Administration confidence that a political
agreement between the P5+ 1 and Iran will be reached by the
March 24 deadline? Are our P5+ 1 coalition partners equally
confident that a political agreement can be reached by this
deadline? What further obstacles remain in place?
A.2. We are seeking to outline the major elements of a deal by
the end of March. We will use the remaining time until the end
of the current extension period to complete the technical
details. We have made incremental but real progress through
intense diplomatic and technical work on the key issues that
form the basis for a comprehensive deal. These negotiations
have been serious and substantive, and we are working hard to
find ways to resolve our concerns while maintaining the
imperative that all pathways to a nuclear weapon must be
cutoff. There may be multiple ways to accomplish that
objective, but this principle is non-negotiable.
If by the end of March we have not decided on the major
elements and do not see a clear path forward, then we can
revisit how to proceed. We cannot continue this process
forever, and we will have all the same options we have today at
the end of this process. We will not take a bad deal and if we
conclude that Iran is unable to unwilling to take the necessary
steps to resolve our concerns, we will walk away from these
negotiations.
Q.3. In your estimation, what would a sturdy yet workable
inspection and verification regime look like from the U.S.
negotiator perspective? Do you envision U.S. inspectors taking
part in this regime? Are you confident that a final agreement
will permit inspectors unfettered and unrestricted access to
sites in Fordow, Natanz, Arak, Isfahan, Bushehr, and Parchin?
Do our coalition partners share this view?
A.3. A comprehensive deal must ensure that Iran is subject to
significantly enhanced transparency and monitoring measures to
verify the exclusively peaceful nature of its nuclear program
and to quickly detect any attempts by Iran to break out. How
exactly that framework will look is still under negotiation and
our team continues to work toward a package that will best
achieve our goals of preventing Iran from acquiring a nuclear
weapon and ensuring that Iran's nuclear program is used for
exclusively peaceful purposes. Regardless, the Administration
is insisting on verification measures to help ensure that
violations will be detected promptly. We continue to place a
high priority on strict monitoring and verification measures in
order to detect violations and retain an ability to snap
sanctions back in place should violations occur.
Additional Material Supplied for the Record
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