    [Senate Hearing 114-128]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-128

         THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT

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

                                    HEARING

                                   before the

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

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

    ASSESSING THE NATURE, IMPLICATIONS, AND POTENTIAL CONSEQUENCES OF IRAN
    SANCTIONS RELIEF THAT ARE PROPOSED TO BE PROVIDED TO IRAN IN RETURN FOR
     THE NUCLEAR-RELATED COMMITMENTS SET FORTH IN THE JOINT COMPREHENSIVE
                                 PLAN OF ACTION

                                   __________

                                 AUGUST 5, 2015

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

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                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      RICHARD C. SHELBY, Alabama, Chairman

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

               William D. Duhnke III, Staff Director and Counsel

                     Mark Powden, Democratic Staff Director

                        Dana Wade, Deputy Staff Director

        John V. O'Hara, Senior Counsel for Illicit Finance and National
                                Security Policy

                      Jay Dunn, Professional Staff Member

                    Shelby Begany, Professional Staff Member

                Laura Swanson, Democratic Deputy Staff Director

                   Colin McGinnis, Democratic Policy Director

                           Dawn Ratliff, Chief Clerk

                          Troy Cornell, Hearing Clerk

                          Shelvin Simmons, IT Director

                              Jim Crowell, Editor

                                      (ii)

                                C O N T E N T S

                                  ----------

                           WEDNESDAY, AUGUST 5, 2015

                                                                       Page

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

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

                                   WITNESSES

    Wendy Sherman, Under Secretary, Department of State..............     4
        Prepared statement...........................................    72
        Responses to written questions of:
            Senator Crapo............................................   163
            Senator Warner...........................................   164
            Senator Heitkamp.........................................   166
    Adam J. Szubin, Acting Under Secretary of Treasury for Terrorism
      and Financial Crimes, Department of the Treasury...............     6
        Prepared statement...........................................    75
    Juan C. Zarate, Chairman & Senior Counselor, Center on Sanctions
      and Illicit Finance, Foundation for Defense of Democracies and
      Senior Adviser, Transnational Threats Project, Center for
      Strategic and International Studies............................    52
        Prepared statement...........................................    79
    Mark Dubowitz, Executive Director, Center on Sanctions and
      Illicit Finance, Foundation for Defense of Democracies.........    54
        Prepared statement...........................................   101
    Matthew Levitt, Ph.D., Fromer-Wexler Fellow and Director, Stein
      Program on Counterterrorism and Intelligence, The Washington
      Institute for Near East Policy.................................    56
        Prepared statement...........................................   150
    Nicholas Burns, Goodman Professor of Diplomacy and International
      Relations, Harvard Kennedy School..............................    58
        Prepared statement...........................................   158

                                     (iii)

         THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT

                                  ----------

                           WEDNESDAY, AUGUST 5, 2015

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:04 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 have
    a very important hearing today, and we have a lot of
    attendants. I will start the hearing off by recognizing my
    colleague and friend Senator Corker because he is tied up on
    similar stuff himself.
        Senator Corker, go ahead.
        Senator Corker. Well, I just want to ask the first
    questions.
        Chairman Shelby. Oh, you want to go ahead and ask it now?
        Senator Corker. I will wait.
        Chairman Shelby. You want to wait?
        Senator Corker. Yeah.
        Chairman Shelby. OK. If that satisfies you, that satisfies
    me.
        Much has changed since the Committee held its hearing on
    Iran and marked up an economic sanctions bill drafted by
    Senators Kirk and Menendez. Since then, there has been a
    nuclear agreement with Iran, after numerous delays.
        Many serious concerns have been raised regarding this deal,
    including, first and foremost, whether it would actually
    prevent Iran from continuing on its dangerous path to a nuclear
    weapon. And although a new deal has been reached, fundamental
    problems remain with Iran, the country upon whose assurances
    the deal rests.
        Iran remains the world's leading state sponsor of terror.
    It remains a serious risk to the national security interests of
    the United States. It remains a constant threat to the survival
    of Israel. And despite these grave concerns, it will remain a
    country with the capability to enrich uranium.
        Under these circumstances, I believe it is critical that
    Congress conduct a thorough review of the agreement as required
    by the Iran Nuclear Agreement Review Act. As part of this
    review, the Banking Committee will focus specifically on
    analyzing the sanctions relief provided in the nuclear
    agreement and the implications of taking such actions.
        There is general agreement that the pressure of sanctions
    brought Iran to the negotiating table. Congress must consider
    carefully now the repercussions of lifting those sanctions on
    our national security and our economic interests.
        In recent weeks, many of my colleagues--on both sides of
    the aisle--have expressed skepticism over several aspects of
    the agreement. For example, the relief provided to Iran under
    this deal would allow it to rejoin the international economic
    system. Over time, this would give Iran the financial means to
    increase its support of terrorism and regional destabilization.
        In addition, the mechanism for reimposing the harshest
    sanctions, should Iran not comply with parts of the deal, may
    prove ineffective except in the most extreme cases of
    violation. Many view it as Iran's ``license to cheat,'' as long
    as such cheating falls just short of a significant violation of
    the agreement.
        Financial sanctions have become a critical tool of U.S.
    foreign policy, and they are an important part of this
    Committee's jurisdiction. In fact, over initial Administration
    objections, this Committee was instrumental in imposing the
    sanctions that brought Iran to negotiations in the first place.
    I believe it is essential for U.S. sanctions law and policy to
    continue to evolve to meet any new security challenges
    presented by Iran.
        Today the Committee will hear from two panels. On our first
    panel, we will hear from the Administration's lead negotiator
    of the agreement and its lead sanctions expert. Following this,
    the Committee will receive testimony from a panel of experts
    who have studied the agreement extensively, including officials
    from the previous Administration.
        Senator Brown.

                   STATEMENT OF SENATOR SHERROD BROWN

        Senator Brown. Thank you, Mr. Chairman.
        Ms. Sherman and Mr. Szubin, thank you for being here and
    for your very important public service.
        We will hear in the second panel from four witnesses who
    worked in the Bush administration and terrorist finance and
    Middle East policy. In fact, this whole process began in the
    Bush administration with a Republican President who was, in the
    wake of the Iraq war, willing to engage Iran diplomatically.
        As Secretary Kerry observed in Senator Corker and Senator
    Menendez's Committee the other day, the Bush administration
    laid the foundation for what became the Iran agreement:
    sanctions relief in return for strict limits on Iran's nuclear
    program.
        In June 2008, President Bush's National Security Adviser
    Condoleezza Rice signed a memorandum with the P5+1, which said
    that, in return for Iran doing key things to limit its nuclear
    program, the United States was ready to do a number of things:
    One, to recognize Iran's right to nuclear energy for peaceful
    purposes; two, to treat Iran's nuclear program like any other
    non-nuclear weapons state party to the NPT if international
    confidence in the peaceful nature of its program could be
    restored; three, provide technical and financial aid for
    peaceful nuclear energy; and, four, to work with Iran on
    confidence-building measures to begin to normalize trade and
    economic relations and allow for civil aviation cooperation.
    That was Condoleezza Rice's agreement at the time.
        This should sound familiar because it was the early outline
    of the Iran agreement just completed. That is partly why I have
    been so disappointed--so disappointed--in the politicized
    nature of the debate on this agreement so far, including from
    colleagues coming out in opposition to the agreement within
    hours of its release even though it is over 100 pages long and
    very dense and complicated to read.
        This is one of the most significant national security
    issues Congress will face in a generation. I say that the most
    important--this will be the second or first most important vote
    I have ever cast on foreign policy, second perhaps only or even
    more important than my vote against the Iraq war a decade-plus
    ago.
        This should not be subject to partisan attacks and
    political ad wars, even though it has been. Congress should
    give this agreement the serious debate that it deserves.
        We know Iran is a sponsor of terrorism. We know it
    destabilizes the region. We know it violates the human rights
    of its people. That is why Western policymakers agreed to
    separate out and try to secure agreement on this one specific
    issue. They knew an Iran with a nuclear weapon would be
    especially dangerous to us, to Israel, and to the region. That
    was the singular goal of P5+1 negotiations: to keep Iran from
    getting a nuclear weapon.
        Since Iran has deceived the West, verification is key. It
    is not a question of trust. Of course, we must understand how
    verification will work.
        There are a number of questions: Will IAEA have sufficient
    resources to conduct inspections, not just at declared sites
    but at suspicious covert sites? Will our intelligence
    capabilities be able to detect cheating? Will Iran's breakout
    time, extended from 2 to 3 months to a year for the next 10
    years, will we have time to respond politically, economically,
    and, if necessary, militarily if Iran makes a break for a
    weapon?
        And, finally, what actually happens if Congress rejects the
    deal? How would we maintain effective enforcement of our
    sanctions without the support of our P5+1 allies whose
    Ambassadors again made clear to a large group of us yesterday
    that we would be isolated? What happens if a country like China
    walks away and dodges our sanctions by establishing banks with
    no correspondent relationships in the United States and starts
    buying Iranian oil again? What would a rejection in Congress do
    to the credibility of the United States in the eyes of the rest
    of the world?
        We need answers to these questions and other questions.
    Some we will hear today; others we have been receiving in
    classified sessions.
        Over the years, I have joined many of my colleagues in
    supporting round after round of tough unilateral and
    international sanctions which clearly brought Iran to the table
    and helped secure this agreement. 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. That has not happened.
        We have an unusually grave and historic responsibility to
    assess the consequences, without partisan rancor, without any
    partisan attacks, to assess the consequences of this agreement,
    then to weigh the risks, weigh the benefits of allowing the
    President and our allies to test Iran's ability to comply with
    it. Ultimately, while some of us might differ on tactics, it is
    clear we share the same goals to assure that Iran does not
    achieve a nuclear weapon, to do that diplomatically if
    possible, and to recognize that other alternatives remain on
    the table and are not precluded by this agreement.
        Thank you, Mr. Chairman.
        Chairman Shelby. Thank you, Senator Brown.
        On our first panel we will hear first from the Honorable
    Wendy Sherman. She is the Under Secretary for Political Affairs
    at the U.S. Department of State.
        Next we will hear from Mr. Adam Szubin. He is currently the
    Acting Under Secretary of the Treasury for Terrorism and
    Financial Crimes.
        Both of your written testimonies will be made part of the
    hearing record today. Ambassador Sherman, you proceed as you
    wish.

      STATEMENT OF WENDY SHERMAN, UNDER SECRETARY, DEPARTMENT OF
                                 STATE

        Ms. Sherman. Good morning, Chairman Shelby, Ranking Member
    Brown, and Members of the Committee. Thank you very much for
    this opportunity to discuss the Joint Comprehensive Plan of
    Action that the United States and our international partners
    recently concluded with Iran. To reserve as much time as
    possible for questions, I will only highlight a few key points.
        By blocking each of Iran's potential pathways to the
    fissile material required for a bomb, the deal approved in
    Vienna ensures that Iran's nuclear program will be peaceful
    over the long term.
        Under the deal's provisions, Iran must remove two-thirds of
    its installed centrifuges for 10 years, reduce its stockpile of
    enriched uranium by 98 percent for 15 years, and cap uranium
    enrichment at 3.67 percent, far below the danger point, for 15
    years.
        The core of Iran's heavy-water reactor at Arak will be
    removed and rendered unusable and the facility rebuilt so that
    it cannot produce weapons-grade plutonium. Meanwhile, spent
    fuel from the reactor will be shipped out of the country.
        I emphasize, as both the Chairman and the Ranking Member
    did, this deal is based on verification, not trust. Before
    obtaining any relief from economic sanctions, Iran must meet
    its major nuclear-related commitments. International inspectors
    will have unprecedented access to Iran's declared nuclear
    facilities and its entire nuclear supply chain, from uranium
    production to centrifuge manufacturing and operation; and if
    there are suspicious undeclared sites, no sites--no sites--will
    be off limits.
        If Iran fails to meet its responsibilities, we can ensure
    that sanctions snap back into place, and no country can stop
    that from happening. If Iran tries to break out of the deal
    altogether, the world will have more time--a year--compared to
    the 2 months prior to the negotiation to respond before Iran
    could possibly have enough fissile material for a bomb. At that
    point, all the potential options that we have today would
    remain on the table, but we would also have the moral authority
    and international support that comes from having exhausted all
    peaceful alternatives.
        This is also a long-term deal. Some provisions will be in
    effect for 10 years, some for 15, some for 25, and some
    indefinitely.
        Under the Nuclear Nonproliferation Treaty, Iran is
    permanently prohibited from pursuing a nuclear weapon, and the
    access and verification provisions associated with the NPT will
    remain in place forever, enhanced by the Additional Protocol as
    a result of the Joint Comprehensive Plan of Action.
        The bottom line is that this deal does exactly what it was
    intended to do when we began formal negotiations nearly 2 years
    ago. At that point, we faced an Iran that was enriching uranium
    up to 20 percent at a facility built in secret and buried in a
    mountain, and was rapidly stockpiling enriched uranium, had
    installed over 19,000 centrifuges, and was building a heavy-
    water reactor that could produce weapons-grade plutonium at a
    rate of one to two bombs per year.
        The plan agreed to in Vienna will shrink those numbers
    dramatically, ensure that facilities can only be used for
    peaceful purposes, and put the entire program under a
    microscope.
        Some have expressed concerns about what might happen 15
    years from now, but without this agreement, as Secretary Kerry
    and Secretary Moniz have said, year 15 would begin today. And
    if the United States walks away from the JCPOA, which has been
    negotiated every step of the way with our international
    partners, we will be left alone. That would be the worst of all
    worlds. Iran could push ahead with its nuclear program in
    whatever direction it chooses. Everything we have tried to
    prevent could occur. We would not have enhanced transparency,
    required under the JCPOA, to scrutinize every element of Iran's
    nuclear program, and the multilateral sanctions regime, which
    the President and Congress worked so hard to put in place, led
    by this Committee, would begin rapidly to unravel--along with
    the Senate Foreign Relations Committee, of course.
        As for Iran's behavior, the United States is under no
    illusions. This agreement was never based on the expectation
    that it would transform the Iranian regime or cause Tehran to
    cease contributing to sectarian violence and terrorism in the
    Middle East. That is why we have made clear that we will
    continue our unprecedented levels of security cooperation with
    Israel.
        As Secretary Kerry confirmed earlier this week in Qatar, we
    will work closely with the Gulf States to build their capacity
    to defend themselves and to push back against Iranian influence
    that destabilizes the region. We will continue to take actions
    to prevent terrorist groups, including Hamas and Hezbollah,
    from acquiring weapons. We will keep in place all of our own
    sanctions related to human rights, terrorism, WMD, and
    ballistic missiles. And we will continue to insist on the
    release of U.S. citizens unjustly detained in Iran and for
    information about the whereabouts of Robert Levinson so
    everyone comes home.
        I am almost done, Mr. Chairman.
        We all know that the Middle East today is undergoing severe
    stress due to violent extremism, challenged governance, and
    sectarian and political rivalries. But every one of those
    problems would be even worse if Iran were allowed to have a
    nuclear weapon. That is why the agreement reached in Vienna is
    so important. None of us can accept a nuclear-armed Iran.
        Some have said if we double down on sanctions, we could
    force Iran to dismantle its nuclear program. But, quite
    frankly, ladies and gentlemen, Members, that is a fantasy. The
    whole purpose of sanctions was to get Iran to the bargaining
    table and to create incentives for precisely the kind of good
    agreement that we were able to achieve in Vienna.
        Over 90 countries have issued public statements in support
    of the deal. That list includes all of the countries that were
    involved in these negotiations. Every one of these countries
    has made tough choices to keep the international sanctions
    regime in place. We need their support for implementation.
        It is important to remember that we tried for many years to
    get here, as was pointed out. We worked on this on a bipartisan
    basis. President Obama and this Committee pushed for stronger
    multilateral sanctions and unilateral sanctions to keep the
    door open to negotiations. Those sanctions forced Iran to pay a
    high price, but were not enough to make them change course.
    That required this diplomatic initiative.
        Congress played a critical role in getting us to this
    point. Sanctions achieved their goal by bringing about serious,
    productive negotiations. Now Congress has a chance to affirm a
    deal that will make our country and our allies safer, a deal
    that will keep Iran's nuclear program under intense scrutiny, a
    deal that will ensure the international community remains
    united in demanding that Iran's nuclear activities must be
    wholly peaceful.
        It is a good deal for America, a good deal for Israel, a
    good deal for the world, and I say to you all, respectively, it
    deserves your support. Thank you.
        Chairman Shelby. Mr. Szubin.

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

        Mr. Szubin. Thank you, Chairman Shelby, Ranking Member
    Brown, and distinguished Members of the Committee. Thank you
    for inviting me this morning to appear before you to discuss
    the nuclear deal with Iran, and it is a pleasure to appear
    alongside Ambassador Sherman.
        The global sanctions coalition built and led by the United
    States across Administrations and with broad bipartisan support
    in Congress, including from this Committee, gave us the
    leverage to secure unprecedented nuclear concessions from Iran.
        From the start, our purpose in imposing these sanctions was
    to build the leverage that could be used to obtain concessions
    on the nuclear file. Our secondary sanctions were meant to be
    the quid for the nuclear quo.
        Our three goals were to close off Iran's paths to a nuclear
    weapon, ensure we had the access to know if they were cheating,
    and preserve the leverage to hold them to their commitments and
    to punish them if there was a breach. The JCPOA obtains these
    purposes.
        On the sanctions side of the deal, I would like to touch
    briefly on four points that have been much debated: the scope
    of relief; the snapback provisions; the campaign that is
    ongoing to combat Iran's support to terrorism, the Quds Force
    and other maligned groups; and, finally our remaining leverage
    in the event that the United States walks away from this deal.
        First, we should be clear in describing what sanctions
    relief will and will not mean to Iran. If Iran completes the
    nuclear steps in this deal, which will take it at least 6 to 9
    months, the United States will lift our nuclear-related
    secondary sanctions. The primary U.S. sanctions--our embargo--
    will still be in place with respect to Iran and still be
    enforced aggressively. Iran will be denied access to the
    world's most important market and unable to deal in the world's
    most important currency.
        Our sanctions list with respect to Iran will remain very
    extensive. We are not relieving sanctions against Iran's
    Revolutionary Guard Corps, the IRGC, or the Quds Force, or any
    of their subsidiaries or senior officials. In fact, under this
    deal more than 225 individuals and companies linked to Iran
    will remain designated, including major Iranian companies and
    their financial engineering and transportation sectors.
        There has been much discussion of the Iranian foreign
    reserves that are to be released from foreign restricted
    accounts under the deal. If Iran fulfills its nuclear
    commitments, Iran will receive about $50 billion, not two or
    three times that much. The rest of what has been inaccessible
    will remain inaccessible, and with that about $50 billion, Iran
    will need to try to address an economic hole that is half a
    trillion dollars deep. This President Rouhani's central promise
    to the Iranian people when he ran for office, and he now needs
    to meet that promise.
        Second, on snap back, if Iran does not uphold its side of
    the bargain once we have suspended sanctions, we can promptly
    snap back U.S. and U.N. sanctions. Our EU colleagues are
    positioned to do the same. For U.S. sanctions, this can be done
    rapidly in a matter of days, and we have the discretion to
    impose everything from smaller penalties to the powerful oil
    and financial restrictions. A binary on-or-off snapback would
    not serve us well, and we have retained maximum flexibility and
    leverage here. If the sanctions snap back, I want to emphasize
    there is no grandfather clause. No provision in the deal gives
    signed contracts special status. Once snapback occurs, any new,
    prospective transactions are sanctionable.
        Third, as we neutralize the most acute threat posed by
    Iran, its nuclear program, we need to be aggressive in
    countering the array of Iran's other malign activities. This
    deal in no way limits our ability to do so. We have made that
    clear both to Iran and to our partners. This means we will
    sustain and intensify our use of sanctions against Iran's
    backing for terror groups like Hezbollah. We will be using our
    authorities to counter Iran's interventions in Yemen and Syria,
    Iran's efforts to oppress those who are standing up for human
    rights in Iran. And we will be using our sanctions to block
    Iran's attempts to develop their missile program.
        Under the interim deal, while negotiations were ongoing, we
    took action against more than 100 Iranian-linked targets, and
    we will be accelerating that work in the days and months ahead,
    alongside Israel and our regional allies to combat Iran's
    proxies, to interdict funds moving through its illicit
    networks. I will personally be focused intensively on these
    efforts.
        Fourth, and finally, let me provide my perspective as a
    sanctions official on the implications of walking away from
    this deal. The sanctions regime generated much of its force
    because the world's major powers, including Iran's closest
    trading partners and oil customers, agreed on the goal of
    ending Iran's nuclear threat through diplomacy. It would be a
    mistake for the United States to back away from this
    international consensus on the notion that we could feasibly
    unilaterally escalate the pressure and obtain a broader
    capitulation from Iran.
        U.S. sanctions are extremely powerful. I have seen that
    firsthand in my 10 years at the Treasury Department. But they
    are now all-powerful. If the United States were to walk away
    and ask our partners to continue locking up Iran's reserves,
    limiting their oil purchases, the coalition we assembled would
    fray, with unpredictable and risky results. It is difficult to
    see how a broken international consensus and less leverage
    would help us to obtain a ``much better deal.''
        Instead, enforcing this deal, securing the far-reaching
    nuclear concessions Iran has made will capitalize on our
    carefully built economic pressure and deny Iran access to a
    terrifying weapons capability for the foreseeable future. And
    as we move forward, you have my commitment that the dedicated
    team at Treasury will continue to pursue smart and aggressive
    sanctions to address Iran's remaining malign activities.
        Thank you very much, and I look forward to answering your
    questions.
        Chairman Shelby. I will yield to Senator Corker.
        Senator Corker. Thank you, Chairman. We have Ms. Romano
    coming in. Actually, we have four briefings and/or hearings
    today, counting this one, so thank you very much.
        I want to start by addressing the Ranking Member's
    comments. I could not agree more that this should not be a
    partisan effort. I could not agree more. I met with Senator
    Reid on Monday just to talk a little bit about how this debate
    will take place in September, and I can say to every one of my
    colleagues on both sides of the aisle, regardless of how people
    vote on this, you are not going to hear me making comments
    either way. I think this is a very important vote. What we have
    tried to do in the Foreign Relations Committee is to make sure
    that people fully understand the ramifications, so I could not
    agree more.
        I do want to say that one of the details you left out in
    your letter regarding the Bush agreement was they were not
    going to agree to enrichment, and that is a detail that has
    kind of been left out. And I think that is the Rubicon that has
    been passed here, is that we in essence are--we have three
    state sponsors of terror that we list: Sudan, Syria, and Iran.
        And what this agreement in essence does is it codifies with
    our approval the industrialization of their nuclear program. I
    mean, that is a fact. That has not been debated.
        I want to say that I think Senator Donnelly, Senator
    Heitkamp, Senator Warner, Senator Tester, Senator Schumer, and
    Senator Menendez all know that I have been very open to
    supporting an agreement. I had one of the few conversations
    that I have ever had with Secretary Kerry--I think we all know
    him well--where I actually thought he was listening to what I
    was saying on a Saturday. It was interesting. I was standing in
    my driveway. And I emphasized the importance of these last
    pieces, and I am talking about the inspections, I am talking
    about the previous military dimensions--I know it is possible
    military dimensions; we all know they are involved militarily--
    and how important that was not just from the standpoint of what
    it said, but the indication to us that we were really going to
    apply these things, that we were really going to be tough and
    make this agreement stand. And when I got the documents--and I
    have been through all of them extensively--I have to say my
    temperature rose very heavily. And then when I saw that we were
    lifting the conventional ban in 5 years, the missile ban in 8
    years, and on the front end lifting the missile test ban, on
    top of what this agreement said, I was very troubled.
        Now, I want to just get the sanctions relief, first of all,
    in perspective. I know you said, Adam, 50--most people have
    been saying 56, but overall it is about 100. But some of that
    money is tied up in deposits for activities that are going to
    be taking place. But, in fairness, it is about $100 billion.
    Just to put that in perspective, their economy is $406 billion.
    So $100 billion would be like us getting in the next 9 months
    $4 trillion, just relative to our economy. They have all said
    that over the next 10 years they are going to get $400 to $600
    billion. That would be like us getting $17.5 trillion in our
    coffers over the next 10 years on a relative basis.
        But here is the question I have. I was very discouraged
    with the final round, and I think maybe I showed a little
    temperature when I went through it and understood it, and I
    apologize for that. But I worked with Senator Cardin, my
    friend, I began with Senator Menendez over an excruciating
    period of time to make sure that the way this agreement worked,
    the Iran Review Act, we got the documents, and we got them in a
    way that was acceptable to you all. He spent all weekend with
    you, the White House, and others on this Iran Review Act. And
    we were to get all agreements, including the side agreements.
        Now, the very entity that we are counting on to do the
    inspection, we cannot even get a copy of the side agreement
    that lays out how we are going to deal with Parchin, and I
    would say to everyone here, if you have not been down to the
    intel area, you ought to see what Iran is doing today while we
    are sitting here in Parchin. You should go look at it or get
    them to bring it to you in the pouch.
        We cannot even see the agreement that relates to how we are
    going to deal with PMD. By the way, all sanctions relief occurs
    regardless of what they do with PMD. All they have to do, the
    IAEA has to write a report, but if they D-minus it, meaning
    they do not tell us much, or if they A-plus it, they tell us
    everything, sanctions relief still occurs.
        So I would just ask Ms. Sherman, after this painstaking
    effort we went through to make sure we did not ask you to give
    us
    documents you could not give us, you knew what the IAEA
    protocols were, why now will you not give us the documents that
    exist that are so important to all of us relative to the
    integrity of this? Why not?
        Ms. Sherman. Thank you very much, and thank you, Mr.
    Chairman, for all of your hard work along with first Senator
    Menendez and then Senator Cardin on this deal and all your
    attention to it.
        Let me answer your question, but then I want to come back
    to one other point that you made.
        You are about to have the Director General come and meet
    informally with the Senate Foreign Relations Committee. He made
    this decision on his own because the IAEA is an independent
    agency. You made a bipartisan invitation to him, and he agreed
    to come, and I found out about it about the same time you found
    out about it. So he did this on his own, and I think it will be
    very useful and----
        Senator Corker. But why can't we get the documents?
        Ms. Sherman. I am going to explain. We do not have the
    documents in the first instance. We do not have them, so we do
    not have them to give to you. And the reason we do not have
    them is because they are Safeguards Confidential. And the
    Director General explained this to you and what that means.
        The IAEA does Safeguards Confidential Protocols with the
    United States, and they do not share them with anyone else, so
    they do not want to share Iran's with anyone else. You, I am
    sure, will say to me, ``But, Ambassador Sherman, they did tell
    you about them.'' And, indeed, they did, and the reason they
    did is it was in the middle of the negotiation, and they wanted
    to go over with some of our experts the technical details.
        So I did see the provisional documents. I did not see the
    final documents. I saw the provisional documents, as did my
    experts. And as you know, there will be a classified, all-
    Senate briefing this afternoon, and I will go over in detail in
    a classified setting everything I know about----
        Senator Corker. That you have been told.
        Ms. Sherman.----these arrangements.
        Senator Corker. So, again, I want to say we spent 4 days
    going over every detail with the Administration to make sure
    that the documents we were asking for were ones that could be
    delivered.
        Ms. Sherman. And you got every single document we have.
    Every single one.
        Senator Corker. The entity that we are depending upon for
    the integrity of this deal, we do not even have the agreement.
        Let me ask you this: Do you have any understandings as to
    whether there are limitations, whether the IAEA actually is
    going to have physical access inside Parchin to take samples
    themselves? Would you give that----
        Ms. Sherman. I will be glad to discuss all of this in a
    classified session this afternoon. And I will say this, also,
    Senator, on two other points you made: What Iran must do is
    give to the IAEA all of the actions and all of the access that
    they believe is required for them to write their final report
    on the possible military dimensions of Iran's program. The
    United States has already made its own judgment about that. We
    made it in a National Intelligence Estimate that was made
    public some years ago, and that estimate said publicly that we
    believe they did have military dimensions of their program up
    until 2003. So the United States has already made its judgment,
    and we stand by that judgment.
        What this deal is most focused on is where the program is
    and where it is headed, and I quite agree, getting access to
    Parchin is important because it says something about access in
    the future. And establishing the credibility of the IAEA is
    also important to this. So I am very glad that the Director
    General is coming to see you.
        I would add one other point, Mr. Chairman, and that is that
    sanctions, as the Acting Under Secretary said, are absolutely
    crucial to having brought Iran to the table. But sanctions
    never stopped Iran's program. When the Obama administration
    began, there were about 5,000 centrifuges. Sanctions were the
    most extensive ever during the Obama administration, and yet
    Iran went to 19,200 centrifuges. So sanctions will not stop
    their program ever. It is negotiations or other options that
    will do that.
        Senator Corker. I would just say in closing--and I did not
    want to take this much time. I would just say to every Senator
    here this is a big decision. But, Wendy, and Secretary Kerry,
    every other country, including Iran, knew that because we
    drafted this Iran Review Act, regardless of what is being said,
    we were going to have the opportunity to weigh in. We were
    going to have the opportunity to weigh in.
        So when people say it is this versus that, especially on
    these issues that we have been so concerned about, and when we
    saw that they were just punted on, negotiated away, issues that
    we with great sincerity talked with the Administration about,
    and yet they were just punted on. I think that each of us has
    to make our own decision based on whether we think this is
    going to keep Iran from getting a nuclear weapon, regardless of
    where we feel with the international community. I just want
    to--I hope at some point on this grandfathering issue--and I
    will stop. We sent out a document to help everybody. It was
    nine pages long. And we asked the Administration for red lines.
    We were able to go--I have got resources with staff and others
    to go through this agreement, and it is a huge privilege to do
    that. So I sent out a CliffsNotes to everybody. And there was
    one question about whether the gold rush that we are all
    concerned about is going to occur, and that is, people going
    into Iran immediately to sign contracts. And we use the words
    ``grandfathered contracts,'' and you used some interesting
    words. I guess the question I have--and it is still unanswered.
    And, by the way, our friends in Britain and Germany and France
    and the EU have all told me that contracts are grandfathered.
    Now, they backed off a little bit. There is some confusion
    around that.
        And, by the way, I want to say there is confusion. I think
    Iran views it the way we had it in this document.
        But if someone spends $1 billion when these sanctions are
    lifted, let us say BP on an oil facility, and sanctions snap
    back--by the way, you all realize that in 9 months Iran has the
    nuclear snapback, meaning it shifts to them. All of a sudden,
    if we put any sanctions in place, the agreement clearly states
    they can walk away. They have all their sanctions relieved, but
    they can walk away. So they have what is called a ``nuclear
    snapback.'' We have sanction snapback.
        But I guess the question is: If somebody enters into a
    contract over the next year when these sanctions are relieved,
    everyone expects them all to be relieved in 9 months, again,
    regardless of what the PMD report says, can that contract
    continue on--in other words, it was put in place during the
    free time. Can it continue on if sanctions are put in place
    afterwards? That is a gray area. I think it is a detail, but I
    think it does--and I realize it is not the biggest issue. But
    it does create concerns about people rushing in now to
    establish contracts, which we see happening right now with
    Europe.
        Mr. Szubin. Senator, I do not think that is an unimportant
    issue. I would not describe that as a detail at all. I think
    that is pretty central. If you are talking about snapback and
    the leverage that we have, if companies could enter into
    contracts and then have them be somehow protected against
    snapback, then we would have a very weak snapback indeed. And
    we were intent that we were not going to let that happen.
        So what we have--and it is not gray. It is very clear. Iran
    might want to put some grayness into the issue, but they
    understand this issue as well. Obviously, when sanctions are
    lifted, the business that is allowed by that lifting can occur.
    If sanctions are snapped back, any prospective transactions, on
    a pre-existing contract or on a new contract, are sanctionable.
    It is that clear. Our friends in the U.K. understand that, in
    France and Germany understand that. And if there is any doubt,
    I want to remove it here today.
        Senator Corker. Could we get a letter from the other
    parties that agree to that? That would be helpful to us. If you
    could get the other parties, even including China and Russia,
    to agree that that is the case, because we are getting very
    mixed--I think it would just help us to some--at least some
    people who may still be on the bubble about the issue.
        Ms. Sherman. If I may just add, I think, Senator Corker, I
    spoke with Sir Peter Westmacott, the U.K. Ambassador to the
    United States, this morning--I know he has talked to many of
    you--and he shared with me an email that I believe he sent to
    your office about this, and he said, ``I want to clarify the E3
    position on our ability to apply sanctions to Iran for other
    activities and for snapback,'' and said that, in fact, he is
    committed and Europe is committed to snapback, and that the EU
    retains the freedom and ability to apply sanctions for other
    forms of unacceptable activity.
        He also said to me on the phone this morning that he
    absolutely understands, all Europeans understand, and Helga
    Schmid, the Deputy of the European Union's High Representative
    Office, just had a meeting with all the services of the
    European Union to affirm this very fact that you question,
    which is that, indeed, companies have no grandfather clause
    whatsoever.
        Chairman Shelby. Senator Corker, thank you.
        Senator Corker. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Brown?
        Senator Brown. Thanks, Mr. Chairman. It is important, as
    Senator Corker and I appreciate, the seriousness and gravitas
    about this issue, and thoroughness, that he talks that we have
    sanctions snapback, the Iranians have, as he said, nuclear
    snapback, but the military option obviously is always on the
    table. It is a political agreement that any party can obviously
    pull out of, just to make that clear.
        Again, I appreciate Senator Corker's comments. I do not
    know that the analogy of what, first of all, the discussion on
    50 versus 100-plus, and I want to get to that with Mr. Szubin
    in a moment. I do not know that analogizing that to the size of
    our economy is really a very compelling--really gets us
    anywhere, but that aside, I want to talk about sanctions
    relief, since this is the jurisdiction of this Committee, the
    primary area of jurisdiction.
        I know you imposed, Secretary Sherman, a pay-for-
    performance model on Iran in the agreement, and I would like
    you to discuss generally the steps that Iran will have to go
    through before receiving any new sanctions relief under the
    agreement on Implementation Day. If you would walk through that
    with us.
        Ms. Sherman. Sure. Iran has to uninstall two-thirds of its
    centrifuges. It has to get its stockpile down 98 percent, from
    12,000 tons to--12,000 kilograms to 300. It must take the
    calandria, which is the core of the Arak reactor, out and fill
    it with concrete so that it is rendered unusable. It must set
    up with the IAEA all of the verification processes. The IAEA
    will have access to the declared facilities--Natanz, Fordow,
    and Arak--on a 24/7 basis. There will also be real-time data
    transmission. There will also be electronic seals so that, in
    fact, if something is tampered with, the IAEA will know about
    it in real time. They will put in place what is called a
    ``surveillance of centrifuge production,'' which means that
    rotors and bellows, which are the active parts of a centrifuge.
    The IAEA will have eyes on that production. That will be for 20
    years. For 25 years, the IAEA will have eyes on uranium from
    the time it comes out of the ground until it is milled, from
    its mining until its milling, conversion, fed into gas so that
    they will not be able to divert one ounce of uranium, one
    portion of uranium. We will always know where it goes. So Iran,
    in essence, would have to create an entire new supply chain
    covertly in order to get to a nuclear weapon.
        In addition to all of these measures which have to be put
    in place, Iran has to have taken all of the steps the IAEA
    requires on PMD. That is supposed to happen, actually, by
    October 15th, which is around Adoption Day, as opposed to
    Implementation Day, so even sooner.
        All of these things have to take place and all of these are
    detailed in Annex V of the agreement before there is any
    sanctions relief whatsoever. At that point, all sanctions
    relief is lifted. It is not a termination. Termination comes
    many years later or when the IAEA reaches what is called ``the
    broader conclusions.'' The broader conclusions means that they
    have no undeclared facilities, that, indeed, they can certify
    that their program is completely peaceful.
        Senator Brown. Mr. Szubin, if you would describe what
    sanctions remain in place that will help us manage, combat,
    eliminate as much as possible nefarious Iranian activities and
    terrorism in the region, and within that answer, if you would
    talk about the $50 billion figure, why it is 50 and not 100 in
    terms of obligations. And, second, if you would speak to the
    $500 billion--you said half a trillion--I think you used the
    term ``hole in the Iranian economy,'' what that means in terms
    of pressure on their government. I assume you are implying to
    meet some domestic needs, as some of this money is available to
    the Iranians.
        Mr. Szubin. Yes, absolutely, Senator. The sanctions regime
    that remains in place to combat Iran's malign activities--and I
    take your question to be referring not just to their support
    for terrorist groups like Hezbollah, but their support to the
    Houthis and the ongoing violence in Yemen, their support to
    Shia militants in Iraq, their support to the Assad regime in
    Syria.
        That sanctions regime fully remains in place, and it is a
    very extensive one. So it is not just the front companies and
    the actors and the generals that we have listed so far, but it
    is an ongoing authority that we have, that the Europeans
    maintain, and that many of our allies maintain to go after
    these actors.
        Senator Brown. If I could interrupt, you are confident that
    our allies stay with us on those sanctions, unlike the
    suggestions we hear from Ambassadors and others that
    particularly China and Russia will not be there with the
    broader, deeper sanctions that are in place now overall.
        Mr. Szubin. One does need to distinguish. When it comes to
    Iran's regional activities, there is a coalition of countries
    that are highly concerned, that are working alongside us.
    Increasingly, we are seeing a lot of cooperation from the Gulf
    countries who, for understandable reasons, are increasingly
    troubled by Iran's activities. And I would note and I think it
    deserves highlighting, you saw Saudi Arabia sanction a number
    of Hezbollah leaders just a few months back, and in doing so
    call out Hezbollah as a terrorist organization. The concern is
    very high.
        But our concerns about Hezbollah, I do not want to mislead
    the Committee, are not shared worldwide. We have not been able
    to obtain U.N. Security Council resolutions with respect to
    Iran's proxies in Lebanon, and I do not think we will see China
    and Russia stepping up in the way that we have seen our allies
    in Europe, in Israel, and the Gulf with respect to a lot of
    these regional interventions.
        Senator Brown. Under Secretary Sherman, the singular goal,
    as we have discussed, of P5+1 negotiations, just to make sure
    that Iran did not obtain a nuclear weapon, many of the
    opponents to this agreement have talked about the dollars that
    will be available because of the lifting of sanctions and what
    discord and terror that Iran can sow in the region.
        Speak to the broader strategy outside of nuclear issues in
    the Middle East and sort of where this money goes and what the
    Administration is doing to combat that.
        Ms. Sherman. Thank you very much, Senator. Indeed, we share
    the concerns that this Committee has and the Senate has and our
    country has about Iran's activities in the region. Not only
    will we have all the sanctions tools that Acting Under
    Secretary Szubin laid out, but as you know, President Obama has
    provided more security assistance to Israel than any other
    President. To be fair, every President, Democrat or Republican,
    has built on the efforts of the previous President, so each
    President has increased that assistance. But this President,
    most assistance.
        This President has also commissioned technology that allows
    us to take actions if we need to in Iran in a way that no
    President has before and to ensure that we have the options
    that we need, commissioned and deployed those options.
        In addition, as you know, the President had all of the GCC,
    the Gulf Cooperation Council, to a meeting at Camp David to
    talk about how to develop security for the region and a
    regional strategy. That has been followed up with a meeting
    that Secretary Kerry just had in Doha--in which, by the GCC
    supported the Joint Comprehensive Plan of Action, believing
    that if it is fully implemented, it indeed will bring security,
    more security to the region, because Iran will not be able to
    project power, will not be able to have a nuclear weapon that
    acts as a deterrent. But we are focused very much on helping
    the GCC to better improve its capabilities, whether that is in
    special forces training, intelligence sharing, having the right
    armaments to deal with these regional efforts, and really work
    in coalition.
        So I think we are all in common cause. This is quite
    critical, and we will be following up on a daily basis to make
    sure that these new strategies, these new efforts go forward.
        And, finally, as you know, Secretary of Defense Carter was
    recently in Israel. We are ready whenever the Prime Minister of
    Israel is ready to discuss further enhancements to security
    assistance.
        Senator Brown. My last question, Mr. Chairman. Mr. Szubin?
        Mr. Szubin. I am sorry, Senator. I neglected to answer----
        Senator Brown. On the $50 billion.
        Mr. Szubin. Yes, on the $50 billion. So the answer is--and
    we have a high degree of confidence in our figures on this--
    that it is about $50 billion. I can get into more detail on
    itemization in a classified setting, and I know we have a
    classified session with you and all Members of the Senate later
    this afternoon.
        Senator Brown. I think that is important to do, so thank
    you.
        Mr. Szubin. I would be pleased to. The reason that the $100
    billion figure has been out there--and we have been speaking to
    it for several years--is that there is $100 billion of the
    Central Bank of Iran's foreign reserves that have been
    inaccessible to it. Some of that has been due to the sanctions,
    the powerful sanctions that Congress put in place; some of it
    because it has already been obligated for other reasons; and
    some of it because it is gone, it has been spent. And so one
    can list it on the books, but it is just not there.
        So, obviously, those latter baskets--the funds that have
    been spent and are not there, the funds that are obligated and
    are now in place as collateral--cannot be recovered, even when
    sanctions are lifted. What remains is this about $50 billion
    that can come back to Iran. And with that, one needs to keep
    the perspective of the about $500 billion or more that Iran
    needs to be able to meet really fundamental needs in terms of
    unpaid military pensions and salaries, in terms of needed
    infrastructure, in terms of their oil sector, which is
    crippled.
        A final point that I want to add with respect to----
        Senator Brown. How much of that one-half-a-trillion hole
    would be required for them to get their oil sector up and
    producing so they can bring the wealth into the country that
    the Iranians that we all think about and worry about and that
    they obviously aspire to?
        Mr. Szubin. Their oil minister has publicly estimated that
    they require $160 to $200 billion just for the oil sector
    repairs alone. That is not to take their oil sector forward
    into the future. That is to get it back to baseline, to undo
    the damage that was done by the sanctions over the last few
    years.
        And across the Iranian economy, writ large, we see about a
    7-year lag due to the sanctions, meaning upon sanctions relief,
    let us say in the middle of next year, the major economic
    sanctions abroad are relieved, it will be 7 years before Iran
    comes back to where they ought to be today. If that----
        Senator Brown. Even if they invested $160 to $200 billion,
    it would take them that long?
        Mr. Szubin. That was not a comment on the oil repairs.
        Senator Brown. I am sorry.
        Mr. Szubin. The oil repairs might happen in a shorter
    amount of time, 2 to 3 years. I am not certain. I would need to
    get back to you on that. What I am saying is if you look at
    their GDP curve and where it ought to have been, it had this
    radical break obviously due to this international sanctions
    effort, and it only gets back in 7 years to where it ought to
    have been today.
        So the hole that they are in really cannot be overstated,
    and $50 billion coming back to them does not begin to meet the
    needs. What is more, that $50 billion is not spending money.
    That is all of their freed-up foreign reserves. In other words,
    no country is going to exhaust its foreign reserves down to
    zero. It is risking huge instability to do so.
        So we estimate that Iran is going to use that money
    primarily for its domestic economy, and it is going to need to
    leave some in reserve in the way any country would with its
    foreign reserves.
        Senator Brown. Last question, Mr. Chairman.
        Secretary Sherman, many of us have raised concern about the
    prospects of the U.N. embargoes in Iran on conventional arms
    being lifted in 5 years and on ballistic missiles in 8 years. I
    know all of us would have preferred to retain these embargoes
    much, much longer. We know Russia and China felt differently.
    Outline, if you will, briefly--since my time has gone over--
    what specific U.S., EU, and U.N. legal authorities remain in
    place to combat Iran's conventional arms and ballistic missile
    efforts.
        Ms. Sherman. Sure. First of all, we will still be able to
    rely on other U.N. Security Council resolutions that levy arms
    embargoes against key areas of concern in Lebanon, Libya, North
    Korea, Houthis and Shia, Shia militants in Iraq, et cetera. So
    all of those remain in place. We will continue to work with
    over 100 countries around the world that have signed the
    Proliferation Security Initiative to help limit Iranian
    missile-related imports or exports. The missile technology
    control regime also remains in place and will play a critical
    role in that regard.
        In conjunction, we have a lot of unilateral, bilateral
    cooperative tools. We have ongoing sanctions in place, as Adam
    has pointed out. We have Executive Orders 12938 and 13382 which
    authorize U.S. sanctions on foreign persons that materially
    contribute to the proliferation of missiles capable of
    delivering weapons, and we will make use of those Executive
    orders.
        The Iran, North Korea, and Syria Nonproliferation Act,
    INKSNA, levies U.S. sanctions on entities connected to Iranian
    ballistic and cruise missile activities. And the Lethal
    Military Equipment sanctions of 2006 provision in the Foreign
    Assistance Act, the Iran Sanctions Act, as you all well know,
    as amended, and the Iran-Iraq Arms Proliferation Act all impose
    U.S. sanctions on individuals and entities.
        I would also say that the U.N. Security Council resolution
    that was just recently passed does not let Iran's ballistic
    missile program off the hook. The current UNSCR prohibitions on
    the supply of ballistic missile-related items, technology, and
    assistance will remain in place. Under this prohibition, states
    are still required to prevent transfers to Iran of ballistic
    missile-related items from their territory or by their
    nationals. They are still required to prevent provision to Iran
    of technology, technical assistance, and other related
    services. They are still required to prevent transfers of
    ballistic missile items that might pass through their
    territory. They are still required--and I could go on. There
    are about 10 things that it still continues to require states
    around the world to do.
        So, quite frankly, yes, would we have liked them to go on
    forever in the U.N. Security Council resolution? Of course. But
    we have kept them on far longer than either Iran, Russia, or
    China wanted them to stay on. We have kept them on under
    Article 41, Chapter 7, which means they are enforceable. And,
    more importantly, we have other U.N. Security Council
    resolutions and other tools unilaterally to make sure that
    where arms are concerned and where missiles are concerned, we
    can keep moving forward in every way we need to.
        Senator Brown. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Toomey.
        Senator Toomey. Thank you, Mr. Chairman, and I thank the
    witnesses for appearing today.
        I want to go back to the issue that was raised by Senator
    Corker. Ambassador Sherman, the Iran Nuclear Review Act of 2015
    is abundantly clear, I think, that Congress is supposed to
    receive all the documentation, all the agreement, all the
    annexes, all the related materials. It says right in the
    beginning, referring to the transmission of agreements, ``The
    President shall transmit to the appropriate congressional
    committees and leadership the agreement as defined in
    subsection (h)(1), including all related materials.''
        Subsection (h)(1) specifies that this agreement includes--
    and I quote the last part of this--``any additional materials
    related thereto, including annexes, appendices, codicils, side
    agreements, implementing materials, documents and guidance,
    technical or other understandings, and any related
    agreements.''
        I think it is clear that is meant to be completely all-
    encompassing, and yet we discover that there is a secret side
    agreement between the IAEA and Iran, which presumably
    contemplates the previous military dimensions of Iranian
    activities, which strikes many of us as very, very important
    information to have to evaluate whether or not future
    activities is in violation of this agreement or not.
        Now, Senator Corker asked why you have not given us the
    document. If I understood correctly, you said, ``It is because
    we do not have the documents.'' And my question is: Knowing
    this statute, knowing the intent of the statute and the letter
    of this law, why didn't you insist that this essential-to-
    enforcement document be disclosed?
        Ms. Sherman. Senator, thank you very much for your
    question. As you point out, we do not have the document, and
    the U.S. Senate has every single document that the U.S.
    Government has.
        Second, the reason we did not insist is because we want to
    protect U.S. confidentiality. This is a Safeguards Protocol.
    The IAEA protects our confidential understandings and our
    confidential arrangements between the United States and the
    IAEA.
        Now, I know you will say this is a different situation, and
    I grant you that this is an international understanding to try
    to stop Iran from having a nuclear weapon, and that is a
    different circumstance. So in the development of where the IAEA
    was going. They did come to us for technical expertise, as they
    came to every other member of the P5+1, and in a classified
    briefing this afternoon, I will share with you everything I
    know about this.
        Senator Toomey. So let me----
        Ms. Sherman. I am also very grateful that the Director
    General on his own cognizance is meeting with the Senate
    Foreign Relations Committee in an informal setting, which is
    extremely unusual because every other country sort of wonders
    why he is.
        Senator Toomey. OK. Did I understand you to say to Senator
    Corker that you personally did not see the final document?
        Ms. Sherman. No. What I said is that I was shown documents
    that I believed to be the final documents. But whether, in
    fact, there are any further discussions--you know, what this is
    about, Senator, are the modalities, the technical modalities
    that the IAEA uses. And I will share with you this afternoon in
    a classified setting every single thing I know about that, and
    I think it will give you great confidence that the IAEA is
    doing what it needs to do.
        Senator Toomey. Well, I look forward to that, but, frankly,
    it is still extremely disappointing to me. We are being asked
    to vote to affirm an agreement that seems to me the enforcement
    of which depends in no small part on a very important document
    that not only are we not allowed to see, it is not clear to me
    that you have read the final document, or anyone else in our
    Government has actually read it.
        Ms. Sherman. I have seen----
        Senator Toomey. And you do not have it in your possession.
        Ms. Sherman. I have seen the document, as I said, as we
    were going through the technical discussions with the IAEA. But
    what is important here, Senator, ultimately what we are talking
    about here is the credibility of the International Atomic
    Energy Agency, whether, in fact, we believe that they are a
    credible, independent verification organization, which it is.
    They have done a superb job on the Joint Plan of Action, which
    is the interim step. All of those reports, because we have had
    to report to Congress on the compliance under the JPOA, have
    come up here. They have done a very fine job, and I have trust
    and confidence in their ability to do a fine job on the Joint
    Comprehensive Plan of Action.
        Senator Toomey. Well, I am glad you do, but I think that is
    a document that we ought to have before us.
        Let me ask a separate question here. Paragraph 36 of the
    JCPOA grants to either party the opportunity to walk away from
    this agreement. Anybody can raise an objection about what the
    other side is doing. And then after an adjudication process
    that seems to me lasts about 35 days, if this objection is not
    resolved to the satisfaction of the complaining participant,
    then the complaining participant can simply walk away, either
    side.
        So Iran, for any reason that Iran deems to be sufficient,
    can walk away from this agreement. Of course, that would be
    after they have their $50 or $100 billion, whatever the figure
    is.
        Here is my concern. I am concerned that this dynamic
    creates a very--this fact creates a very dangerous dynamic, one
    in which the Administration will have a very hard time
    enforcing anything other than a massive violation.
        You know, former Secretaries of State Shultz and Kissinger
    wrote a widely read piece some time ago where they suggested
    that most likely if a violation occurs, it would not be a
    clear-cut event but, rather, the gradual accumulation of
    ambiguous evasions.
        So let us say we start to discover the gradual accumulation
    of ambiguous evasions, which strikes me as extraordinarily
    plausible. If we were to take any measures at all, any
    enforcement mechanism of any kind, Iran could invoke Paragraph
    36, decide that this is unacceptable, and they are walking
    away. And since this Administration has told us so many times
    so forcefully that the alternative to this is war and so we
    have to have this agreement and we had to make all of these
    concessions after concessions after concessions to get this
    agreement, why should we believe that in the face of the
    accumulation of these small but accumulating evasions that the
    Administration is going to risk Iran walking away from the
    table? Because I suspect that is pretty likely that that would
    be their threat.
        Ms. Sherman. So, Senator, I appreciate that you believe
    that Iran will have gotten enormous sanctions relief and they
    will be sitting in the driver's seat, but you seem to forget
    the other half of the equation. Iran will have reduced their
    centrifuges by two-thirds. They will have eliminated 98 percent
    of their stockpile. They will have made the Arak reactor
    inoperable. They will have allowed inspectors in their country
    to have 24/7 access to their facilities. They will have----
        Senator Toomey. 24-day access.
        Ms. Sherman. No. For the declared facilities--Arak, Fordow,
    and Natanz--the IAEA has 24/7 access every day of the week, 365
    days of the year.
        Senator Toomey. And the military sites?
        Ms. Sherman. The military sites, if the IAEA believes there
    is justification for them going to a site, the Additional
    Protocol allows them to give 24 hours' notice to get into that
    site. If the country--in this case Iran--says, ``Well,
    actually, we think you should go to this site,'' or ``We think
    you should have this document,'' under the Additional Protocol
    they are allowed to suggest an alternative. However, under the
    Additional Protocol, that debate about what the IAEA can do can
    go on for quite some time.
        So what this agreement did, different than any other arms
    control agreement ever negotiated, we put a clock on that
    debate. We said that if the IAEA under the Additional Protocol
    wants to go to a site, it has to have access to that site. And
    so we said you can debate with Iran for 2 weeks. At the end of
    those 2 weeks, the Joint Commission, which is made up of all of
    us, looks at that. If we believe on day one of the 7 days we
    have to consider this situation that they ought to give access,
    if five out of eight of us believe the IAEA should get access--
    and we believe we will always have Europe and European High
    Representative with us--Iran then has 3 days to provide access.
        So at the most, it is 24 days, but it could be as short as
    18 days. And as Secretary Moniz has testified again and again
    and again, nuclear material cannot be cleansed away. It will be
    found if it is there.
        So, quite frankly, Senator, what we have negotiated in this
    agreement is absolutely unprecedented access whenever the IAEA
    believes that it has a suspicious site that it needs access to.
        Mr. Szubin. Senator, would it be permissible to address the
    snapback aspect of your question?
        Senator Toomey. At the pleasure of the Chairman.
        Chairman Shelby. Senator Reed, you are next. Do you want
    to----
        Senator Reed. I will take my time and ask Mr. Szubin to
    respond quickly to Senator Toomey's question. Very quickly.
        Mr. Szubin. Thank you, Senator. I just wanted to speak to
    one of the premises that I think is behind your question on
    snapback.
        First, I absolutely agree that the more likely scenario we
    see is small breach, is a testing, is sticking a toe across the
    line, and what we need to do then is obviously hit Iran in a
    proportionate way, show them that those breaches have
    consequences. Otherwise, we are just asking for larger
    breaches. And we have to be very serious about that. We have
    been very clear with our partners that we are going to be very
    serious about that.
        But there is a premise that I have heard circulating that
    after the initial sanctions relief, Iran can somehow immunize
    itself to further pressure and, therefore, it will not care
    about snapback, and that is just simply not the case. Iran's
    foreign reserves cannot be put in a vault or in a mattress in
    Iran in the form of gold or bills. If so, they are not liquid,
    they are not usable.
        What Iran needs with its foreign reserves is what every
    country needs, which is to have them in major financial
    centers, usable for imports, usable to boost their currency--
    the whole host of things that countries do with their foreign
    reserves. That means they are going to have to keep them in
    foreign jurisdictions where they are subject to snapback. If
    anything, the more Iran begins to benefit from a deal, the more
    vulnerable they are to this pressure.
        So we need to be very serious, and I agree with your
    question in that respect. But the consequences to Iran will
    remain very serious, very severe throughout this agreement.
        Chairman Shelby. Senator Reed, go ahead.
        Senator Reed. Thank you very much, Mr. Chairman. And within
    my allotted time, Secretary Szubin, you have testified that you
    do not expect Iran to stop funding Hezbollah and other proxies,
    so what will you do to combat this activity?
        Mr. Szubin. Unfortunately, I do expect to continue to see
    Iran funding Hezbollah and their other violent proxies, and it
    is extremely troubling. It is, frankly, what I have devoted the
    bulk of my career to combating. I have been working 13 years on
    the terrorist financing portfolio because of how serious of a
    threat I believe that to be.
        We have a lot of tools at our disposal here, and, frankly,
    one of the most powerful is one that the Congress has given us,
    which is that when we sanction Iranian terrorist supporters,
    our designation is amplified international. What I mean by that
    is when we name a Hezbollah financier, a Hezbollah money
    launderer, any bank worldwide, not just American banks, any
    bank worldwide that facilitates transactions for that
    designated entity faces very severe sanctions from the United
    States, sanctions that no bank wants to face.
        And so what we have seen as a practical matter, thanks to
    those congressional sanctions, is that our sanctions against
    Iran's proxies carry this international weight, and those
    designated entities become pariahs worldwide.
        But we need to do more and I think it is incumbent on us to
    do more in terms of additional intelligence targeting, to be
    able to identify the money launderers, the facilitators, and
    the funders, and then to muster the coalition of countries who
    care about this to cut it off, to shut it down.
        Senator Reed. Thank you. Let me just go to a very critical
    point here. The sanction regime is in place today. If we reject
    this arrangement, this deal, some have argued, well, it will
    not make a difference, the sanctions will stay in place, we can
    keep it in place. You have been working on these things for 10
    years. How would our partners react if we walked away from the
    deal?
        Mr. Szubin. From my perspective--and I would certainly
    defer to Ambassador Sherman on the diplomatic perspective. But
    from a sanctions perspective, we have tremendous clout,
    tremendous influence as the United States, as the world's most
    powerful economy, when it comes to our moral sway, when it
    comes to our sanctions and economic sway.
        I do not underestimate that. I have had the privilege to be
    a part of exercising that clout for the last 10 years, and I
    have seen firsthand how effective it can be.
        But as I mentioned in my opening statement, it is not all-
    powerful. We do not simply get to dictate to other countries,
    especially major economies, what their foreign policy will be.
    We need to harness shared concerns. When it comes to Iran, we
    have a shared concern. Four U.N. Security Council resolutions
    have called out Iran's nuclear program as being a threat, and
    so when we went to China, when we went to India, South Korea,
    Japan, to say, ``You need to work with us. We have these very
    powerful sanctions in place. We do not want to use them, but
    you agree with us that Iran's nuclear program is a threat,''
    they said, ``Yes, we do agree with you it is a threat.'' And we
    said, ``Well, here is the way to
    address it. We have got a diplomatic path forward. Join us and
    let us test it. Let us see if we can use our sanctions leverage
    to obtain the nuclear concessions we all need from Iran.''
        They worked with us, and it succeeded. It succeeded, I
    think, to a remarkable extent.
        In the event that we walk away, it is a very different and
    much bleaker scenario. The international consensus, as
    Ambassador Sherman described, is behind this deal; 90 countries
    have come out and endorsed this deal. We would be alone walking
    away from it. And in that event, going and asking them to take
    very costly economic sacrifices in the hope of a future, much
    better, much tougher deal that I think they would doubt the
    feasibility of, I think we would have very weak prospects for
    that.
        Senator Reed. Thank you.
        Mr. Chairman, I think I will stop.
        Chairman Shelby. Senator Scott.
        Senator Scott. Thank you, Mr. Chairman, and good morning to
    the witnesses. Thank you all for being here.
        I, like so many of us, am very concerned about this deal,
    not supportive of it whatsoever, and the more I read of the
    deal, the less I like it, and that does not include the parts
    that I do not know about, the IAEA side agreements.
        Ambassador, you have said a couple of conflicting things
    this morning from my perspective. Sitting here, I can see your
    notebooks. I cannot read what is in it. In the final deal from
    the IAEA, have you seen it and read it?
        Ms. Sherman. Let me be very clear. I have seen the
    documents that the IAEA and Iran discussed to create the final
    arrangements for the modalities that underpin the road map--the
    road map document being a public document that Congress has a
    copy of. I was not allowed to keep any of the documents about
    the arrangements on the modalities that underpin the public
    road map that you have a copy of.
        However, I told the IAEA that, given our Constitution, if
    Congress asked me to brief on the details that I understood, I
    would do so in a classified session. And I will do so this
    afternoon in the all-Senate classified session. I will give you
    all of the details of which I am aware.
        Senator Scott. So have you read the final agreement?
        Ms. Sherman. It is not an agreement. It is a set of
    arrangements that are made----
        Senator Scott. Have you read it?
        Ms. Sherman. I have.
        Senator Scott. OK. A question for you, Secretary. You
    stated earlier that the Iranian regime continues to fund
    terrorism and bad behavior. And at the same time, we are
    concerned, at least those of us who have commented on the fact
    that we are concerned, that the more money the Iranian regime
    has, the more they will fund terrorist activity. In spite of
    the fact that they have a crumbling economy, they have
    infrastructure needs, they have needs to repair their ability
    to sell more oil, yet in spite of all of that, they are still
    funding terrorism.
        And so it seems like to me that you would agree with
    National Security Adviser Susan Rice when she said that we
    should expect that some portion of the money from the sanctions
    relief will go to the Iranian military and could potentially be
    used, as you said, will be used to fund more bad behavior and
    terrorist behavior in the region in spite of the state of their
    economy.
        Mr. Szubin. Thank you, Senator. I do agree with the
    premises of your question. I agree with the statement that you
    quote from former National Security Adviser Rice. We have seen
    Iran fund terrorism before the sanctions, through the period,
    the toughest period of the sanctions. We saw them fund these
    groups during the Iran-Iraq war when their economy was in
    shambles.
        Senator Scott. Yes.
        Mr. Szubin. And I expect we will continue to see that. The
    question is: What do we do about it? And it is my office's
    responsibility, along with our colleagues in the interagency,
    in the intelligence community, to ramp up our efforts to be
    able to go after those funding streams.
        The alternative, though, that I think is put out there does
    not make sense to me strategically, which is that we do not
    enter into a nuclear agreement, we do not give them back their
    money--in other words, we do not do this exchange of securing a
    nuclear commitment in exchange for sanctions relief, and then,
    what? So we will continue to combat Iran's support for
    terrorism, as we have been doing, but we will have the prospect
    of Iran 2 to 3 months away from breakout. To me, when you are
    talking about a state sponsor of terrorism, that is a
    terrifying prospect. And so we have decided we need to address
    the nuclear threat and then turn to the terrorism. And I think
    that is the strategic way to do this.
        Senator Scott. So, strategically speaking, according to the
    agreement, 5 years from the start of the agreement they will
    have more access to weapons, 8 years they will have access to
    ballistic missiles, and they will be able to move forward in
    advanced research on nuclear technology, and then we know for
    certain at the end of the 10th year we are looking at a
    breakout phase. So the reality of the agreement is that we will
    with certainty be able to mark on a calendar when the Iranians
    will have an opportunity for a nuclear weapon.
        Mr. Szubin. No. As Ambassador Sherman has said repeatedly,
    at no point, at no future date, not 25 years, not 50 years,
    does Iran have the ability to pursue a nuclear weapon. In fact,
    the agreement locks in the contrary. The agreement has varying
    durations with respect to Iran's enrichment limits, and those
    are strictest in the first 10 and 15 years and then are
    reduced. But at no point does Iran have the right to pursue or
    obtain a nuclear weapon.
        Senator Scott. We will have to just respectfully disagree.
    Let me ask one final question. My time is up as well.
        In Paragraph 25 of the agreement, it seems to suggest that
    there will be an effort made to preempt State laws and States
    who have otherwise passed laws that prohibit companies from
    investing in Iran. How is this not a violation of States
    rights? And how do you read Paragraph 25 of the agreement?
        Mr. Szubin. Thank you, Senator. There is nothing, to my
    knowledge, about preemption in the Joint Comprehensive Plan of
    Action. All that the JCPOA says is that we will make sure that
    State authorities who have enacted legislation, divestment
    legislation with respect to Iran are informed of the
    developments, which I think are pretty key to be aware of, when
    it comes to the Iran nuclear deal, and that we will encourage
    them to take those into account as they consider their
    divestment laws.
        Senator Scott. And how will you encourage them?
        Mr. Szubin. Simply by setting forth what this deal is, what
    it is not. In some cases, those divestment laws were predicated
    on the nuclear case, and I think for any State authority who is
    looking at divestment laws based on Iran's nuclear program, you
    would have to take into account the developments, the historic
    developments that we are talking about today.
        Senator Scott. Thank you.
        Chairman Shelby. Senator Schumer.
        Senator Schumer. I want to thank you, Chairman Shelby and
    Ranking Member Brown, and I want to thank Under Secretary
    Sherman and Acting Under Secretary Szubin.
        Under Secretary Sherman, I have appreciated through this
    process your thoughtfulness, intelligence, your candor, your
    availability in our past meetings. I thank you for many years
    of service, laudable service to our country.
        And Acting Under Secretary Szubin, thank you for being here
    as well. I look forward to helping remove ``Acting'' from your
    title so that we can have you officially at the helm for the
    daunting challenges our country faces, not only in Iran but
    around the world.
        Now, I have read and reread the agreement. I have had many
    meetings with people on both sides of the issue, several
    classified briefings, more meetings to come this week. I am
    carefully analyzing the proposed deal because its implications
    are profound and far-reaching. I have had many questions
    answered. I have not yet reached a conclusion.
        This is one of the most important votes I have had to take,
    any of us will have to take in our legislative career, as
    Senator Brown mentioned. I owe it to my constituents to make an
    informed decision. I will not let party, pressure, politics
    interfere with doing what I think is right. I want to judge the
    deal on the merits and the merits alone, and in that spirit, I
    want to ask you questions today.
        So one of the questions I have is this, to both of you:
    Where will Iran be 10 years from now? Now, I know you will say
    no matter what they are, you have a very good agreement. But I
    am interested in where Iran will be. Some say, well, look at
    the people of Iran, they tend to be secular, they have economic
    needs, they will push Iran in a direction that is more
    moderate, more welcoming to the world, et cetera.
        Some say we have had that population for a long time, and
    this dictatorship, a very totalitarian, evil dictatorship of
    mullahs, has barely shuddered, even with one transition of
    power.
        So let me ask you how you see these two elements competing.
    I want your judgment, because this is only a judgment question,
    but I think a very important one as to where Iran will be 10
    years from now. And I would ask you each to answer that
    question in your respective spheres.
        Ms. Sherman. Thank you, Senator Schumer, and I thank all
    Members for the enormous diligence of looking at this deal and
    trying to ask and answer incredibly difficult questions. The
    U.S. Senate has been united behind Democratic and Republican
    Presidents for war, and I appreciate that perhaps we can come
    united together behind peace.
        Where Iran will be in the future, I do not know, Senator. I
    really do not. I do not think anyone does. Our intelligence
    community can give and I think probably has given you an
    assessment of what they believe, but, quite frankly, it is a
    very complicated situation. The people who turn out on the
    streets tend to be the young people who are desperate not only
    for a better life and a stronger rial and a job, but they want
    to end their isolation. We live in a technologically connected
    world. No matter what the Iranian regime does, indeed they get
    on the Internet. They see Twitter. They use all of the devices
    all of our kids use, and they know what is going on in the
    world, and they want to be part of it. And I thank the U.S.
    Senate for their support for programs that have helped break
    through the Internet so they can get on.
        And at the same time, we have a regime led by clerics who
    have been around for a very long time, have very conservative
    views--more than conservative; radical--are part of the
    revolution of 1979, have not let go of that history. The depth
    of mistrust between us is profound. I do not believe there will
    be some magic transformation as a result of this deal. For me,
    this deal is about one thing and one thing only, and that is,
    making sure that this regime, which does do a lot of terrible
    things in the region and to its own people, will not have a
    nuclear weapon that could further terrorize the world and
    terrorize the region.
        I am hopeful, because I am a hopeful person, that a
    transformation will take place in 10 years. But it may not. So
    we have to use every tool we have on all of the activities of
    concern that we have and work with Israel, work with the region
    to stop those activities, to make sure that those young people
    have a future at all.
        Senator Schumer. Do you have anything to add, Mr. Szubin?
        Mr. Szubin. I do not.
        Senator Schumer. OK. She is a very hard act to follow.
        Mr. Szubin. That is right.
        Senator Schumer. OK. Let me ask you a question. It relates
    to what Senator Corker talked about, and that is, the
    retroactivity or the grandfathering of contracts. I want to
    give you a hypothetical. A country, not the United States, its
    major oil company, maybe government owned, maybe not, signs a
    10-year contract with Iran immediately after sanctions are
    lifted because Iran has complied with the long list in the
    agreement. OK?
        And then we go--snap back. We find a major violation. We go
    forward on snapback. It is now year 4 of that contract. I
    understand that grandfathering will not affect years 1, 2, and
    3. The profit that, say, Total, just to use an example, has
    made in those first 3 years they keep.
        Is the contract terminated in year 4 for the next 6 years?
    Or does the contract continue? And, I mean, this is an
    important question. As Senator Corker said, it is not the most
    important question. But we need a yes or no answer.
        There was a New York Times article where people had
    different views, and they asked a U.S. Government spokesman,
    and they
    refused to give an answer. So that made me worried. So that is
    why I am glad you are here to clarify. What happens in years 4,
    5, 6, and 7? Is that contract terminated?
        Mr. Szubin. So I want to be very clear, and I also want to
    be very careful with my words to make sure I am exactly
    answering the question.
        Sanctions do not terminate a contract. They do not have the
    authority to annul a contract between parties. What sanctions
    do, what U.S. sanctions do in that circumstance that you are
    describing, is they say any future transactions, whether it is
    future investment by the foreign oil company, future derivation
    of profits, future expansion, or future just work under the
    contract----
        Senator Schumer. Purchase. It could be purchase of oil.
        Mr. Szubin.----is sanctionable. That is what the sanctions
    do right now. That is what they have been doing over the last--
    --
        Senator Schumer. So you have to explain what that means to
    me in layman's terms. So I am Total, and it is my fourth year,
    and I am due to send Iran $1 billion for oil which I want. I
    still send that oil. That is allowed.
        Mr. Szubin. No. What it means----
        Senator Schumer. What does it mean it is ``sanctionable''?
    What happens? Is it your view the sanctions are severe enough
    that Total will terminate the contract and risk being sued by
    Iran? I mean, give me the--what does ``sanctionable'' mean in
    that situation?
        Mr. Szubin. Let me spell it out, and it is exactly what the
    circumstances are right now and what the circumstances have
    been when we put these tough sanctions into place. There were a
    lot of pre-existing contracts that were 10-year, 20-year
    contracts when we put NDAA and CISADA into place.
        Senator Schumer. That is a good--yes.
        Mr. Szubin. What companies saw is that they faced the
    threat of these powerful U.S. sanctions and made the next
    purchase.
        Senator Schumer. So, in other words, Total would not be
    able to do business in the United States if it continued in
    year 4, for instance? Is that right?
        Mr. Szubin. There are all sorts of consequences,
    including----
        Senator Schumer. Well, answer me that question. Would Total
    be able to do business in the United States in year 4 if they
    continue the contract?
        Mr. Szubin. Total could face a menu of choices under the
    Iran Sanctions--a menu of penalties under the Iran Sanctions
    Act, which could include being cut off from the U.S. market. So
    there is this menu of tough----
        Senator Schumer. What does ``could include'' mean? I am
    sorry. I just want to nail this down.
        Mr. Szubin. The Iran Sanctions Act has a menu of----
        Senator Schumer. OK, could. And who has the ability to
    determine which on the menu is chosen? Is that the U.S.
    Government unilaterally?
        Ms. Sherman. If I may, I was in the private sector for a
    decade, and at the time when these sanctions came into place
    and Total had to make a decision at that point about whether to
    leave, the risks were too high for them. Same for Siemens, who
    actually, to be perfectly frank, was a client of mine at the
    time, and they had to leave. They had to unwind those
    investments. They had to see if there was a force majeure that
    would allow them to come out. But the risks were too high
    because, yes----
        Senator Schumer. And what were those--that is what I am
    trying to----
        Ms. Sherman. The risks are they do not have access to U.S.
    secondary markets. They do not have corresponding banking
    relationships. Their shipping is at risk.
        Senator Schumer. And who determines--Mr. Szubin, you said
    ``could.'' You did not say ``will.'' Who determines----
        Mr. Szubin. The selection----
        Senator Schumer.----the ``could''?
        Mr. Szubin. So the selection of the penalties with respect
    to Total in your hypothetical is done at the State Department.
    The penalties imposed on the bank----
        Senator Schumer. But solely unilaterally----
        Mr. Szubin.----would be the Treasury----
        Senator Schumer.----by the U.S. Government?
        Ms. Sherman. Yes.
        Mr. Szubin. That is right.
        Senator Schumer. OK. That is good. OK. Now----
        Mr. Szubin. And the only----
        Senator Schumer.----next--you----
        Mr. Szubin.----reason I was putting in the caveat at the
    top about the contract is that, of course, if a contract is
    signed between a European company and Iran, the contract is not
    invalidated by U.S. sanctions. What our sanctions do is deter--
    --
        Senator Schumer. Right, and then Total----
        Mr. Szubin.----performance under that----
        Senator Schumer.----just to use an example, would have to
    make a decision. Does it risk the suit----
        Ms. Sherman. Correct.
        Senator Schumer.----by the Iranians because they are
    violating their contract, given the heaviness of our sanctions?
        Mr. Szubin. That is exactly right. But we saw how that
    played out----
        Senator Schumer. I appreciate the answer----
        Mr. Szubin.----in 2012.
        Senator Schumer.----and I think you have answered.
        Now, next question. So that is our interpretation, what you
    just gave, of what grandfathering means. I think Secretary
    Sherman--what is your title?
        Ms. Sherman. Yes.
        Senator Schumer. Secretary. Under Secretary----
        Ms. Sherman. Whatever.
        Senator Schumer. Ambassador Sherman. Excuse me.
        Ms. Sherman. ``Wendy.'' Whatever.
        Senator Schumer. OK. You are good by me, whatever your name
    is, title is.
        Ms. Sherman. Likewise, Senator.
        Senator Schumer.----said that a British Ambassador said
    Britain agreed with that interpretation. OK? Do we have that in
    writing somewhere that Britain, France, Germany, and the
    European Union agree with that interpretation since they are
    members of the Group of Eight?
        Ms. Sherman. We do not have a letter to that effect. I will
    talk with them about that possibility. I want to tell this
    Committee, though, I had extensive discussions the 27 days I
    was in Vienna toward the end of this with every single one of
    our partners, quite extensive, because they all had these
    concerns, and we were extremely explicit. And the explicitness
    is the following, which Adam said and I will repeat. We said
    there is no validity to a snapback provision if there is any
    form of grandfathering. Then it renders snapback meaningless,
    and we will not agree to a deal--the United States of America
    will not agree to a deal where there is not a real snapback
    provision. That is what we insisted upon, and that is what we
    got.
        Senator Schumer. But the snapback has lots of other aspects
    to it, I understand. I just want to ask you, do Russia and
    China, do we have any indication that they agree with this
    interpretation of grandfathering?
        Ms. Sherman. Yes. We had very, very explicit discussions
    with them. There is language in the document that talks about
    prior contracts. But if you read that language very carefully,
    you will see there is no grandfathering whatsoever.
        Senator Schumer. OK. And just one other point to make. I
    suppose if it is a major contract to them, they could just ask
    that snapback not be put in effect, or they could pull out of
    the deal. But who knows what----
        Ms. Sherman. But snapback----
        Senator Schumer. That is just speculation.
        Ms. Sherman.----cannot be stopped by any one country. It
    cannot.
        Senator Schumer. Yes. No. But they can--let us say it is a
    huge contract of real importance to the Soviet--to Russia. They
    could say, ``You go forward with snapback, which you have the
    unilateral power to do; we are pulling out.'' They could.
        Ms. Sherman. They could.
        Senator Schumer. Who knows if they would, but they could.
        Ms. Sherman. They could.
        Senator Schumer. Yes. Thank you, Mr. Chairman.
        Mr. Szubin. Senator Crapo.
        Senator Crapo. Thank you, Mr. Chairman.
        I would like to address my first questions to you, Mr.
    Szubin, with regard to sanctions. At this point, the JCPOA has
    been approved and--submitted to the Security Council and
    approved by the Security Council of the United Nations,
    correct?
        [Mr. Szubin nods head.]
        Senator Crapo. What impact does that approval have on the
    sanctions regimes, both the U.N. sanctions regimes and the
    sanctions of the United States?
        Mr. Szubin. So it has no impact on the sanctions of the
    United States whatsoever. With respect to the U.N. sanctions
    regimes, as I understand it, the endorsement by the U.N.
    Security Council sets out a timetable right in line with what
    Ambassador Sherman was describing where Iranian performance,
    when verified, will lead to the lifting of U.N. sanctions.
        Senator Crapo. And that would be all of the U.N. sanctions
    on Iran?
        Mr. Szubin. No. What it would mean--at Implementation Day,
    when Iran is taking its initial steps and all those key nuclear
    steps that Ambassador Sherman described would mean that the
    economic sanctions in the United Nations Security Council would
    be relieved. The sanctions on their arms trade, the sanctions
    on their acquisition of ballistic missile technology remain in
    place for many years to come under the U.N.
        Senator Crapo. And in your opening statement, you made some
    point about the fact that it would be very hard right now for
    the United States to back out of the agreement that it has
    reached and then reimpose a sanctions regime, correct?
        Mr. Szubin. Senator, what I was referring to is if Congress
    were to strike down the deal, would we as the United States be
    able to unilaterally coerce international pressure to be able
    to secure a much better agreement. I was not talking there
    about snapback. And the key distinction between those two is
    obviously Iran is in breach in the second. Iran is defying the
    international community in the second, and I think we have very
    good leverage in that case.
        Senator Crapo. Well, that is the question I wanted to ask,
    because if it is not possible for us to go back and reimplement
    an effective sanctions regime now, what about snapback? And I
    understand that snapback is based on an Iranian violation of
    the agreement. But what about that makes you think that now
    that the sanctions have been essentially put into the process
    of being removed, what makes you think that the snapback will
    work?
        Mr. Szubin. And that is a question I have spent the better
    part of 2 years working on. I appreciate it very much, Senator.
    One of the reasons that you hear us talking about lifting,
    viz., terminating sanctions is for that exact reason: to ensure
    that these authorities remain in place, that the structure of
    the U.N. sanctions resolutions is still on the books, that the
    EU sanctions are still on the books, and that the U.S.
    sanctions are still on the books so that they are hovering in
    suspense and we make very clearly, not just symbolically but
    legally, that we are in a position very quickly to restore that
    pressure.
        Senator Crapo. So you believe the fact that we have five
    other nations agreeing that a violation of the agreement would
    require a snapback of sanctions means that they would
    immediately join us if we said that there is a violation of the
    agreement?
        Mr. Szubin. Obviously, if we are talking about a scenario
    in the future of a violation, the key question would be: What
    is the violation? How material is it? But in the event where
    we, the United States, view it as a significant breach, we have
    retained the authority to do so unilaterally, including at the
    United Nations, even if the other members of the Security
    Council are not with us.
        Senator Crapo. And you believe that in that case, we could
    effectively cause the other nations to reimplement sanctions?
        Mr. Szubin. In the event of a serious breach, I do. What
    you are talking about then is the scenario we were facing in
    2012, where Iran seemed to be on the path toward a nuclear
    weapons capability, and we won international agreement to
    impose very tough sanctions to cut off contracts, to pull out
    of investments. All of those costly steps were taken because
    the world, frankly, does not want Iran to have that capability.
    That is not a U.S.-only priority.
        Senator Crapo. So what I am getting here, though, is that
    you are talking about an extremely serious violation that would
    cause the other nations of the world to believe that Iran was,
    in fact, developing or had developed a nuclear weapon.
        Mr. Szubin. Yes, Senator.
        Senator Crapo. So we have to get to that level of proof of
    a violation before we can see an effective reimplementation of
    sanctions?
        Mr. Szubin. No. I think what I am saying is that we will
    obviously want to respond in a proportional way. It is not in
    our strategic interests to respond to a small breach with
    scrapping the agreement and trying to put all of the sanctions
    back into place. I do not think that would have the success
    that we had over the last few years, and I do not think it
    would be in our interest to see this agreement scrapped. If we
    see a small breach, it is in our interest to see Iran cure and
    to come back into full compliance in a way that we can verify.
        Senator Crapo. All right. Thank you.
        Mr. Chairman, I see my time is up. Thank you.
        Chairman Shelby. Thank you.
        Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman.
        Let me thank you both for your service. Regardless of my
    questions, I certainly appreciate your service.
        Madam Secretary, is this agreement or war--is that the
    choice? A simple yes or no.
        Ms. Sherman. I do not think it is a simple yes or no. Do
    I----
        Senator Menendez. So if you had not--if you cannot give me
    a simple yes or no as to whether it is either this agreement or
    war, and since I do not have the unlimited time--so if you had
    not struck agreement with Iran, would we be at war with Iran?
        Ms. Sherman. I believe that the chances that we would be
    down the road to war would go up exponentially.
        Senator Menendez. So you are saying compared to other
    witnesses who have served in the Administration in the past,
    who support the agreement before the Senate Foreign Relations
    Committee, and have been asked the same question, they have
    unequivocally, easily said no, it is not this or war. So you
    have a view that it is this or----
        Ms. Sherman. As I just said to you, it is not binary,
    Senator.
        Senator Menendez. Further down the path----
        Ms. Sherman. It is not binary----
        Senator Menendez.----a year from now, 2 years from now, 3
    years----
        Ms. Sherman. I do not--you know, I do not think any of us
    can predict the future in that way. What I will say----
        Senator Menendez. Well, that is the problem.
        Ms. Sherman. What I will say----
        Senator Menendez. The Secretary of State has come before
    various Members of the Senate----
        Ms. Sherman. Yes.
        Senator Menendez.----and said it is either this or war. I
    think that is----
        Ms. Sherman. Yes, because----
        Senator Menendez.----a binary statement.
        Ms. Sherman. And the reason, Senator, is because sanctions
    have never gotten rid of their nuclear program. It has only
    brought them to the table. And so----
        Senator Menendez. But that has not----
        Ms. Sherman.----if we----
        Senator Menendez.----created war either.
        Ms. Sherman. If we walk away from this deal, Iran will
    begin marching forward with their program further, as they have
    done over the years, and the President of the United States has
    said he will not allow them to obtain a nuclear weapon----
        Senator Menendez. Well, I think there is real doubt----
        Ms. Sherman.----and that leaves you with only one option.
        Senator Menendez. I think there is real doubt, including--
    --
        Ms. Sherman. That only leaves you with one----
        Senator Menendez.----if you were to get an intelligence
    briefing, I think there is real doubt that Iran believes that a
    credible military threat of force is on the table.
        Let me ask you----
        Ms. Sherman. I do not agree with that at all.
        Senator Menendez.----this: On page 26 of the agreement, it
    says:

            The United States will make its best efforts in good faith to
            sustain the agreement and to prevent interference with the
            realization of the full benefit by Iran of the sanctions
            lifting specified in Annex II.

    Which is basically, for the most part, the U.S. sanctions.

            The U.S. administration, acting consistent with the respective
            roles of the President and the Congress, will refrain from
            reintroducing or reimposing the sanctions specified in Annex II
            that has ceased applying under the [Joint Comprehensive Plan of
            Action].

        Now, I tried to get this from the Treasury Secretary, and
    he did not give me an answer. The Iran Sanctions Act that I was
    one of the authors of expires next year. Do we have the right
    to reauthorize those sanctions now or at any given time? Yes or
    no.
        Ms. Sherman. I believe, Senator, that it does not expire
    until the end of next year, and it is premature to have that
    discussion.
        Senator Menendez. OK. So here we go again. We either have
    the right or we do not have the right. Having a question of
    prematurely discussing something does not answer the question
    of do you understand the agreement is that we have the right or
    we do not have the right?
        Ms. Sherman. We said in this document that it recognizes
    the Constitution of the United States. The U.S. Congress has
    the right to do whatever it wants to do within its authority.
    So in that case, you do have the right. What we are saying is
    it is premature--we would urge that it is premature to make
    that decision----
        Senator Menendez. Well, if you are going to snap back, you
    got to snap back to something. And if the Iran Sanctions Act,
    which this Administration on various occasions has credited as
    one of the significant elements of getting Iran to the
    negotiating table, if they do not exist after next year, there
    is nothing to snap back to in that context. So----
        Ms. Sherman. We believe there is a way forward in that
    regard.
        Senator Menendez. Well, let me then just read to you what
    your partner in this deal said in a letter to the Security
    Council dated July 20, 2015. The Iranians said:

            It is clearly spelled out in the Joint Comprehensive Plan of
            Action that both the European Union and the United States will
            refrain from reintroducing or reimposing the sanctions and
            restrictive measures lifted under the Joint Comprehensive Plan
            of Action. It is understood that reintroduction or
            reimposition, including through extension of the sanctions and
            restrictive measures, will constitute significant
            nonperformance which would relieve Iran from its commitments,
            in part or in whole.

    So your partner in this regard believes that, in fact, if we
    were to--if Congress were to go ahead and reauthorize, which I
    think most members believe that it is still going to exist, I
    think most members considering this agreement, Mr. Chairman,
    believe that the Iran Sanctions Act is still going to exist, as
    something, with all the waivers the President has, as something
    that, in fact, will be reverted back to if the Iranians
    violate, and it is a form of deterrence.
        And so either sanctions work or they do not. Either they
    are a deterrent or they are not. And if they are not, then the
    agreement is really based on the hope over the course of 10
    years, or 13 as the President said in his NPR interview, that,
    in fact, there will be performance by the Iranians, that they
    will not violate, and then with no sanctions in place, that, in
    fact, the only choice you have is a very limited window in
    which you will have to act possibly militarily for the next
    President of the United States.
        So, Mr. Szubin, let me ask you this: Isn't it true that
    whenever we have imposed sanctions, we have given countries and
    companies and individuals sufficient notice for them to divest
    themselves of the sanctionable activity?
        Mr. Szubin. No. What I would say, Senator, is when we have
    imposed major sanctions that affect sectoral behavior or major
    investments, we have typically built in a wind-down period, a
    short wind-down period--so that could be 60 days, 90 days--in
    order to----
        Senator Menendez. It has often been 6 months, has it not?
        Mr. Szubin. In some cases it has been 6 months.
        Senator Menendez. OK.
        Mr. Szubin. But typically that is longer. We want----
        Senator Menendez. So if it is 6 months and you have a 1-
    year breakout time, although David Albright, in testimony
    before the Senate Foreign Relations Committee, a physicist, a
    former weapons inspector, and the head of the Institute for
    Science, said that they believe their calculation of potential
    breakout time under one scenario is 6 to 7 months. That is a
    heck of a lot less than 1 year.
        So the time period of potential re-enactment of sanctions,
    which the Administration argues both ways--it will not get Iran
    to do what we want it to do; at the same time you say this is
    our defense, it is snapback. It is either one or the other.
        I just do not see how, in fact, we have the wherewithal
    under this agreement. Your partner says that, in fact, there is
    no way that they will respect that in terms of they will be
    able to get out of the agreement, and we will be back to point
    zero. When they choose to do that, which is why you are all
    reluctant to go ahead and acknowledge that there should be a
    reauthorization of the Iran Sanctions Act because then they may
    very well walk away, and if, in fact, they are going to walk
    away simply by the existence of sanctions that do not go into
    effect unless there is a violation in the future, you have to
    worry that what they are doing is buying for time.
        And the last point I want to make, you know, sometimes what
    is past is prologue. And I just want to read some excerpts from
    a hearing when I was pursuing the Iran Sanctions Act when the
    then-Chairman of the Senate Foreign Relations Committee, now
    the Secretary of State, was actually arguing against the
    sanctions. So I guess, you know, in this respect, things have
    not changed. He went on to say that:

            Rather than motivating these countries to join us in increasing
            pressure on Iran, they are most likely to resent our actions
            and resist following our lead, a consequence that would serve
            the Iranians more than it harms them. And it could have the
            opposite effect than was intended and increase the Iranian
            regime's revenue.

        And then you were quoted, Secretary Sherman, as, in fact,
    also buying into that point of view, and if you look at the
    transcript of the hearing, basically what it talks about is
    everything we have heard here, that we will break the
    coalition, that, in fact, we will be isolated, that, in fact,
    we will be alone, and that, therefore, we will not have the
    consequences against Iran. And the problem is when you cry wolf
    one too many times, it really is problematic.
        And so based upon a history here which says, no, those
    sanctions should not be imposed because if they do, we will
    lose the coalition, now listening to if this agreement is not
    accepted we will lose the coalition, saying--unwilling to say
    that the Iran Sanctions Act should be reauthorized, which I
    think every member believes is going to exist as a deterrent,
    and then saying there is a deterrence or no deterrence, that is
    hard to understand.
        And the final point I would make, Mr. Chairman, this
    Iranian regime cares about two things: preserving the regime
    and the revolution. They are not going to enter into any
    agreement that does not preserve the regime and the revolution.
    And so they must think this is a good agreement for them
    ultimately to accomplish that goal. And that is worrisome. That
    is worrisome.
        So I understand the hope that the agreement implies and
    that they will perform. But when they do not perform, I do not
    think we are going to be in a better position at that time, and
    that is my concern.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Sasse.
        Senator Sasse. Thank you, Mr. Chairman. Thank you both for
    being here.
        Ambassador Sherman, I wonder if you can help me understand
    what you think the Congress is actually voting on. Whether or
    not Congress would kill the deal, does that matter in any way
    to the Iranians? Or are they already guaranteed all the
    benefits of what has been negotiated today?
        Ms. Sherman. Well, of course, they are not, Senator.
        The U.S. Congress has the authority and the right under our
    Constitution and under the Corker-Cardin legislation to, in
    fact, review this and to vote a resolution of disapproval. The
    President of the United States then has the right and the
    authority to exercise his veto if he wants, and I would expect
    that he would. And then the U.S. Congress has the right to try
    to override that veto. That is how our system works.
        I would hope that the U.S. Congress would not override that
    veto because I believe that the Joint Comprehensive Plan of
    Action is the most profound, the most far-reaching arms control
    agreement ever negotiated and that indeed it will keep this
    country, Israel, and our allies safer.
        Senator Sasse. Thank you. But what I am asking is: If the
    Congress did override that veto, why would it matter to the
    Iranians? What would they lose?
        Ms. Sherman. They would lose an opportunity to have
    sanctions relief. They would lose the opportunity to end their
    isolation from the rest of the world. They would lose their
    opportunity to come into the community of nations.
        Now, they may not care about that, and what I would expect
    if the U.S. Congress overrides a Presidential veto, which I
    would not expect to have happen because I believe that this
    Congress has united behind Democratic and Republican Presidents
    for war, and I would expect in the end they would unite behind
    a Democratic President or a Republican President for peace, and
    that is what this deal is about, not having to go to war, but
    ensuring that Iran does not get a nuclear weapon.
        Senator Sasse. I agree with you that this should not be a
    partisan issue. But isn't it the case that the Administration
    is arguing to undecided members that we have already lost the
    international community, and so if the United States does not
    act, if we do not go forward with your deal, the Iranians are
    going to get this relief anyway? If not, isn't that an answer
    to Senator Menendez's question, and, frankly, it is what the
    President and Secretary Kerry were saying 3 or 4 weeks before
    July 1st, that it is not a choice between this deal and war,
    but that there are other scenarios where sanctions could have
    an effect? I think you cannot have it both ways.
        Ms. Sherman. Yes, I understand that. The issue is what kind
    of effect, how far-reaching an effect, and whether that will
    stop their nuclear program. So is it true that our unilateral
    sanctions could be put back in place and continue on? Is it
    possible that the rest of the world--maybe not Europe; Europe
    may follow through because they are allies and partners of
    ours--but other parts of the world that have taken huge
    economic costs by stopping their importation of Iranian oil or
    taken huge costs by other ending of trade with Iran would not
    pay attention to our unilateral, bilateral sanctions? Yes, that
    is indeed the case.
        So our sanctions regime would not be as effective as it
    would be. There would not be--the international community has
    come together behind this deal. They will not stay together
    behind our alone rejecting this deal if the U.S. Congress
    overrides the veto. The United States will be in a weaker
    position not only on this, Senator, but on many other things
    that we are trying to do internationally in the world.
        Senator Sasse. But just to be clear, it is your position
    that if the Congress would kill this deal, the U.S. sanctions
    regime could still have some significant effect?
        Ms. Sherman. It would have some effect. I would suspect so,
    yes. But it will not have the effect that it does today, and
    everyone has to remember that Iran will then move forward with
    its program, that sanctions, as devastating as they have been
    and, as I would say to Senator Menendez, and hope it shows in
    the record, that indeed this Administration has enforced both
    unilateral and multilateral sanctions even more profoundly that
    every previous Administration, each of which has tried to do a
    very good and credible job, but we have intensified that. That
    is what President Obama set out to do, was to intensify that
    sanctions pressure so that Iran would come to the negotiating
    table in a serious way to get the most profound and far-
    reaching arms control agreement that has ever been negotiated.
        Senator Sasse. Thank you, and I do appreciate your advocacy
    for the agreement. But I think this was the yes-or-no answer
    that you just gave to the question that Senator Menendez asked.
    You do not believe that it is war or this deal. You just
    outlined a third scenario. You----
        Ms. Sherman. Yes, but----
        Senator Sasse.----would not answer yes or no for him, but I
    think you just----
        Ms. Sherman. No, but----
        Senator Sasse.----said yes, it is not.
        Ms. Sherman. I did not, Senator, because a third scenario
    is even though our sanctions would have some bite, Iran would
    move forward with its nuclear program, because why wouldn't
    they? They would not be getting the relief, all the relief they
    wanted. They would keep marching forward with their program.
    And it would force us into a choice: Were we going to allow
    them to have a nuclear weapon? And President Obama is resolute.
    He will not allow that to happen. And that leaves you heading
    down a road to war.
        Senator Sasse. Thanks. Almost at time, but, Secretary
    Szubin, I want to ask you one question. You and I have had
    previous discussions, and you know that I appreciate the work
    that you do, and I know that we have mutual affection for one
    of your predecessors, Secretary Zarate. I do not know if you
    have read his testimony today. I will not quote the whole
    length of it, but you said in your opening statement that the
    IRGC receives no sanctions relief under this deal. Is that
    correct?
        Mr. Szubin. Yes.
        Senator Sasse. The Secretary in his testimony in the second
    panel is going to outline much of what he calls their
    ``business empire'' that is driven by the IRGC. Most of those
    entities do receive sanctions relief under this deal. So isn't
    your point really fairly meaningless that they do not receive
    sanctions relief since all the entities that they get their
    money from do?
        Mr. Szubin. No, Senator. On this point--and maybe it is the
    only one--I would respectfully beg to differ with former
    Assistant Secretary Zarate. The business empire of the IRGC
    will remain under sanctions. That means the companies that it
    controls, that it is deriving revenue from, will remain under
    sanctions, and certainly, obviously, its senior officers will
    remain under sanctions as well. And thanks to Congress, that
    will have international effect, meaning any international bank
    that does business with that--and let me give a very specific
    example here.
        Khatam al-Anbia, the largest construction engineering firm
    in Iran, we have designated for being owned or controlled by
    the IRGC. It is a revenue source for the IRGC. It is not coming
    off, not at 5 years, 8 years, 15 years under this deal. Any
    international bank that hosts accounts for it will face cutoff
    from the U.S. financial system. So those are very tough,
    aggressive sanctions, and those all remain in place.
        Now, there are companies who have done what I would call
    ``arm's-length transactions'' with the IRGC over time that we
    have designated for conducting business for the IRGC. We have
    companies like that that are due to receive relief at various
    phases under the deal, but the business empire, as you
    described it, remains intact.
        Ms. Sherman. And if I might add, the IRGC does not support
    this deal. That should tell you something.
        Senator Sasse. Thank you, Mr. Chairman.
        Chairman Shelby. Thank you.
        Senator Merkley.
        Senator Merkley. Thank you, Mr. Chairman.
        In regard to that, my understanding is the IRGC controls a
    lot of smuggling and benefits very handsomely, if you will,
    from the sanctions in that regard, and that that is one of the
    reasons they are opposed to that. Is that a correct impression?
        Mr. Szubin. The IRGC is engaged in a lot of nefarious
    activity within Iran's economy as well, as you point out, and
    we have seen allegations, I think credible allegations, that
    they have engaged in profiteering, black market profiteering,
    off of sanctioned goods, including, very cynically, off of
    goods that are going to the health of the Iranian people.
        Senator Merkley. Ms. Sherman, I want to turn to you. I
    submitted a series of questions to the Administration, and in
    response to one of the questions, the Administration has
    responded, ``Iran has committed indefinitely to not engage in
    specific activities that could contribute to the design and
    development of a nuclear weapon.''
        In this context, does ``indefinitely'' mean the time period
    has not been established? Or does it mean ``perpetually''?
        Ms. Sherman. It means that under this agreement and under
    the Nuclear Nonproliferation Treaty, Iran is prohibited from
    pursuing a nuclear weapon, obtaining, acquiring, or developing
    one. Ever. Ever.
        Senator Merkley. So it really means perpetually.
        Ms. Sherman. Perpetually, yes.
        Senator Merkley. So under the NPT, the Additional Protocol
    and modified Code 3.1, does Iran have the right to enrich up to
    weapons-grade uranium after the expiration of the Iranian
    enrichment cap?
        Ms. Sherman. No, because if they indeed move to enriching
    to what we would consider weapons-grade, it will raise a red
    flag to the entire international community, to the IAEA. There
    are very few circumstances where Iran needs to, for peaceful
    nuclear purposes, enrich above 5 percent. One could argue for
    submarine fuel, perhaps, but indeed, if they went to weapons-
    grade, it would raise instantaneous red flags, and we would see
    it as a major noncompliance.
        Senator Merkley. So enrichment over 5 percent starts to
    essentially raise this red flag with the exception of submarine
    fuel? And what percentage----
        Ms. Sherman. Submarine fuel, and there may be one other or
    two things. I am not an expert. I could ask my physicist, who
    is sitting behind me, if there are other instances, but there
    are very few.
        Senator Merkley. Well, what enrichment would the submarine
    fuel be?
        Ms. Sherman. I think it is 20?
        It could be 20, some are higher, Dr. Timby says.
        Senator Merkley. So that is a big distinction between 5 and
    20. But are you basically saying that if the amount of fuel
    enriched did not specifically meet the quantity profile of the
    nuclear submarines, that that would be a red flag? So,
    essentially, for most purposes, it is 5 percent?
        Ms. Sherman. It is 5 percent or less.
        Senator Merkley. OK. And in terms of after the----
        Ms. Sherman. The one other distinction I should make is for
    the Tehran Research Reactor, which helps to make medical
    isotopes for cancer research, cancer treatment in Iran--it uses
    20 percent. But this agreement says that we will provide
    fabricated fuel for that Tehran Research Reactor over time, and
    we have put controls on that so that it cannot be used for
    other purposes.
        Senator Merkley. So how much enriched uranium above 5
    percent could Iran store without creating a red flag?
        Ms. Sherman. So two points. Acting Under Secretary
    helpfully reminds me that for 15 years Iran is not allowed
    under this agreement to enrich beyond 3.67 percent. So the
    concern you have raised only begins to raise those red flags
    after those 15 years. They are allowed for those 15 years to
    only have a stockpile of 300 kilograms. That 300 kilograms is
    not enough to provide enough fissile material for a nuclear
    weapon.
        Senator Merkley. Right. But after those 15 years, they can
    have more than the 300 kilograms, so there is no particular
    limit at that point?
        Ms. Sherman. There is not a limit, but, of course, again,
    we would look at an ever increasing stockpile and want to
    understand the reasons and uses of it. And one of the things
    that is very clear here, because we have uranium accountancy
    for 25 years, centrifuge production for 20 years, they have to
    make a declaration to the IAEA of their Additional Protocol
    research and development over the long term, that there will be
    many, many metrics for measuring what they are doing with their
    program for a very, very long time.
        Senator Merkley. Because my time is expiring, my last
    question is: When you look at snapback, that is kind of a
    sledgehammer approach. Given the scale of violations, is there
    a scalable response?
        Mr. Szubin. Yes, Senator. We have reserved the right to
    snap back ``in whole or in part,'' and that is a quote from the
    agreement, and we can do that with our unilateral sanctions or
    we can do that with the U.N. sanctions. And the EU has reserved
    a similar right, whether it is putting back in place on a
    sector, on a category of transactions, all the way through to
    full snapback.
        Senator Merkley. Thank you.
        Chairman Shelby. Senator Cotton.
        Senator Cotton. Thank you, Mr. Chairman.
        I have to note with some astonishment that there was an 8-
    minute exchange between Senator Schumer and the witnesses about
    the meaning of the grandfather clause. I think we got some kind
    of answer out of it, but I also know that Administration
    officials have said repeatedly that Iran will exploit every
    ambiguity in the text of this agreement to that advantage, so I
    can only imagine what they will say about that clause, should
    it come to pass.
        But moving on, Secretary Sherman, there is a lot of
    commentary about access--access to Iran's necessary sites,
    their military sites. It is throughout the JCPOA. Secretary
    Kerry and Secretary Moniz have frequently talked about
    ``managed access.'' Can you assure us that this access will
    actually be physical access, IAEA inspectors will be physically
    walking into these sites and taking samples or installing
    equipment?
        Ms. Sherman. I think that every situation is different,
    Senator, and that the IAEA has the capability, the expert
    knowledge to make sure that whatever they do can be technically
    authenticated. So I cannot go through every hypothetical
    situation. I know that Director General Amano I am sure will
    get asked these questions by your colleagues in the Senate
    Foreign Relations Committee in this informal meeting, so I
    would rely on his answers more than on my answers. But what I
    am assured of is that whatever they do in every circumstances
    where they believe they need to have access, it will be
    technically authenticated, and it will be meet the standards
    that they must have and that they require for ensuring
    verification and monitoring.
        Senator Cotton. The answer then, it sounds like, is no, we
    cannot be assured that IAEA----
        Ms. Sherman. No.
        Senator Cotton.----inspectors will physically and
    personally be present on every single site.
        Ms. Sherman. You know, you do not have to be physically
    present on every site in this technological world to get done
    what is necessary. Our labs can you walk you through those
    parameters as well.
        Senator Cotton. Who will decide what is and is not a
    military site?
        Ms. Sherman. Well, I think the better way to respond to
    your question is to say if the IAEA believes that it has
    justification to have access to a site, we have a process to
    ensure they get that access, whatever that site is, military or
    nonmilitary.
        Senator Cotton. Can Iran deem its research universities to
    be a military site?
        Ms. Sherman. As I said, if they have justification to enter
    any site, regardless of what it is, and the access agreement
    provides a process to ensure they will get access. The United
    States of America would not have agreed to an agreement where
    access was not assured if the IAEA believed it had to have it.
    That is what we have in this agreement.
        Senator Cotton. Are you aware of any actions that the
    Government of Iran has taken to sanitize any sensitive or
    suspected sites since the date of the JCPOA?
        Ms. Sherman. I am not going to discuss anything that would
    be considered classified, but there is an all-Senate briefing
    this afternoon. The National Intelligence Manager will be
    there, and we will be prepared to answer these questions.
        Senator Cotton. Let us move to the side deals between the
    IAEA and Iran. You acknowledged to Senator Scott that you read
    the side agreements between the IAEA and Iran. Did anyone else
    in the U.S. Government read these side agreements?
        Ms. Sherman. Yes. Some of our experts did as well, as did
    all of the P5+1.
        Senator Cotton. Can you give me an estimate of how many
    officials read the side agreements?
        Ms. Sherman. A handful. I would have to stop and think.
        Senator Cotton. So you said earlier to Senator Corker that
    we have to honor the confidentiality of these agreements
    between the IAEA and Iran, but if you have read them----
        Ms. Sherman. Well, actually, it is the IAEA and every
    country with which it does Safeguards----
        Senator Cotton. I will come to that----
        Ms. Sherman.----Confidential Protocols.
        Senator Cotton.----in a moment. But the fact that you have
    read them and other U.S. Government officials have read them,
    doesn't that undermine the claims of supposed confidentiality
    in these agreements?
        Ms. Sherman. Well, we were shown them in a confidential
    setting, and I will share with the U.S. Senate, as I have done
    with House leadership, Chairs, and Rankings, my confidential
    understanding, and we will hopefully keep them in a classified
    setting.
        Senator Cotton. How long are these documents?
        Ms. Sherman. Very short.
        Senator Cotton. Like the road map itself?
        Ms. Sherman. I would have to stop and think back, but it is
    very short.
        Senator Cotton. Why are these documents classified? This is
    not a U.S. Government document. It is not a covert action. It
    is not subject to sensitive collection and methods of our
    intelligence community. Iran----
        Ms. Sherman. Because it is----
        Senator Cotton. Iran knows what they agreed to. You know
    what is in it. Why are these classified?
        Ms. Sherman. So the reason is they are what are called
    ``Safeguards Confidential.'' Under----
        Senator Cotton. Yes----
        Ms. Sherman.----the Comprehensive Safeguards Agreement
    (CSA), to which we are also a party, we have confidential
    Safeguards documents and protocols with the IAEA, between the
    United States and the IAEA, as do all of the countries that are
    under the CSA. The IAEA has committed to keeping them
    confidential, and so, therefore, they are committed to keeping
    these protocols under CSA confidential as well.
        Senator Cotton. Yes, I am aware that that is the statement
    you also gave Senator Corker. I assume that you are not
    implying any kind of moral equivalence between the United
    States----
        Ms. Sherman. Absolutely not----
        Senator Cotton.----and Iran.
        Ms. Sherman.----and I indeed said to a Senator--you were
    not here yet, Senator Cotton, that I understood that this was a
    very different circumstance in the sense that we were trying to
    keep Iran from obtaining a nuclear weapon, and that this was an
    international understanding that had been negotiated among six
    parties and Iran. So, yes, I understand this is a different
    circumstance, which is why I believe the IAEA at an expert
    level shared the protocol arrangements, understanding they
    would be classified. And I made clear to the IAEA under our
    system I would be required to share in a classified,
    confidential setting with members of the U.S. Congress what I
    had seen, and I will do so this afternoon.
        Senator Cotton. Did you make clear to Iran and the other
    parties that U.S. law, U.S. law that was, in fact, signed in
    the middle of these negotiations, required Congress to receive
    the text of all agreements, to include agreements to which the
    United States was not a party?
        Ms. Sherman. Indeed, our understanding of the Corker-Cardin
    legislation that was passed by the House and the Senate is that
    we must give you every document that we have, and we have given
    you every document that we have.
        Senator Cotton. The legislation says ``all agreements.'' It
    does not actually matter whether the U.S. Government has it in
    its possession or not.
        Ms. Sherman. Well, it is very difficult--it is very
    difficult to give you something that we do not have.
        Senator Cotton. Did you make that clear to Iran and IAEA at
    the time, however?
        Ms. Sherman. Iran and the IAEA are quite well aware of our
    legislation. I can assure you they follow what you do every
    single day.
        Senator Cotton. And one final question. A fascinating new
    interview today from Secretary Kerry and Jeffrey Goldberg says
    that if Congress were to vote no on this, it would be screwing
    the Ayatollah. And then Secretary Kerry says that if Congress
    rejects the deal, it would show Iran ``America is not going to
    negotiate in good faith. It did not negotiate in good faith
    now, and that would be the Ayatollah's point.''
        Surely you made clear to Iran that Congress had to vote on
    this deal before it could go forward and, therefore, they
    should not be operating under such a misperception?
        Ms. Sherman. Of course they knew that Congress was going to
    vote on this. Everything was very public. Everything that
    happens here in our country is transparent, democratic, and
    public, and we are very proud of that fact.
        Senator Cotton. Are you concerned about Congress screwing
    the Ayatollah?
        Ms. Sherman. I have not seen this interview. I am not going
    to comment on it, Senator. What I will comment on is that
    Secretary Kerry, Secretary Moniz, myself, the negotiating team
    who have been working diligently on this for over 2 years,
    having briefed the U.S. Senate and the Congress countless
    times--hundreds of times, quite frankly--did everything they
    could to ensure the safety and security of the United States.
    That is our solemn obligation, and that is what we did.
        Senator Cotton. Thank you.
        Chairman Shelby. Senator Warner.
        Senator Warner. Thank you, Mr. Chairman.
        I am going to start by simply saying, one, I appreciate
    what you have been doing. I think many of us have concerns
    about components of the deal. Many of us would like to Monday
    morning quarterback, but I find it remarkable that some members
    seem to impugn that you were not there trying to do the best
    deal possible for the United States of America and for long-
    term prospects of stability in the region.
        I may agree or not agree with what you negotiated, and I
    have got more due diligence to do. But I would never question
    the approach you took or the dedication that you have taken in
    this process.
        Mr. Szubin, clearly your actions through both
    Administrations working on this bring a lot of history and
    commitment, and I absolutely believe that you want to make sure
    that we follow up in particular on Iranian actions,
    destabilizing actions in the region.
        I do want to continue, I think, something that Senator
    Sasse asked about, what would happen if we do not act. There
    are some who have put forward a theory that have said that if
    the U.S. Congress turns this agreement down, Iran would still--
    it would still be in Iran's best interest to go through to
    Implementation Day so that take down their nuclear stockpiles,
    dissemble parts of their reactors, so that they could still
    obtain the $50-plus billion, in effect isolate America since
    the rest of the world would be otherwise aligned.
        Do you want to comment on that theory? Because it is being
    speculated on a lot.
        Mr. Szubin. So, Senator, obviously it is always dangerous
    to speculate about how scenarios play out, especially highly
    compromise international scenarios like the one you are
    describing. But I think the point Ambassador Sherman made
    earlier is really important in this respect, which is it is not
    a black or white answer. If the United States were to retain
    our sanctions because Congress rejects the deal, and certainly
    for our part we would then implement the sanctions, as it is
    our obligation to do, we would still see some international
    enforcement, whether it is on the oil side, whether it is on
    the reserve side. That enforcement would begin to erode,
    especially in a scenario that you are describing, where Iran
    actually goes through with its commitments in order to isolate
    us and to show they are now the good actor, they are complying
    with all their commitments, and the United States is the one
    who walked away.
        That is a scenario I very much hope does not occur. It
    would be terrible for us in terms of our sanctions, in terms of
    our credibility. When we exercise these authorities, these
    extraordinary authorities, we need to be able to do so in a way
    that is meaningful and where people know we are ready to act.
        So I very much hope it does not come to that, but it
    certainly would be a situation of weakened leverage. It is not
    going to be zero. It is not going to be 100 percent. But it
    will be weakened leverage. And the question then is: Could we
    turn weakened leverage into a much stronger deal? And my
    assessment is no.
        Senator Warner. Ambassador Sherman, do you have any other
    comment on that?
        Ms. Sherman. I could not agree more. My assessment would
    also be, no, that, in fact, if we walk away, even if we retain
    some sanctions capability--and we would, of course, enforce our
    laws--the rest of the world will go in another direction and,
    more importantly, Iran will go in another direction, and the
    President of the United States, whether it is President Obama
    or the next President of the United States, will face a very
    difficult choice----
        Senator Warner. But there is one--you know, there is a
    separate premise. Would they walk away immediately or would
    they actually go through to implementation? We do not know, but
    it is----
        Ms. Sherman. I doubt very seriously--if the United States
    sanctions remain in place, Iran will perceive that we have
    walked away from the deal and they no longer have to stick with
    it.
        Senator Warner. Two questions. One, two more questions, and
    I will try to stay within my time. One is that, you know, one
    of the concerns we have had is the Administration did say when
    Congress put tougher sanctions in, moved forward particularly
    on the SWIFT notions, using the SWIFT system, there was great
    reluctance from the Administration about us taking that step. I
    think in retrospect taking that step was important and
    effective and helped tighten down the sanctions.
        I do wonder if we do not move forward, though, you know,
    will we be prepared to move forward with the severity of those
    same sanctions, particularly as we look at sanctioning Bank of
    India, Bank of Korea, Bank of Japan. Comments on that? And I
    would like to get one last question in, recognizing everybody
    has gone a little over time.
        Mr. Szubin. It is a very stark scenario that you are
    depicting because the institutions you are talking about are
    some of the most significant and fundamental institutions in
    the international financial sector, whether it is SWIFT, who is
    the leading messaging company, secure messaging company for
    banks worldwide, whether it is the largest commercial banks in
    Korea, India, the Central Bank of Japan. The prospect of us
    having to use our sanctions authorities against those entities
    is frightening.
        Senator Warner. But if we chose to reject this, that would
    be our policy.
        Mr. Szubin. It would then be threatening those institutions
    unless they come along with the U.S. approach on this.
        Senator Warner. Let me just get my last question in. One of
    the statements you made earlier, as we kind of--and I think
    further explanation on them, how you got to the 24 days, I was
    surprised at first about that time. I still have some concerns,
    but at least I have a little more clarification now. You know,
    one of the things that you have said--and I think it is an
    artful process you created with, in effect, not allowing other
    members of the Permanent Council of the U.N. to have a veto,
    that we, in effect, have a default veto. But what kind of
    assurance can we really have that our current EU partners and
    friends in the U.K., for example, if they have--and in Germany,
    if they have engaged in a major way with Iran on a business
    basis going forward, that they will stick with us? How do we
    get more comfort around that?
        Thank you, Mr. Chairman, for giving me the extra minute.
        Ms. Sherman. I think the best comfort is the one that
    Acting Under Secretary Szubin gave, which is, in 2012, we were
    in the same circumstance where, in fact, Europe had lot of
    business with Iran. They had a lot of businesses in Iran, and
    they were very concerned about Iran having a nuclear weapon and
    moving down that pathway. And so they joined us in enforcement
    of not only our unilateral sanctions, but put on their own
    sanctions and multilateral sanctions, and, in fact, enforced
    them, and companies like Total and Siemens, Peugeot and Renault
    all had to leave.
        Senator Warner. I would like to hear more particularly from
    our European allies on that matter.
        Ms. Sherman. I would urge you to speak with them directly.
    I think you will get the right answer you are looking for.
        Chairman Shelby. Senator Warren.
        Senator Warren. Mr. Chairman, if I could, I would like to
    yield to Senator Donnelly and then come back when it is my
    turn.
        Chairman Shelby. Senator Donnelly is recognized.
        Senator Donnelly. Thank you. I want to thank Senator Warren
    for her kindness on that, and thank you both for your hard
    work.
        In regards to Parchin and the IAEA agreement and moving
    forward--and this has been asked by others, but I want to try
    to clarify. Moving ahead in Parchin and every other facility,
    is it your understanding that the IAEA can get into every
    facility that, if they choose to, they can go in there
    physically themselves as opposed to having Iran turn over
    materials, that they have physical access?
        Ms. Sherman. I would be happy to get into this in greater
    detail in a classified session, Senator. What I can tell you is
    that whatever the IAEA believes that it needs to do to have a
    technical authenticated result for whatever access they believe
    they need to have, they will get it.
        Senator Donnelly. So if they believe they need to have
    physical access to a place, that will not be denied?
        Ms. Sherman. As I said, whatever they believe they need for
    a technically authenticated process, they will get under the
    agreements that we have negotiated here, and I will be glad to
    discuss this in greater and more explicit detail in a
    classified setting.
        Senator Donnelly. That would be fine. We can talk this
    afternoon, but that sounds like a yes to me.
        Is there reason to believe there are any other documents
    out there?
        Ms. Sherman. No. If there are, I do not know about them.
        Senator Donnelly. OK. Have you asked the IAEA if there are
    any other documents out there?
        Ms. Sherman. I have not asked them explicitly, but I did
    see the Director General when he arrived here yesterday. We
    talked. I asked him questions about where we were with various
    things, and I have no reason to believe there is any other
    document.
        Senator Donnelly. Have you asked the Iranians whom you have
    had these discussions with, ``Do you have any other agreements
    with anybody else at this time that we do not know about?''
        Ms. Sherman. I have not asked that question explicitly, but
    given the hours and hours we have spent together, I do not
    believe there are any other documents.
        Senator Donnelly. I think that is a question well worth
    asking as we move forward.
        Mr. Szubin, the alternative theory that has been put out
    there or one of the alternative scenarios is that the United
    States walks away and then we, in effect, go country by country
    saying, ``Make a choice economically. Do not deal with Iran or
    else we will sanction your''--in effect, ``We will not deal
    with your economy.'' What is the likeliness of that kind of
    scenario having success?
        Mr. Szubin. In the event of us walking away from this deal,
    I think we would be very much swimming against the tide,
    because the cooperation we have obtained to date in going
    around the world, just as you describe, and saying, ``We need
    to pressure Iran,'' was predicated on a diplomatic path. And so
    China, India, South Korea could see here is a roadway to test
    Iran to see if they are ready to make a deal. In this context,
    we would be walking away from that.
        Senator Donnelly. And I apologize because time is limited,
    but if we walk away, what is left in terms of strength of
    sanctions? Because some folks have said we still have
    significant impact on Iran at that time. What is left as--we
    obviously know we will still have sanctions in place. So what
    other global effects will take place?
        Mr. Szubin. The United States, as you note, Senator, would
    retain our unilateral sanctions.
        Senator Donnelly. Right.
        Mr. Szubin. Basically our primary embargo on Iran remains
    in place, and that is, frankly, true, notwithstanding the deal
    either way. Our embargo is going to remain in place.
        The EU has sanctions with respect to Iran's bad activity
    outside the nuclear file. Terrorism, human rights, those
    sanctions would remain in place. But the most severe economic
    sanctions that we have spent time talking about today and that
    Congress helped to put in place affect things like Iran's sales
    of crude oil, petrochemicals, and the assets of the Central
    Bank of Iran, the access to the banking system internationally.
    Those are all built on the threat of U.S. sanction with
    international acquiescence. And it is that acquiescence that I
    fear we would be risking.
        Senator Donnelly. And the alternative suggestion is that
    for countries who are not willing to also continue their
    sanctions if we walk away, that we go to them and say, ``Make a
    choice.'' How realistic is that?
        Mr. Szubin. I think it would be a very tough conversation,
    and I think when you are going to a country like China or India
    and telling them, ``We are going to dictate where you buy your
    oil from,'' which is what, frankly, we have been doing for the
    last few years, they are going to say, ``With an eye on what?''
    What is your prospect for getting a nuclear deal so that we can
    lift these
    sanctions? And if they think that our bar, having moved the
    goalposts--sorry to mix sports metaphors, but that our bar is
    unrealistically high, then I think we will have a very hard
    time securing that cooperation, and that means our sanctions
    leverage will erode considerably.
        Senator Donnelly. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman, and thank you,
    Ambassador Sherman and Under Secretary Szubin, for your work.
    And I think everyone here understands that a nuclear-armed Iran
    threatens the United States, threatens Israel, threatens the
    entire world.
        The question now before Congress and the only question
    before Congress is whether the nuclear agreement negotiated
    alongside other countries represents our best available option
    for preventing Iran from acquiring a nuclear weapon. So I want
    to see if we can just pull some of these pieces together and
    evaluate the options. What happens if we go forward with this
    deal versus what happens if we back out?
        Let us start with the tough sanctions imposed by the United
    States with the cooperation of other countries around the
    world, such as the U.K., France, China, Russia, Germany, the
    EU. If we reject this deal, we need our international partners
    to continue the tough sanctions, refuse to trade with Iran,
    block Iran's access to the frozen assets in order to be
    effective.
        So, Ambassador Sherman, if we walk away, do you believe
    that all the other nations that have endorsed this deal are
    likely to continue working with us to impose strong sanctions
    against Iran?
        Ms. Sherman. No, because as Acting Under Secretary Szubin
    said, the reason they cooperated was because we were pursuing a
    diplomatic solution and they thought that was worth trying to
    accomplish. That has now been accomplished, so they believe it
    was worth taking the economic hits they all did to do that. But
    if we walk away from what they consider to be a good deal--90
    countries have spoken out in support of that deal--they will
    believe that we have changed the equation, we have not operated
    in good faith, and we are on our own.
        Senator Warren. All right. So let us look at what happens
    if we are on our own. If the United States attempts to continue
    sanctions on our own while other nations resume trade with
    Iran, how effective will our sanctions likely be?
        Mr. Szubin. They will be less effective than they are today
    and than they were when we negotiated this agreement.
        Senator Warren. All right. Thank you.
        Let us now consider the roughly $50 billion of Iran's money
    that is frozen and could be granted to Iran as part of
    sanctions relief if Iran complies with the deal.
        Under Secretary Szubin, let me ask, is most or even a very
    significant part of this $50 billion held in the United States?
        Mr. Szubin. No.
        Senator Warren. So if we walk away, do you believe that the
    other countries that hold this money will continue to keep it
    out of Iran's hands?
        Mr. Szubin. I think we will begin to see those funds be
    released if Iran starts meeting its commitments under the deal.
        Senator Warren. All right. But the question I ask is: If we
    walk away from the deal, are you convinced that other countries
    that hold these funds are going to continue to withhold those
    funds from Iran?
        Mr. Szubin. I cannot guarantee you that they will.
        Senator Warren. All right. So let us talk next about Iran's
    nuclear weapons ambitions. Ambassador Sherman, if we reject
    this deal and Iran decides to build nuclear weapons, what would
    be Iran's breakout time--that is, how long do you estimate it
    would take Iran to produce enough material for a nuclear
    weapon?
        Ms. Sherman. The assessment today is 2 to 3 months.
        Senator Warren. OK, 2 to 3 months. And if we accept this
    deal and if Iran complies with it, what would be Iran's
    breakout time?
        Ms. Sherman. At least for 10 years, 1 year.
        Senator Warren. OK. Now, let us next think about cheating.
    Iran may sign the deal and then try to develop a nuclear bomb
    anyway. So, Ambassador Sherman, will it be easier for us or
    harder for us to detect a secret Iranian nuclear weapons
    program if we accept the deal or if we reject the deal?
        Ms. Sherman. Clearly, if we accept the deal, we will have
    many more eyes on; the IAEA not only will have access to the
    declared sites--Natanz, Fordow, Arak--but they will also have
    surveillance over uranium, the entire supply chain through the
    procurement channel. They will have eyes on centrifuge
    production. They will have access to undeclared sites, that is,
    suspicious sites; if they believe there is a justification, get
    in. Much of that, most of that, nearly all of that will
    disappear if there is no deal.
        Senator Warren. All right. And then I just have one more
    question on this. Let us talk about war. I do not think
    Americans want to be dragged into another war in the Middle
    East, but let us face hard facts. If we reject this deal,
    Iran's breakout time will go down, and that will increase the
    pressure to take military action very soon. So what I want to
    compare here is the effectiveness of these two options, a
    negotiated option versus a military option.
        In the long term, which action is likely to be more
    effective at preventing Iran from developing a nuclear bomb:
    accept the agreement and closely monitor Iran's nuclear
    program, or reject the agreement and, if there is escalation,
    bomb Iran? Which one is more likely to be effective?
        Ms. Sherman. Clearly, a long-term negotiated solution,
    which is what we have in the Joint Comprehensive Plan of
    Action, is more effective because if we take military action,
    which the President of the United States will do if he has
    absolutely no choice, indeed we will only set back their
    program, it is estimated by the intelligence community, 2 to 3
    years because Iran has the know-how. They have mastered the
    entire fuel cycle to create fissile material for a nuclear
    weapon, and so, therefore, although we could bomb away their
    facilities, they could reconstruct them. You cannot bomb away
    knowledge, you cannot sanction away knowledge. The only way to
    control it is a negotiated solution that is intrusively and
    highly monitored and verified. That is what we have negotiated.
        Senator Warren. Thank you. You know, some have said that
    they want a better deal, but that is not the choice that
    Congress faces. The deal is the deal, and Congress has two
    choices: accept it or reject it.
        No one can say for certain that this deal will prevent a
    nuclear-armed Iran, and I will not say it. But no one has put a
    better, more realistic alternative on the table, and until I
    hear a better option, I intend to support this deal. Thank you.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Heitkamp.
        Senator Heitkamp. Thank you, Mr. Chairman, and thank you,
    Mr. Chairman, for your patience today. I think this is such an
    important issue and this Committee has unique jurisdiction, and
    I have watched as you have let Members really get to the heart
    of what they need to examine, and I want to personally thank
    you for that.
        There is a lot of attempt here to unbake the cake. Right?
    And I think I have been product and I have been somebody who
    has been engaged in multi-party negotiations, including some of
    the large civil settlements that this country has seen, and I
    know how difficult it is to unbake a cake and to start saying,
    well, this could be better or that could be better. And I think
    Elizabeth--Senator Warren--just took us through the paces in
    terms of what the real options are.
        But I will tell you that one thing that I do not believe
    has been talked a lot about is that the fact of lifting the
    sanctions regime will, in fact, build a bigger, better, more
    economically stable Iran into the future. And as long as Iran
    is on the terrorism list, that creates incredible opportunity,
    as I think, Mr. Secretary, you have so appropriately talked
    about the challenges that they have economically today. If, in
    fact, the sanctions regime is lifted and we look 10 years into
    the future, Iran is going to be a much more stable economic
    power. I do not think there is any doubt about it.
        And so this might seem off topic for some people, but it is
    certainly on topic for me, which is the one thing that we could
    do that would provide competition against an Iran that has the
    ability to market their oil into the market and have the
    resulting economic growth as a result of marketing that oil is
    actually exporting American oil to compete with that Iranian
    oil. And it is very difficult in my State to explain why we
    should lift sanctions on Iran when we are sanctioned in the
    United States of America in terms of our oil exports.
        And so I would like to hear from both the State Department
    and Department of Treasury your response to that statement,
    especially looking into the future in 10 years when we know
    that that competition could, in fact, curtail that economic
    might of an enemy that is pretty powerful.
        Mr. Szubin. Senator, thank you for the question.
    Unfortunately, I am not the right Treasury official to speak to
    the restrictions on sales of American oil overseas.
        Senator Heitkamp. But you do manage the sanctions.
        Mr. Szubin. Yes.
        Senator Heitkamp. And that is a big part of it. And when
    you look--as part of your job of managing the sanctions, it is
    to look at how those sanctions have an impact on the viability
    economically of Iran. So you kind of are for me the right guy
    to ask.
        Mr. Szubin. Well, what I----
        Senator Heitkamp. No dodging.
        Mr. Szubin. What I can say with respect to the sanctions is
    you are right, what is envisioned under this deal is to relieve
    some of the secondary pressure, not the U.S. sanctions against
    Iran that are bilateral sanctions, but the secondary pressure
    internationally on Iran's economy, and if Iran adheres to all
    of its commitments, Iran can expect some economic recovery. I
    think it is going to be many, many years in the making before
    Iran gets back to where it ought to have otherwise been today.
    But----
        Senator Heitkamp. But you do understand there is a lot of
    concern about an economically empowered Iran and what that
    means for stability in the region.
        Mr. Szubin. I understand it to my very core, and----
        Senator Heitkamp. I do not have a lot of time, and I think
    the Chairman has been extraordinarily generous with all of us,
    so I would turn to you, Ambassador Sherman.
        Ms. Sherman. So, Senator, I think neither Adam nor myself
    can comment on U.S. domestic policy, though we do well
    understand how U.S. domestic policy has a profound impact on
    international relations and international markets. And so I am
    sure that the particular interests that you have, that we all
    have, in American economic security and independence when it
    comes to oil and gas is something that has to be resolved here.
        Senator Heitkamp. But there has been a lot written about
    the ability to provide some kind of energy security into Europe
    that could, in fact, be one of those soft power measures,
    Ambassador.
        Ms. Sherman. Absolutely.
        Senator Heitkamp. And so I understand that this might be
    above your pay grade or whatever it is, but I just want to
    acknowledgment that American oil moving into international
    markets has the effect of curtailing the economic power of
    Iran, the economic power of Russia, and a whole lot of people
    that are nation states that really are not friends of this
    country. And this is an opportunity to give our allies a step
    forward in the energy security that may, in fact, strengthen
    the sanctions regime in the event that we ever snap back.
        Ms. Sherman. I think no one would disagree that energy
    security for our country, for the world, and, for that matter,
    dealing with issues of climate and how we manage that will have
    a profound impact on the development of countries and America's
    continuing to be the preeminent economy in the world. No
    question.
        Senator Heitkamp. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Vitter.
        Senator Vitter. Thank you, Mr. Chairman. Thanks to both of
    you for being here and for your service.
        Ms. Sherman, I wanted to follow up on a really important
    issue that I think my colleague Senator Scott got into, and
    that is, these two significant secret IAEA agreements. They are
    certainly significant in terms of enforcing this agreement, are
    they not?
        Ms. Sherman. I would say they are important arrangements on
    the modalities that the IAEA will use, but I believe that the
    public road map, which you all have access to, lays out what
    the IAEA is requiring of Iran in broad terms as one of the
    steps it must take in order to get any sanctions relief along
    with all the other nuclear steps. And although I agree that
    possible military dimensions are important--they are--the
    United States has already made its judgment about it, so we are
    much more focused on where the program is today and where it is
    headed in the future, which is what the bulk of the Joint
    Comprehensive Plan of Action is about.
        Senator Vitter. Well, you just said what is available to
    Members of the Senate and the public is laying things out in
    broad terms. Aren't the real specifics of verification very
    significant in judging this agreement? Would you agree with
    that or not?
        Ms. Sherman. Of course they are, and that is why, Senator,
    at the all-Senate briefing this afternoon I will share in a
    classified session the details that I am aware of the
    arrangements that have been made under Safeguards Confidential
    Protocols between Iran and the IAEA.
        Senator Vitter. And you have read those two secret
    agreements?
        Ms. Sherman. I have read those two Safeguards Confidential
    arrangements, yes.
        Senator Vitter. OK. When do I get to read them?
        Ms. Sherman. Well, you will not, sir, any more than any
    other country will get to read the Safeguards Confidential
    Protocols between the United States and the IAEA.
        Senator Vitter. Do you have a vote on this agreement?
        Ms. Sherman. I do not, obviously.
        Senator Vitter. I have a vote on this agreement.
        Ms. Sherman. Yes, sir.
        Senator Vitter. You do not think it is appropriate that I
    would get to read--you have read these agreements, and I think
    that is appropriate. I am not arguing with that. I have to vote
    on this agreement. You do not think it is appropriate that I
    would get to read it?
        Ms. Sherman. As I said to the IAEA and to all of my
    colleagues that I would have to share the arrangements in a
    classified session with the U.S. Congress----
        Senator Vitter. That is not my question.
        Ms. Sherman.----because of the responsibility in our
    Constitution----
        Senator Vitter. Do you think it is appropriate that I do
    not get to read it when I have to vote on the matter?
        Ms. Sherman. Senator, you will have to make your own
    judgment about it. I do----
        Senator Vitter. I am asking your opinion. Do you think that
    is appropriate?
        Ms. Sherman. My opinion is that it is in the U.S. national
    security interest for there to be a Comprehensive Safeguards
    Protocol and that those protocols remain confidential. That is
    in our national security interest.
        Senator Vitter. Do you think it is appropriate that I, as a
    sitting U.S. Senator, representing a significant number of
    Americans, who has to vote on this do not get to read those
    agreements? I am not talking about putting them on the
    Internet. I am not talking about handing out copies.
        Ms. Sherman. I do not have those agreements to give to you,
    sir. I do not have them in----
        Senator Vitter. That was not my question.
        Ms. Sherman.----my possession.
        Senator Vitter. That was not my question. Please answer my
    question. Do you think it is appropriate that I do not get to
    read them?
        Ms. Sherman. I think that the system that has been put in
    place that maintains these as confidential documents between
    the IAEA and the countries with which it operates under the
    Comprehensive Safeguards Agreement is appropriate.
        Senator Vitter. And under that appropriate system, you get
    to read it, although you do not have a vote. I do not get to
    read it, although I do have to vote. OK. Let me move on.
        President Obama earlier said that, ``In year 13, 14, and
    15, they''--meaning Iran--``have advanced centrifuges that
    enrich uranium fairly rapidly, and at that point the breakout
    times would have shrunk almost down to zero.'' Is that
    accurate?
        Ms. Sherman. Indeed, what is accurate is that----
        Senator Vitter. Is that quote accurate?
        Ms. Sherman. In those years it will not come down to zero,
    no.
        Senator Vitter. OK. What will it come down to?
        Ms. Sherman. We can discuss that in a classified session.
        Senator Vitter. Well, his quote was ``almost down to
    zero.''
        Ms. Sherman. I know. It is not almost down to zero.
        Senator Vitter. OK. So he was wrong.
        Ms. Sherman. For those years, it is not almost down to
    zero. It is literally technically impossible for enrichment to
    go down to literally zero. It is just not possible. That is why
    even today it is 2 to 3 months.
        Senator Vitter. 2 to 3 months, OK. So maybe it is something
    comparable to that. In that context, do you think that other
    Middle Eastern countries will strongly consider developing
    nuclear weapons?
        Ms. Sherman. I do not, and it is the intelligence
    community's assessment that they will not.
        Senator Vitter. And to a lay person, that makes no sense.
    To a lay person, when you have a radical, dangerous regime
    which has the capability within months of having nuclear
    weapons, it is not credible that everybody is just going to sit
    on their hands. So explain to me----
        Ms. Sherman. Sure.
        Senator Vitter.----why that judgment would be credible.
        Ms. Sherman. So, first of all, to build a nuclear weapon,
    you not only need fissile material--which today the breakout
    time is 2 to 3 months; under this agreement it will be a year
    for at least 10 years, which gives us plenty of time to
    understand what is going on and to act if we need to take
    action--but you also have to weaponize that material, and then
    you have to have a delivery system. And it is the assessment of
    our community that even if Iran were able to enrich to highly
    enriched uranium to have fissile material for a bomb, which it
    does not have today and would take some time for them to get,
    that they would indeed still be some--maybe as much as a year
    or two away from getting a nuclear
    weapon, if, in fact, they had a program to weaponize and the
    delivery system to carry it.
        Senator Vitter. Well, again, as I tried to lay out my
    question, I am not talking about today. I am talking about
    assuming they live under the agreement----
        Ms. Sherman. So why----
        Senator Vitter.----in the later years, those timeframes
    considerably shorten.
        Ms. Sherman. Well, the fissile material timeframes shorten.
    We would have to ask the intelligence community. I am not aware
    of a current weaponization program. I am not aware of a current
    program that marries a bomb with a delivery system in Iran. I
    expect that, in fact, they could do that should they make the
    decision to do that.
        But your question was about other countries, and I did not
    get to that, and I apologize. I believe other countries will
    not go there because it is expensive, very expensive. Second,
    we would know about it. They would find themselves under the
    intense sanctions that Iran has been under because some of the
    countries that you are talking about are partners or allies of
    ours and are trying to deal with aspects of state sponsorship
    of terrorism of Iran, and they want to work with us to do that,
    and we are working with them to do that.
        So I believe there are any number of both incentives and
    disincentives for those countries to choose not to move in the
    direction that Iran has moved in.
        Senator Vitter. OK. Thank you, Mr. Chairman.
        Chairman Shelby. This has been a long hearing, an
    interesting hearing. I just have a few short observations. I
    will forgo the question.
        It has been brought up here. What is and what is not in an
    agreement is very important, is it not, Mr. Szubin? But if you
    do not have all of the information, it is hard to discern what
    is in an agreement.
        My question to both of you, we know the history of Iran. We
    know what is at stake here. Ambassador Sherman, do you trust
    Iran?
        Ms. Sherman. Of course not.
        Chairman Shelby. OK. Mr. Szubin?
        Mr. Szubin. No, Senator.
        Chairman Shelby. So we are entering into an agreement here
    of great importance with a country that we do not trust, that
    we have reason to believe is going to cheat or do whatever they
    have to because they are determined--they are in pursuit of
    nuclear weapons, and as you have said, they are close to it
    right now. Is that correct?
        Ms. Sherman. Well, actually, they are not close to it right
    now. They are at least a year or 2 years away from a nuclear
    weapon, should they decide to pursue one, and it is not
    apparent that the Supreme Leader has made a decision to
    actually pursue a nuclear weapon. It is 2 to 3 months right now
    breakout for fissile material.
        Chairman Shelby. Fissile material.
        Ms. Sherman. Yes, and under this agreement that would
    change to a year.
        Chairman Shelby. Which is a big step in----
        Ms. Sherman. Huge step.
        Chairman Shelby. Big step.
        Ms. Sherman. Huge step.
        Chairman Shelby. Mr. Szubin, do you trust Iran to forgo
    their terrorist activity and not spend any of this money that
    they would get, if we say $50 billion, on promoting terrorism
    and unrest all over the world?
        Mr. Szubin. Mr. Chairman, I do not trust Iran, and I think
    we can be nearly certain that Iran is going to continue to
    sponsor terrorism and groups like the Quds Force. And that is
    why it is incumbent on us to intensify our campaign against
    that.
        Chairman Shelby. Strange agreement. Thank you both for your
    patience and for your appearance before the Committee.
        We have another panel. I know it is a long day. Very
    important issues. I will call them up.
        Our witnesses for the second panel today include: The
    Honorable Juan Zarate, Senior Adviser for the Transnational
    Threats Project at the Center for Strategic and International
    Studies.
        Mr. Mark Dubowitz, Executive Director of the Foundation for
    Defense of Democracies.
        Dr. Matthew Levitt, Director of the Stein Program on
    Counterterrorism and Intelligence at the Washington Institute
    for Near East Policy.
        And Ambassador Nicholas Burns, the Roy and Barbara Goodman
    Family Professor of Diplomacy and International Relations at
    Harvard University's John F. Kennedy School of Government.
        We welcome all of you here to the Banking Committee, and
    all of your written testimony will be made part of the hearing
    record in its entirety. And when we get seated, we will
    proceed.
        Mr. Zarate--is that it?
        Mr. Zarate. Zarate, Mr. Chairman. Like ``karate,'' but with
    a ``Z.''
        Chairman Shelby. Yes, sir. I will not forget that. We will
    start with you, sir, when you are ready.

       STATEMENT OF JUAN C. ZARATE, CHAIRMAN & SENIOR COUNSELOR,
    CENTER ON SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE
       OF DEMOCRACIES AND SENIOR ADVISER, TRANSNATIONAL THREATS
        PROJECT, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES

        Mr. Zarate. Thank you, Mr. Chairman, Ranking Member Brown,
    distinguished Members of the Committee. I am honored to testify
    before you to discuss the sanctions implications of the Iran
    nuclear agreement. I am privileged to be testifying with my
    fellow panelists whose work I have admired for years.
        I take this responsibility seriously, given the gravity and
    implications of this agreement. I come to this issue with views
    born from relevant experience dealing with Iran from the
    Treasury Department and the National Security Council.
        I know that all involved, including my good friend and
    former colleague, Adam Szubin, who just testified, have been
    working incredibly hard toward a peaceful solution to the
    Iranian nuclear problem.
        Mr. Chairman, the financial and economic constriction
    campaign, which you know well and this Committee has been a
    part of, built methodically over the course of a decade thanks
    to the innovative work of patriots like Ambassador Burns,
    helped bring Iran to the table. In the words of President
    Rouhani, the sanctions threatened to drive Iran back into ``the
    Stone Age.''
        These efforts, it is important to remember, have also been
    designed to constrain and isolate rogue Iranian behavior--it
    supports terrorism, the Assad regime, proliferation, human
    rights abuses--as well as to protect the integrity of the U.S.
    and international financial systems.
        Unfortunately, the sanctions relief framework is flawed.
    The relief is too front-loaded. It does not account for the
    increased risks stemming from Iranian commercial and financial
    activity, and it ultimately constrains the U.S. Government's
    ability to use effective financial power against Iranian non-
    nuclear national security risks.
        There are structural problems in the agreement. The
    snapback is a blunt instrument. The Iranians maintain a
    heckler's veto on any reimposition of nuclear sanctions. The
    agreement unwinds sanctions too broadly. It may put the United
    States in the position of rehabilitating Iran's economy.
        Mr. Chairman, significantly, the agreement creates an
    international process that now subjects U.S. sanctions to
    review. Based on the appellate processes, any U.S. sanction or
    related action to which Iran objects would be subject to review
    by the other parties, including Iran, China, and Russia.
        We have potentially converted the Iranian sanctions program
    into one in which the target has an immediate right to
    challenge and an international venue in which to do it. This
    will be done with the support of parties that do not like or
    want to see the use of U.S. financial power and influence. It
    may even drive a wedge between the United States and Europe
    moving forward. And at a minimum, all this will temper our
    aggressive use of financial tools against Iran.
        Mr. Chairman, the spirit and letter of the agreement may
    neuter U.S. ability to leverage our financial power in the
    future. From the start of negotiations, what the Iranians
    wanted most was the ability to do business again, unfettered
    and plugged back into the global system. The regime has needed
    access to banking, shipping, insurance, new technologies, and
    connectivity to global markets. That is what they lost over the
    past decade. That appears to be what they have gained and
    guaranteed in this deal.
        The United States will need to amplify its use of financial
    measures aggressively against key elements of the Iranian
    economy to deal with increases risks. It is not at all clear
    that this is well understood by all parties or even part of our
    strategy. And we have the ability to do so, unilaterally if
    needed.
        The United States has been shaping and leading the efforts
    to isolate Iran and enforce sanctions since 2005. The sanctions
    regime has not been faltering. On the contrary, Iran's
    isolation by virtue of its own actions and market reaction has
    increased over time, and there has been increasing risk
    aversion to doing business with Iran because of the underlying
    conduct it engages in, as well as the deep role of the
    Revolutionary Guard, the mullahs, and the regime in controlling
    strategic elements of the economy.
        The responsible private sector actors will not rush in
    immediately, waiting to understand how the sanctions will
    unwind, whether Iran will adhere to the deal, and their own
    risk. And the risks from Iran are real and will increase, from
    terrorist financing and proliferation to corruption and illicit
    financing. These risks will help keep legitimate actors away
    from the economy for some time. The private sector as well, Mr.
    Chairman, will be watching and listening to you and to Congress
    which can affect the global environment and the reach of our
    financial power in the future.
        I think there are three critical principles for Congress to
    demand related to this deal and to sanctions. Congress should
    ensure that there is clarity in implementation of the deal and,
    in particular, the execution of any sanctions unwinding plans.
    It should ensure the United States maintains as much financial
    and economic power as possible. Congress should mitigate the
    risks attendant to an enriched and emboldened regime in Tehran.
    These principles then could help inform a new strategy to
    address the dangerous risks stemming from Iran.
        The United States could and should adopt an aggressive
    financial constriction campaign focusing on the Revolutionary
    Guard and the core elements of the regime that engage in
    terrorist financing, proliferation, human rights abuses. This
    could include the use of secondary sanctions. There should be a
    recommitment to the elements of a nonproliferation regime
    focused on Iran. We can reinforce our financial measures
    against Iranian banks, for example, using Section 311 of the
    PATRIOT Act. The Global Magnitsky Act could be used expansively
    to target the finances and holdings of the Iranian regime and
    those involved in gross human rights violations on its behalf.
        Mr. Chairman, these are just some of the measures that
    could be taken to confront the risks from Iran and shape a new
    sanctions framework.
        Mr. Chairman, just very quickly, when President Rouhani
    came back to the negotiating table, a Western diplomat based in
    Tehran shared with me that he thought we had won the war, using
    economic sanctions and financial pressure. But then he asked,
    ``Can you win the peace?'' I think and certainly hope we can
    still win the peace, but it will require using and leveraging
    the very same powers and authorities that helped bring the
    regime to the table. We must ensure that this agreement has not
    inadvertently empowered the regime in Tehran and taken one of
    America's most potent powers off the table.
        Thank you, Mr. Chairman.
        Chairman Shelby. Mr. Dubowitz.

       STATEMENT OF MARK DUBOWITZ, EXECUTIVE DIRECTOR, CENTER ON
       SANCTIONS AND ILLICIT FINANCE, FOUNDATION FOR DEFENSE OF
                              DEMOCRACIES

        Mr. Dubowitz. Chairman Shelby, Ranking Member Brown,
    Members of the Committee, on behalf of the FDD and its Center
    on Sanctions and Illicit Finance, thank you for inviting me to
    testify, particularly with these three great experts.
        The Iran nuclear deal is deeply flawed. I will address two
    of its most serious design defects: the Sunset Clause and the
    nuclear snapback.
        The Sunset Clause permits critical nuclear arms and
    ballistic missile restrictions to disappear over a 5- to 15-
    year period. Tehran has to simply abide by the agreement to
    emerge as a threshold nuclear power, with an industrial-size
    enrichment program, near-zero breakout time, an easier
    clandestine sneak-out pathway, ICBMs, access to heavy weaponry,
    and an economy increasingly immunized against future economic
    pressure. And we learned today it sounds like from Under
    Secretary Sherman the IAEA weapons inspectors will not get
    physical access to all military sites.
        Now, as Iran grows more powerful, America's ability to use
    peaceful economic leverage diminishes. This is a result of an
    additional fatal flaw in the agreement that provides Iran with
    what I have called a ``nuclear snapback.'' The agreement
    repeatedly notes that if sanctions are reimposed, in whole or
    in part, in response to Iranian nuclear noncompliance, Iran
    will view that as grounds to void the deal. It also contains an
    explicit requirement for the United States and European Union
    to do nothing to interfere with the normalization of trade and
    economic relations with Iran. I call this the ``nuclear
    snapback'' because Iran will use these provisions to threaten
    to walk away from the deal and engage in nuclear escalation.
        Iran will likely target the Europeans to intimidate them
    not to support the reimposition of any sanctions on any grounds
    or risk provoking nuclear escalation and potentially war. This
    is likely to provoke disagreements between Washington and its
    European allies on the credibility of the evidence, the
    seriousness of infractions, the appropriate level of response,
    and likely Iranian retaliation.
        It will also stymie the dispute resolution process governed
    by a joint commission in the agreement. The Administration
    assumes that even if Russia and China were to take Iran's side
    in a dispute, Washington could always count on the votes of
    Germany, France, and Britain, as well as the EU representative.
    This 5-3 vote majority assumes that one European vote will not
    change in the face of Iranian nuclear intimidation. While the
    United States can move unilaterally to impose U.N. Security
    Council sanctions over the objections of China and Russia, Mr.
    Chairman, would it do so without European support?
        Europe will also have a strong economic incentive not to
    join the United States in snapping back sanctions. As European
    companies invest billions in the Iranian market, pressure not
    to reimpose sanctions will grow.
        The same dynamics apply to the reimposition of non-nuclear
    sanctions, including terrorism. On July 20th, Iran released a
    statement to the U.N. Security Council that it ``may reconsider
    its commitments under the agreement if new sanctions are
    imposed, irrespective of whether such new sanctions are
    introduced on nuclear-related or other grounds.'' Iran may be
    able to use this nuclear snapback threat to prevent Washington
    from combating Iran's support for terrorism or human rights
    abuses.
        Now, in the face of Iranian threats, for example, would
    Europe agree to a U.S. plan to reimpose terrorism sanctions on
    the Central Bank of Iran if it was found to be financing
    terrorism? I am very doubtful given the deterrence power of the
    Iranian nuclear snapback. If the United States cannot use
    economic pressure to stop Iran, military force may become the
    only option. As a result, I fear that this agreement may make
    war with Iran more likely, not less likely. And when that war
    comes, Iran will be stronger, and the consequences will be much
    more severe.
        But there is an alternative, and it is not war, and it is
    not about killing the deal. It is about a better deal. Congress
    should require the Administration to amend the agreement's
    fatal flaws, especially the Sunset Clause. One key amendment.
    Restrictions on Iran's nuclear program, access to heavy
    weaponry and ballistic missiles should remain until the U.N.
    Security Council, where America retains its veto, determines
    that Iran's nuclear program is not a threat. One key amendment.
    The United States and Europe should also keep in place some key
    parts of the economic sanctions architecture so that we do not
    need to snap back anything. That leverage will still be in
    place.
        Now, there is ample precedent to amend this deal. Congress
    has rejected or required amendments to about 200 bilateral and
    multilateral international agreements, including significant
    cold war arms control agreements with the Soviets at a time
    when Moscow had thousands of nuclear-tipped missiles aimed at
    our cities. If Congress rejects this deal, China and Russia
    might return to some Iranian business, but they are likely to
    stay at the table to keep Iran from getting nuclear weapons.
        Europe, however, is Tehran's big economic prize. The key
    will be to use diplomatic persuasion and U.S. financial
    sanctions to keep the Europeans out of Iran. Few European banks
    are going to risk penalties or their ability to transact in
    dollars. European energy companies will find their financial
    pathways into Iran stymied. We will never again have the kind
    of powerful U.S. secondary sanctions leverage as we do today.
    We should use it to get key amendments to this deal. Those
    amendments will lower the risk of a future war against a much
    more powerful and dangerous Iran.
        Thank you, Mr. Chairman.
        Chairman Shelby. Dr. Levitt.

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

        Mr. Levitt. Chairman Shelby, Ranking Member Brown, and
    Members of the Committee, thank you for this opportunity to
    appear before you today to discuss the nuclear agreement with
    Iran and the challenges it poses to the future viability of the
    U.S. sanctions architecture.
        The Administration is telling people privately that it
    interprets the deal's sanctions provisions in a very aggressive
    way, but it is not making that clear to the public, to
    Congress, our allies, the business and finance communities in
    particular, or Iran.
        Unfortunately, if we do not articulate the position that
    doing business with Iran still comes with real business and
    reputational risks, others will not perceive there being much
    risk at all and will rush head first into the lucrative Iranian
    market.
        U.S. officials say the Administration's interpretation of
    the deal enables it to do several unilateral things that will
    hinder Iran's economic development, including denying Iran
    access to the U.S. financial system and the U.S. dollar,
    denying Iran access to the
    U-Turn transaction mechanism, through which Iran dollarized
    international oil transactions in the past, and aggressively
    enforcing CISADA's secondary sanctions on foreign entities
    doing business with entities that remain listed for terrorism
    or human rights issues.
        The problem is that these laudable positions have not been
    made public in any meaningful way, and they are only effective
    if they are aggressively publicized and then equally aggressive
    enforced. The fact is, as U.S. officials will concede in
    private conversations, that the Administration suffers from a
    trust deficit. Whether one believes that this is deserved or
    not, it is there. And the fact is that not only are none of the
    positions I just listed clear within the deal, the deal could
    easily be read as prohibiting each and every one of them.
    Failing to make these positions public not only undermines
    their utility, it makes people question whether the
    Administration's intention is to act on these positions moving
    forward. These are critical issues, which should not be open to
    interpretation under the Iran deal.
        Just a few weeks ago, the Financial Action Task Force
    issued its latest public statement identifying Iran as a
    jurisdiction with strategic deficiencies which poses risks to
    the international financial system. FATF found that Iran
    presents such ongoing and substantial money-laundering and
    terrorist financing risks that the international community must
    apply active, what they call ``counter measures'' to protect
    themselves and the larger international financial system from
    Iran's illicit financial conduct. But now, under the Iran deal,
    much of the world will be looking to expand business
    relationships with Iran. A respected European journal already
    contacted me asking me to write an article on what more Europe
    can do to proactively reintegrate Iran into the international
    financial system. And one could forgive the editors for
    thinking this should be our collective policy, since the JCPOA
    specifically talks about parties refraining from actions that
    could undermine normalization of trade and economic relations
    with Iran.
        For years now, U.S. officials have pointed to the conduct-
    based nature of Iran sanctions. Illicit conduct brought upon
    Iran sanctions aimed at countering said conduct. Today Iran's
    illicit conduct continues, and if the conduct-based
    consequences do not kick in, this could be the death knell of
    this toolkit. Designating a person here or there or a company
    here or there is not enough. What worked was making Iran as a
    jurisdiction an unattractive market due to the massive business
    and reputational risks inherent to doing business in or with
    Iran. But at the very time we most need to be able to highlight
    the fact that Iran is a tremendously risky jurisdiction, where
    the IRGC controls much of the economy, human rights abuses are
    on the rise, and support for militancy and terrorism continue
    unabated, we are denied under the Iran deal the ability to
    discourage business with Iran.
        The best we can do is to delineate Iran's ongoing illicit
    conduct, remind that there are still some U.S. secondary
    sanctions, and maybe some reputational risk. The former--
    secondary sanctions--depends on U.S. follow-through, while the
    latter--reputational risk--depends on how the rest of the
    international community perceived risk in the wake of an Iran
    deal that does not discourage, but actively encourages business
    with Iran. How effective will it be to highlight the role of
    the IRGC in Iran's economy once the IRGC has been removed from
    the EU sanctions list?
        Major international banks will be slow to move back into
    the Iranian markets, but major non-U.S. companies are likely to
    trip over one another in a rush to re-enter the potential
    market--which is already being described in Europe as an ``El
    Dorado'' and a potential ``bonanza.''
        Finally, under the Iran deal, we lose the current balance
    of U.S. unilateral and regional and global multilateral
    sanctions. Under the deal, U.N. and EU sanctions largely
    disappear, and what remains are only U.S. sanctions. To be
    sure, U.S. secondary sanctions on non-WMD proliferation illicit
    conduct remain in place and would impact the behavior of
    European and other foreign banks and businesses, but this puts
    the onus solely on the United States. The deal is not a
    bilateral U.S.-Iran deal but a multilateral one, in fact, and
    our partners should be expected to do their part holding Iran
    accountable for its illicit conduct.
        Thank you very much.
        Chairman Shelby. Ambassador Burns.

    STATEMENT OF NICHOLAS BURNS, GOODMAN PROFESSOR OF DIPLOMACY AND
            INTERNATIONAL RELATIONS, HARVARD KENNEDY SCHOOL

        Mr. Burns. Mr. Chairman, thank you, Ranking Member Brown,
    Senator Kirk, thank you for the opportunity to testify. Mr.
    Chairman, you have my testimony. I will just make four quick
    points.
        I served in the Bush administration as Under Secretary of
    State and had the pleasure to appear before your Committee
    before, had lead responsibility on Iran, and I come to you as a
    supporter of this agreement. I think it has many benefits for
    our country, and this is my first point. I will effectively
    arrest the forward movement in Iran's nuclear program that
    began with Mahmoud Ahmadinejad's election 10 years ago this
    summer. And it is good morning make sure that Iran does not
    have the potential to produce fissile material for their
    nuclear weapons program for the next 10 to 15 years. It is
    going to narrow that breakout time, as the last panel
    discussed, from 2 to 3 months now to about a year. There will
    be significantly strengthened inspections of Iran's nuclear
    supply chain for 25 years. And sanctions will not be lifted--
    and this is important; this could take months--until Iran
    complies with the letter of the agreement.
        The Administration is rightly going to maintain sanctions
    on Iran for terrorism and human rights violations, and a final
    advantage--and it has not been discussed this morning--is that
    we have an opportunity to stop Iran from becoming a nuclear
    weapons power through diplomacy and negotiation without having
    to resort to war. I certainly believe any American President
    should use force should they get close to a nuclear weapon.
    That is not the case now. And I think both President Obama and
    President Bush before him thought that diplomacy should be
    tried first. I congratulate the Administration on this
    accomplishment.
        Second point: But there are risks here. I have outlined
    some of the benefits, but there are substantial risks, and I am
    mindful of them. The most important is that the super structure
    of Iran's program, both uranium and plutonium, is going to
    remain in mothballs. It will be intact. It can be rebuilt and
    revived 10 to 15 years from now when the restrictions begin to
    lapse. I fully expect the Iranians two decades from now will
    want to reconstitute a civil nuclear program. The problem for
    us then will be that they could perhaps build a covert program
    on that facility or behind that facility, and that is going to
    be a problem for the United States at that time. We will have
    to reconstitute a sanctions regime. That will not be
    impossible, but I do not minimize the difficulty of doing that.
    I worked with Juan Zarate in trying to establish that regime 10
    years ago.
        And, finally, I would just like to say that the global
    embargo is on Iran conventional arms and Iran's ballistic
    missile programs that will end in 5 and 8 years, respectively.
    I wish they had not been agreed to, the end of the embargoes. I
    wish the Administration had held the line. I wish we would not
    be in a position 5 and 8 years from now of having to
    reconstitute sanctions programs, and I think that was a
    compromise that should not have been made.
        The third point, Mr. Chairman, if you weigh the benefits
    and the risks, I think that the benefits outweigh the risks,
    because we are going to freeze this program for 10 to 15 years.
    And without the agreement, and if we get into a scenario of no
    deal, where Congress disapproves and defeats the President, I
    think three things will happen: The global coalition that we
    have built for 10 years across two Administrations I think
    inevitably is going to weaken. The sanctions regime will not
    end immediately. Certainly, the United States would not end its
    sanctions. But it is going to atrophy. And, most importantly,
    the Iranians will not feel constrained to abide by the
    restrictions that Under Secretary Sherman and Secretary Kerry
    negotiated. They will be unfettered and unshackled. They will
    be able to move forward to become a nuclear threshold state
    again, and I think that would be a weakening of American
    strategic interest.
        I do think that sometimes we are too caught up in the
    conventional wisdom in this debate, and just two quick examples
    that I think are relevant, Mr. Chairman. I do not believe the
    congressional defeat of this nuclear deal with lead inevitably
    to war. I do not think that is right. I think Iran would be
    careful perhaps to become a threshold state but not to cross
    the line. But neither do I believe that implementing the deal
    leads inevitably to an Iranian nuclear weapon. A lot will
    depend on what we do--not so much perhaps President Obama, but
    the next President and the President after that. And I think
    that is what Congress should be thinking about. How do we
    strengthen American strategic policy in the Middle East to
    effectively deter the Iranians as we implement the nuclear
    deal?
        The President is giving a speech at this hour at the
    American University. I hope what he is saying there is that we
    are going to close the big gap right now between the United
    States and Israel and ensure Israel's qualitative military
    edge. I assume he is saying that, that we should continue with
    the effort to strengthen the Gulf countries militarily, as
    Secretary Kerry did, I think successfully, this week. But we
    should also say, the American President should say that he
    would use force against Iran should it get close to a nuclear
    weapon, should it violate this deal. There are things, I think,
    that both Democrats and Republicans here on Capitol Hill can
    agree to perhaps in an accompanying statement to the nuclear
    deal to strength on a bipartisan basis America's policy in the
    Middle East.
        So, Mr. Chairman, I support this agreement. I would hope
    that Congress would approve this agreement and strengthen the
    ability of our country to move ahead, both to pursue the
    nuclear deal but to contain Iranian power in the Middle East in
    the process.
        Thank you.
        Chairman Shelby. Thank you.
        I have a few questions of Mr. Zarate. Secondary sanctions
    or sanctions, as I understand it, place restrictions not
    directly on Iran but on those who would deal with Iranian
    entities. I will pose this question to you and to Mr. Dubowitz.
    Even if the Europeans and others were to completely lift
    restrictions on dealings with Iran, would U.S. secondary
    sanctions still keep major global companies from doing business
    in and with Iran?
        Mr. Zarate. U.S. secondary sanctions, which would apply to
    third-country nationals and companies, have enormous impact and
    reach and do affect what countries do and what these companies
    decide to invest in. So I think the general answer is yes. It
    depends on the environment. It depends on the nature of the
    secondary sanctions, whether or not they are deemed to be
    legitimate, whether or not they are conduct-based, which is how
    these efforts have really worked and pinched the Iranians. And
    it would depend on the sense of enforcement of those sanctions.
    If there is a sense that these are sanctions on the books only
    and are not going to be expanded, are not going to be enforced,
    then they will not work.
        Part of the effectiveness over the past 10 years has not
    only been that the sanctions regime has been put in place, but
    that they have been enforced. And they have been enforced and
    led by the United States and the United States alone.
        Chairman Shelby. They have to be meaningful, in other
    words.
        Mr. Zarate. Exactly right.
        Chairman Shelby. Mr. Dubowitz?
        Mr. Dubowitz. Chairman Shelby, I agree. I think if Congress
    overwhelmingly approved this deal, I do not think major
    financial institutions and energy companies are rushing back
    in, anyway. I think they have deep concerns over counterparty
    risk, over doing business with the Revolutionary Guards. And,
    most importantly, they have very deep concerns over political
    risks with respect to who the next President is, who the next
    Under Secretary of the Treasury is, and how vigorously will we
    enforce our--I think if Congress were to disapprove the deal,
    even more reason why they would not be rushing in. I think that
    actually would extend the amount of time it takes for them to
    actually reenter the Iranian market. So a result of the
    congressional disapproval I do not believe is going to lead to
    the collapse of the sanctions regime. If anything, as Mr.
    Zarate has said, the power of U.S. secondary sanctions,
    conduct-based sanctions, are going to make major financial
    institutions and energy companies very reticent about
    reentering the market, whether you approve or disapprove of
    this deal.
        Chairman Shelby. Dr. Levitt, risks to the financial system
    generally. The integrity of the U.S. financial system is a
    major concern of this Committee. The Financial Action Task
    Force found Iran to present great risk to the financial system
    due to its lack of money-laundering safeguards and the
    involvement of Iranian banks in supporting terrorism. Is there
    reason to believe that the problems that gave rise to this task
    force designation will go away anytime soon? And is it safe for
    non-U.S. persons and entities to do business with Iranian
    banks? Would you explain?
        Mr. Levitt. Thank you for the question, Chairman. It is a
    very simple answer to the FATF question. No, those risks are
    not going away. And let us be clear. FATF is talking
    specifically about terrorism and money laundering, illicit
    financial risks. It has nothing to do with proliferation. Take
    proliferation activities off the table. All of the FATF
    warnings remain in full force. This was just from the end of
    June. Their next report will be issued in October. And it is
    very important, and the Administration claims that it will, and
    it should be held to, going around explaining to people these
    risks exist.
        The problem is that how the world interprets risk is going
    to change when it is just the United States. In the first
    instance, secondary sanctions apply only if you want to have
    business here. If you are a small company that does not want
    to, if you combined an Iranian company that is doing this
    arm's-length business with the IRGC that Adam Szubin talked
    about, they might be able to do business. But foreigners,
    especially Europeans and others, when these entities come off
    the EU list and there now is a fissure, the kind of fissure
    Iran has been trying to create between the international
    community for some time now, well, the European Union does not
    seem to think that these are listable entities anymore. The
    United States does. There is some risk. It is less risk. How
    long? Will it be 2 years? Will it be 5 years? Will it be 8
    years? The full 20 years? No one can fully answer that question
    because it is changing the nature of risk. It is no longer a
    consensus.
        Chairman Shelby. Mr. Dubowitz, pathway to a bomb, that is
    what we all underline and are thinking here, I believe. In your
    testimony, you describe how the agreement is fundamentally
    flawed because even if Iran abides by the deal, which none of
    us believe it will, it can reopen and expand each pathway to a
    bomb that the agreement seeks to shut down. Could you describe
    briefly here today how this would work and what sanction tools
    a future U.S. President would have to stop Iran from achieving
    a pathway to a bomb?
        Mr. Dubowitz. Thank you, Chairman Shelby. So under the
    agreement, because of the Sunset Clauses, the restrictions on
    Iran's nuclear program, ballistic missile program, access to
    heavy weaponry are going to go away. They start going away year
    5 and then 8. At year 8 \1/2\ Iran can start to do advanced
    centrifuge R&D. At year 10 it can start installing an unlimited
    number of centrifuges in the Natanz facility. It can shorten
    the breakout time between 10 and 15 years. By the way, after 15
    years, Iran can enrich uranium to 60 percent, we heard from
    Under Secretary Sherman today. I mean, 60 percent is about as
    close to weapons grade as you can get. Iran will be able to
    legally do that under the
    agreement. They will legally be able to build multiple
    Natanzes, multiple Fordows, multiple heavy-water reactors. They
    will be able to accumulate an unlimited amount of enriched
    uranium all over the country. So what that implies is a
    patient, multi-pathway to a bomb, both a Natanz pathway, a
    Fordow pathway, and an Arak pathway.
        Now, the second part of your question is: What do you do
    about that? When Iran has an industrial-size nuclear program
    with near-zero breakout and an easier clandestine sneak-out and
    an ICBM program, my concern is in terms of sanctions there is
    nothing you can do about it. The sanctions tool is gone. And at
    that point you have to face a binary choice, which is you
    either accept that you now have a nuclear threshold Iran with
    unlimited enrichment capacity and multiple heavy-water reactors
    and an ICBM program and the capability to build a bomb very,
    very quickly, or you use military force to forestall that kind
    of breakout or sneak-out. We will not have a peaceful option
    left, and when that military force is used, Iran will be a much
    stronger country, much more powerful, and I think the
    consequences to American security will be much more grave.
        Chairman Shelby. I will pose this question for all of you.
    As I mentioned in my opening statement, sanctions are a crucial
    tool of U.S. policy. I am concerned that the U.S. Government is
    not taking maximum advantage of this tool. Is any part of the
    U.S. Government tasked with long-range strategic sanctions
    planning? And is anyone within the U.S. Government tasked with
    doing contingency planning for sanctions equivalent to what the
    Pentagon does with operational plans? And what improvements
    could we make in those kind of matters? We will start with you,
    Mr. Zarate.
        Mr. Zarate. Mr. Chairman, we established, when I was at the
    Treasury, the Office of Terrorism and Financial Intelligence,
    now led by Adam Szubin, and that is putatively the war command
    for financial power and tools. There is a question, though as
    to whether or not we are doing enough to think about the
    preservation of those tools, the use of them aggressively in
    other contexts, and, frankly, the use of these tools by other
    nation states like the Chinese and Russians to not only extend
    their reach but to also exploit our vulnerabilities.
        And so I would say that that responsibility lies largely
    with the Office of Terrorism and Financial Intelligence at the
    Treasury Department, in concert with the intelligence
    community, in concert with others, but that perhaps we need to
    be more aggressive and more forward-leaning in terms of the use
    of this power.
        And one of my concerns with this deal is it is not clear
    that we have considered fully the long-term implications for
    the use of our power in this regard.
        Chairman Shelby. Mr. Dubowitz?
        Mr. Dubowitz. Chairman Shelby, a simple answer. I would ask
    Under Secretary Szubin, who is an incredibly talented
    professional, to provide you the 10- to 15-year contingency
    plan for the use of economic sanctions against Iran when it has
    near-zero breakout, easier clandestine sneak-out, and unlimited
    enrichment capacity. That plan should be in place today because
    that fundamentally is something that I think everybody is
    concerned about, that because of the sunset provisions we are
    going to use our economic power over time, and we should have
    that plan in place today, and that plan should be disclosed to
    your Committee.
        Chairman Shelby. Dr. Levitt?
        Mr. Levitt. I will just echo what Juan said in particular.
    I used to be the Deputy Assistant Secretary for Intelligence at
    Treasury with NTFI. It is the only finance ministry in the
    world that had its own intelligence component. The ability to
    interact with the intelligence community is quite vigorous. We
    were both there when with NTFI we would have these types of
    strategic planning meetings at the time for the things we were
    dealing with then, and I believe and certainly hope that they
    are having these types of meetings now.
        What is unclear is just how far over the horizon the
    strategic conversations are going and whether or not we are
    taking into consideration the immediate impact of this deal on
    the long-term efficacy of our U.S. sanctions architecture.
        Sanctions are a tool to be used to reach goals. We should
    not be doing this to say we want to use sanctions forever. But
    we are always going to have goals that we want to reach for
    which sanctions could be a useful tool, and, therefore, it is
    critically important to maintain that tool as viable and
    effective.
        Chairman Shelby. I will ask all of you this simple
    question, and I think it goes--Ambassador Burns first, go
    ahead.
        Mr. Burns. Mr. Chairman, if you would not mind, I just
    wanted to answer your question if that is OK.
        Chairman Shelby. You go ahead. I should have.
        Mr. Burns. Thank you so much.
        I would say that the most important thing for us, the
    United States, is to have effective Treasury, State, and White
    House cooperation on what we are trying to do with sanctions
    and to persist over the long term, first.
        Second, we have got to marry what we do with our allies
    around the world, and I think that is the problem if Congress
    disapproves the deal and we walk away. We lose that potency of
    the sanctions.
        And, third, I say objectively--I cannot speak objectively
    about the Bush administration because I was part of it. But I
    think that both President Bush and President Obama have
    effectively pursued a sanctions regime against the Iranians,
    which is one of the reasons why we are here today. They, you
    know, submitted to negotiations, and the deal has been made.
        Thank you.
        Chairman Shelby. I will ask that question to you. I asked
    it earlier to each one of you. Do you believe that any
    agreement with Iran--can you trust Iran? Do you trust Iran not
    to cheat if they get a chance?
        Mr. Zarate. Mr. Chairman, I served in the White House as
    the Deputy National Security Adviser for Combating Terrorism,
    so I got to watch Iranian nefarious activity, lethal activity
    against our own troops and against civilians around the world.
    So do I trust Iran? Absolutely not. And this is precisely why
    any deal of any sort, whether it is this JCPOA or any other,
    has to have effective monitoring, effective enforcement, and we
    have to have tools that deal with all of the other risks, which
    will go up because of an enriched regime in Tehran.
        And so I do not think we have done that. I do not think the
    deal has that in mind, and certainly, I have not heard from the
    Administration a plan to deal with those increased risks, and
    that is a real challenge with the regime in Tehran.
        Chairman Shelby. Mr. Dubowitz?
        Mr. Dubowitz. Mr. Chairman, I do not trust Iran, and I was
    struck today--my jaw dropped--when Under Secretary Sherman
    effectively admitted that we will not have physical access to
    all military sites, because this deal is a bet on the IAEA.
    This deal is a bet on verification and inspection. This deal is
    a fundamental, existential bet that we will be able to go
    anywhere anytime into military sites. The Iranians have been
    saying for years now, ``We will not allow the United States or
    the IAEA into our military sites.'' And if we cannot get
    physical access, boots-on-the-ground access into all military
    sites, then I am deeply concerned about the efficacy of the
    verification and inspection regime. And, therefore, we all
    agree we do not trust Iran, but if we do not trust our own
    verification and inspection regime, I think we have a serious
    problem.
        Chairman Shelby. Dr. Levitt?
        Mr. Levitt. We can all trust Iran to engage in even more
    nefarious activity tomorrow than it did today. Beyond that, we
    cannot trust Iran for those of us who have worked on the issue
    in and out of Government. The verification regime, therefore,
    is critically important, and as Mark laid out, there are some
    holes big enough to drive a truck through.
        The question is not even so much is it fair that the people
    who have a vote do not get to read these IAEA agreements and
    others did. The question is: Why was that agreed to? It is
    absolutely true that we in the United States want those
    provisions to be kept a secret so that our information is not
    made public either. But why was that agreed to in the deal?
    That is what I do not understand. And the question is how
    strong these verification tools are going to be, not the 24/7
    verifications of declared sites but the ones where the real
    work is happening.
        Chairman Shelby. Ambassador Burns?
        Mr. Burns. Mr. Chairman, you will remember President Reagan
    said of the Soviets, ``Trust, but verify.'' I think we have to
    say of the Iranians, ``Do not trust, and we must verify.'' And
    I think everyone agrees on that.
        But I would say on military sites, if this agreement is
    implemented, and if, you know, 2 or 3 years down the road we
    suspect there are covert facilities, and if the Iranians deny--
    ultimately after this managed inspection process deny access,
    they will be in violation of the deal. And so in that
    eventuality--it may not be what Mr. Dubowitz was talking about
    directly--we will have a way forward to press the Iranians.
        Chairman Shelby. Thank you.
        Senator Brown.
        Senator Brown. Thank you, Mr. Chairman.
        Especially to Mr. Zarate and to Ambassador Burns, thank you
    for the work you did. I think that neither you two nor
    Secretary Clinton nor Secretary Kerry nor President Obama nor
    President Bush get the credit for weaving together these six
    countries, the P5+1, against all odds and holding them together
    in these sanctions, and I think the historical context and the
    very difficult diplomatic maneuvers and accomplishments that
    you made we should all thank you for, and that should be the
    historical context of all of that, so thank you.
        Ambassador Burns, you said a number of things that were
    interesting. You said you do not see a more effective,
    credible, or realistic alternative that would give the United
    States a greater probability at this point of preventing an
    Iranian nuclear weapon. You then said that if Congress rejects
    this agreement, you mentioned the global coalition would
    weaken, sanctions would atrophy, and shackles on Iran--I cannot
    remember if you said ``undone'' or ``loosen.''
        Talk to us, if you would, what would happen if we reject
    this, and especially in light of what our P5+1 allies would do,
    what their reaction would be; and what about other countries in
    Europe and Asia, notably Japan and India and Italy, what their
    reactions might be.
        Mr. Burns. Thank you, Senator. I do think that the
    framework for members--I mean, one of the questions that
    members have to ask, and we all do, too, is: Is there a
    credible alternative? I wish there were because I do think this
    is a combination of benefit and risk. It is not a perfect deal.
    But I do not see one right now, because if you work through the
    logic train, if Congress defeats the President, if the United
    States cannot implement the deal, if we cannot remove the
    sanctions and get the benefit of Iran complying, then I think a
    couple things happen.
        Number one, part of the value of the sanctions regime has
    been the countries that you mentioned, not just the EU but
    India finally, after a lot of work, complying; and Japan and
    South Korea and the other major trading partners. Some of the
    banks, obviously, are not going to go back and do business, but
    some of the corporations in those countries will. And so I
    think we will begin--the regime will begin to believe that
    political unity we have had--and it is very powerful when you
    have well over 170 countries sanctioning Iran politically. So
    that is the first thing that will go.
        Second, I think the Europeans will be in an extraordinarily
    difficult place. You know, all their prime ministers and
    parliaments support this deal. They all support the deal, the
    governments do. And so they will not want to hurt the United
    States if we cannot implement the deal, if we ask them not to
    move forward. But I think there will not be unity in the
    European Union.
        For instance, the European Union will have to reauthorize
    EU sanctions at some point. I can think of three or four
    European Union members who might not want to reauthorize--the
    weaker countries, the ones that are closer to Russia, for
    instance, and the Russians would love to embarrass the United
    States. So I think that is a problem.
        The biggest problem that I see in Congress defeating the
    President is that ultimately then this deal will not go into
    effect. Iran will be unfettered and unshackled. It will not
    have the restrictions that the deal promises the next 10 or 15
    years. It will not be a
    frozen country in terms of its nuclear capacity. It will be a
    nuclear threshold state again. So if I weigh the--it is hard to
    say exactly what would happen because we are talking about
    hypotheticals. I do not want to be too doctrinaire. I think
    this would be a messy situation. But I think ultimately two
    things would happen: the Iranians would be strengthened and we
    would be weakened in the long-range struggle that we are in
    with them. We are competing for power in the Middle East. We
    need to win over the next 20 to 25 years. And despite my
    misgivings about part of the deal--and I enumerated them--I
    think what we get is we stop them for the next 10 or 15 years,
    and for me that means a lot, and that is why I support the
    deal.
        Senator Brown. Thank you. I think people supporting this
    agreement and people on the other side and people that are
    undecided, like a number of us on this Committee, all believe
    that the President--that the military option should be
    available. You mentioned that in your testimony. When you said
    that we should provide a more concrete assurance that the
    United States would take military action, what did you mean by
    that? Should the President say that again? Should the
    Presidential candidates, people who want to be the next
    President, make that clear? Is it something we do now? Is it
    something we reiterate in the next 18 months? What do you mean
    by that?
        Mr. Burns. What I mean, Senator, is that the United States
    needs to have strategic intimidation of Iran, and it needs to
    be credible. It cannot be credible if they do not think we mean
    what we say. And this is going to have to be, I think, for
    President Obama and his successor and the successor's successor
    over the next 25 years.
        So I would hope that every Presidential candidate of both
    parties, but also most pertinently President Obama, would say
    unequivocally, unambiguously, if Iran bolts from the agreement,
    violates it in a fundamental way, and if we see Iran racing
    toward a nuclear weapon--we would have a little bit of time to
    react--that the United States President would use force to
    prevent that from happening. It would not resolve the entire
    problem. It would knock them back for a couple of years if we
    bombed Natanz, Fordow, and the Arak heavy-water reactor. But
    that would be substantial. It would mean that at some point we
    would probably have to have another negotiation down the line.
    But I cannot see the United States succeeding in containing
    Iran if we are not willing to use force and be credible about
    it. And I say this with the greatest respect, because I respect
    President Obama, of course--I think he needs to say that in the
    middle of this debate to reassure the Congress and reassure the
    American people and reassure people like me that that is a
    credible threat of force. And I have not seen the speech that
    he just gave, and perhaps he said it in that speech.
        Senator Brown. OK. Thank you.
        One last question, Mr. Chairman, for Mr. Levitt. You
    describe in your testimony that major secondary bank sanctions
    will be retained under the agreement. You note that is a good
    thing. If Congress does not reject the deal, are there ways
    that Treasury should be using these bank sanctions in a more
    robust way to mitigate the problems you have identified with
    the deal?
        Mr. Levitt. Thank you for the question. The secondary
    sanctions, as we have all said, are very, very powerful. The
    secondary sanctions would remain on the non-WMD proliferation
    activities. The kicker then is that they are not there for
    everything, and it has never been the case that a particular
    bank was only involved in proliferation or terrorism.
        So it is going to be difficult to get the intelligence
    sometimes to be able to show that an entity is engaged in
    activities relating just to terrorism, and then it is going to
    be a question of political will. As Mark said, if you have
    something like the Central bank of Iran, will there be the will
    to put forth sanctions on those types of major entities, or
    even smaller ones if we think that that might annoy the
    Iranians?
        It will deter the major financial institutions and some
    major corporations from doing business in Iran, at least for a
    period of time, the banks probably for a long period of time.
    That is for sure. But by virtue of it being limited to certain
    types of illicit activity, we are no longer talking about Iran
    as a risky jurisdiction when it is becoming an even more risky
    jurisdiction. And that toolkit, which was in some ways the most
    effective--not the formal sanctions of any kind, but the
    informal sanctions that brought to bear the reputational and
    business risks, those are going to begin to fade very, very
    quickly.
        Senator Brown. Thank you.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Kirk.
        Senator Kirk. Thank you, Mr. Chairman.
        Mr. Dubowitz, let me show you a list that I got, 290
    American citizens who we think have been killed through Iranian
    terror. This list covers 40 States, including 24 people from
    New York, 22 people from Florida, 14 people from Ohio, and 13
    from my home State of Illinois. If we deliver over $100 billion
    to Iran, what do you suspect will happen with regard to this
    death toll of Americans against Iranian terror?
        Senator Brown. Mr. Chairman, if I could interrupt, we have
    a habit in this Committee of doing this. Could you give us the
    source of this list?
        Senator Kirk. This is mainly the U.S. Marines that were
    killed in 1983.
        Senator Brown. U.S. Marines who were killed in 1983.
        Senator Kirk. This is the 241 Marines that were killed
    there.
        Senator Brown. At the Lebanese----
        Senator Kirk. This was in Lebanon.
        Senator Brown. OK. Thank you.
        Mr. Dubowitz. So, Senator Kirk, I mean, it is well known
    who the victims of Iranian terrorism are. There have been
    multiple lawsuits. There is over $20 billion in outstanding
    judgments.
        I would note, by the way, that a group representing U.S.
    victims of terrorism just filed an injunction in a U.S. court
    to block the Administration from giving $100 billion back to
    Iran. And so I think that the purpose of that injunction,
    Senator Kirk, is to actually prevent future victims of Iranian
    terrorism. I actually find it quite surprising that we have not
    required the Iranians to satisfy the judgments for past victims
    of Iranian terrorism, and yet we are willing to give them
    billions of dollars to fund what everybody agrees would be
    future acts of terrorism against Americans and others.
        Senator Kirk. Thank you.
        Mr. Dubowitz. I would also note one of thing, Senator,
    Kirk. I did some research into this, because we talk a lot
    about where this money is going to be spent in terms of Syria
    and Hezbollah and Hamas, and people have said that it is not a
    lot of money, it is low-cost and low-tech. But I looked into
    actually the Iranian budget for 2015. The IRGC and the Quds
    Force are going to get $6.4 billion in that budget. President
    Rouhani is anticipating the sanctions relief in his 2015
    budget. That represents 65 percent of the total defense budget
    of Iran. It represents actually almost 10 percent of the total
    public budget. So the Iranians will spend almost 10 percent of
    their total public budget supporting the Revolutionary Guards
    and the Quds Force, who are the entities primarily responsible
    for acts of terrorism. It gives you a sense of where the
    Iranian regime is actually highlighting its own priorities.
        Senator Kirk. If I could follow up, I have got a second----
        Chairman Shelby. Senator Kirk, he wants to answer.
        Senator Kirk. OK.
        Mr. Zarate. Senator, I just wanted to add to that, if I
    could for just a moment. It does strike me as odd that we have
    assumed as a country that the cost of the deal is simply that
    the money will flow back to Iran in an unfettered, uncontrolled
    way, and that we are doing nothing, at least in the immediate
    term, to deal with the very real risk that terrorist financing
    will flow in the international system through the Revolutionary
    Guard Corps, the MOIS, or the Quds Force. So it just strikes me
    as odd that we have accepted almost as a principle of shrugging
    our shoulders that this is a cost of the deal when I do not
    think it should be. And I also think it is remarkable that the
    Administration has described the walk-away plan here as if we
    will be the isolated party internationally, when, in fact, the
    Iranians continue to engage in a whole range of illicit
    conduct.
        When we entered into the negotiations with Iran completely
    isolated, with the onus on Iran to prove its bona fides, to
    prove the peaceful nature of its regime, and suddenly we are
    being told at the moment of fruition that if we do not accept a
    deal, we are going to be the isolated party internationally,
    that is a remarkable turn of the tables. And I just do not
    think the cost of the deal as described is acceptable, and we
    should be mitigating against that. And there are ways of doing
    that, and I just have not heard that from the Administration.
        Chairman Shelby. Ambassador Burns, do you have a comment?
        Mr. Burns. Senator Kirk, I just want to thank you for your
    first chart. In my written testimony, I also said that one of
    the issues we have to press the Iranians on now is the Marines
    that they killed in 1983; the American Embassy personnel who
    died in 1983; Malcolm Kerr, president of the American
    University of Beirut, gunned down in Beirut in 1984 at the
    instigation of Iran. It is one of the issues that we have to
    pursue. Some of these issues are in Federal court where
    American citizens have sued the Iranian Government, and they
    deserve justice.
        I would not advise making this conditional on the nuclear
    deal, but I would advise making it conditional on any
    resumption of relations with Iran in the future. And I think on
    balance we will be able to contain better this problem of Iran
    if they are non-nuclear than if they are a nuclear weapons
    power. It is another reason why I support the agreement.
        Chairman Shelby. Dr. Levitt, do you have another----
        Mr. Levitt. If I may, I would just point out to follow up
    on the last question and partially answer this one, breaking
    apart proliferation and terrorism sanctions does not exactly
    work, and the Administration has conceded this. Last year,
    David Cohen, then Under Secretary of the Treasury, now Deputy
    Director of the CIA, specifically touted the collateral
    counterterrorism benefit of counterproliferation sanctions
    targeting Iran's banking and oil sectors, and I quote, he said:

            In fact, the success of our unprecedented Iran sanctions
            regime, including sanctions on Iranian financial institutions
            and Iran's ability to sell its oil, has had the collateral
            benefit of squeezing Tehran's ability to fund terrorist groups
            such as Hezbollah.'' That will no longer be the case.

        Chairman Shelby. Senator Kirk?
        Senator Kirk. Mr. Chairman, I wanted to go through this
    chart here to show you the estimates of the Congressional
    Research Service on what Iran's notional terror budget is.
        According to CRS, their support for Hezbollah is about $100
    to $200 million per year, and support for Hamas is tens of
    millions of dollars per year. Support for the Assad regime in
    Syria is $16 to $15 million per year. Support for the rebels in
    Yemen, tens of millions of dollars per year.
        The key question, when you add it all, it is between $6 to
    $16 billion per year as a state sponsor of terror. The key
    question to follow up from all this information is: Should they
    get $100 billion in sanctions relief, what will become of the
    situation on the international terror front?
        Chairman Shelby. Go ahead.
        Mr. Zarate. They would be enriched. They would be
    emboldened. They would add to the budget that they have already
    allocated for these groups. These groups, hearing from them
    directly, Secretary General Nasrallah from Hezbollah has said
    he expects more support from the Iranians. So I think we should
    take the Iranians and their proxies at their word. They are
    going to profit from this deal, and we have got to do things to
    mitigate the risk of that if this deal moves forward. There is
    no question. And I think shrugging our shoulders, assuming that
    it is a cost of the deal, is not good enough.
        Mr. Dubowitz. Senator Kirk, what has not been discussed as
    well is that in 6 to 12 months the U.S. Treasury Department
    will be lifting sanctions on an entity called the ``Execution
    of Imam Khomeini's Order,'' or EIKO, otherwise known as Setad
    in its Iranian acronym. This is the holding company of the
    Supreme Leader of Iran. It is a $95 billion holding company
    that would be de-designated by OFAC in 6 to 12 months, allowing
    the Supreme Leader freely to move $95 billion through the
    formal financial system around the world.
        So this is not just the $100 billion in oil escrow funds.
    It is $95 billion in a HoldCo that the Supreme Leader actually
    has. That is $200 billion.
        Just one point of clarification here. Under Secretary
    Szubin was talking about these accounts, and it is now down to
    $56 billion. The Administration is trying to have an argument
    both ways. If that money is only going to be spent on the
    economy and not on terrorism, then that $56 billion also
    includes about $25 billion that the Chinese are going to spend
    on upstream energy investments. It is going to include another
    $20 billion that is being secured against nonperforming loans.
    That is money that will be spent on Iran's economy. So if it is
    Iran's economy, it is $100 billion. If, on the other hand, the
    argument is from the Administration that the Iranians will
    spend that money on terrorism, then the Administration is
    right, $100 billion is not available for terrorism, only $56
    billion is available for terrorism. But let us get our
    arguments straight: $100 billion is available for Iran's
    economy. That is what is in those escrow funds. And as I said,
    $95 billion is sitting in Khameini's holding company available
    to fund exactly what you are talking about. And the
    Revolutionary Guards are going to be getting $6.5 billion,
    representing almost 10 percent of their public budget, and they
    are the entity in control of Iran's overseas expansionism and
    its terrorist activities.
        Chairman Shelby. Dr. Levitt, do you have a comment?
        Mr. Levitt. You know, let us listen to what Hezbollah,
    Secretary General Hassan Nasrallah said about it. He is not
    only quite close to the regime, but his treasury recently
    exposed, has been holding weekly meetings with Bashar al-Assad
    to see about furthering their cooperation there.
        Nasrallah noted that even under sanctions, Iran funded its
    allies and anticipated that now ``a rich and powerful Iran,
    which will be open to the world,'' would be able to do even
    more. And his quote continued:

            I say that in the next phase Iran will be able to stand by its
            allies, friends, the people in the region, and especially the
            resistance in Palestine and the Palestinian people more than at
            any time in the past, and this is what the others are afraid
            of.

        Chairman Shelby. Ambassador Burns, do you have a comment?
        Mr. Burns. Senator, I assume that whether it is $100
    billion or 56--and I am not competent to answer that question--
    some of this is going to have to go to contracts, as was
    explained in the last panel; some will inevitably go to revive
    the Iranian economy given the population's frustration with
    sanctions; and some is going to go to the IRGC. And you are
    right about that.
        I do think that if there is congressional disapproval and
    we cannot fulfill the agreement and they become a threshold
    state, they are a more powerful force to exert mayhem in the
    Middle East than if we can freeze them and weaken them over the
    next 10 years.
        So just thinking strategically, I think we have to combat
    this force and set up a containment regime. But if they are
    weakened by the nuclear agreement, we will have greater
    success, I would think, in doing that.
        Chairman Shelby. Thank you, Senator Kirk.
        I thank all of you for appearing and your patience here
    today. A very important hearing, very important issue.
        The Committee is adjourned.
        [Whereupon, at 1:41 p.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                      PREPARED STATEMENT OF WENDY SHERMAN
                      Under Secretary, Department of State
                                 August 5, 2015
        Good morning, Chairman Shelby, Ranking Member Brown and Members of
    the Committee. Thank you for this opportunity to discuss the Joint
    Comprehensive Plan of Action that the United States and our
    international partners recently concluded with Iran. The testimony from
    my colleague from Treasury, Acting Under Secretary Szubin, discusses
    how our work in crafting an international consensus around tough
    sanctions brought about the conditions that made negotiations possible.
    As Adam notes, JCPOA sanctions relief is tied to specific steps that
    Iran must take to demonstrate the peaceful nature of its nuclear
    program and verification of these steps, and we will absolutely retain
    the ability to snap back both our own national sanctions and U.N.
    sanctions.
        The JCPOA is the end result of not 1 year or 2 years' effort, but a
    decade working to find the right approach to address the international
    community's concerns over Iran's nuclear program. The approach that
    finally succeeded in getting us to where we are today, with a clear
    plan for ensuring that Iran's nuclear program will be exclusively
    peaceful, combined the toughest sanctions ever put in place with the
    willingness to negotiate to find a diplomatic solution. Congress played
    a critical role in fashioning and supporting those sanctions that
    brought Iran to the negotiating table, and now Congress has an
    opportunity to further support this approach by backing its outcome,
    the JCPOA.
        I will focus in my testimony on the specific ways in which the deal
    that we reached meets the President's stated goal of ensuring that Iran
    will not acquire a nuclear weapon and that Iran's nuclear program will
    be exclusively peaceful. I will outline how the JCPOA cuts off all of
    Iran's pathways to enough fissile material for a nuclear weapon, and
    will discuss the comprehensive verification and transparency mechanisms
    built into the deal. Finally, I will review the timeline that we have
    achieved in the JCPOA, which puts significant restraints on Iran's
    nuclear program for 10, 15, 20, and 25 years, and other restraints that
    last forever.
    The JCPOA Cuts Off All of Iran's Pathways to Fissile Material for a
            Weapon
        On July 14, the United States along with our partners in the P5+1
    and the EU concluded a historic deal that, when fully implemented, will
    peacefully and verifiably prevent Iran from obtaining a nuclear weapon.
    This deal is the result of nearly 20 months of intensive negotiations
    since the P5+1 and Iran concluded the Joint Plan of Action in November
    2013.
        From the day that those talks began, we were crystal clear that we
    would not accept anything less than a good deal. A good deal would
    effectively close off all four pathways to enough fissile material for
    a nuclear weapon. That includes the two possible pathways via uranium
    enrichment at Natanz and Fordow, the plutonium pathway at the Arak
    heavy water reactor, and any possible covert pathway. This was our
    standard, and the JCPOA meets that standard.
        The uranium enrichment pathways are addressed by substantially
    reducing the number of centrifuges enriching uranium at Natanz, ending
    enrichment at the underground Fordow facility, and reducing Iran's
    stockpile of enriched uranium.
        Iran must remove two-thirds of its installed centrifuges for 10
    years, reduce its stockpile of enriched uranium by 98 percent to 300
    kilograms for 15 years, and cap uranium enrichment at 3.67 percent--far
    below the danger point--for 15 years. This combination will ensure a
    breakout time, the time required to produce enough fissile material for
    a weapon, to a year or more for at least 10 years.
        The plutonium pathway is closed off by redesigning and rebuilding
    the Arak heavy water reactor so that it will be smaller and no longer
    produce weapons-grade plutonium. This is not a temporary conversion
    that could be easily reversed should Iran ever make a decision to try
    to break out to pursue enough plutonium material for a weapon. The core
    of the reactor will be removed and rendered unusable and the facility
    will rebuilt to a different design. In addition, all the plutonium-
    bearing spent fuel will be shipped out of the country for the life for
    the reactor. And Iran has committed to light-water reactors in the
    future.
        The covert pathway is cut off in multiple ways, because Iran would
    need multiple facilities to covertly produce enough fissile material
    for a weapon. The normal IAEA safeguards will be substantially expanded
    to cover the entire uranium supply chain, from the mines and mills, to
    conversion and enrichment, to assure uranium cannot be diverted to a
    covert facility. A dedicated procurement channel will be established to
    oversee the acquisition of sensitive nuclear technologies needed for
    Iran's nuclear program, with the United States having the ability to
    approve or disapprove of any equipment. All centrifuge production will
    be continuously monitored, and the IAEA will be able to track
    centrifuges from the time they are produced to ensure they are not
    diverted to a covert enrichment facility. In no other country does the
    IAEA have continuous monitoring of uranium production and centrifuge
    production, and these provisions will be in place for 25 and 20 years,
    respectively.
        If we should suspect Iran is engaged in activities inconsistent
    with the JCPOA at any undeclared location in Iran, the IAEA can request
    access to that location and if we and our European colleagues agree
    that access is necessary, Iran must grant that access to the IAEA. The
    entire process cannot take more than 24 days. In no other country does
    the IAEA have assured access to undeclared locations. This provision
    gives us the assurance for the first time that Iran cannot delay access
    indefinitely to suspect locations.
    Verification and Transparency
        You have heard us say often that this deal is based on
    verification, not trust. Let me be clear here that we are not talking
    about the normal verification procedures that apply to all non-nuclear
    weapon state parties to the Non-Proliferation Treaty. We are talking
    about provisions that go far beyond that. As was just noted,
    international inspectors will have unprecedented continuous monitoring
    at Iran's declared nuclear facilities that will allow it to monitor the
    entire nuclear supply chain, from uranium production and centrifuge
    manufacturing to conversion and enrichment. The IAEA will also have
    access to undeclared locations if it has concerns about activities
    inconsistent with the JCPOA.
        The IAEA will be permitted to use advanced technologies such as
    online enrichment monitoring, and electronic seals which report their
    status to inspectors, technologies developed in the United States.
    The Timeline
        One of the President's stated goals in these negotiations, and a
    guiding principle for those of us at the negotiating table, was that
    any comprehensive solution must ensure a breakout time of at least 1
    year for 10 years, and then a gradual decrease of possible breakout
    time after that. This is what we have achieved with the JCPOA.
        For a minimum of 10 years, Iran will be subject to strict limits on
    its facilities, domestic enrichment capacity, and research and
    development. Other provisions extend for 15 years, 20 years, and 25
    years.
        And under the Nuclear Non-Proliferation Treaty, Iran is permanently
    prohibited from pursuing a nuclear weapon--and the verification
    provisions of the safeguards associated with the NPT will remain in
    place forever, enhanced by the Additional Protocol as a result of the
    JCPOA.
        The bottom line is that this deal does exactly what it was intended
    to do when we began formal negotiations 2 years ago. Remember that, 2
    years ago, when our negotiations began, we faced an Iran that was
    enriching uranium up to 20 percent at a facility built in secret and
    buried in a mountain, was rapidly stockpiling enriched uranium, had
    installed over 19,000 centrifuges, and was building a heavy water
    reactor that could produce weapons-grade plutonium at a rate of one to
    two bombs per year. Experts estimated Iran's so-called breakout time--
    the interval required for it to have enough fissile material for a
    bomb--at 2 to 3 months.
        This is the reality we would return to if this deal is rejected--
    except that the diplomatic support we have been steadily building in
    recent years would disappear because the rest of the world believes
    that we have achieved a deal that credibly resolves this problem.
        The plan agreed to in Vienna will shrink the number of centrifuges,
    expand the breakout timeline, and ensure that facilities can only be
    used for peaceful purposes, and put the whole program under a
    microscope.
        If Iran fails to meet its responsibilities, we can ensure that U.N.
    Security Council sanctions snap back into place, and no country can
    stop that from happening. If Iran tries to break out of the deal
    altogether, the world will have more time--a year compared to the 2
    months prior to the negotiation--to respond before Iran could possibly
    have enough fissile material for a bomb. At that point, all the
    potential options that we have today would remain on the table, and we
    would also have the moral authority and international support that
    comes from having exhausted all peaceful alternatives.
        As for Iran's other behavior, including its ongoing support for
    terrorism, its destabilizing activities in the region, its anti-Israel
    and anti-Semitic rhetoric and actions, and its dismal human rights
    record, the United States is under no illusions. These nuclear
    negotiations were never based on the expectation that a deal would
    transform the Iranian regime or cause Tehran to cease contributing to
    sectarian violence and terrorism in the Middle East. That is why we
    have made clear that we will
    continue to enhance our unprecedented levels of security cooperation
    with Israel. And as Secretary Kerry confirmed earlier this week in
    Qatar, we will work closely with the Gulf States to build their
    capacity to defend themselves and to push back against malign Iranian
    influence. We will continue to take actions to prevent terrorist
    groups--including Hamas and Hezbollah--from acquiring weapons. We will
    maintain and enforce our own sanctions related to human rights,
    terrorism, WMD, and ballistic missiles. And we will continue to insist
    on the release of the U.S. citizens unjustly detained in Iran--Saeed
    Abedini, Amir Hekmati and Jason Rezaian--and for information about the
    whereabouts of Robert Levinson so he too comes home.
        We all know that the Middle East today is undergoing severe stress
    due to violent extremism, challenged governance, and sectarian and
    political rivalries. But every one of those problems would be even
    worse if Iran were allowed to have a nuclear weapon. That's why the
    plan reached in Vienna is so important. We cannot accept a nuclear-
    armed Iran.
        Now, some have said that if we only doubled down on sanctions we
    could force Iran to agree to dismantle its nuclear program. But that is
    a fantasy, as my colleague Acting Under Secretary Szubin from the
    Treasury Department will attest. The whole purpose of sanctions was to
    get Iran to the bargaining table and to create incentives for precisely
    the kind of good deal we were able to achieve in Vienna. Over 90
    countries have issued public statements in support of the deal. That
    list includes all of the countries that participated in the negotiation
    as well as the six economies that steadily reduced their purchases of
    oil in furtherance of our sanctions. It includes the countries that
    stopped their imports of Iranian oil altogether, and the countries that
    could potentially be major trading partners of Iran but have sacrificed
    economically because we showed good faith in reaching a negotiated
    diplomatic solution. Each of these countries has stood with us and made
    tough choices to keep the international sanctions regime intact so that
    we could achieve a deal like the JCPOA. We need their support now as we
    move toward its implementation.
        It is important to remember that the United States has had
    unilateral sanctions on Iran for many years, and yet its nuclear
    program continued to advance. President Obama's strategy was to push
    for stronger multilateral sanctions while keeping the door open to
    negotiations. Those sanctions forced Iran to pay a high price, but
    sanctions alone were not enough to make Iran change course. That
    required a diplomatic initiative that included strong support from our
    international partners.
        If we walk away from what was agreed in Vienna, we will be walking
    away from every one of the restrictions we have negotiated, and giving
    Iran the green light to double the pace of its uranium enrichment,
    proceed full speed ahead with a heavy water reactor, install new and
    more efficient centrifuges, and do it all without the unprecedented
    inspection and transparency measures we've secured.
        If we walk away, our partners will not walk away with us. Instead,
    they'll walk away from the tough multilateral sanctions regime they
    helped us to put in place. We will be left to go it alone and whatever
    limited economic pressure we could apply would be unlikely to compel
    Tehran to negotiate or to make any deeper concessions. They would
    instead push the program ahead, potentially forcing military conflict.
    And we will have squandered the best chance we have to solve this
    problem through peaceful means.
        Make no mistake: we will never accept a nuclear-armed Iran. But the
    fact is that Iran has extensive experience with nuclear fuel cycle
    technology. We can't bomb that knowledge away. Nor can we sanction that
    knowledge away. Remember that sanctions did not stop Iran's nuclear
    program from growing steadily, to the point that it had accumulated
    enough low enriched uranium that, if further enriched, could be used to
    produce about 10 nuclear bombs.
        The United States will always retain the right to take whatever
    steps necessary to protect our security and prevent Iran from acquiring
    a nuclear weapon. But we also have not been afraid to pursue the
    diplomatic approach. We negotiated arms control agreements with the
    Soviet Union when that nation was committed to our destruction, and
    those agreements ultimately made us safer. Likewise, the truth is that
    the Vienna plan will provide a stronger, more comprehensive, and more
    lasting means of limiting Iran's nuclear program than any realistic
    alternative.
        Congress played a critical role in getting us to this point.
    Sanctions achieved their goal by bringing about serious, productive
    negotiations with Iran. Now Congress has a chance to approve a deal
    that will make our country and our allies safer; a deal that will keep
    Iran's nuclear program under intense scrutiny; a deal that will ensure
    that the international community remains united in demanding that
    Iran's nuclear activities must be wholly peaceful. It is a good deal
    for America--a good deal for the world--and it deserves your support.
    Thank you.
                                     ______

                      PREPARED STATEMENT OF ADAM J. SZUBIN
                Acting Under Secretary of Treasury for Terrorism
             and Financial Intelligence, Department of the Treasury
                                 August 5, 2015
        Chairman Shelby, Ranking Member Brown, and Members of the
    Committee: Thank you for inviting me to appear before you today to
    discuss the Joint Comprehensive Plan of Action (JCPOA) that the United
    States and our negotiating partners concluded with Iran on July 14. It
    is an honor to appear alongside Ambassador Sherman. A foreign policy
    matter of such importance deserves a careful analysis. I am confident
    that an open and honest debate based on the facts will make evident
    that this deal will strengthen America's security and that of our
    allies.
        Having spent more than a decade at the Treasury Department working
    to strengthen our diplomatic efforts by imposing sanctions pressure on
    Iran, I will focus on the global sanctions coalition built and led by
    the United States that gave us the leverage necessary to secure
    unprecedented nuclear concessions from Iran. I will then discuss the
    nature of the sanctions relief in this deal, and how the JCPOA is
    designed to keep pressure on Iran to fulfill its nuclear commitments.
    Last, I will explain the tough sanctions that will remain in place to
    combat a range of malign Iranian activity outside the nuclear sphere--
    including its support for terrorism and militant proxies in the Middle
    East, its missile program, and its human rights abuses.
    The Impact of Our Sanctions: Bringing Iran to the Table
        The powerful set of U.S. and international sanctions on Iran, and
    especially those imposed over the last 5 years, effectively isolated
    Iran from the world economy. The U.S. Government led this effort across
    two Administrations and with bipartisan backing in Congress. Together
    we obtained four tough U.N. Security Council resolutions, and built
    upon our longstanding primary embargo by enlisting the support of
    foreign partners from Europe to Asia to impose further pressure on
    Iran. This campaign yielded results. After years of intransigence, Iran
    came to the table prepared to negotiate seriously over its nuclear
    program.
        To see the impact of the sanctions campaign, consider the following
    metrics. Today, the Iranian economy is estimated to be only 80 percent
    the size that it would have been, had it continued on its pre-2012
    growth path. Consequently, it will take until at least 2022--even with
    sanctions relief--for Iran to get back to where it would have been
    absent our sanctions. Iran has foregone approximately $160 billion in
    oil revenue alone since 2012, after our sanctions reduced Iran's oil
    exports by 60 percent. This money is lost and cannot be recovered.
        Iran's designated banks, as well as its Central Bank, have been cut
    off from the world. The Iranian currency has declined by more than 50
    percent. We maintained strong economic pressure throughout the 2-year
    negotiating period. Indeed, during that time, our sanctions deprived
    Iran of an additional $70 billion in oil revenue, and Iran's total
    trade with the rest of the world remained virtually flat.
        To achieve this pressure, international consensus and cooperation
    were vital. Around the world, views on Iran's sponsorship of groups
    like Hizballah and its regional interventions differ. But the world's
    major powers have been united in preventing a nuclear-armed Iran.
    Iran's major trading partners and oil customers joined us in imposing
    pressure on Iran, and paid a significant economic price to do so, based
    on U.S. sanctions and a clear path forward. The point of these efforts
    was clear: to change Iran's nuclear behavior, while holding out the
    prospect of relief if Iran addressed the world's concerns about its
    nuclear program.
    The Nature and Scope of JCPOA Relief
        As Ambassador Sherman has described, the JCPOA addresses these
    nuclear concerns by closing off Iran's pathways to a nuclear weapon and
    providing access to ensure compliance, while preserving leverage if
    Iran breaches the deal. If Iran fully complies with the terms of the
    JCPOA, and if the IAEA verifies their compliance, phased sanctions
    relief will come into effect.
        To be clear: when the JCPOA goes into effect, there will be no
    immediate relief from United Nations, EU, or U.S. sanctions. There is
    no ``signing bonus.'' Only if Iran fulfills the necessary nuclear
    conditions--which will roll back its nuclear program and extend its
    breakout time fivefold to at least 1 year--will the United States lift
    sanctions. We expect that to take at least 6 to 9 months. Until Iran
    completes those steps, we are simply extending the limited relief that
    has been in place for the last year and a half under the Joint Plan of
    Action. There will not be a cent of new sanctions relief.
        Upon ``Implementation Day,'' when phased relief would begin, the
    United States will lift nuclear-related secondary sanctions targeting
    third-country parties conducting business with Iran, including in the
    oil, banking, and shipping sectors. These measures were imposed in
    response to the security threat from Iran's nuclear program;
    accordingly, they will be suspended in exchange for verifiable actions
    to alleviate that threat.
        As we phase in nuclear-related sanctions relief, we will maintain
    and enforce significant sanctions that fall outside the scope of this
    deal, including our primary U.S. trade embargo. Our embargo will
    continue to prohibit U.S. persons from investing in Iran, importing or
    exporting to Iran most goods and services, or otherwise dealing with
    most Iranian persons and companies. Iranian banks will not be able to
    clear U.S. dollars through New York, hold correspondent account
    relationships with U.S. financial institutions, or enter into financing
    arrangements with U.S. banks. Nor will Iran be able to import
    controlled U.S.-origin technology or goods, from anywhere in the world.
    In short, Iran will continue to be denied access to the world's
    principal financial and commercial market. The JCPOA provides for only
    minor exceptions to this broad prohibition.
    Countering Malign Iranian Conduct
        As we address the most acute threat posed by Iran, its nuclear
    program, we will be aggressively countering the array of Iran's other
    malign activities. The JCPOA in no way limits our ability to do so, and
    we have made our posture clear to both Iran and to our partners. This
    means that the United States will maintain and continue to vigorously
    enforce our powerful sanctions targeting Iran's backing for terrorist
    groups such as Hizballah. In the last 2 months alone, for example, we
    designated eleven Hizballah military officials and affiliated companies
    and businessmen. We will also continue our campaign against Hizballah's
    sponsors in Iran's Islamic Revolutionary Guard Corps-Quds Force; Iran's
    support to the Houthis in Yemen; its backing of Assad's regime in
    Syria; and its domestic human rights abuses. We will also maintain the
    U.S. sanctions against Iran's missile program and the IRGC writ large.
        Let there be no doubt about our willingness to continue enforcing
    these sanctions. During the JPOA period, when we were intensely
    negotiating with Iran, we took action against more than 100 Iranian-
    linked targets for their WMD, terrorism, human rights abuses, evasion
    and other illicit activities.
        Nor are we relieving sanctions on Iran's Revolutionary Guard Corps,
    its Quds Force, any of their subsidiaries or senior officials. The U.S.
    designation of Quds Force commander Qassem Suleimani will not be
    removed, nor will he be removed from EU lists related to terrorism and
    Syria sanctions.
        Sanctions will also remain in place on key Iranian defense
    entities, including Iran's Ministry of Defense and Armed Forces
    Logistics (MODAFL), Defense Industries Organization, Aerospace
    Industries Organization and other key missile entities, including
    Shahid Hemat Industrial Group (SHIG) and Shahid Bagheri Industrial
    Group (SBIG). We will also retain sanctions on Iranian firms such as
    the Tiva Sanat Group, which has worked to develop a weapons-capable
    fast boat to be used by the IRGC-Navy, and Iran Aircraft Manufacturing
    Industrial Company (HESA), which manufactures unmanned aerial vehicles
    used by the IRGC, as well as third country firms that have assisted
    Iran's missile and defense programs. Under the JCPOA, more than 225
    Iran-linked persons will remain designated and subject to our
    sanctions, including major Iranian companies and military and defense
    entities and firms.
        It is worth emphasizing that our sanctions authorities will
    continue to affect foreign financial institutions that transact with
    these more than 200 Iranian persons on our Specially Designated
    Nationals List, as well as persons who provide material or other types
    of support to Iranian SDNs. These measures provide additional
    deterrence internationally. For example, a foreign bank that conducts
    or facilitates a significant financial transaction with Iran's Mahan
    Air, the IRGC-controlled construction firm Khatam al Anbiya, or Bank
    Saderat will risk losing its access to the U.S. financial system, and
    this is not affected by the nuclear deal.
    Sanctions Snap Back
        Of course, we must guard against the possibility that Iran does not
    uphold its side of the bargain. That is why, should Iran violate its
    commitments once we have suspended sanctions, we will be able to
    promptly snap back both U.S. and U.N. sanctions, and our EU colleagues
    have reserved the ability to do so with respect to their sanctions as
    well.
        For U.S. sanctions, this can be achieved rapidly--in a matter of
    days--from smaller penalties up to and including the powerful oil and
    financial measures that were so effective against Iran's economy. New
    measures could also be imposed if Iran were to violate its commitments
    and renege on the deal.
        Multilateral sanctions at the U.N. also can be reimposed quickly,
    and the United States has the ability to reimpose those sanctions
    unilaterally, even over the objections of other P5 members.
        To those with concerns that Iran can accumulate minor violations
    over time, it is important to clarify that if there are small
    violations, we can address them through a variety of measures--snapback
    does not have to be all or nothing. This approach gives us maximum
    flexibility and maximum leverage.
        If sanctions snap back, there is no ``grandfather clause.'' While
    we have committed not to retroactively impose sanctions for legitimate
    activity undertaken during the period of relief, any transactions
    conducted after the snapback occurs are sanctionable. To be clear,
    there is no provision in the deal that protects contracts signed prior
    to snapback once snapback occurs, any prospective transaction is
    sanctionable.
    JCPOA Relief in Perspective
        Some have argued that sanctions relief is premature until Iran
    pursues less destructive policies at home and abroad, and that funds
    Iran recovers could be diverted for destructive purposes. But Iran's
    ties to terrorist groups are exactly why we must keep it from ever
    obtaining a nuclear weapon. The JCPOA will address this nuclear danger,
    freeing us and our allies to check Iran's regional activities more
    aggressively. By contrast, walking away from this deal would leave the
    world's leading state sponsor of terrorism with a short and decreasing
    nuclear breakout time. We are far better positioned to combat Iran's
    proxies with the nuclear threat off the table.
        We must also be measured and realistic in understanding what
    sanctions relief will really mean to Iran. Estimates of total Central
    Bank of Iran (CBI) foreign exchange assets worldwide are in the range
    of $100 to $125 billion. Our assessment is that Iran's usable liquid
    assets after sanctions relief will be much lower, at a little more than
    $50 billion. The other $50-70 billion of total CBI foreign exchange
    assets are either obligated in illiquid projects (such as over 50
    projects with China) that cannot be monetized quickly, if at all, or
    are composed of outstanding loans to Iranian entities that cannot repay
    them. These assets would not become accessible following sanctions
    relief.
        Because Iran's freely accessible assets constitute the country's
    reserves, not its annual budgetary allowance, Iran will need to retain
    a portion of these assets to defend its currency and stability. Of the
    portion that Iran spends, we assess that the vast majority will be used
    to tackle a mountain of debts and domestic needs that at over a half
    trillion dollars are more than 10 times as large as the funds it can
    freely use. Iran will also likely need a meaningful portion of its
    liquid foreign exchange reserve assets to finance pent-up import
    demand, unify official and unofficial exchange rates, and maintain an
    adequate foreign exchange buffer against future external shocks. For
    reference, $50 billion is roughly in line with the 5-10 months of
    imports foreign exchange buffer that comparable emerging markets
    countries and the IMF consider prudent. All the while, Iran's economy
    continues to suffer from immense challenges--due to factors including
    budget deficits, endemic corruption, dilapidated energy infrastructure,
    a poor business environment, and the reputational concerns of foreign
    companies. Let us also recall that President Rouhani, who rose to the
    presidency on a platform of economic revival, faces a political
    imperative to show meaningful economic gains to the Iranian population.
    The Supreme Leader's approval of the negotiations suggests his
    understanding of this need as well.
        We are mindful that at least some of the funds Iran receives from
    relief could find their way to malign purposes. This prospect is
    inherent in any realistic nuclear deal, no matter its duration or
    terms. But therefore it is incumbent on us to intensify our work,
    alongside Israel and our regional allies, to combat these malicious
    proxies.
    Alternative Approaches
        Sanctions were a means to an end, and relief was a necessary part
    of any deal. The deal we have achieved in the JCPOA is a strong one. It
    phases in relief in exchange for verified Iranian compliance with
    nuclear-related steps, and has a strong snap-back built in. It would be
    a mistake for the United States to back away based on the misconception
    that it would be feasible to escalate the economic pressure in order to
    obtain a broader Iranian capitulation.
        It is unrealistic to think that, with a broken international
    consensus and less leverage, we could somehow secure a ``much better''
    deal involving Iran's capitulation and the eradication of its peaceful
    nuclear infrastructure or the cessation of its support for longtime
    proxies such as Hizballah.
        Our partners agreed to impose costly sanctions on Iran for one
    reason--to negotiate an end to the threat of a nuclear weapon-capable
    Iran. If we change our terms now, and insist that these countries now
    escalate sanctions when we have jointly addressed this threat through
    the JCPOA, then our ability to impose additional pressure will be
    severely diminished.
        Iran's escrowed reserves are not in our hands, and much of the
    world is prepared to do business in Iran. If the United States were to
    walk away from this deal, and ask our partners to continue locking up
    Iran's reserves and maintaining sanctions, the consensus likely would
    fray, with unpredictable results. Rejecting the deal in pursuit of
    objectives over which there is far less international consensus and
    unity would allow the sanctions regime to unravel and our leverage to
    dissipate. And we would risk losing both a nuclear deal and the
    sanctions leverage.
    Conclusion
        Enforcing this deal, and securing the nuclear concessions Iran has
    made, will capitalize on our carefully built economic pressure
    strategy. The deal's terms accomplish our overarching goal. Blocking
    all of Iran's paths to a nuclear bomb makes us and our allies safer.
                                     ______

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                      PREPARED STATEMENT OF NICHOLAS BURNS
           Goodman Professor of Diplomacy and International Relations
                             Harvard Kennedy School
                                 August 5, 2015
        Mr. Chairman, Ranking Member Brown and Members of the Committee,
    thank you for this opportunity to testify on the international
    agreement to prevent Iran from becoming a nuclear weapons power and the
    implications for sanctions relief.
        This is one of the most urgent and important challenges for our
    country, for our European allies as well as for Israel and our Arab
    partners in the Middle East. The United States must thwart Iran's
    nuclear weapons ambitions and its determination to become the dominant
    military power in the region.
        This will be a long-term struggle requiring the focus and
    determination of the next two American Presidents after President Obama
    to ensure Iran complies with the agreement. We should thus marshal our
    diplomatic, economic and military strength to block Iran now and to
    contain its power in the region in the years ahead.
        With this in mind, I support the Iran nuclear agreement and urge
    the Congress to vote in favor of it in September.
        This is, understandably, a difficult decision for many Members of
    Congress. It is an agreement that includes clear benefits for our
    national security but risks, as well. It is also a painful agreement,
    involving tradeoffs and compromises with a bitter adversary of our
    country--the government of Iran.
        I believe, however, that if it is implemented effectively, the
    agreement will restrict and weaken Iran's nuclear program for more than
    a decade and help to deny it a nuclear weapons capacity over the long
    term. That crucial advantage has convinced me that the Obama
    administration is right to seek Congressional approval for this
    agreement.
        I have followed the Iran nuclear issue closely for the last decade.
    From 2005 until 2008, I had lead responsibility in the State Department
    on Iran policy. During the second term of the George W. Bush
    administration, we worked hard to blunt Iran's nuclear efforts. We
    created in 2005 the group that has since led the global effort against
    Iran--the United States, the United Kingdom, France, Russia, China and
    Germany (the P-5 plus One). This group offered to negotiate with Iran
    in 2006 and again in 2007. We were rebuffed on both occasions by the
    Iranian regime.
        When Iran accelerated its nuclear research program, we turned to
    sanctions. I helped to negotiate for the United States the first three
    United Nations Security Council Chapter VII sanctions resolutions to
    punish Iran for its actions. Led by the Treasury Department, we
    initiated U.S. financial sanctions and encouraged the European Union to
    do the same. We built a global coalition against Iran. While Iran
    became increasingly isolated, however, it chose to accelerate its
    nuclear research efforts in defiance of international law.
        When President Obama came into office in 2009, Iran had made
    considerable progress in advancing its uranium and plutonium programs.
    It made further progress in his first years in office and was on its
    way to become, in effect, a nuclear threshold state. In response,
    President Obama expanded the sanctions and coordinated an aggressive
    international campaign to punish and isolate the Iranian regime.
        Congress made a vital contribution by strengthening American
    sanctions even further. This increasingly global and comprehensive
    sanctions campaign weakened the Iranian economy and ultimately
    convinced the Iranian government to agree to negotiate during the past
    eighteen months.
        The Obama and Bush Administrations and the Congress acted over 10
    years to expand American leverage against Iran and to coerce it to
    accept negotiations. Despite these efforts, Iran was far along the
    nuclear continuum when negotiations began in earnest in 2013.
        It made sense for the United States to commit to negotiations with
    Iran in 2013. We retained then, as we do now, the capacity and right to
    use military force to prevent Iran from achieving a nuclear weapon
    should that be necessary. It is important to note that there were
    alternative negotiating frameworks available to the Obama
    administration in 2013 that might have served our interest in
    containing Iran's nuclear program more effectively. But, the issue
    before the Congress now is the specific agreement that has been
    negotiated by the Obama team. That is thus the focus of my own
    testimony today.
        In my judgment, the Joint Comprehensive Plan of Action (JCPOA)
    negotiated by Secretaries Kerry and Moniz is a solid and sensible
    agreement. It has many concrete advantages for the United States.
        First, the agreement will arrest Iran's rapid forward movement on
    its nuclear research programs over the past decade since the
    inauguration of former President Mahmoud Ahmadinejad. It will
    essentially freeze that program. The restrictions the United States
    negotiated will effectively prevent Iran from producing fissile
    material for a nuclear weapon (either through uranium enrichment or the
    plutonium process) at its nuclear facilities for at least 10 to 15
    years.
        The number of centrifuges at the Natanz plant will be reduced by
    two-thirds. Use of advanced centrifuges will not be permitted for a
    decade. Iran's store of enriched uranium will be restricted to levels
    below those needed for a nuclear device. In addition, there will be no
    enrichment at all at the Fordow plant for 15 years.
        The Administration also succeeded in blocking Iran's plutonium
    program. The core of the Arak Heavy Water Reactor will be dismantled.
    The reactor will be transformed to make it impossible to produce
    sufficient quantities of plutonium for a nuclear device. Spent fuel
    will be transported out of Iran. There will be no reprocessing of fuel
    for at least 15 years.
        The most important advantage for the United States is that Iran's
    current breakout time to a nuclear weapon will be lengthened from 2 to
    3 months now to roughly 1 year once the agreement is implemented. This
    is a substantial benefit for our security and those of our friends in
    the Middle East. It sets back the Iranian nuclear program by a
    significant margin and was a major concession by the Iranian government
    in this negotiation.
        Significantly strengthened inspections of Iran's nuclear supply
    chain for the next 25 years is a second advantage of the nuclear
    agreement. Iran has also agreed to be subjected to permanent and
    enhanced IAEA verification and monitoring under the Additional
    Protocol. This will give the IAEA much greater insights into Iran's
    nuclear program and will increase substantially the probability of the
    United States detecting any Iranian deviations from the agreement.
        Third, sanctions will not be lifted until Iran implements the
    agreement in every respect. This could take up to 3 to 6 months. The
    United States and other countries should demand full and unambiguous
    Iranian implementation to deconstruct and modify its nuclear program
    according to the letter of the agreement. And, after sanctions are
    lifted, we must be ready and willing to re-impose them should Iran seek
    to cut corners, cheat or test the integrity of the agreement in any
    way. In addition, the United States will continue to maintain sanctions
    on Iran for terrorism and human rights violations.
        A final advantage, Mr. Chairman, is that this agreement gives us a
    chance to prevent an Iranian nuclear weapon through diplomacy and
    negotiations, rather than through war. While the United States should
    be ready to use force against Iran if it approaches our red line of
    acquisition of a nuclear weapon, the more effective strategy at this
    point is to coerce them through negotiations. And, it will be more
    advantageous for the United States to contain a non-nuclear Iran in the
    Middle East for the next decade than to contend with a country on the
    threshold of a nuclear weapon. In this respect, I admire the
    commitment, energy and the achievements of Secretary Kerry, Secretary
    Moniz and their team.
        While the benefits of this agreement for the United States are
    substantial, there are also risks in moving ahead. The most
    significant, in my judgment, is that while Iran's program will be
    frozen for a decade, the superstructure of its nuclear apparatus will
    remain intact, much of it in mothballs. Iran could choose to rebuild a
    civil nuclear program after the restrictions begin to end 10 to 15
    years from now. This could give Tehran a base from which to attempt to
    build a covert nuclear weapons program at some point in the future.
        Here is where considerable challenges may arise for the United
    States and its allies. While we can be confident Iran's program will be
    effectively stymied for the first 10 to 15 years of the agreement, many
    of those restrictions will loosen and disappear altogether in the
    decade after. We will need to put in place a series of mitigating
    measures to deter Iran from diverting any part of its revived civil
    nuclear program to military activities.
        President Obama and his team will need to reassure Congress about
    the effectiveness and credibility of these initiatives to keep Iran
    away from a nuclear weapon after the first decade of this agreement.
    This should include a direct, public and unambiguous American
    commitment to use military force to deter Iran should it ever get close
    to construction of a nuclear weapon. In addition, the United States
    should assemble a coalition of strong partners willing to re-impose
    sanctions should Iran deviate from the agreement. The United States and
    its partners should also bolster the capacity of the IAEA and our own
    governments to be fully capable of detecting Iranian cheating. In sum,
    we will have to construct a long-term strategic deterrent to convince
    the Iranian government that it is not in its interest to pursue a
    nuclear weapons program a decade from now.
        Containing Iran will be a difficult challenge for American
    diplomacy. I differ with those critics, however, who believe that the
    expiration of the agreement will make Iranian acquisition of a nuclear
    weapon all but certain a decade or two from now. Much will depend on
    the Iranian leadership at that time. Will they want to risk another
    generation of international isolation and sanctions if they drive
    toward a nuclear weapon? Will they risk the possibility of an American
    or Israeli use of military force in response? A decision by Iran to
    turn back to a nuclear weapons ambition is a possibility, but by no
    means a certainty. The actions and resolve of the United States will
    have a major impact on Iran's calculations. It will be up to the
    President and Congress at that time to make clear to Iran that we will
    be ready to use any option available to us, including the use of
    military force, to prevent Iran from becoming a nuclear weapons power.
        The overall effectiveness of the agreement will thus require the
    Obama administration and its successors to maintain a very tough
    inspections regime and to be ready to re-impose sanctions if Iran seeks
    an illicit nuclear weapons program in the future.
        Congress is right to focus on these concerns and to require
    concrete assurances from the Administration that they can be overcome.
    Specifically, the Administration will need to focus hard on the
    possibility that Iran will cheat, as it has done so often in the past
    and attempt to construct covert facilities. Should this occur, the
    United States would need to ensure that the ``managed inspections'' set
    out in the agreement would work effectively. If Iran were to violate
    the agreement, American sanctions should be re-imposed. Gaining broader
    international agreement for sanctions would be a more effective way to
    intimidate the Iranian authorities. This would be a priority, but also
    a challenging hurdle, for American diplomacy.
        A final risk is the agreement that the prohibitions on Iran's
    conventional arms sales and purchases and ballistic missiles will end
    in 5 and 8 years, respectively, after the agreement is in force. I
    remain opposed to this compromise. In my view, it could embolden Iran
    and strengthen its conventional capacity in ways detrimental to our own
    interest. The next U.S. administration will need to construct a new
    coalition to attempt to restrict and sanction Iran in these two areas.
        On balance, however, I believe the nuclear deal will deliver more
    advantages than disadvantages to the United States. There are greater
    risks, in my judgment, in turning down the agreement and freeing Iran
    from the considerable set of restrictions it has now accepted for the
    next decade and beyond.
        Most importantly, I do not see a more effective, credible or
    realistic alternative that would give the United States a greater
    probability at this point of preventing an Iranian nuclear weapon. That
    is the key question Members of Congress should ask before you vote. Is
    there a more effective way forward than the one negotiated by the Obama
    administration?
        The most common criticism of the nuclear deal is that the United
    States should have walked away from the talks during the last year,
    sanctioned Iran further and attempted to negotiate a better and
    stronger agreement. Some experts have recommended that Congress vote to
    disapprove the President's policies or to pass a bill that would alter
    the deal in such a way that a fundamental renegotiation of the
    agreement would be necessary.
        If I thought it was realistic to renegotiate the agreement to make
    it stronger, I would support that option. But, I don't believe it would
    be possible to do so and, at the same time, to maintain the integrity
    of our coalition against Iran.
        While this ``No Deal'' scenario could play out in many, different
    ways, I think it is probable that it would leave the United States
    weaker, rather than stronger, in confronting Iran's nuclear program. If
    the United States left the negotiations unilaterally, I don't believe
    it is likely that Russia and China and even possibly the European
    allies and other key international economic powers would follow us out
    the door. These countries are all strong supporters of the nuclear deal
    before the Congress today. The global coalition and the sanctions
    regime we spent the last 10 years building would likely fray and weaken
    over time. We would lose the strong leverage that brought Iran to the
    negotiating table. While American sanctions were very important in
    convincing Iran to negotiate, it was the global nature of the sanctions
    with buy-in from nearly every major economy in the world, that also
    made a critical difference in cutting off Iran from the international
    banking and financial system during the past few years. All of these
    benefits would be at risk after a U.S. walkout.
        Most importantly, the strong restrictions that have effectively
    frozen Iran's nuclear program since January 2014 would all be lifted if
    the negotiations are ended. The negotiated agreement would cease to be
    in force. Iran would be free to resume its advanced uranium enrichment
    and plutonium programs. We would lose the IAEA's insights into Iran's
    program as the inspections regime would weaken. Iran would not be 1
    year away from a bomb under the Obama agreement but on the threshold of
    a nuclear weapons capability.
        While I don't agree that this ``No Deal'' scenario would lead
    inevitably to war, it would leave the United States worse off. On
    balance, this alternative is not preferable to the concrete
    restrictions on Iran's program ensured by the nuclear deal.
        If it seeks to disapprove the President's policy, Congress should
    offer a realistic and effective alternative. But, I am unaware of any
    credible alternative that would serve our interests more effectively at
    this point than the agreement proposed by the Obama administration and
    the other major countries of the world.
        Rather than vote to disapprove the President's policy, I hope
    members of both parties will work with the Administration to strengthen
    the ability of the United States to implement the agreement
    successfully and to contain simultaneously Iranian power in the Middle
    East.
        We should create, in effect, a two-track American policy toward
    Iran in the future. On the one hand, we should work to ensure Iran
    implements the nuclear deal. On the other hand, we will need to
    construct a renewed effort with Israel, Turkey and our friends in the
    Arab world to contain Iran's growing power in the region.
        Now that we are talking to Iran again after 35 years of minimal
    contact, there may be issues on which contact with Tehran will be in
    our interest. Protecting the Afghan government from Taliban assaults is
    one such possibility. Convincing Iran to withdraw its support for
    President Assad in Syria is another.
        But, I do not believe we will experience anything approaching a
    normal relationship with the Iranian government as some in our own
    country have suggested. This is not the time to restore full diplomatic
    relations with its government. There is too much that still separates
    us to justify such a decision. In fact, our larger interests in the
    Middle East require the creation of a coalition of countries to oppose
    Iran as it makes an assertive push for power into the heart of the
    Sunni world in Iraq, Syria, Lebanon and Yemen. The United States will
    have greater success, however, in confronting a non-nuclear Iran over
    the next decade rather than an Iran with nuclear weapons. This is
    another advantage of the nuclear deal.
        With this in mind, there is more the Obama administration can do to
    ensure effective implementation of the nuclear deal and to push back
    against a more assertive Iranian policy in the region. Here are some
    concrete suggestions toward that end.

        A first-order diplomatic priority should be for the United
            States to do everything in its power to maintain the ability to
            re-impose sanctions on Iran, if necessary. Russia and,
            especially, China will likely be weak and undependable partners
            in this regard. The United States should thus focus on securing
            commitments from the European allies that they will work with
            us to re-impose sanctions in the future, if necessary. The
            Administration should also convince Japan, South Korea, India
            and other major economies to be ready to curtail commercial
            links to Iran and return to sanctions should Iran violate the
            nuclear agreement.

        The United States should maintain a prohibition on trade
            with Iran for American business.

        In addition, we should maintain terrorism sanctions on
            General Qassem Suleimani, the Commander of the Iranian
            Revolutionary Guard Corps. His actions continue to be a threat
            to America's national security interests in the Middle East.

        The United States should also remind its allies and
            partners around the world that, if Iran violates the nuclear
            deal, foreign companies that decided to do business with Iran
            might subsequently lose their investment when sanctions are re-
            imposed.

        The United States should set a very high bar for Iran on
            implementation of the agreement. Specifically, the United
            States should call attention to even the most minor Iranian
            transgressions from the start of the implementation process. If
            we don't set an exacting standard, Iran may well diminish the
            integrity of the inspections regime by cutting corners and
            testing its limits. Establishing a tough-minded policy now is
            the right way to convince Iran there will be immediate
            penalties--a return to sanctions--should it not implement the
            deal fully and completely;

        The United States should reaffirm publicly that we have
            vital national interests in the Persian Gulf and that we will
            use military force, if necessary, to defend them. That was the
            essence of the Carter Doctrine of the late 1970s and has been
            the policy of Republican and Democratic Administrations since.
            President Obama should continue the campaign he has already
            begun to assemble a strong coalition of Gulf States to contain
            Iranian power in the region. This will require accelerated
            military assistance to our Arab partners and a strong, visible
            and continuous American military presence in the region.

        The United States should try to close ranks with Israel and
            to strengthen even further our long-standing military
            partnership. The United States-Israel 10-year military
            assistance agreement that I led in negotiating in 2007 expires
            in 2 years. The Obama administration could reaffirm our ongoing
            commitment to Israel's Qualitative Military Edge (QME) over any
            potential aggressor in the Middle East region. The
            Administration should accelerate military technology transfers
            to Israel to head off any potential challenge to Israel from
            Iran or, as is more likely, from its proxies, Hezbollah and
            Hamas.

        The United States and Israel should also make a renewed
            effort to diminish their public divisions. President Obama
            should take steps to work more effectively with Prime Minister
            Netanyahu. But, repairing such a wide public dispute requires
            both leaders to make it work. Prime Minister Netanyahu would be
            well advised to diminish his excessive public criticism of the
            U.S. Government. I found in my diplomatic career that allies
            work best when they work out their differences privately rather
            than publicly.

        President Obama should reaffirm publicly and in the most
            unmistakable terms, his readiness to deploy military force to
            strike Iran should it violate the agreement and seek to race
            toward a nuclear weapon. This would help to create a more
            durable American strategic deterrence to convince Iran that
            abiding by the nuclear agreement is in its best interest.

        Finally, the United States should also press Iran to meet
            the grievances of American families who lost their loved ones
            in Iranian-inspired attacks on American citizens in past
            decades. This includes, of course, the bombings of the U.S.
            Embassy in Beirut and the U.S. Marine Barracks in 1983. It also
            includes the assassination of Dr. Malcolm Kerr, President of
            the American University of Beirut, in January 1984. His family
            has brought suit against Iran in U.S. Federal Court as they
            believe Iran authorized his murder through its proxies in
            Lebanon. There are many other such civilian cases against Iran.
            Implementation of the nuclear deal should not be made
            conditional on resolution of these cases, in my judgment. But,
            we should not agree to resume full diplomatic relations until
            Iran has agreed to settle them. By raising them now, we would
            send Iran an unmistakable signal that we expect these cases to
            be adjudicated fairly and with justice for the American
            families in the future.

        At the same time, the Administration must continue to press
            as an urgent priority for the release of those Americans
            imprisoned or missing in Iran.

        These steps would help to strengthen our ability to implement the
    Iran nuclear agreement and to put Iran on notice that it has a long way
    to go before it can resume a normal relationship with the United
    States.
        Successful implementation of the nuclear deal will require strong,
    self confident and determined American leadership. We are the
    indispensable center of the P5+1 group that negotiated the agreement.
    We have to insist on full Iranian implementation of the agreement. We
    must assemble an Arab coalition to contain Iran in the region. And we
    have to remain Israel's strong and faithful partner in a violent,
    turbulent, revolutionary era in Middle East history.
        Mr. Chairman, I urge members of Congress to support this agreement.
    A vote of disapproval in the absence of a credible alternative, would,
    after 10 years of effort, be self-defeating for our country.
        If Congress votes to disapprove and manages to override the
    President's veto, it would very likely dismantle the agreement, lead to
    the gradual disintegration of the global sanctions regime and remove
    all current restrictions on Iran's nuclear efforts. Such a result would
    leave Iran closer to a nuclear weapon. That is not a sensible course
    for our country.
        I also fear a vote of disapproval would weaken the effectiveness
    and credibility of the United States in the Middle East and around the
    world.
        There is another path open to Congress. Work with the President to
    strengthen America's position in the Middle East. Move forward with the
    nuclear deal. Push back against Iranian power in the region. A Congress
    that sought greater unity with President Obama would help to strengthen
    our country for the struggles that are inevitably ahead with Iran in
    the years to come.

      RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM WENDY
                                SHERMAN

    Q.1. If Congress imposed economic sanctions on Iran, even those
    suspended under the JCPOA, for the continued detention of
    Americans, such as Pastor Saeed Abedini, would that be a
    violation of the agreement?

    A.1. Under the JCPOA, we have only committed to relieve
    nuclear-related sanctions. We have not made any commitments
    that prevent us from using sanctions to address other non-
    nuclear issues. What we have committed to do is quite specific:
    not to re-impose those nuclear-related sanctions specified in
    Annex II of the JCPOA and not to impose new nuclear-related
    sanctions, contingent on Iran abiding by its JCPOA commitments.
    We would also not be precluded from sanctioning specific
    Iranian actors or sectors, if the circumstances warranted. Our
    human rights sanctions authorities remain in place and are
    unaffected by the JCPOA. Moreover, we have made it clear to
    Iran that we would continue to use and enforce sanctions to
    address its destabilizing activities in the region.
        That said, the United States would not be acting in good
    faith if we simply re-imposed all of our nuclear-related
    sanctions the day after they were relieved using some other
    justification. In the end, if we decide to re-impose sanctions
    for any reason, it will be important that we have a credible
    rationale. That has always been the case and will remain the
    case in the future.

    Q.2. The Administration has continuously maintained that
    discussion of the situation involving Pastor Abedini and the
    other Americans to be a ``side issue'' for the JCPOA talks.
    Since the international conventional arms embargo was not a
    part of the sanctions regime relating to Iran's illicit nuclear
    enrichment activities, why was that ``side issue'' taken up in
    the talks and the final agreement?

    A.2. The U.N. arms embargo is, in fact, directly associated
    with Iran's nuclear program. The arms embargo and missile-
    related restrictions on Iran under U.N. Security Council
    Resolution (UNSCR) 1929 were specifically designed to pressure
    Iran to address the international community's concerns with its
    nuclear program. The other members of the Security Council
    agreed to them on that basis. UNSCR 1929 anticipated that these
    restrictions would be lifted when the international concerns
    regarding Iran's nuclear program had been addressed. This is
    why relief from those sanctions was part of the U.N. Security
    Council sanctions relief contemplated in the JCPOA. During
    negotiations, Iran pushed for a lifting of the arms embargo and
    missile restrictions on Implementation Day, which is the day
    that the IAEA certifies that Iran has taken all the key nuclear
    steps provided for in the JCPOA. Through hard bargaining, we
    were able to ensure that UNSCR 2231 endorsing the JCPOA extends
    arms- and missile-related restrictions for a significant period
    of time after the JCPOA takes effect.
        Independent of the nuclear talks or any other issue, we
    have repeatedly called for U.S. citizens Saeed Abedini, Jason
    Rezaian, and Amir Hekmati to be returned to their families, and
    for Iran to work with us to locate U.S. citizen Robert
    Levinson. We will continue to raise these cases with Iranian
    officials. While the nuclear talks created the first
    opportunity we had to discuss these cases bilaterally, we have
    been clear that we have never and would never link these cases
    to the nuclear talks, not because these cases would complicate
    the negotiations, but because the fate of our detained and
    missing citizens should not depend on unrelated negotiations
    that may or may not have reached a successful conclusion.
                                    ------

      RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER FROM WENDY
                                SHERMAN

    Q.1. Secretary Sherman, you have been involved in negotiating
    this deal, and can provide valuable insight into our partners'
    thinking and some of the discussions that took place, including
    about items that did not make it into the agreement. The JCPOA
    restricts uranium enrichment until year 15. After year 15, even
    though inspectors still have access to uranium production sites
    and centrifuge manufacturing, other than Iran's obligations
    under NPT--which they have violated repeatedly in the past--
    there is nothing that would constrain their enrichment.
        Have there been discussions among negotiating partners
    about what steps might be necessary to keep Iran's enrichment
    contained after 15 years? If so, what might we see? If not,
    what provides the Administration the confidence to assess that
    no further action would be required?

    A.1. Under the JCPOA, Iran has committed to never pursue a
    nuclear weapon. Under the agreement, Iran is constrained to
    using only its first generation IR-1 centrifuges to enrich
    uranium for the first 10 years. Iran will have the option after
    Year 10 to undertake a gradual development of its enrichment
    program, but it will be limited to enriching only up to 3.67
    percent and constrained to a minimal 300 kg stockpile for
    another 5 years. These limitations are important to ensure that
    Iran's breakout timeline does not drop dramatically after Year
    10. Importantly, the transparency measures under the JCPOA will
    ensure unparalleled insight into Iran's program. Certain
    transparency and monitoring measures will last for 15 years,
    others for 20-25 years, and some will last indefinitely, such
    as Iran's adherence to the Additional Protocol. After 15 years,
    should we suspect Iran is pursuing nuclear weapons, we would
    have the same options available to us then as we do today to
    prevent such an effort from coming to fruition.
        Similarly, although the JCPOA does not limit enrichment
    after 15 years, U.S. nonproliferation policy has been and will
    continue to be to limit the spread of enrichment capabilities,
    and we would apply this standard to Iran's enrichment program.
    Similarly, the Nuclear Suppliers Group has a policy of strictly
    limiting enrichment-related transfers. While we would not want
    to speculate about the specific policies we would pursue after
    15 years, we are cognizant of the importance of addressing any
    Iranian enrichment at that time that is not consistent with a
    peaceful nuclear program. Non-nuclear weapon states generally
    have no need for uranium enriched above 5 percent, and they
    should be able to rely on the international market for nuclear
    fuel and enrichment, and on other nuclear supply mechanisms
    such as the IAEA Fuel Bank recently established in Kazakhstan.
    Enrichment above that level by Iran would raise concerns given
    Iran's past activities and would require a clear civilian
    justification.

    Q.2. After Year 8 or when the IAEA reaches its Broader
    Conclusion that Iran's nuclear activity is exclusively for
    peaceful purposes, Iran's enrichment program is codified
    internationally. This would significantly increase the
    difficulty of making claims that Iran is enriching for the
    purposes of weaponization.
        If Iran is given IAEA's Broader Conclusion, based on your
    experience raising issues on Iran's activities in the
    international community, what type of proof would be needed to
    support a claim that they are in pursuit of a nuclear weapon?

    A.2. Based on the IAEA's past practice in other countries and
    the extent of Iran's nuclear program, we expect it will take a
    substantial number of years of applying the Additional Protocol
    and evaluating the full range of Iranian nuclear activities for
    the IAEA to reach the Broader Conclusion that all nuclear
    material in Iran is in peaceful activities. After this point,
    Iran's commitments not to seek, develop, or acquire nuclear
    weapons under the JCPOA, as well as under the NPT, will remain
    in place indefinitely, and are not affected by the IAEA's
    Broader Conclusion.
        After the Broader Conclusion is drawn, or after Year 8,
    Iran's Additional Protocol (AP) implementation will continue.
    It will give the IAEA the tools it needs to investigate
    indications of undeclared nuclear material and activities in
    Iran, including any activities of a potential military nature.
    For example, under the AP, the IAEA must only provide 24 hours'
    notice prior to seeking access to a location, whether declared
    or undeclared, and the IAEA can seek access in as little as 2
    hours or less in certain circumstances. Implementation of the
    AP will deter Iran from cheating by creating a high likelihood
    that such cheating would be caught early. Finally, the IAEA
    reviews the Broader Conclusion on an annual basis, such that it
    could be withdrawn if the IAEA is subsequently unable to verify
    that all nuclear material in Iran is in peaceful purposes. If
    any state is in possession of information regarding undeclared
    nuclear activities in Iran, that state can approach the IAEA at
    any point to share that information.
        Finally, under the IAEA Statute the Director General must
    report to the Board of Governors if IAEA inspectors find that
    Iran has not complied with its safeguards obligations. The
    Statute provides for the Board to report to the U.N. Security
    Council any noncompliance that it finds to have occurred and
    call on Iran to remedy such noncompliance forthwith.
        While we cannot specify all of the activities by Iran that
    would raise compliance concerns, we will continue to look for
    undeclared nuclear activities and other activities that would
    not be commensurate with a peaceful nuclear program, including
    enrichment not supported by the needs of Iran's nuclear power
    and research reactors.
                                    ------

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP FROM WENDY
                                SHERMAN

    Q.1. Please provide more information on how the United States
    could calibrate the re-imposition of sanctions on a sector or a
    category of transactions if Iran violates the terms of the
    JCPOA and the United States chooses not to seek the full re-
    imposition of sanctions. Is there flexibility to re-impose some
    sanctions but not others in the case of incremental violations
    by Iran?

    A.1. Yes. Under the JCPOA, we will retain a wide range of
    options to deal with significant nonperformance by Iran under
    the deal or more minor instances of noncompliance, and our
    ability to calibrate our response will deter Iran from
    violating the deal.
        The United States has the ability to re-impose both
    national and multilateral nuclear-related sanctions in the
    event of nonperformance by Iran. In the case of U.N. sanctions,
    under U.N. Security Council resolution 2231, we could do so
    even over the objections of any member of the Security Council,
    including China or Russia. Additionally, we have a range of
    other options for addressing minor noncompliance. These include
    snapping back certain domestic sanctions to respond to minor
    but persistent violations of the JCPOA, and using our leverage
    in the Joint Commission on procurement requests. If we were to
    snap back domestic sanctions, the United States would have
    maximum flexibility to determine which sanctions to re-impose,
    taking into account relevant considerations including the
    circumstances surrounding Iran's noncompliance.
        That said, this does not give us free rein to simply re-
    impose tomorrow our nuclear-related sanctions under some other
    pretext. Iran, as well as our international partners, would see
    this as an act of bad faith. In the end, if we decide to impose
    new sanctions, it will be important that we have a credible
    rationale for doing so. This has always been the case and will
    be no different in the future.

    Q.2. The agreement says that ``Iran has stated that if
    sanctions are reinstated in whole or in part, Iran will treat
    that as grounds to cease performing its commitments under this
    JCPOA in whole or in part.'' In other words, if the United
    States chooses to re-impose limited sanctions as part of a
    calibrated response to Iranian violations, Iran could choose to
    renege on some of its obligations or pull out of the deal. How
    does the Administration think about this dynamic and gauging
    the Iranian response to calibrated sanctions?

    A.2. We have been clear with Iran that the sanctions relief in
    the JCPOA is contingent on Iran's fulfillment of its nuclear-
    related commitments. Moreover, we would not violate the JCPOA
    if we imposed sanctions on Iran for terrorism, human rights,
    missiles, or any other non-nuclear reason. We have been clear
    about this fact with Iran and the other P5+1 countries.
        What we have committed to do in the JCPOA is quite
    specific: not to re-impose those nuclear-related sanctions
    provisions specified in Annex II to the JCPOA, contingent on
    Iran abiding by its JCPOA commitments. All of our other
    sanctions authorities remain in place and are unaffected by the
    JCPOA. We have made it clear to Iran that we would continue to
    use and enforce sanctions to address its other troubling
    activities, including its destabilizing activities in the
    region.
        With respect to the sanctions relieved pursuant to the
    JCPOA, we have made clear to Iran that should Iran violate its
    commitments under the JCPOA once we have suspended sanctions,
    we will be able to promptly snap back both U.S. and U.N.
    sanctions. Our EU colleagues have made clear their intention to
    do the same. In the event that there is an Iranian violation,
    we expect to have strong international support for sanctions,
    as evidenced by the broad international coalition that we have
    built in recent years in response to the Iranian nuclear
    threat. In the case of a violation on behalf of Iran, we are
    not precluded from sanctioning specific Iranian actors or
    sectors if circumstances are warranted.