[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
__________
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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
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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
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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.
______
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.