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










                                                        S. Hrg. 114-128


     THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT

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

                                HEARING

                               before the

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

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

                               __________

                             AUGUST 5, 2015

                               __________

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

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

           William D. Duhnke III, Staff Director and Counsel

                 Mark Powden, Democratic Staff Director

                    Dana Wade, Deputy Staff Director

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

                  Jay Dunn, Professional Staff Member

                Shelby Begany, Professional Staff Member

            Laura Swanson, Democratic Deputy Staff Director

               Colin McGinnis, Democratic Policy Director

                       Dawn Ratliff, Chief Clerk

                      Troy Cornell, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)






















                            C O N T E N T S

                              ----------                              

                       WEDNESDAY, AUGUST 5, 2015

                                                                   Page

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

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

                               WITNESSES

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

                                 (iii)
 
     THE IMPLICATIONS OF SANCTIONS RELIEF UNDER THE IRAN AGREEMENT

                              ----------                              


                       WEDNESDAY, AUGUST 5, 2015

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:04 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Richard Shelby, Chairman of the 
Committee, presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

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

               STATEMENT OF SENATOR SHERROD BROWN

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

  STATEMENT OF WENDY SHERMAN, UNDER SECRETARY, DEPARTMENT OF 
                             STATE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Chairman Shelby. Ambassador Burns, do you have a comment?
    Mr. Burns. Senator, I assume that whether it is $100 
billion or 56--and I am not competent to answer that question--
some of this is going to have to go to contracts, as was 
explained in the last panel; some will inevitably go to revive 
the Iranian economy given the population's frustration with 
sanctions; and some is going to go to the IRGC. And you are 
right about that.
    I do think that if there is congressional disapproval and 
we cannot fulfill the agreement and they become a threshold 
state, they are a more powerful force to exert mayhem in the 
Middle East than if we can freeze them and weaken them over the 
next 10 years.
    So just thinking strategically, I think we have to combat 
this force and set up a containment regime. But if they are 
weakened by the nuclear agreement, we will have greater 
success, I would think, in doing that.
    Chairman Shelby. Thank you, Senator Kirk.
    I thank all of you for appearing and your patience here 
today. A very important hearing, very important issue.
    The Committee is adjourned.
    [Whereupon, at 1:41 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
                  PREPARED STATEMENT OF WENDY SHERMAN
                  Under Secretary, Department of State
                             August 5, 2015
    Good morning, Chairman Shelby, Ranking Member Brown and Members of 
the Committee. Thank you for this opportunity to discuss the Joint 
Comprehensive Plan of Action that the United States and our 
international partners recently concluded with Iran. The testimony from 
my colleague from Treasury, Acting Under Secretary Szubin, discusses 
how our work in crafting an international consensus around tough 
sanctions brought about the conditions that made negotiations possible. 
As Adam notes, JCPOA sanctions relief is tied to specific steps that 
Iran must take to demonstrate the peaceful nature of its nuclear 
program and verification of these steps, and we will absolutely retain 
the ability to snap back both our own national sanctions and U.N. 
sanctions.
    The JCPOA is the end result of not 1 year or 2 years' effort, but a 
decade working to find the right approach to address the international 
community's concerns over Iran's nuclear program. The approach that 
finally succeeded in getting us to where we are today, with a clear 
plan for ensuring that Iran's nuclear program will be exclusively 
peaceful, combined the toughest sanctions ever put in place with the 
willingness to negotiate to find a diplomatic solution. Congress played 
a critical role in fashioning and supporting those sanctions that 
brought Iran to the negotiating table, and now Congress has an 
opportunity to further support this approach by backing its outcome, 
the JCPOA.
    I will focus in my testimony on the specific ways in which the deal 
that we reached meets the President's stated goal of ensuring that Iran 
will not acquire a nuclear weapon and that Iran's nuclear program will 
be exclusively peaceful. I will outline how the JCPOA cuts off all of 
Iran's pathways to enough fissile material for a nuclear weapon, and 
will discuss the comprehensive verification and transparency mechanisms 
built into the deal. Finally, I will review the timeline that we have 
achieved in the JCPOA, which puts significant restraints on Iran's 
nuclear program for 10, 15, 20, and 25 years, and other restraints that 
last forever.
The JCPOA Cuts Off All of Iran's Pathways to Fissile Material for a 
        Weapon
    On July 14, the United States along with our partners in the P5+1 
and the EU concluded a historic deal that, when fully implemented, will 
peacefully and verifiably prevent Iran from obtaining a nuclear weapon. 
This deal is the result of nearly 20 months of intensive negotiations 
since the P5+1 and Iran concluded the Joint Plan of Action in November 
2013.
    From the day that those talks began, we were crystal clear that we 
would not accept anything less than a good deal. A good deal would 
effectively close off all four pathways to enough fissile material for 
a nuclear weapon. That includes the two possible pathways via uranium 
enrichment at Natanz and Fordow, the plutonium pathway at the Arak 
heavy water reactor, and any possible covert pathway. This was our 
standard, and the JCPOA meets that standard.
    The uranium enrichment pathways are addressed by substantially 
reducing the number of centrifuges enriching uranium at Natanz, ending 
enrichment at the underground Fordow facility, and reducing Iran's 
stockpile of enriched uranium.
    Iran must remove two-thirds of its installed centrifuges for 10 
years, reduce its stockpile of enriched uranium by 98 percent to 300 
kilograms for 15 years, and cap uranium enrichment at 3.67 percent--far 
below the danger point--for 15 years. This combination will ensure a 
breakout time, the time required to produce enough fissile material for 
a weapon, to a year or more for at least 10 years.
    The plutonium pathway is closed off by redesigning and rebuilding 
the Arak heavy water reactor so that it will be smaller and no longer 
produce weapons-grade plutonium. This is not a temporary conversion 
that could be easily reversed should Iran ever make a decision to try 
to break out to pursue enough plutonium material for a weapon. The core 
of the reactor will be removed and rendered unusable and the facility 
will rebuilt to a different design. In addition, all the plutonium-
bearing spent fuel will be shipped out of the country for the life for 
the reactor. And Iran has committed to light-water reactors in the 
future.
    The covert pathway is cut off in multiple ways, because Iran would 
need multiple facilities to covertly produce enough fissile material 
for a weapon. The normal IAEA safeguards will be substantially expanded 
to cover the entire uranium supply chain, from the mines and mills, to 
conversion and enrichment, to assure uranium cannot be diverted to a 
covert facility. A dedicated procurement channel will be established to 
oversee the acquisition of sensitive nuclear technologies needed for 
Iran's nuclear program, with the United States having the ability to 
approve or disapprove of any equipment. All centrifuge production will 
be continuously monitored, and the IAEA will be able to track 
centrifuges from the time they are produced to ensure they are not 
diverted to a covert enrichment facility. In no other country does the 
IAEA have continuous monitoring of uranium production and centrifuge 
production, and these provisions will be in place for 25 and 20 years, 
respectively.
    If we should suspect Iran is engaged in activities inconsistent 
with the JCPOA at any undeclared location in Iran, the IAEA can request 
access to that location and if we and our European colleagues agree 
that access is necessary, Iran must grant that access to the IAEA. The 
entire process cannot take more than 24 days. In no other country does 
the IAEA have assured access to undeclared locations. This provision 
gives us the assurance for the first time that Iran cannot delay access 
indefinitely to suspect locations.
Verification and Transparency
    You have heard us say often that this deal is based on 
verification, not trust. Let me be clear here that we are not talking 
about the normal verification procedures that apply to all non-nuclear 
weapon state parties to the Non-Proliferation Treaty. We are talking 
about provisions that go far beyond that. As was just noted, 
international inspectors will have unprecedented continuous monitoring 
at Iran's declared nuclear facilities that will allow it to monitor the 
entire nuclear supply chain, from uranium production and centrifuge 
manufacturing to conversion and enrichment. The IAEA will also have 
access to undeclared locations if it has concerns about activities 
inconsistent with the JCPOA.
    The IAEA will be permitted to use advanced technologies such as 
online enrichment monitoring, and electronic seals which report their 
status to inspectors, technologies developed in the United States.
The Timeline
    One of the President's stated goals in these negotiations, and a 
guiding principle for those of us at the negotiating table, was that 
any comprehensive solution must ensure a breakout time of at least 1 
year for 10 years, and then a gradual decrease of possible breakout 
time after that. This is what we have achieved with the JCPOA.
    For a minimum of 10 years, Iran will be subject to strict limits on 
its facilities, domestic enrichment capacity, and research and 
development. Other provisions extend for 15 years, 20 years, and 25 
years.
    And under the Nuclear Non-Proliferation Treaty, Iran is permanently 
prohibited from pursuing a nuclear weapon--and the verification 
provisions of the safeguards associated with the NPT will remain in 
place forever, enhanced by the Additional Protocol as a result of the 
JCPOA.
    The bottom line is that this deal does exactly what it was intended 
to do when we began formal negotiations 2 years ago. Remember that, 2 
years ago, when our negotiations began, we faced an Iran that was 
enriching uranium up to 20 percent at a facility built in secret and 
buried in a mountain, was rapidly stockpiling enriched uranium, had 
installed over 19,000 centrifuges, and was building a heavy water 
reactor that could produce weapons-grade plutonium at a rate of one to 
two bombs per year. Experts estimated Iran's so-called breakout time--
the interval required for it to have enough fissile material for a 
bomb--at 2 to 3 months.
    This is the reality we would return to if this deal is rejected--
except that the diplomatic support we have been steadily building in 
recent years would disappear because the rest of the world believes 
that we have achieved a deal that credibly resolves this problem.
    The plan agreed to in Vienna will shrink the number of centrifuges, 
expand the breakout timeline, and ensure that facilities can only be 
used for peaceful purposes, and put the whole program under a 
microscope.
    If Iran fails to meet its responsibilities, we can ensure that U.N. 
Security Council sanctions snap back into place, and no country can 
stop that from happening. If Iran tries to break out of the deal 
altogether, the world will have more time--a year compared to the 2 
months prior to the negotiation--to respond before Iran could possibly 
have enough fissile material for a bomb. At that point, all the 
potential options that we have today would remain on the table, and we 
would also have the moral authority and international support that 
comes from having exhausted all peaceful alternatives.
    As for Iran's other behavior, including its ongoing support for 
terrorism, its destabilizing activities in the region, its anti-Israel 
and anti-Semitic rhetoric and actions, and its dismal human rights 
record, the United States is under no illusions. These nuclear 
negotiations were never based on the expectation that a deal would 
transform the Iranian regime or cause Tehran to cease contributing to 
sectarian violence and terrorism in the Middle East. That is why we 
have made clear that we will
continue to enhance our unprecedented levels of security cooperation 
with Israel. And as Secretary Kerry confirmed earlier this week in 
Qatar, we will work closely with the Gulf States to build their 
capacity to defend themselves and to push back against malign Iranian 
influence. We will continue to take actions to prevent terrorist 
groups--including Hamas and Hezbollah--from acquiring weapons. We will 
maintain and enforce our own sanctions related to human rights, 
terrorism, WMD, and ballistic missiles. And we will continue to insist 
on the release of the U.S. citizens unjustly detained in Iran--Saeed 
Abedini, Amir Hekmati and Jason Rezaian--and for information about the 
whereabouts of Robert Levinson so he too comes home.
    We all know that the Middle East today is undergoing severe stress 
due to violent extremism, challenged governance, and sectarian and 
political rivalries. But every one of those problems would be even 
worse if Iran were allowed to have a nuclear weapon. That's why the 
plan reached in Vienna is so important. We cannot accept a nuclear-
armed Iran.
    Now, some have said that if we only doubled down on sanctions we 
could force Iran to agree to dismantle its nuclear program. But that is 
a fantasy, as my colleague Acting Under Secretary Szubin from the 
Treasury Department will attest. The whole purpose of sanctions was to 
get Iran to the bargaining table and to create incentives for precisely 
the kind of good deal we were able to achieve in Vienna. Over 90 
countries have issued public statements in support of the deal. That 
list includes all of the countries that participated in the negotiation 
as well as the six economies that steadily reduced their purchases of 
oil in furtherance of our sanctions. It includes the countries that 
stopped their imports of Iranian oil altogether, and the countries that 
could potentially be major trading partners of Iran but have sacrificed 
economically because we showed good faith in reaching a negotiated 
diplomatic solution. Each of these countries has stood with us and made 
tough choices to keep the international sanctions regime intact so that 
we could achieve a deal like the JCPOA. We need their support now as we 
move toward its implementation.
    It is important to remember that the United States has had 
unilateral sanctions on Iran for many years, and yet its nuclear 
program continued to advance. President Obama's strategy was to push 
for stronger multilateral sanctions while keeping the door open to 
negotiations. Those sanctions forced Iran to pay a high price, but 
sanctions alone were not enough to make Iran change course. That 
required a diplomatic initiative that included strong support from our 
international partners.
    If we walk away from what was agreed in Vienna, we will be walking 
away from every one of the restrictions we have negotiated, and giving 
Iran the green light to double the pace of its uranium enrichment, 
proceed full speed ahead with a heavy water reactor, install new and 
more efficient centrifuges, and do it all without the unprecedented 
inspection and transparency measures we've secured.
    If we walk away, our partners will not walk away with us. Instead, 
they'll walk away from the tough multilateral sanctions regime they 
helped us to put in place. We will be left to go it alone and whatever 
limited economic pressure we could apply would be unlikely to compel 
Tehran to negotiate or to make any deeper concessions. They would 
instead push the program ahead, potentially forcing military conflict. 
And we will have squandered the best chance we have to solve this 
problem through peaceful means.
    Make no mistake: we will never accept a nuclear-armed Iran. But the 
fact is that Iran has extensive experience with nuclear fuel cycle 
technology. We can't bomb that knowledge away. Nor can we sanction that 
knowledge away. Remember that sanctions did not stop Iran's nuclear 
program from growing steadily, to the point that it had accumulated 
enough low enriched uranium that, if further enriched, could be used to 
produce about 10 nuclear bombs.
    The United States will always retain the right to take whatever 
steps necessary to protect our security and prevent Iran from acquiring 
a nuclear weapon. But we also have not been afraid to pursue the 
diplomatic approach. We negotiated arms control agreements with the 
Soviet Union when that nation was committed to our destruction, and 
those agreements ultimately made us safer. Likewise, the truth is that 
the Vienna plan will provide a stronger, more comprehensive, and more 
lasting means of limiting Iran's nuclear program than any realistic 
alternative.
    Congress played a critical role in getting us to this point. 
Sanctions achieved their goal by bringing about serious, productive 
negotiations with Iran. Now Congress has a chance to approve a deal 
that will make our country and our allies safer; a deal that will keep 
Iran's nuclear program under intense scrutiny; a deal that will ensure 
that the international community remains united in demanding that 
Iran's nuclear activities must be wholly peaceful. It is a good deal 
for America--a good deal for the world--and it deserves your support. 
Thank you.
                                 ______
                                 
                  PREPARED STATEMENT OF ADAM J. SZUBIN
            Acting Under Secretary of Treasury for Terrorism
         and Financial Intelligence, Department of the Treasury
                             August 5, 2015
    Chairman Shelby, Ranking Member Brown, and Members of the 
Committee: Thank you for inviting me to appear before you today to 
discuss the Joint Comprehensive Plan of Action (JCPOA) that the United 
States and our negotiating partners concluded with Iran on July 14. It 
is an honor to appear alongside Ambassador Sherman. A foreign policy 
matter of such importance deserves a careful analysis. I am confident 
that an open and honest debate based on the facts will make evident 
that this deal will strengthen America's security and that of our 
allies.
    Having spent more than a decade at the Treasury Department working 
to strengthen our diplomatic efforts by imposing sanctions pressure on 
Iran, I will focus on the global sanctions coalition built and led by 
the United States that gave us the leverage necessary to secure 
unprecedented nuclear concessions from Iran. I will then discuss the 
nature of the sanctions relief in this deal, and how the JCPOA is 
designed to keep pressure on Iran to fulfill its nuclear commitments. 
Last, I will explain the tough sanctions that will remain in place to 
combat a range of malign Iranian activity outside the nuclear sphere--
including its support for terrorism and militant proxies in the Middle 
East, its missile program, and its human rights abuses.
The Impact of Our Sanctions: Bringing Iran to the Table
    The powerful set of U.S. and international sanctions on Iran, and 
especially those imposed over the last 5 years, effectively isolated 
Iran from the world economy. The U.S. Government led this effort across 
two Administrations and with bipartisan backing in Congress. Together 
we obtained four tough U.N. Security Council resolutions, and built 
upon our longstanding primary embargo by enlisting the support of 
foreign partners from Europe to Asia to impose further pressure on 
Iran. This campaign yielded results. After years of intransigence, Iran 
came to the table prepared to negotiate seriously over its nuclear 
program.
    To see the impact of the sanctions campaign, consider the following 
metrics. Today, the Iranian economy is estimated to be only 80 percent 
the size that it would have been, had it continued on its pre-2012 
growth path. Consequently, it will take until at least 2022--even with 
sanctions relief--for Iran to get back to where it would have been 
absent our sanctions. Iran has foregone approximately $160 billion in 
oil revenue alone since 2012, after our sanctions reduced Iran's oil 
exports by 60 percent. This money is lost and cannot be recovered.
    Iran's designated banks, as well as its Central Bank, have been cut 
off from the world. The Iranian currency has declined by more than 50 
percent. We maintained strong economic pressure throughout the 2-year 
negotiating period. Indeed, during that time, our sanctions deprived 
Iran of an additional $70 billion in oil revenue, and Iran's total 
trade with the rest of the world remained virtually flat.
    To achieve this pressure, international consensus and cooperation 
were vital. Around the world, views on Iran's sponsorship of groups 
like Hizballah and its regional interventions differ. But the world's 
major powers have been united in preventing a nuclear-armed Iran. 
Iran's major trading partners and oil customers joined us in imposing 
pressure on Iran, and paid a significant economic price to do so, based 
on U.S. sanctions and a clear path forward. The point of these efforts 
was clear: to change Iran's nuclear behavior, while holding out the 
prospect of relief if Iran addressed the world's concerns about its 
nuclear program.
The Nature and Scope of JCPOA Relief
    As Ambassador Sherman has described, the JCPOA addresses these 
nuclear concerns by closing off Iran's pathways to a nuclear weapon and 
providing access to ensure compliance, while preserving leverage if 
Iran breaches the deal. If Iran fully complies with the terms of the 
JCPOA, and if the IAEA verifies their compliance, phased sanctions 
relief will come into effect.
    To be clear: when the JCPOA goes into effect, there will be no 
immediate relief from United Nations, EU, or U.S. sanctions. There is 
no ``signing bonus.'' Only if Iran fulfills the necessary nuclear 
conditions--which will roll back its nuclear program and extend its 
breakout time fivefold to at least 1 year--will the United States lift 
sanctions. We expect that to take at least 6 to 9 months. Until Iran 
completes those steps, we are simply extending the limited relief that 
has been in place for the last year and a half under the Joint Plan of 
Action. There will not be a cent of new sanctions relief.
    Upon ``Implementation Day,'' when phased relief would begin, the 
United States will lift nuclear-related secondary sanctions targeting 
third-country parties conducting business with Iran, including in the 
oil, banking, and shipping sectors. These measures were imposed in 
response to the security threat from Iran's nuclear program; 
accordingly, they will be suspended in exchange for verifiable actions 
to alleviate that threat.
    As we phase in nuclear-related sanctions relief, we will maintain 
and enforce significant sanctions that fall outside the scope of this 
deal, including our primary U.S. trade embargo. Our embargo will 
continue to prohibit U.S. persons from investing in Iran, importing or 
exporting to Iran most goods and services, or otherwise dealing with 
most Iranian persons and companies. Iranian banks will not be able to 
clear U.S. dollars through New York, hold correspondent account 
relationships with U.S. financial institutions, or enter into financing 
arrangements with U.S. banks. Nor will Iran be able to import 
controlled U.S.-origin technology or goods, from anywhere in the world. 
In short, Iran will continue to be denied access to the world's 
principal financial and commercial market. The JCPOA provides for only 
minor exceptions to this broad prohibition.
Countering Malign Iranian Conduct
    As we address the most acute threat posed by Iran, its nuclear 
program, we will be aggressively countering the array of Iran's other 
malign activities. The JCPOA in no way limits our ability to do so, and 
we have made our posture clear to both Iran and to our partners. This 
means that the United States will maintain and continue to vigorously 
enforce our powerful sanctions targeting Iran's backing for terrorist 
groups such as Hizballah. In the last 2 months alone, for example, we 
designated eleven Hizballah military officials and affiliated companies 
and businessmen. We will also continue our campaign against Hizballah's 
sponsors in Iran's Islamic Revolutionary Guard Corps-Quds Force; Iran's 
support to the Houthis in Yemen; its backing of Assad's regime in 
Syria; and its domestic human rights abuses. We will also maintain the 
U.S. sanctions against Iran's missile program and the IRGC writ large.
    Let there be no doubt about our willingness to continue enforcing 
these sanctions. During the JPOA period, when we were intensely 
negotiating with Iran, we took action against more than 100 Iranian-
linked targets for their WMD, terrorism, human rights abuses, evasion 
and other illicit activities.
    Nor are we relieving sanctions on Iran's Revolutionary Guard Corps, 
its Quds Force, any of their subsidiaries or senior officials. The U.S. 
designation of Quds Force commander Qassem Suleimani will not be 
removed, nor will he be removed from EU lists related to terrorism and 
Syria sanctions.
    Sanctions will also remain in place on key Iranian defense 
entities, including Iran's Ministry of Defense and Armed Forces 
Logistics (MODAFL), Defense Industries Organization, Aerospace 
Industries Organization and other key missile entities, including 
Shahid Hemat Industrial Group (SHIG) and Shahid Bagheri Industrial 
Group (SBIG). We will also retain sanctions on Iranian firms such as 
the Tiva Sanat Group, which has worked to develop a weapons-capable 
fast boat to be used by the IRGC-Navy, and Iran Aircraft Manufacturing 
Industrial Company (HESA), which manufactures unmanned aerial vehicles 
used by the IRGC, as well as third country firms that have assisted 
Iran's missile and defense programs. Under the JCPOA, more than 225 
Iran-linked persons will remain designated and subject to our 
sanctions, including major Iranian companies and military and defense 
entities and firms.
    It is worth emphasizing that our sanctions authorities will 
continue to affect foreign financial institutions that transact with 
these more than 200 Iranian persons on our Specially Designated 
Nationals List, as well as persons who provide material or other types 
of support to Iranian SDNs. These measures provide additional 
deterrence internationally. For example, a foreign bank that conducts 
or facilitates a significant financial transaction with Iran's Mahan 
Air, the IRGC-controlled construction firm Khatam al Anbiya, or Bank 
Saderat will risk losing its access to the U.S. financial system, and 
this is not affected by the nuclear deal.
Sanctions Snap Back
    Of course, we must guard against the possibility that Iran does not 
uphold its side of the bargain. That is why, should Iran violate its 
commitments once we have suspended sanctions, we will be able to 
promptly snap back both U.S. and U.N. sanctions, and our EU colleagues 
have reserved the ability to do so with respect to their sanctions as 
well.
    For U.S. sanctions, this can be achieved rapidly--in a matter of 
days--from smaller penalties up to and including the powerful oil and 
financial measures that were so effective against Iran's economy. New 
measures could also be imposed if Iran were to violate its commitments 
and renege on the deal.
    Multilateral sanctions at the U.N. also can be reimposed quickly, 
and the United States has the ability to reimpose those sanctions 
unilaterally, even over the objections of other P5 members.
    To those with concerns that Iran can accumulate minor violations 
over time, it is important to clarify that if there are small 
violations, we can address them through a variety of measures--snapback 
does not have to be all or nothing. This approach gives us maximum 
flexibility and maximum leverage.
    If sanctions snap back, there is no ``grandfather clause.'' While 
we have committed not to retroactively impose sanctions for legitimate 
activity undertaken during the period of relief, any transactions 
conducted after the snapback occurs are sanctionable. To be clear, 
there is no provision in the deal that protects contracts signed prior 
to snapback once snapback occurs, any prospective transaction is 
sanctionable.
JCPOA Relief in Perspective
    Some have argued that sanctions relief is premature until Iran 
pursues less destructive policies at home and abroad, and that funds 
Iran recovers could be diverted for destructive purposes. But Iran's 
ties to terrorist groups are exactly why we must keep it from ever 
obtaining a nuclear weapon. The JCPOA will address this nuclear danger, 
freeing us and our allies to check Iran's regional activities more 
aggressively. By contrast, walking away from this deal would leave the 
world's leading state sponsor of terrorism with a short and decreasing 
nuclear breakout time. We are far better positioned to combat Iran's 
proxies with the nuclear threat off the table.
    We must also be measured and realistic in understanding what 
sanctions relief will really mean to Iran. Estimates of total Central 
Bank of Iran (CBI) foreign exchange assets worldwide are in the range 
of $100 to $125 billion. Our assessment is that Iran's usable liquid 
assets after sanctions relief will be much lower, at a little more than 
$50 billion. The other $50-70 billion of total CBI foreign exchange 
assets are either obligated in illiquid projects (such as over 50 
projects with China) that cannot be monetized quickly, if at all, or 
are composed of outstanding loans to Iranian entities that cannot repay 
them. These assets would not become accessible following sanctions 
relief.
    Because Iran's freely accessible assets constitute the country's 
reserves, not its annual budgetary allowance, Iran will need to retain 
a portion of these assets to defend its currency and stability. Of the 
portion that Iran spends, we assess that the vast majority will be used 
to tackle a mountain of debts and domestic needs that at over a half 
trillion dollars are more than 10 times as large as the funds it can 
freely use. Iran will also likely need a meaningful portion of its 
liquid foreign exchange reserve assets to finance pent-up import 
demand, unify official and unofficial exchange rates, and maintain an 
adequate foreign exchange buffer against future external shocks. For 
reference, $50 billion is roughly in line with the 5-10 months of 
imports foreign exchange buffer that comparable emerging markets 
countries and the IMF consider prudent. All the while, Iran's economy 
continues to suffer from immense challenges--due to factors including 
budget deficits, endemic corruption, dilapidated energy infrastructure, 
a poor business environment, and the reputational concerns of foreign 
companies. Let us also recall that President Rouhani, who rose to the 
presidency on a platform of economic revival, faces a political 
imperative to show meaningful economic gains to the Iranian population. 
The Supreme Leader's approval of the negotiations suggests his 
understanding of this need as well.
    We are mindful that at least some of the funds Iran receives from 
relief could find their way to malign purposes. This prospect is 
inherent in any realistic nuclear deal, no matter its duration or 
terms. But therefore it is incumbent on us to intensify our work, 
alongside Israel and our regional allies, to combat these malicious 
proxies.
Alternative Approaches
    Sanctions were a means to an end, and relief was a necessary part 
of any deal. The deal we have achieved in the JCPOA is a strong one. It 
phases in relief in exchange for verified Iranian compliance with 
nuclear-related steps, and has a strong snap-back built in. It would be 
a mistake for the United States to back away based on the misconception 
that it would be feasible to escalate the economic pressure in order to 
obtain a broader Iranian capitulation.
    It is unrealistic to think that, with a broken international 
consensus and less leverage, we could somehow secure a ``much better'' 
deal involving Iran's capitulation and the eradication of its peaceful 
nuclear infrastructure or the cessation of its support for longtime 
proxies such as Hizballah.
    Our partners agreed to impose costly sanctions on Iran for one 
reason--to negotiate an end to the threat of a nuclear weapon-capable 
Iran. If we change our terms now, and insist that these countries now 
escalate sanctions when we have jointly addressed this threat through 
the JCPOA, then our ability to impose additional pressure will be 
severely diminished.
    Iran's escrowed reserves are not in our hands, and much of the 
world is prepared to do business in Iran. If the United States were to 
walk away from this deal, and ask our partners to continue locking up 
Iran's reserves and maintaining sanctions, the consensus likely would 
fray, with unpredictable results. Rejecting the deal in pursuit of 
objectives over which there is far less international consensus and 
unity would allow the sanctions regime to unravel and our leverage to 
dissipate. And we would risk losing both a nuclear deal and the 
sanctions leverage.
Conclusion
    Enforcing this deal, and securing the nuclear concessions Iran has 
made, will capitalize on our carefully built economic pressure 
strategy. The deal's terms accomplish our overarching goal. Blocking 
all of Iran's paths to a nuclear bomb makes us and our allies safer.
                                 ______
                                 
                                 
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                  PREPARED STATEMENT OF NICHOLAS BURNS
       Goodman Professor of Diplomacy and International Relations
                         Harvard Kennedy School
                             August 5, 2015
    Mr. Chairman, Ranking Member Brown and Members of the Committee, 
thank you for this opportunity to testify on the international 
agreement to prevent Iran from becoming a nuclear weapons power and the 
implications for sanctions relief.
    This is one of the most urgent and important challenges for our 
country, for our European allies as well as for Israel and our Arab 
partners in the Middle East. The United States must thwart Iran's 
nuclear weapons ambitions and its determination to become the dominant 
military power in the region.
    This will be a long-term struggle requiring the focus and 
determination of the next two American Presidents after President Obama 
to ensure Iran complies with the agreement. We should thus marshal our 
diplomatic, economic and military strength to block Iran now and to 
contain its power in the region in the years ahead.
    With this in mind, I support the Iran nuclear agreement and urge 
the Congress to vote in favor of it in September.
    This is, understandably, a difficult decision for many Members of 
Congress. It is an agreement that includes clear benefits for our 
national security but risks, as well. It is also a painful agreement, 
involving tradeoffs and compromises with a bitter adversary of our 
country--the government of Iran.
    I believe, however, that if it is implemented effectively, the 
agreement will restrict and weaken Iran's nuclear program for more than 
a decade and help to deny it a nuclear weapons capacity over the long 
term. That crucial advantage has convinced me that the Obama 
administration is right to seek Congressional approval for this 
agreement.
    I have followed the Iran nuclear issue closely for the last decade. 
From 2005 until 2008, I had lead responsibility in the State Department 
on Iran policy. During the second term of the George W. Bush 
administration, we worked hard to blunt Iran's nuclear efforts. We 
created in 2005 the group that has since led the global effort against 
Iran--the United States, the United Kingdom, France, Russia, China and 
Germany (the P-5 plus One). This group offered to negotiate with Iran 
in 2006 and again in 2007. We were rebuffed on both occasions by the 
Iranian regime.
    When Iran accelerated its nuclear research program, we turned to 
sanctions. I helped to negotiate for the United States the first three 
United Nations Security Council Chapter VII sanctions resolutions to 
punish Iran for its actions. Led by the Treasury Department, we 
initiated U.S. financial sanctions and encouraged the European Union to 
do the same. We built a global coalition against Iran. While Iran 
became increasingly isolated, however, it chose to accelerate its 
nuclear research efforts in defiance of international law.
    When President Obama came into office in 2009, Iran had made 
considerable progress in advancing its uranium and plutonium programs. 
It made further progress in his first years in office and was on its 
way to become, in effect, a nuclear threshold state. In response, 
President Obama expanded the sanctions and coordinated an aggressive 
international campaign to punish and isolate the Iranian regime.
    Congress made a vital contribution by strengthening American 
sanctions even further. This increasingly global and comprehensive 
sanctions campaign weakened the Iranian economy and ultimately 
convinced the Iranian government to agree to negotiate during the past 
eighteen months.
    The Obama and Bush Administrations and the Congress acted over 10 
years to expand American leverage against Iran and to coerce it to 
accept negotiations. Despite these efforts, Iran was far along the 
nuclear continuum when negotiations began in earnest in 2013.
    It made sense for the United States to commit to negotiations with 
Iran in 2013. We retained then, as we do now, the capacity and right to 
use military force to prevent Iran from achieving a nuclear weapon 
should that be necessary. It is important to note that there were 
alternative negotiating frameworks available to the Obama 
administration in 2013 that might have served our interest in 
containing Iran's nuclear program more effectively. But, the issue 
before the Congress now is the specific agreement that has been 
negotiated by the Obama team. That is thus the focus of my own 
testimony today.
    In my judgment, the Joint Comprehensive Plan of Action (JCPOA) 
negotiated by Secretaries Kerry and Moniz is a solid and sensible 
agreement. It has many concrete advantages for the United States.
    First, the agreement will arrest Iran's rapid forward movement on 
its nuclear research programs over the past decade since the 
inauguration of former President Mahmoud Ahmadinejad. It will 
essentially freeze that program. The restrictions the United States 
negotiated will effectively prevent Iran from producing fissile 
material for a nuclear weapon (either through uranium enrichment or the 
plutonium process) at its nuclear facilities for at least 10 to 15 
years.
    The number of centrifuges at the Natanz plant will be reduced by 
two-thirds. Use of advanced centrifuges will not be permitted for a 
decade. Iran's store of enriched uranium will be restricted to levels 
below those needed for a nuclear device. In addition, there will be no 
enrichment at all at the Fordow plant for 15 years.
    The Administration also succeeded in blocking Iran's plutonium 
program. The core of the Arak Heavy Water Reactor will be dismantled. 
The reactor will be transformed to make it impossible to produce 
sufficient quantities of plutonium for a nuclear device. Spent fuel 
will be transported out of Iran. There will be no reprocessing of fuel 
for at least 15 years.
    The most important advantage for the United States is that Iran's 
current breakout time to a nuclear weapon will be lengthened from 2 to 
3 months now to roughly 1 year once the agreement is implemented. This 
is a substantial benefit for our security and those of our friends in 
the Middle East. It sets back the Iranian nuclear program by a 
significant margin and was a major concession by the Iranian government 
in this negotiation.
    Significantly strengthened inspections of Iran's nuclear supply 
chain for the next 25 years is a second advantage of the nuclear 
agreement. Iran has also agreed to be subjected to permanent and 
enhanced IAEA verification and monitoring under the Additional 
Protocol. This will give the IAEA much greater insights into Iran's 
nuclear program and will increase substantially the probability of the 
United States detecting any Iranian deviations from the agreement.
    Third, sanctions will not be lifted until Iran implements the 
agreement in every respect. This could take up to 3 to 6 months. The 
United States and other countries should demand full and unambiguous 
Iranian implementation to deconstruct and modify its nuclear program 
according to the letter of the agreement. And, after sanctions are 
lifted, we must be ready and willing to re-impose them should Iran seek 
to cut corners, cheat or test the integrity of the agreement in any 
way. In addition, the United States will continue to maintain sanctions 
on Iran for terrorism and human rights violations.
    A final advantage, Mr. Chairman, is that this agreement gives us a 
chance to prevent an Iranian nuclear weapon through diplomacy and 
negotiations, rather than through war. While the United States should 
be ready to use force against Iran if it approaches our red line of 
acquisition of a nuclear weapon, the more effective strategy at this 
point is to coerce them through negotiations. And, it will be more 
advantageous for the United States to contain a non-nuclear Iran in the 
Middle East for the next decade than to contend with a country on the 
threshold of a nuclear weapon. In this respect, I admire the 
commitment, energy and the achievements of Secretary Kerry, Secretary 
Moniz and their team.
    While the benefits of this agreement for the United States are 
substantial, there are also risks in moving ahead. The most 
significant, in my judgment, is that while Iran's program will be 
frozen for a decade, the superstructure of its nuclear apparatus will 
remain intact, much of it in mothballs. Iran could choose to rebuild a 
civil nuclear program after the restrictions begin to end 10 to 15 
years from now. This could give Tehran a base from which to attempt to 
build a covert nuclear weapons program at some point in the future.
    Here is where considerable challenges may arise for the United 
States and its allies. While we can be confident Iran's program will be 
effectively stymied for the first 10 to 15 years of the agreement, many 
of those restrictions will loosen and disappear altogether in the 
decade after. We will need to put in place a series of mitigating 
measures to deter Iran from diverting any part of its revived civil 
nuclear program to military activities.
    President Obama and his team will need to reassure Congress about 
the effectiveness and credibility of these initiatives to keep Iran 
away from a nuclear weapon after the first decade of this agreement. 
This should include a direct, public and unambiguous American 
commitment to use military force to deter Iran should it ever get close 
to construction of a nuclear weapon. In addition, the United States 
should assemble a coalition of strong partners willing to re-impose 
sanctions should Iran deviate from the agreement. The United States and 
its partners should also bolster the capacity of the IAEA and our own 
governments to be fully capable of detecting Iranian cheating. In sum, 
we will have to construct a long-term strategic deterrent to convince 
the Iranian government that it is not in its interest to pursue a 
nuclear weapons program a decade from now.
    Containing Iran will be a difficult challenge for American 
diplomacy. I differ with those critics, however, who believe that the 
expiration of the agreement will make Iranian acquisition of a nuclear 
weapon all but certain a decade or two from now. Much will depend on 
the Iranian leadership at that time. Will they want to risk another 
generation of international isolation and sanctions if they drive 
toward a nuclear weapon? Will they risk the possibility of an American 
or Israeli use of military force in response? A decision by Iran to 
turn back to a nuclear weapons ambition is a possibility, but by no 
means a certainty. The actions and resolve of the United States will 
have a major impact on Iran's calculations. It will be up to the 
President and Congress at that time to make clear to Iran that we will 
be ready to use any option available to us, including the use of 
military force, to prevent Iran from becoming a nuclear weapons power.
    The overall effectiveness of the agreement will thus require the 
Obama administration and its successors to maintain a very tough 
inspections regime and to be ready to re-impose sanctions if Iran seeks 
an illicit nuclear weapons program in the future.
    Congress is right to focus on these concerns and to require 
concrete assurances from the Administration that they can be overcome. 
Specifically, the Administration will need to focus hard on the 
possibility that Iran will cheat, as it has done so often in the past 
and attempt to construct covert facilities. Should this occur, the 
United States would need to ensure that the ``managed inspections'' set 
out in the agreement would work effectively. If Iran were to violate 
the agreement, American sanctions should be re-imposed. Gaining broader 
international agreement for sanctions would be a more effective way to 
intimidate the Iranian authorities. This would be a priority, but also 
a challenging hurdle, for American diplomacy.
    A final risk is the agreement that the prohibitions on Iran's 
conventional arms sales and purchases and ballistic missiles will end 
in 5 and 8 years, respectively, after the agreement is in force. I 
remain opposed to this compromise. In my view, it could embolden Iran 
and strengthen its conventional capacity in ways detrimental to our own 
interest. The next U.S. administration will need to construct a new 
coalition to attempt to restrict and sanction Iran in these two areas.
    On balance, however, I believe the nuclear deal will deliver more 
advantages than disadvantages to the United States. There are greater 
risks, in my judgment, in turning down the agreement and freeing Iran 
from the considerable set of restrictions it has now accepted for the 
next decade and beyond.
    Most importantly, I do not see a more effective, credible or 
realistic alternative that would give the United States a greater 
probability at this point of preventing an Iranian nuclear weapon. That 
is the key question Members of Congress should ask before you vote. Is 
there a more effective way forward than the one negotiated by the Obama 
administration?
    The most common criticism of the nuclear deal is that the United 
States should have walked away from the talks during the last year, 
sanctioned Iran further and attempted to negotiate a better and 
stronger agreement. Some experts have recommended that Congress vote to 
disapprove the President's policies or to pass a bill that would alter 
the deal in such a way that a fundamental renegotiation of the 
agreement would be necessary.
    If I thought it was realistic to renegotiate the agreement to make 
it stronger, I would support that option. But, I don't believe it would 
be possible to do so and, at the same time, to maintain the integrity 
of our coalition against Iran.
    While this ``No Deal'' scenario could play out in many, different 
ways, I think it is probable that it would leave the United States 
weaker, rather than stronger, in confronting Iran's nuclear program. If 
the United States left the negotiations unilaterally, I don't believe 
it is likely that Russia and China and even possibly the European 
allies and other key international economic powers would follow us out 
the door. These countries are all strong supporters of the nuclear deal 
before the Congress today. The global coalition and the sanctions 
regime we spent the last 10 years building would likely fray and weaken 
over time. We would lose the strong leverage that brought Iran to the 
negotiating table. While American sanctions were very important in 
convincing Iran to negotiate, it was the global nature of the sanctions 
with buy-in from nearly every major economy in the world, that also 
made a critical difference in cutting off Iran from the international 
banking and financial system during the past few years. All of these 
benefits would be at risk after a U.S. walkout.
    Most importantly, the strong restrictions that have effectively 
frozen Iran's nuclear program since January 2014 would all be lifted if 
the negotiations are ended. The negotiated agreement would cease to be 
in force. Iran would be free to resume its advanced uranium enrichment 
and plutonium programs. We would lose the IAEA's insights into Iran's 
program as the inspections regime would weaken. Iran would not be 1 
year away from a bomb under the Obama agreement but on the threshold of 
a nuclear weapons capability.
    While I don't agree that this ``No Deal'' scenario would lead 
inevitably to war, it would leave the United States worse off. On 
balance, this alternative is not preferable to the concrete 
restrictions on Iran's program ensured by the nuclear deal.
    If it seeks to disapprove the President's policy, Congress should 
offer a realistic and effective alternative. But, I am unaware of any 
credible alternative that would serve our interests more effectively at 
this point than the agreement proposed by the Obama administration and 
the other major countries of the world.
    Rather than vote to disapprove the President's policy, I hope 
members of both parties will work with the Administration to strengthen 
the ability of the United States to implement the agreement 
successfully and to contain simultaneously Iranian power in the Middle 
East.
    We should create, in effect, a two-track American policy toward 
Iran in the future. On the one hand, we should work to ensure Iran 
implements the nuclear deal. On the other hand, we will need to 
construct a renewed effort with Israel, Turkey and our friends in the 
Arab world to contain Iran's growing power in the region.
    Now that we are talking to Iran again after 35 years of minimal 
contact, there may be issues on which contact with Tehran will be in 
our interest. Protecting the Afghan government from Taliban assaults is 
one such possibility. Convincing Iran to withdraw its support for 
President Assad in Syria is another.
    But, I do not believe we will experience anything approaching a 
normal relationship with the Iranian government as some in our own 
country have suggested. This is not the time to restore full diplomatic 
relations with its government. There is too much that still separates 
us to justify such a decision. In fact, our larger interests in the 
Middle East require the creation of a coalition of countries to oppose 
Iran as it makes an assertive push for power into the heart of the 
Sunni world in Iraq, Syria, Lebanon and Yemen. The United States will 
have greater success, however, in confronting a non-nuclear Iran over 
the next decade rather than an Iran with nuclear weapons. This is 
another advantage of the nuclear deal.
    With this in mind, there is more the Obama administration can do to 
ensure effective implementation of the nuclear deal and to push back 
against a more assertive Iranian policy in the region. Here are some 
concrete suggestions toward that end.

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

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

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

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

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

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

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

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

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

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

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

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

  RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM WENDY 
                            SHERMAN

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

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

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

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


  RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER FROM WENDY 
                            SHERMAN

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

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

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

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


 RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP FROM WENDY 
                            SHERMAN

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

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

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

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