    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                        INCREASING THE EFFECTIVENESS OF
                       NON-NUCLEAR SANCTIONS AGAINST IRAN

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

                                 JOINT HEARING

                                   BEFORE THE

                            SUBCOMMITTEE ON MONETARY

                                POLICY AND TRADE

                                    AND THE

                           SUBCOMMITTEE ON TERRORISM

                              AND ILLICIT FINANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 4, 2017

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 115-14

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
    BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
    BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
    BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
    SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
    STEVE STIVERS, Ohio                  AL GREEN, Texas
    RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
    DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
    ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
    ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
    ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
    KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
    LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
    SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
    ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
    BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
    MIA LOVE, Utah                       DENNY HECK, Washington
    FRENCH HILL, Arkansas                JUAN VARGAS, California
    TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
    LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
    DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
    BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
    ALEXANDER X. MOONEY, West Virginia
    THOMAS MacARTHUR, New Jersey
    WARREN DAVIDSON, Ohio
    TED BUDD, North Carolina
    DAVID KUSTOFF, Tennessee
    CLAUDIA TENNEY, New York
    TREY HOLLINGSWORTH, Indiana

                      Kirsten Sutton Mork, Staff Director
                   Subcommittee on Monetary Policy and Trade

                         ANDY BARR, Kentucky, Chairman

    ROGER WILLIAMS, Texas, Vice          GWEN MOORE, Wisconsin, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
    BILL HUIZENGA, Michigan              BILL FOSTER, Illinois
    ROBERT PITTENGER, North Carolina     BRAD SHERMAN, California
    MIA LOVE, Utah                       AL GREEN, Texas
    FRENCH HILL, Arkansas                DENNY HECK, Washington
    TOM EMMER, Minnesota                 DANIEL T. KILDEE, Michigan
    ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
    WARREN DAVIDSON, Ohio                CHARLIE CRIST, Florida
    CLAUDIA TENNEY, New York
    TREY HOLLINGSWORTH, Indiana
                 Subcommittee on Terrorism and Illicit Finance

                       STEVAN PEARCE, New Mexico Chairman

    ROBERT PITTENGER, North Carolina,    ED PERLMUTTER, Colorado, Ranking
        Vice Chairman                        Member
    KEITH J. ROTHFUS, Pennsylvania       CAROLYN B. MALONEY, New York
    LUKE MESSER, Indiana                 JAMES A. HIMES, Connecticut
    SCOTT TIPTON, Colorado               BILL FOSTER, Illinois
    ROGER WILLIAMS, Texas                DANIEL T. KILDEE, Michigan
    BRUCE POLIQUIN, Maine                JOHN K. DELANEY, Maryland
    MIA LOVE, Utah                       KYRSTEN SINEMA, Arizona
    FRENCH HILL, Arkansas                JUAN VARGAS, California
    TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
    LEE M. ZELDIN, New York              RUBEN KIHUEN, Nevada
    WARREN DAVIDSON, Ohio                STEPHEN F. LYNCH, Massachusetts
    TED BUDD, North Carolina
    DAVID KUSTOFF, Tennessee

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        April 4, 2017................................................     1
    Appendix:
        April 4, 2017................................................    37

                                   WITNESSES
                             Tuesday, April 4, 2017

    Maloney, Suzanne, Deputy Director, Foreign Policy, and Senior
      Fellow, Center for Middle East Policy, the Brookings
      Institution....................................................     9
    McInnis, J. Matthew, Resident Fellow, the American Enterprise
      Institute......................................................     7
    Ottolenghi, Emanuele, Senior Fellow, Foundation for Defense of
      Democracies....................................................    10
    Taleblu, Behnam Ben, Senior Iran Analyst, Foundation for Defense
      of Democracies.................................................     5

                                    APPENDIX

    Prepared statements:
        Maloney, Suzanne.............................................    38
        McInnis, J. Matthew..........................................    46
        Ottolenghi, Emanuele.........................................    52
        Taleblu, Behnam Ben..........................................    81

                  Additional Material Submitted for the Record

    Hill, Hon. French:
        Written responses to questions for the record submitted to
          Behnam Ben Taleblu.........................................   104
    Perlmutter, Hon. Ed:
        Letter to FBI Director James B. Comey, Jr., Treasury
          Secretary Steven T. Mnuchin, and U.S. Attorney General Jeff
          Sessions from Senators Sherrod Brown, Ben Cardin, and
          Dianne Feinstein, dated March 30, 2017.....................   108
        Washington Post article entitled, ``Blackwater founder held
          secret Seychelles meeting to establish Trump-Putin back
          channel''..................................................   110

                          INCREASING THE EFFECTIVENESS
                            OF NON-NUCLEAR SANCTIONS
                                  AGAINST IRAN

                                  ----------

                             Tuesday, April 4, 2017

                 U.S. House of Representatives,
         Subcommittee on Monetary Policy and Trade, and
         Subcommittee on Terrorism and Illicit Finance,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittees met, pursuant to notice, at 2:39 p.m., in
    room 2128, Rayburn House Office Building, Hon. Andy Barr
    [chairman of the Subcommittee on Monetary Policy and Trade] and
    Hon. Stevan Pearce [chairman of the Subcommittee on Terrorism
    and Illicit Finance] presiding.
        Members present from the Subcommittee on Monetary Policy
    and Trade: Representatives Barr, Williams, Pittenger, Huizenga,
    Love, Hill, Emmer, Mooney, Davidson, Tenney, Hollingsworth;
    Moore, Sherman, Foster, and Vargas.
        Members present from the Subcommittee on Terrorism and
    Illicit Finance: Representatives Pearce, Williams, Pittenger,
    Rothfus, Messer, Tipton, Poliquin, Love, Hill, Emmer, Zeldin,
    Davidson, Budd, Kustoff; Perlmutter, Maloney, Lynch, Foster,
    Delaney, Sinema, Vargas, and Gottheimer.
        Chairman Barr. The subcommittees will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the subcommittees at any time.
        Also, without objection, members of the full Financial
    Services Committee who are not members of the Subcommittee on
    Monetary Policy and Trade or the Subcommittee on Terrorism and
    Illicit Finance may participate in today's hearing.
        Today's hearing is entitled, ``Increasing the Effectiveness
    of Non-Nuclear Sanctions Against Iran.''
        I now recognize myself for 2\1/2\ minutes to give an
    opening statement.
        As chairman of the Monetary Policy and Trade Subcommittee,
    it is a pleasure for me to join Chairman Pearce and my
    colleagues on the Terrorism and Illicit Finance Subcommittee in
    holding this joint hearing.
        It is no secret that Washington has been deeply divided
    over how to confront Iran's nuclear ambitions both before and
    after implementation of the Joint Comprehensive Plan of Action
    (JCPOA). This hearing, however, is not about the JCPOA per se,
    and I am hopeful that we can find common ground in addressing
    Iran's non-nuclear activities, including terrorism, weapons
    procurements, and regional destabilization.
        Since the agreement's implementation day in January of
    2016, Iran has continued to sponsor Hezbollah and other
    militias in the region. Its support for the Assad regime alone,
    including the use of planes to airlift military supplies, has
    helped claim an estimated 400,000 lives.
        Last April, even President Obama suggested that the
    Iranians were violating the spirit of the deal by engaging in
    these activities. Rather than be deterred, Iran went on in
    October to sentence three Americans to long prison terms on
    bogus charges.
        In January of this year, the country tested a ballistic
    missile, in violation of U.N. Security Council Resolution 2231.
    And this very morning, just as Boeing was announcing new sales
    to Iran, we learned that dozens of Syrian civilians, including
    at least 11 children, were gassed in a chemical weapons attack.
        If Republicans and Democrats can agree that intensifying
    non-nuclear sanctions is key for our national security, then we
    should think of new ways that deepen their impact on Iranian
    behavior. Iran's continued illicit activities underscore that
    we must not be complacent. Non-nuclear sanctions are more than
    a form of condemnation. We should expect them to undermine
    Iran's capabilities and influence Iranian policies.
        In closing, I want to emphasize that U.S. sanctions are
    directed against an authoritarian government, not the many
    ordinary Iranians who denounce terrorism and welcome closer
    relations with our country. These Iranians know the regime has
    failed them for decades, and they know that the only choice for
    Iran is to abandon its anti-Western, anti-Semitic, violent
    extremism. Our sanctions should make that choice as explicit as
    possible.
        The Chair now recognizes the gentlelady from Wisconsin, the
    ranking member of the Monetary Policy and Trade Subcommittee,
    Congresswoman Moore, for 2\1/2\ minutes for an opening
    statement.
        Ms. Moore. Thank you so much, Mr. Chairman.
        And I thank the panel for joining us.
        I have been on record in support of the Joint Comprehensive
    Plan of Action, negotiated and implemented by President Obama
    to derail Iran's nuclear ambitions. That being said, I am going
    to use this time to discuss President Trump's ongoing and
    increasingly problematic foreign and business entanglements.
        PBS reports that Trump engaged in a business deal with a
    money launderer with supposed ties to the notorious Iranian
    Revolutionary Guard Corps, a Mr. Anar Mammadov. The project was
    a hotel in Baku, Azerbaijan. Ivanka was involved, as well.
        That's one example, but these political and financial
    entanglements between ``bad hombres'' and Trump keep cropping
    up. We have a Commerce Secretary who was former vice chair of
    the Bank of Cyprus, a bank that participated in deals with
    unsavory, criminal-backed individuals and the Russian state-run
    bank Sberbank, which is subject to U.S. and EU sanctions.
        We have jaw-dropping allegations that rise at least to a
    probable cause case against Trump associates and family
    members, such as Manafort, Page, Tillerson, Flynn, Stone,
    Ivanka, and her husband, Jared Kushner. These are troubling
    financial ties to the Kremlin, Iran, or the Chinese government,
    saying nothing of his D.C. hotel or the Mar-a-Lago, which are
    gross conflicts that should not be permitted to continue for
    one more second.
        These communities should use our subpoena power to bring
    some of these people in to testify under oath to this joint
    committee so we can get a better understanding of these ties,
    and the American people deserve to know.
        It is a Pyrrhic exercise to go over the JCPOA over and over
    again when the Trump Administration has invited all of the
    world's worst actors into the White House in order to enrich
    him and his family, like this Third-World-like kleptocracy that
    would make Ferdinand Marcos blush.
        And, with that, I yield my remaining 27 seconds to Mr.
    Perlmutter.
        Mr. Perlmutter. I have my own time, so keep going.
        Ms. Moore. Oh, you do? No, I am done. I am yielding back.
        Chairman Barr. Okay. The gentlelady yields back.
        And the Chair now recognizes the gentleman from New Mexico,
    the chairman of the Terrorism and Illicit Finance Subcommittee,
    Congressman Pearce, for 1\1/2\ minutes for an opening
    statement.
        Chairman Pearce. Thank you, Mr. Chairman.
        New to the Financial Services Committee in the 115th
    Congress, the Terrorism and Illicit Finance Subcommittee has
    the direct mission of interpreting to the greatest extent
    possible the financial support networks of national security
    interests. Our new subcommittee is honored to join Chairman
    Barr's Monetary Policy and Trade Subcommittee this afternoon to
    assess the current state of Iran's non-nuclear sanctions.
        First designated as a state sponsor of terrorism in 1984,
    Iran has grown into the global leader in terrorist financing.
    The message is clear: Despite our Nation's best efforts, Iran
    continues to be the foremost sponsor of terrorism globally.
    This is not anecdotal or subjective; the U.S. State
    Department's annual country report on terrorism has continually
    listed Iran as the top illicit financier, and the most recent
    report stated that Iran remains the foremost state sponsor of
    terrorism.
        From its continued support and assistance to the Assad
    regime in Syria, to its financial backing of Hezbollah and its
    reliance on its intelligence and security arms, the Islamic
    Revolutionary Guard Corps, the IRGC, and its elite Quds Force,
    Iran has been near-impervious to U.S. and international
    sanctions. No silver bullet exists to prevent and impede Iran's
    actions. Despite the U.S. and international sanctions, combined
    with a stagnant oil market in 2015, Iran continued to fund and
    supply international terror groups even when it was to the
    detriment of its own people and economy.
        Today's hearing, therefore, begins a much-needed
    conversation: Where has the United States succeeded and where
    has it failed in its targeted actions against Iran? What
    actions, if any, can the Financial Services Committee take?
    What actions should be avoided?
        I thank our witnesses for being here today, and I thank
    Chairman Barr for holding this important joint hearing. I look
    forward to the conversation, and I yield back.
        Chairman Barr. Thank you.
        The Chair now recognizes the gentleman from Colorado, the
    ranking member of the Terrorism and Illicit Finance
    Subcommittee, Congressman Perlmutter, for 2\1/2\ minutes.
        Mr. Perlmutter. Thank you, Mr. Chairman.
        I would like to introduce into the record a letter dated
    March 30, 2017, from Senators Brown, Feinstein, and Cardin to
    James Comey, and also an article from The Washington Post dated
    April 3, 2017, concerning--both of them have as their subjects
    the Islamic Revolutionary Guard Corps that Congressman Pearce
    was just referring to.
        Chairman Barr. Without objection, it is so ordered.
        Mr. Perlmutter. I thank the gentleman from Kentucky. I also
    thank my friend from New Mexico and Ms. Moore from Wisconsin.
        There are several important questions before us today.
    First, I assume my friends on the other side of the aisle are
    going to bring forth some questions about the JCPOA, which I
    call a nuclear nonproliferation agreement. And we just want to
    see exactly how that has transpired or how it has worked so
    far. I think it has reduced nuclear tension in the world, but,
    even so, we all agree Iran and, in particular the IRGC, is a
    real threat and destabilizing force in the Middle East.
        The IRGC is heavily involved in just about every aspect of
    the Iranian economy, including oil, construction, and banking.
    And with vast shell corporations and commercial interests all
    over the world, the IRGC strategically and conspicuously moves
    money through its many front businesses, and we need to
    understand the beneficial ownership of those businesses.
        We also need to understand--to the degree that Russia is
    supporting Iran and the IRGC, we want to see exactly how that
    kind of funding exists. So the new subcommittee that we have
    formed here is Terrorism and Illicit Finance, and we want to
    see the connections to this potential money laundering that is
    going around that is funding terrorism around the globe. And I
    think, in particular, we have to see the activities of the IRGC
    as well as their connection to Russia, which is using Iran as
    kind of a place to advance its interests in the Middle East.
        And, with that, I yield back to the Chair, and I look
    forward to the testimony of our witnesses today.
        Chairman Barr. Thank you.
        The gentleman yields back.
        The Chair now recognizes the gentleman from North Carolina,
    the vice chairman of the Terrorism and Illicit Finance
    Subcommittee, Congressman Pittenger, for a 1-minute opening
    statement.
        Is Mr. Pittenger here?
        Mr. Pittenger is not here, so we will go ahead and turn to
    our witness testimony.
        Today, we welcome the testimony of Mr. Behnam Ben Taleblu.
    He is a senior Iran analyst at the Foundation for Defense of
    Democracies (FDD). Previously, Ben Taleblu served as a
    nonresident Iran research fellow and Iran research analyst at
    FDD. Ben Taleblu frequently briefs Washington audiences on a
    host of Iran-related issues. Ben earned his master's degree in
    international relations from the University of Chicago.
        Mr. J. Matthew McInnis is a resident fellow at the American
    Enterprise Institute, where he focuses on Iran, specifically
    its intentions, strategic culture, military power, and goals.
    Previously, Mr. McInnis served as a senior analyst and in other
    leadership positions for the U.S. Department of Defense,
    including work with U.S. Central Command, from 2006 to 2013.
    Mr. McInnis has a master's degree in European studies from NYU
    and a master's degree in international relations from the Johns
    Hopkins School of Advanced International Studies.
        Dr. Suzanne Maloney is a senior fellow at the Brookings
    Institution. She is deputy director of the foreign policy
    program at Brookings. Dr. Maloney previously served as an
    external adviser to senior State Department officials on long-
    term issues related to Iran. Before joining Brookings, she
    served on the Secretary of State's policy planning staff as
    Middle East adviser for ExxonMobil Corporation, and director of
    the 2004 Council on Foreign Relations task force on U.S. policy
    toward Iran. She holds a doctorate from the Fletcher School of
    Law and Diplomacy at Tufts University.
        And Dr. Emanuele Ottolenghi is a senior fellow at the
    Foundation for Defense of Democracies, and an expert at its
    Center on Sanctions and Illicit Finance, focused on Iran. Prior
    to joining FDD, Dr. Ottolenghi headed the Transatlantic
    Institute in Brussels, and taught Israel studies at St.
    Anthony's College, Oxford University. Dr. Ottolenghi obtained
    his Ph.D. in political theory at the Hebrew University of
    Jerusalem.
        Each of you will be recognized for 5 minutes to give an
    oral presentation of your testimony. And without objection,
    each of your written statements will be made a part of the
    record.
        Mr. Behnam Ben Taleblu, you are now recognized for 5
    minutes.

         STATEMENT OF BEHNAM BEN TALEBLU, SENIOR IRAN ANALYST,
                 FOUNDATION FOR DEFENSE OF DEMOCRACIES

        Mr. Taleblu. Thank you very much, Chairmen Barr and Pearce,
    Ranking Members Moore and Perlmutter, and distinguished members
    of the Committee on Financial Services. On behalf of the
    Foundation for Defense of Democracies, thank you for providing
    me with this opportunity to testify, particularly alongside
    such a distinguished panel.
        Today, I will discuss the Islamic Republic of Iran's non-
    nuclear threats and how best to counter them.
        Despite being called comprehensive, the JCPOA nuclear deal
    overshadowing this discussion was anything but. It does not
    address delivery of vehicles for nuclear weapons like ballistic
    missiles. It also does not address Tehran's illicit financial
    activities, support for terrorism, regional destabilization,
    and flagrant human rights abuses.
        These issues constitute Iran's enduring non-nuclear
    threats. They are enduring because they are the same issues
    that have made and kept Iran an international pariah for over 3
    decades. Worse, they are threats that the JCPOA accentuates.
        According to FDD's survey of open-source English and
    Persian language reporting on Iran, Iran has launched up to 14
    ballistic missiles since inking the deal. Such behavior defies
    the annex of UNSCR 2231 codifying the accord. These include two
    upgrades to a solid-fuel, short-range ballistic missile, a new
    medium-range ballistic missile that allegedly has a
    maneuverable reentry vehicle, and a ballistic missile bearing a
    proclamation threatening the state of Israel with genocide.
        According to the former Director of National Intelligence,
    Iran currently possesses the largest arsenal of ballistic
    missiles in the Middle East. This arsenal of lethality is
    enhanced by flight testing and domestic refinement.
        Iran also continues to exemplify the ``state sponsor of
    terrorism'' epithet bequeathed to it by the State Department 3
    decades ago. For the past 5 years, however, Tehran has
    furnished the Assad regime in Syria with money, men, and
    munitions so that it can continue the war against its own
    people. Iran is also creating something of a Shia
    internationale, marshaling zealous Shias from around the
    region, including Iraq, Pakistan, and Afghanistan, to fight and
    die in Syria.
        Elsewhere, Tehran relies on a tried-and-true method:
    distributing low-cost weaponry, like anti-tank missiles, to
    jurisdictions of weak central authority. Nowhere exemplifies
    this better than Yemen. Despite a ban on arms transfers in
    UNSCR 2231, weapons transfers to Yemen have been seized at
    least 4 times by coalition forces.
        Iran's illicit financial activities also continue
    undermining the integrity of the rules-based financial order.
    These activities involve the movements of money to illicitly
    procure parts and technology for Iran's missile program as well
    as sponsoring terrorist activities.
        However, even innocuous-looking transactions may involve
    illicit actors. Iran remains designated by the U.S. Treasury
    Department as a ``jurisdiction of primary money-laundering
    concern.'' The hesitancy exhibited by European banks towards
    doing business with Iran is indicative of this status, in
    addition to their concerns over institutions which lack anti-
    money-laundering controls.
        Fortunately, nowhere in the JCPOA is the U.S. restricted
    from using diplomatic, informational, military, and economic
    tools to challenge these activities. By enforcing existing
    sanctions and levying conduct-based nonnuclear ones, Congress
    and the Administration can signal that there is a strategy
    guiding Washington's Iran policy.
        Such a policy would have three goals: punishment for past
    illicit activities; coercion to alter Iran's calculus to cease
    its present bad behavior; and deterrence to forestall
    prospective bad behavior.
        In my written testimony, I have provided four likely
    scenarios that would require coercive economic measures based
    on Iran's existing capabilities and intentions. I also offer 10
    broader recommendations, like new reporting requirements to
    enhance existing sanctions; targeting Iran's IRGC pursuant to
    two additional Executive Orders; using the Global Magnitsky Act
    to target corrupt Iranian entities; and developing graduated,
    sector-specific sanctions on Iran's domestic ballistic missile
    supply chain to neatly complement the web of export controls
    already in place. I can also speak to nonstatutory measures, if
    asked, in the Q and A.
        In my written testimony, I similarly explain and refute
    Iran's claims that such actions violate the deal. They do not.
    These arguments can be overcome if the U.S. adheres to three
    principles: one, calling Iran's bluff and walking away from the
    deal in response to such measures; two, contesting Iran's
    narrative that it is a member of the international community in
    good standing; and three, putting the spotlight on Iran through
    sophisticated use of the bully pulpit.
        Additionally, the U.S. should not fall for arguments about
    a perceived lack of sanctions relief when it has already lived
    by its deal requirements. To quote Adam Szubin of the Treasury
    Department, ``The JCPOA is an international agreement, not a
    cashier's check.''
        While sanctions relief has made it harder to influence
    Iranian behavior, it is still not impossible. Congress and the
    Administration have the capability to push for a change in
    behavior by imposing costs. However, as in most international
    crises, the balance of resolve will matter just as much, if not
    more, than the balance of capability.
        I thank you very much for your time and attention, and I
    look forward to answering your questions today.
        [The prepared statement of Mr. Taleblu can be found on page
    81 of the appendix.]
        Chairman Barr. Thank you.
        Mr. Matthew McInnis, you are now recognized for 5 minutes.

    STATEMENT OF J. MATTHEW MCINNIS, RESIDENT FELLOW, THE AMERICAN
                          ENTERPRISE INSTITUTE

        Mr. McInnis. Thank you, Chairman Barr, Chairman Pearce,
    Ranking Member Moore, Ranking Member Perlmutter, and
    distinguished committee members. Thank you for this opportunity
    to testify today on this important issue.
        Some had hoped that after the implementation of the JCPOA,
    Iran would moderate its support to proxy and terrorist groups,
    restrict is ballistic missile testing and cyber activities, and
    refrain from risky and unprofessional actions at sea in the
    Persian Gulf. However, we have seen all of these activities not
    only continue but increase since the nuclear deal.
        As U.S. CENTCOM Commander General Joseph Votel stated in
    testimony before the House Armed Services Committee last week,
    ``Iran poses the greatest long-term threat to stability in this
    part of the world.''
        Why is Iran such a disruptive force in the region?
        Since the 1979 Islamic Revolution, reshaping the Middle
    East under its political and ideological image has driven
    Tehran's foreign policy. The wars in Syria, Iraq, and Yemen,
    along with new resources from the nuclear deal, have brought us
    to an inflection point in Iran's strategy in the region. Tehran
    is turning its traditional network of proxies, led by Lebanese
    Hezbollah, into a transnational army that can conduct hybrid
    warfare and operate from Beirut to Basra to Sana'a, with Shia
    militias drawn from across South Asia and the Middle East.
    These forces are led by the IRGC, with an estimated quarter-
    million personnel potentially responsive to their direction.
        In addition to proxies, Iran's efforts to dominate the
    region extend to more traditional military forces. Tehran has
    historically lacked sufficient air and land forces to project
    conventional power beyond its borders. Ballistic missiles and
    its asymmetric naval forces in the Persian Gulf have served as
    substitutes. A critical question following the JCPOA is whether
    Iran can or will use its new resources to successfully
    modernize its military and permanently alter the regional
    balance of power in the coming decades.
        So how do we stand up to Iran's destabilizing activities
    and begin to dismantle Tehran's global terror network? The
    United States needs to reinvigorate a well-coordinated
    political, economic, military, and intelligence campaign
    against Iran's malign influence. A better sanctions strategy
    should be nested at the heart of this effort, given at least 20
    percent of Iran's GDP is now under the Guard's control.
        The IRGC owns the state's largest construction firm,
    Khatam-al Anbiya, and holds major stakes in the banking,
    energy, extractive, and manufacturing sectors. The Guard also
    operates most Iranian ports and is deeply involved in the
    commercial shipping and aviation sectors, which are critical
    elements in building and sustaining its proxy and terror
    networks in the Middle East.
        However, Washington needs to ask first what we want to
    accomplish with our sanctions, rather than focusing solely on
    the targets and means. With this in mind, any Iran sanctions
    strategy must first blunt and then diminish the foundations of
    the IRGC's destabilizing activities. Consequently, the United
    States should aim for these five objectives:
        First, we should suppress Iran's military modernization to
    maintain the U.S.'s and our allies' military superiority in the
    region. We should prevent Iran from making major military
    breakthroughs and maintain our deterrence advantage against
    Iran. We should seek to deter Russian and Chinese and other
    sales of the most advanced equipment to Iran through new
    sanctions and prevent any efforts to evade U.N. conventional
    weapons sanctions while they remain.
        Second, we should starve the IRGC's financial fuel to
    weaken the Guard's ability to generate revenue from global
    markets and incentivize international divestment from IRGC-
    affiliated businesses.
        Third, we should disrupt the IRGC's logistical abilities,
    including close monitoring of potential new sanctions and
    designations against Iranian commercial aircraft used by the
    IRGC for the illicit transport of weapons and personnel into
    Syria, Iraq, Yemen, and elsewhere.
        Fourth, we should disrupt and deter Iran's ballistic
    missile program. We may not be able to stop the program
    entirely, but we can help push their program more in the box by
    disrupting their technological acquisition through additional
    sanctions.
        Fifth, we should drive down Iran's internal confidence in
    the regime and its policies. To the degree that we can, the
    U.S. should expose, through sanctions, the regime's internal
    contradictions, corruptions, massive expenses on overseas
    adventures, and human rights violations.
        There is an important caveat. Any new sanctions should not
    conflict, at least legally, with the JCPOA. However, any such
    sanctions can and likely should be part of a broader approach
    to shape the negotiating environment for a successor or
    supplementary agreement with Iran to address the key flaws of
    the nuclear deal.
        I appreciate the opportunity to speak on this important
    topic and welcome your questions and comments. Thank you.
        [The prepared statement of Mr. McInnis can be found on page
    46 of the appendix.]
        Chairman Barr. Thank you.
        Dr. Maloney, you are now recognized for 5 minutes.

    STATEMENT OF SUZANNE MALONEY, DEPUTY DIRECTOR, FOREIGN POLICY,
    AND SENIOR FELLOW, CENTER FOR MIDDLE EAST POLICY, THE BROOKINGS
                              INSTITUTION

        Ms. Maloney. Thank you for the opportunity to appear before
    you today. I have submitted a statement for the record, noting
    that Brookings does not take institutional positions on policy
    issues.
        In considering the non-nuclear threats posed by Iran, we
    must also recognize the dividends of the nuclear agreement. The
    accord addressed only one dimension of the Iranian threat, and,
    in those narrow terms, it has succeeded. Amidst the turbulence
    and tragedy that besets the Middle East today, the absence of
    constraints on Iran's nuclear capabilities would magnify the
    risks in terrible ways.
        However, as my fellow panelists have stated, we can't
    ignore the finite ramifications of the deal. Hopes that the
    agreement would jump-start wider moderation in Iran's approach
    to the world have proven unfounded. Instead, Iran has continued
    to do what it has done consistently since 1979, deploying
    violence and subversion to extend its influence across the
    Middle East. It is consolidating a predominant position in the
    region and tentatively reorienting the regional order in its
    favor. As a result, the challenges posed by Tehran to U.S.
    interests and allies remain as relevant and as alarming as
    ever.
        Understanding the motivations behind Iran's regional
    ambitions and its ballistic missile program are vital.
    Historical memory and years of violent challenge to the
    theocracy's existence have stoked an acute, abiding sense of
    insecurity amongst its leadership. Tehran prioritizes regime
    survival above all else, and self-preservation has become
    intertwined with a deeply ingrained conviction that the world,
    led by Washington, is bent on its eradication.
        The consequences of this dystopian vision can be seen in
    Tehran's campaign to cultivate allies and proxies, bolster its
    indigenous deterrent capabilities, expand the revolution's
    strategic death, and deploy violence and subversion across the
    region. Iran's regional adventurism has never enhanced the
    security or prosperity of the Iranian people, but it has helped
    keep the regime in power.
        The experience of the past decade underscores the efficacy
    of sanctions when wielded wisely. Sanctions forced Iran to make
    concessions on its nuclear weapon program. However, it is not
    clear that new authorities are particularly useful or necessary
    for pushing back against Iran's non-nuclear threats.
        The deal left intact significant restrictions on Iran's
    economy. Iran's worst actors, including those associated with
    the Revolutionary Guard, remain designated under existing
    sanctions, tainting, by extension, any company that deals with
    them. The Trump Administration can augment the list of
    designated entities at any time. The primary embargo on U.S.
    trade and investment in Iran criminalizes even the most
    tangential involvement in the Iranian economy by U.S. firms,
    except for specific exemptions.
        And all of these measures benefit from a number of powerful
    force multipliers, including a decade of intensifying
    restrictions and rigorous enforcement that has created a
    culture of compliance in the international business community.
        The success of the nuclear sanctions has fostered the
    perception that these measures can serve as a silver bullet.
    However, there are few guarantees that new measures will
    provide sufficient disincentives to alter Tehran's longstanding
    patterns of regional power projection or revise the broad
    calculus of opportunism and insecurity that underlines its
    policies.
        The long-term track record underscores the unfortunate
    reality: Iran's support for terrorism has never been driven
    primarily or even substantially by resource availability. In
    fact, Iran's most destructive regional policies have been
    undertaken and sustained even at times of epic constraints.
    Sanctions and lower oil prices have provided no remedy to
    Iran's efforts to extend its influence or its substantial
    investment in fueling and fighting conflicts in Iraq and Syria.
    These policies have a very low funding threshold for the
    Islamic Republic and an existential importance to the regime.
        In addition, the sanctions regime that was constructed over
    the 12-year nuclear crisis benefited from an exceptional degree
    of multilateral support and consensus. Compounded by concerns
    beyond the nuclear file, and encouraged by a well-coordinated
    campaign that highlighted the non-sanctions risks to business
    with Iran, many of Iran's major trading partners gradually
    committed to sever economic ties with Tehran.
        Multilateralism is key to sanctions adherence and creates
    an interlocking and often redundant web of pressure that proves
    far stronger and more persuasive than the sum of its parts. At
    this time, Washington does not have, nor can we quickly
    instigate, anything close to the level of multilateral
    consensus that was built slowly and through fortuitous
    confluence on the nuclear issue.
        We must also anticipate Iran's responses to sanctions, both
    in terms of bandwagoning to try to hedge by developing further
    business and diplomatic ties with Europe and the rest of the
    world, as well as its retaliatory capacity against U.S. Forces
    in the region.
        Like most complex challenges, the problem of Iran has
    resisted quick fixes for nearly 4 decades. American leadership
    will remain essential.
        Thank you.
        [The prepared statement of Dr. Maloney can be found on page
    38 of the appendix.]
        Chairman Barr. Thank you.
        And, Dr. Ottolenghi, you are recognized for 5 minutes.

    STATEMENT OF EMANUELE OTTOLENGHI, SENIOR FELLOW, FOUNDATION FOR
                         DEFENSE OF DEMOCRACIES

        Mr. Ottolenghi. Chairmen Barr and Pearce, Ranking Members
    Moore and Perlmutter, and distinguished members of the
    committee, I thank you for the opportunity to testify today.
        The Joint Comprehensive Plan of Action, or JCPOA, has
    emboldened Iran. In theory, under the JCPOA, the United States
    can use non-nuclear sanctions to counter Iran's regional
    ambitions and ongoing support for terrorism. In practice,
    however, this measure has been rarely used, especially with
    regards to Iran's ongoing airlifts to the Assad regime and
    Hezbollah.
        The JCPOA lifted U.S. sanctions against Iran's civil
    aviation sector exactly at the time when the sector became
    vital to Tehran's war efforts in Syria. Put simply, the JCPOA
    has made it legal to sell aircraft to airlines that are
    accessories to Assad's war crimes and keep Hezbollah armed to
    the teeth.
        The activities of Iran's aviation sector have exposed the
    inadequacy of the JCPOA caveat that licensed items and services
    must be used exclusively for commercial passenger aviation.
        Currently, at least five Iranian and two Syrian commercial
    airlines are engaged in regular military airlifts to Syria.
    These carriers have been crisscrossing Iraqi airspace since
    2011 but have increased their tempo since the summer of 2015
    when Iran and Russia coordinated their efforts to save Assad's
    regime. Flight-tracking data indicate that from implementation
    day on January 16, 2016, to March 30, 2017, there were 696
    flights from Iran to Syria, only 6 of which were carried out by
    Iran's Air Force.
        In 2011, the Department of the Treasury blacklisted Iran
    Air and Mahan Air because they colluded with Iran's Islamic
    Revolutionary Guard Corps, or IRGC, in these military airlifts.
    It also blacklisted Syrian Arab Airlines in 2015 and Sham Wings
    in 2016 for transporting weapons and fighters to Syria. These
    airlines are not ferrying civilian passengers between Tehran
    and Damascus.
        The two primary Iranian actors in the airlifts are Iran Air
    and Mahan Air, with a combined 345 out of 696 flights, almost
    half of the total.
        Mahan Air remains under U.S. sanctions because of its
    support for terrorism. Iran Air, by contrast, is no longer
    sanctioned, despite its material support to the IRGC and
    Syria's internal repression, despite weapons transfers to Syria
    and the use of deceptive practices to conceal its cargo. The
    U.S. Government delisted Iran Air because of a political
    agreement. There is no evidence that there has been a change of
    behavior.
        It is extremely likely that Iran Air is still an active
    participant in the airlifts. This conclusion is based on the
    following: There is no justification for frequent commercial
    flights to Damascus. Syria is a war zone with little tourism or
    commerce. Yet, it is served almost twice daily.
        Iran Air flies to Damascus twice a week. The flight cannot
    be purchased on Iran Air's booking website or through travel
    agencies, and the booking website does not include Damascus
    among its destinations from Tehran's international airport,
    where the flights usually originate. And, lastly, Iran Air
    flights to Damascus occasionally make unscheduled stopovers in
    Abadan, an IRGC logistical hub for the Syria airlifts.
        Iran Air's participation in the Syria airlifts would make
    the airline eligible for renewed sanctions. Congress and the
    Administration should instruct the intelligence community to
    investigate this. If Iran Air's participation is confirmed, the
    Administration should immediately revoke OFAC's licenses
    authorizing sales of aviation industry items and services to
    Iran Air, resanction the airline, and release its entire fleet.
        That is why Congress should also demand transparency about
    aircraft sales to Iran. The financial terms of the Boeing and
    Airbus deals are surprisingly opaque. If Iran Air is found to
    be ferrying weapons and fighters to Syria, the two
    manufacturers would unwittingly become accessories to war
    crimes. Congress should demand that Boeing and Airbus make
    those details fully public.
        The United States should also renew its focus on Mahan Air,
    Iran's largest commercial carrier and the most active
    participant in the airlift. Existing U.S. sanctions have not
    stopped European and Asian companies from transacting with
    Mahan. It is not that U.S. sanctions are ineffective; it is
    rather that the U.S. has so far declined to impose sanctions
    against those who provide material support to Mahan. It is time
    to reverse that and punish Iranian and foreign providers of
    material support to Syria's airlift and its participants--first
    and foremost, Mahan Air.
        FDD research has identified Abadan as the main IRGC
    logistical hub for the airlifts to Syria. Abadan and other
    airports where flights originate should also be designated.
        And, finally, to conclude, the U.S. also should consider:
    designating the Abadan Refining Company for selling jet fuel to
    the aircraft involved in the airlifts; sanctioning the insurers
    of the aircraft; and targeting the financial institutions
    involved.
        Thank you so much for your time, and I look forward to
    questions.
        [The prepared statement of Dr. Ottolenghi can be found on
    page 52 of the appendix.]
        Chairman Barr. Thank you.
        The gentleman's time has expired.
        And the Chair will now recognize himself for 5 minutes for
    questions.
        Mr. Taleblu, what specific non-nuclear sanctions and
    additional designations do you believe would be most effective
    in combating Iranian sponsorship of terrorism?
        Mr. Taleblu. Thank you very much for your question,
    Congressman.
        The immediate one that comes to mind is to pursue sanctions
    on Iran's Islamic Revolutionary Guard Corps pursuant to
    Executive Order 13224. Getting that listed, I think, is key
    because that is one of the major drivers of Iran's non-nuclear
    threats. Iran's Islamic Revolutionary Guard Corps Aerospace
    Force, for instance, is the force that oversees Iran's
    ballistic missile program.
        Going after the IRGC pursuant to that executive order and
    then asking the intelligence community and the Administration
    for additional targets that liaise with the IRGC and can be
    targeted for being shells for this entity should be gone after,
    both at the statutory level and at the Administration.
        Chairman Barr. Mr. McInnis, on a related note, as you may
    know, Senator Ted Cruz in January introduced legislation
    calling on the State Department to assess IRGC's suitability
    for designation as a foreign terrorist organization.
        What are your thoughts about that? And do you agree with
    your colleague that designation of IRGC under 13224 would be
    prudent?
        Mr. McInnis. Yes. I think for designation as a foreign
    terrorist organization, as an FTO, there is certainly a moral
    argument to make for that. I think from a practical standpoint,
    designation under Executive Order 13224 is most likely
    sufficient to achieve your objectives.
        I think that there is a great consideration, as Dr. Maloney
    pointed out, that as we look at potential retaliation from the
    Iranians, not to say that should stop us from taking any of
    these measures, but we need to be very much prepared for
    potential repercussions insofar as how that may change rules of
    engagement with the IRGC, both at sea and with our forces there
    in places like Iraq and elsewhere.
        I think these are things that we need to be thinking
    through. And so these are areas that I think designation under
    EO 13224 probably gives us what we want, but I am certainly
    very much drawn to the moral argument of designating under FTO.
    And I also agree that that is the pathway that will give us the
    most effect for pulling back on support for terrorism.
        Chairman Barr. Thank you.
        And, Dr. Ottolenghi, Dr. Maloney warned against downplaying
    the dividends of the nuclear deal and alleviating the urgency
    of Iran's nuclear ambitions. But given the forward movement of
    Iran's ballistic missile program, given the tests using
    missiles that are capable of carrying nuclear payloads, do you
    disagree with that analysis or do you agree with that analysis?
        And can you speak to whether or not these non-nuclear
    activities have been emboldened as a result of lingering
    questions about the reliability of the inspections regime?
        Mr. Ottolenghi. Thank you for your question. Two points.
        First of all, I think that when one looks at a nuclear
    program, of course the question of delivery systems is
    essential and a part of a nuclear program. The omission of the
    ballistic missile program from the JCPOA of course indicates
    that this is by no means a comprehensive arrangement, as my
    colleague pointed out in his statement, but it also creates an
    opportunity for the United States to target sectors of the
    Iranian economy that are complicit in the Iran ballistic
    missile program.
        Whether it is the financial institutions that facilitate
    the transactions for procurement, the companies that procure,
    the extracting activities for the raw materials, or the
    transport or the insurance of the vectors that carried the
    technology and the procurement for the missile program, all
    these are areas and opportunities for targeting.
        As for whether the regime has been emboldened, I think that
    that is very clear--not just emboldened but also provided
    additional resources to pursue its most nefarious activity more
    actively and assiduously.
        Chairman Barr. Thank you.
        My time has expired, so the Chair will yield back and now
    recognize the gentlelady from Wisconsin for 5 minutes.
        Ms. Moore. Thank you so much.
        And I thank the panel again. As I expected, we have some
    excellent testimony here. So much information, so little time.
    Let me just start with Mr. McInnis.
        You had a very well-prepared presentation. I was looking at
    your recommendations for the five things we need to do, and I
    was focusing in particular on starving the IRGC's financial
    fuel.
        And so, in that context, would you agree that there might
    be some threat or some problem with the article that I believe
    Mr. Perlmutter entered into the record, where it demonstrates
    that there was a lot of contact between Donald Trump, in trying
    to establish the Baku tower, and not only this Mammadov
    family--would you see that as problematic?
        Mr. McInnis. In that particular incident, even though I was
    asked to comment on that particular situation earlier, I don't
    know the full details of that situation--
        Ms. Moore. Okay. Thank you, then.
        Mr. McInnis. Yes.
        Ms. Moore. Thank you.
        Let me ask you about your ``disrupt and deter Iran's
    ballistic missile program.'' You say that they are not going to
    even give up or meaningfully limit its ballistic missiles. And
    as I look through, just briefly peruse the Iran sanctions, even
    though I think Mr. Taleblu mentioned some things they are
    doing, they are still substantially in compliance. Is that your
    understanding, as well? Even though they are kind of showing
    off, because they have to show their people that they are not
    caving--but they are in compliance. Would you agree?
        Mr. McInnis. This has been the main point of contention.
    Certainly, the issue is with the new language under U.N.
    Security Council Resolution 2231 that implemented the JCPOA,
    the language there insofar as what they are doing with their
    ballistic missile program. That is, they are using their
    ballistic missiles--from their perspective, they are not
    nuclear-capable weapons. And, from their perspective, the new
    language that was used to implement the deal, from their
    perspective, allows them to do what they are doing.
        Ms. Moore. Okay.
        Mr. McInnis. And, unfortunately, not all members of the
    U.N. Security Council interpret that the way we do.
        Ms. Moore. Okay. Thank you for that.
        Dr. Maloney, we have talked a lot about Iran's influence in
    Syria, but would you say that Putin also has a stake in keeping
    Assad in power? And do you think that the Russian banks can
    help facilitate financial transactions to Assad in Syria?
        Ms. Maloney. The Russians are clearly a major player in
    Syria and in preserving and stabilizing the Assad regime. They
    do have distinct interests from those of the Iranians, and,
    clearly, that is an area where both Congress and the
    Administration might usefully try to separate those two
    parties.
        Ms. Moore. Right. And so we need to continue to be vigilant
    and cautious about relationships with the Russians. We are
    focusing on the Iran sanctions, but a workaround could be
    Russia. Would that be correct?
        Ms. Maloney. Russia would be key to any solution in the
    Syrian conflict, and we should be using all of the resources at
    our disposal to try to force the Russians to find a political
    solution rather than participating in what is effectively a war
    crime.
        Ms. Moore. Exactly.
        Okay. I think I have one more question. I think it is for
    Mr. Taleblu.
        Are you concerned that Iran is on the verge of being
    actively weaponizing their missile systems in the near future?
        Mr. Taleblu. Thank you very much for your question.
        I am actually worried about the conventional and asymmetric
    threats that Iran's ballistic missiles pose. This is because I,
    like most Members of Congress, read the yearly DNI statements
    before the body, and I worry that they are continuously
    assessed to be the largest force in the Middle East.
        So, regardless of weaponization, which we should have
    better access to but the Supreme Leader has not allowed
    inspections of military facilities, regardless of that caveat,
    which is a big one, I am concerned about the conventional and
    asymmetric capabilities of this force.
        Ms. Moore. Thank you.
        And thank you, Mr. Chairman, for your indulgence.
        Chairman Barr. The gentlelady's time has expired.
        And the Chair now recognizes the chairman of the Terrorism
    and Illicit Finance Subcommittee, Congressman Pearce of New
    Mexico, for 5 minutes.
        Chairman Pearce. Thank you, Mr. Chairman.
        Mr. McInnis, your report deals more with the economic
    impacts of having, I guess, the IRGC involved in economic
    activities. What is the scope of that? In other words, you say
    about 20 percent of the economy, but is it import/export or
    domestic economy? Tell me a little bit about that. And I have
    several questions, so the brief version would be better.
        Mr. McInnis. Yes, I think that the IRGC--certainly their
    domestic economy, it could be a minimum 20 percent from their
    construction sectors, telecommunications, mining,
    manufacturing. But there is certainly plenty involved in the
    export/import as well, so, you have a full spectrum there.
        Chairman Pearce. Who are their primary trading partners
    from outside the country? And when you study it, do you see any
    difficulties with that part of the economy being diverted?
        Mr. McInnis. Certainly, Iran's major trading partners tend
    to be India or China. On arms sales, it is obviously Russia.
    And, of course, now that the sanctions are down, they are
    trying to grow significantly with the Europeans.
        Chairman Pearce. How about oil sales? What are they doing
    in oil sales since the lifting of the embargo and the sanctions
    on that?
        Mr. McInnis. Oil sales are recovering up to almost pre-
    sanctions level, mostly to Asia and South Asia but also
    recovering with Europe quite nicely.
        Chairman Pearce. About how many barrels a day?
        Mr. McInnis. I don't have those right at--
        Chairman Pearce. Do any of you have that information?
        Ms. Maloney. They have hit 3 million barrels a day in
    exports.
        Chairman Pearce. Okay.
        So, on page 4, Mr. McInnis, you talk about reinvigorated
    economic warfare campaign against the IRGC. And what would that
    look like, this reinvigorated economic warfare campaign? What
    would that look like to us nonparticipants, the people who
    don't study this every day? You all would see very minor
    changes; we wouldn't, necessarily.
        Mr. McInnis. I think that we had during the sanctions
    period a fairly aggressive effort, especially prior to the
    negotiations beginning in 2013, we had a fairly aggressive
    effort against the IRGC on a variety of fronts, of which one
    was economics. And I think that there was certainly a decision
    to hold back on--partly tied to fears that provoking IRGC
    reaction would potentially disrupt the diplomatic efforts tied
    to the JCPOA. And I think there is still a degree of that.
    There was, up until the end of the Obama Administration, a
    certain fear of that continuing.
        I think the current Administration is weighing those types
    of policy options of how much pressure can be put against the
    IRGC and weighing potential reactions and being able to
    maintain the deal and what they want to do with the deal. I am
    not sure where those policy debates are right now.
        But I think those are all things that--what we were trying
    to do prior to the negotiations beginning in 2013, I think that
    can be reinvigorated and can be, frankly, made stronger. And
    that can be done against Hezbollah, against the Iraqi Shia
    militia groups.
        Chairman Pearce. Yes, I--
        Mr. McInnis. It can be quite aggressive.
        Chairman Pearce. I get the idea.
        Mr. Taleblu, in 2010 and 2011, Iran was financing Hezbollah
    at about $100 million to $200 million. Where was that money
    coming from? And has that flow increased now after the
    agreement?
        Mr. Taleblu. Thank you very much for your question.
        The most popularly cited figure is $100 million to $200
    million, as you mentioned, and that is pursuant to a 2010
    military power of Iran report produced by the Department of
    Defense. It is the most popularly cited because most of Iran's
    Hezbollah funding, like its illicit funding of other terrorist
    groups, is off the books. You can't necessarily find it as an
    IRGC line item, even though a colleague of mine who did do an
    assessment of ``the IRGC budget'' noted that they are receiving
    a 24-percent windfall in their budget allocation this year. I
    would note, however, that it would be hard to find on Iran's
    official reporting.
        Chairman Pearce. Okay.
        Let me squeeze one more question in. Is it possible to
    know, kind of, where all the streams of funding are coming
    from, or is that a subject that is not easy to penetrate? I
    think you just alluded to that, but go ahead and touch on that,
    if you can.
        Mr. Taleblu. It is challenging but not impossible. I think
    we should definitely task the intelligence community with
    finding these streams.
        You mentioned the funding in Syria, for instance. Hezbollah
    has been marshaled by Iran in Syria. Hezbollah was essential to
    helping bail out the city of Qusayr in 2013 and the siege of
    Aleppo in 2016. So I would assume you would get significant
    funding spikes in those years.
        Chairman Pearce. All right.
        Thanks, Mr. Chairman. I yield back.
        Chairman Barr. The Chair now recognizes the ranking member
    of the Terrorism and Illicit Finance Subcommittee, Mr.
    Perlmutter from Colorado.
        Mr. Perlmutter. Thanks, Mr. Chairman.
        Dr. Ottolenghi, you said that there were coordinated
    efforts, I think were your words, to save the Assad regime
    between Iran and Russia. What did you mean by that?
        Mr. Ottolenghi. I mean that both governments, both regimes
    in Russia and in Iran, are invested in the survival of the
    Assad regime and its continuing control, if not of the whole
    country, at least of part of it.
        Mr. Perlmutter. So I guess one of the things that the
    Terrorism and Illicit Finance Subcommittee deals with are
    sanctions, whether it is North Korea, Russia, Iran, or a number
    of other players.
        In the coordination effort, do you see any assistance by
    Russia of Iran or the IRGC financially as they participate
    either with Hezbollah or Assad?
        Mr. Ottolenghi. Thank you.
        I have seen reports in the media, which I cannot personally
    confirm, of a variety of coordinated activities of this kind,
    particularly transfers of weapons from Russia.
        I also, when I monitor the airlifts from Iran to Syria, I
    do see frequently Russian planes crisscrossing the same air
    corridors. They follow the same routes. I am not in a position
    to tell you whether those planes are just supplying the Russian
    forces on the ground or supporting the Russian aviation
    operations inside Syria.
        We do know from open sources, public reports, that the
    Russians have used one airbase in Iran, so there obviously has
    been some type of transaction there. And I would highly
    recommend that in an intelligence review of the airlifts some
    attention is paid to what Russian Air Force planes are carrying
    to Syria as well.
        Mr. Perlmutter. Thank you.
        And I would turn to the other panelists. Coordination
    between Russia and Iran, particularly with respect to Hezbollah
    and Assad, are you aware of any funding streams from Russia to
    the IRGC or Iran generally?
        Dr. Maloney?
        Ms. Maloney. The Russians play a relatively small role in
    the Iranian economy overall, but they have obviously been a
    long-term important supplier of weaponry to Iran.
        In terms of the management of Hezbollah and of the other
    Shia militias that are fighting under Iranian operational
    guidance in Syria, that is primarily Iranian-run, but clearly,
    there is coordination between the Iranians and the Russians on
    the overall state of the campaign--the Russians primarily from
    the air, and the Iranians primarily on the ground. And that
    coordination extends to Hezbollah and the other Shia groups.
        Mr. Perlmutter. Thanks.
        Would either of you two gentlemen like to comment?
        Mr. McInnis. I would just confirm what Dr. Maloney said and
    also add that what has been fascinating is watching how much
    Iran has learned from Russia in how to conduct and develop new
    forms of warfare as they have begun to do certain levels of
    integration of their campaigns there in Syria and, frankly, the
    fact that the Russians are using Iranian air bases at times to
    launch their air strikes into Syria, which is from an Iranian
    ideological standpoint unprecedented. And it goes to the degree
    of how much the Iranians have had to shift their thinking and
    how they look at Russia as a potential ally.
        And, of course, their long term, as they look at post-
    sanctions, conventional weapons sanctions, after the nuclear
    deal, the big investments they want to make in transforming
    their military, they are going to be very Russian-centric on
    that. And that is what I particularly worry about, is that
    could transform the region if they are allowed to do major
    investments with Russia.
        Mr. Perlmutter. Mr. Taleblu?
        Mr. Taleblu. Thank you very much.
        I want to echo most of the sentiments of the panel. High-
    level coordination could be seen by the visits of IRGC QF
    Commander Major General Qassem Soleimani's flights to Russia. I
    assume that flight to Russia actually had more of an impact on
    Iranian strategy in Syria than the more public one, where
    President Rouhani recently went to Russia and met with
    President Putin.
        To Dr. Maloney's comment, I actually think Iran and Shia
    militias in general in Syria have a perverse form of what
    Stephen Biddle has called the modern military system. It is a
    perverse form of combined arms, non-Arab Shia militias as
    cannon fodder supplementing Russian airpower. So it is odd to
    watch but horrifying.
        Mr. Perlmutter. Thank you.
        Thanks, Mr. Chairman. I will yield back.
        Chairman Barr. The gentleman yields back.
        The Chair now recognizes the vice chairman of the Monetary
    Policy and Trade Subcommittee, Mr. Williams from Texas.
        Mr. Williams. Thank you, Chairman Barr, and thank you,
    Chairman Pearce and all of our witnesses today.
        Since 2011, Iran has been classified by the Treasury
    Department as a jurisdiction of primary money-laundering
    concern, a finding that is unaffected by the JCPOA. The
    Treasury Department determined that Iran's financial system,
    including the central bank, constitutes a threat to governments
    or financial institutions that do business with these banks.
        Iran is also labeled, alongside North Korea, as one of the
    two high-risk and noncooperative jurisdictions by the Financial
    Action Task Force.
        Last year, in his testimony before our Monetary Policy and
    Trade Subcommittee, Eric Lorber testified that, ``the nature of
    the Iranian economy and the role of the government within the
    economy presents serious risks related to bribery and
    corruption, money laundering, and illicit financing.'' That is
    a combination.
        But despite these multiple financial actions by Treasury,
    Hezbollah, which we know has sophisticated financial expertise,
    continues to exploit the internal financial system. Their
    ability to move and store illicit assets makes them dangerous
    to penetrating U.S. markets.
        Many of these finance schemes flow right through the United
    States, and our ability to combat them remains challenging. So
    some might say, despite these designations, Hezbollah's trade-
    based money laundering schemes have continued to expand.
        So my first question, to any of the witnesses today, is
    this: The designation carried no immediate penalty, but it
    imposed additional requirements on U.S. banks to ensure against
    improper Iranian access to the U.S. financial system. So, in
    one of your opinions, has this been an effective designation?
    Any of you?
        Mr. McInnis. I think the designation, especially when it
    comes to--if I am understanding the question correctly--
    Hezbollah, in particular, and Iran's deep, deep problems with
    money laundering, this is something that, the more the U.S. can
    do when it comes to exposing the problems of Iran's money
    laundering and toxifying, from my perspective, from the
    international community's perspective, toxifying these assets
    or these financial institutions, so that they are avoided, that
    does benefit long-term. Because, even as Iran finds ways around
    it, it makes it harder for Iran to move money, even if Iran
    still finds ways to get money and Hezbollah finds ways to get
    money. But, again, I know it is extremely challenging to have
    those types of effects that we want.
        Mr. Williams. Okay. Thank you.
        Dr. Ottolenghi?
        Mr. Ottolenghi. Yes, thank you. If I may just add one
    point, at least 20 percent of Hezbollah's annual budget
    actually comes from trade-based money laundering outside the
    region. It comes from Latin America, mainly from the tri-border
    area of Argentina, Brazil, and Paraguay.
        The U.S., through its Treasury designations, has targeted
    entities and individuals associated with Hezbollah involved in
    that type of trade-based money laundering, but those
    designations are more than a decade old. And because of
    collusion, complicity, or just plain negligence by local powers
    in that area of the world, most of these entities and
    individuals are still able to conduct business and remit
    finances back to Hezbollah.
        So I think that the broader point is, within the context of
    the power of designations and sanctions, I think that what you
    need to continue is to have monitoring, enforcement, and
    updating of this information so that compliance can be updated
    all the time and, as Hezbollah finds new ways to pursue its
    illicit financial activities, these designations can catch up.
        Thank you.
        Mr. Williams. Okay.
        Dr. Taleblu, should the new Administration consider any new
    non-nuclear sanctions, money laundering sanctions, cyber export
    controls?
        Mr. Taleblu. Yes. And, unfortunately, I do not have a
    Ph.D., despite my deepest academic desires for one, but thank
    you.
        I actually think that there are a whole host of tools--
    military, economic, diplomatic, informational. But on the
    economic side, statutory specifically, we can go after
    ballistic missiles.
        Dr. Ottolenghi mentioned that there is a whole-of-
    government approach Iran is taking to develop this potent
    ballistic missile threat. That means institutions that engage
    in research, such as engineering and physics. That means the
    companies that produce the transporter erector launchers (TELs)
    that move Iran's missiles from silo to silo, from mobile
    launchpad to mobile launchpad. That means also going after the
    companies and entities that produce and procure solid and
    liquid fuel--this is the propellant that powers Iran's
    missiles--to go after the companies that produce and procure
    the aluminum tubes and the carbon fiber that actually allow
    Iran to develop these longer and wider-diameter and more high-
    strength medium-range ballistic missiles.
        So there is plenty of space. The one of choice, I think, to
    deal with this threat--because Iran's 14 missile tests since
    the deal I think is a blatant violation and something that
    should be addressed more urgently than some of the other
    threats you mentioned. This is one area I think we can do a lot
    of damage.
        Mr. Williams. Okay.
        I yield back. Thank you.
        Chairman Barr. The gentleman's time has expired.
        The Chair now recognizes the gentlelady from New York, Mrs.
    Maloney.
        Mrs. Maloney of New York. Thank you, so much, Mr. Chairmen
    and Ranking Members, for calling this hearing, and I also thank
    all of the panelists.
        My first question is for Dr. Maloney. One of the key
    Iranian entities targeted by U.S. sanctions is the Islamic
    Revolutionary Guard. No sanctions have been lifted on the
    Guard. So business with the Revolutionary Guard remains off
    limits for U.S. companies. The CRS notes, however, that the
    exact relationship between the Revolutionary Guard and Iranian
    corporate or other entities is not always known precisely,
    which means that U.S. or European companies may be
    inadvertently doing business with Iranian companies that are
    fronts for the Revolutionary Guard. That would obviously
    undermine the effectiveness of U.S. sanctions against the
    Revolutionary Guard. What can we do to improve this, and how do
    we get better at identifying Iranian companies with ties to the
    Revolutionary Guard?
        Ms. Maloney. Thank you very much for your question,
    Congresswoman Maloney. This is, I think, an inordinate
    challenge for the U.S. intelligence community. What the Iranian
    economy has done over the course of the past 38 years is
    effectively privatized through crony capitalism. That is not
    limited to the Revolutionary Guard, but the Revolutionary
    Guard's expansion in the economy is very much emblematic of it.
        What this means is that there are hundreds, possibly
    thousands, of spinoff companies, companies that have evolved
    from some part of the official government entity or parastatal
    entities that are formally associated with the Revolutionary
    Guard and moved into what is ostensibly the private sector of
    the Iranian economy. This makes it very difficult to
    distinguish between companies that are associated with the
    Guard formally, companies that are run or managed or work to
    the benefit of those who are former guardsmen who, in fact,
    might cooperate and collude with the Guard.
        We have done an enormous amount of work, and some of my
    fellow panelists here work with organizations that can provide
    names of dozens and possibly larger numbers of companies that
    are associated with the Guard, but there is an almost infinite
    capacity within the Iranian economy to proliferate economic
    organizations that have some connection with the regime in
    power.
        Mrs. Maloney of New York. In America, law enforcement has
    targeted and put a spotlight on beneficial ownership laws that
    allow terrorists and others, gun runners and everyone else, to
    hide their assets by buying assets, and under beneficial
    ownership, they don't have to reveal who that person is.
        I am wondering, is that a problem in the Middle East too
    and in Iran? And is this another way that the Guard is hiding
    money or able to easily access money by quickly selling real
    estate for a million dollars or so and having money for
    weapons? And I would ask you and any of the panelists to answer
    if you would like.
        Ms. Maloney. Let me just make a quick comment on that
    point, which is that what we have seen during the course of the
    year-plus of the implementation of the JCPOA is that the
    elected government within Iran does have an interest in trying
    to marginalize the role of the Revolutionary Guard and the
    economy, and some of the penalties that we have imposed on the
    Guard, including the FATF designation and the government's
    desire to get a clean bill of health from FATF have, in fact,
    assisted the government in trying to marginalize the role of
    the Guard. There have been instances, in fact, with Iranian
    banks reportedly refusing to lend to companies affiliated with
    the Guard.
        And so I think a smart strategy of trying to marginalize
    the role of the Guard and particularly to penalize its economic
    activities would play into what are clearly divisions within
    the regime.
        Mrs. Maloney of New York. Yes. And on the beneficial
    ownership, sir.
        Mr. Ottolenghi. If I may add a point to reinforce what my
    esteemed colleague said and also provide an example which poses
    a dilemma to actually a U.S. company, we at FDD have identified
    an enormous number of IRGC-affiliated companies, but what we
    have seen clearly is that, oftentimes, the companies manage to
    keep well below the radar established by the criteria for
    ownership by the IRGC created by U.S. law and by the standards
    of the U.S. Treasury. In other words, oftentimes, although you
    can't prove 50 percent ownership, you see that they control the
    majority of the board and the chairmanship.
        And here is the example that poses the great dilemma for a
    great U.S. company, and that is namely Boeing. Today Boeing has
    signed--or has announced a deal with Aseman Airlines to sell 30
    737 MAX to the third national carrier of Iran. And here is the
    problem that Boeing will face. The CEO of Aseman Airlines is
    the former commander of the IRGC Navy. He was the commander of
    the IRGC Navy during the Iran-Iraq war when the IRGC Navy was
    trying to sink U.S. ships in the Gulf. He is the former deputy
    minister of defense. He is the former CEO of the Iran Aviation
    Industry Organization, a company, an entity under U.S.
    sanctions still after the JCPOA. He is the former head of the
    IRGC general staff. He is a professor of strategic studies at
    Imam Hossein University, the university of the IRGC that is
    still under U.S. sanctions. And he was Rouhani's first pick for
    Ministry of Defense before Dehghan was appointed.
        This obviously is a great problem. Companies will go into
    the Iranian economy thinking that, because the ownership
    principle is met, they can deal with them, but actually they
    can't, because IRGC--
        Chairman Barr. The gentlelady's time has expired.
        Thank you.
        Mrs. Maloney of New York. Thank you very much.
        Chairman Barr. The Chair now recognizes the vice chairman
    of the Terrorism and Illicit Finance Subcommittee, Mr.
    Pittenger from North Carolina.
        Mr. Pittenger. Thank you, Mr. Chairman, for your excellent
    leadership in this important mission. And I thank each of you
    for being with us today. We really appreciate your commitment
    to this important work.
        Addressing the issue of Section 311 and the JCPOA agreement
    as well, are there any banks, recognizing that there are no
    penalties involved for these--it is not very punitive of what
    has occurred with 311--that are still operating under the SWIFT
    authority to transfer money, that they are going about their
    business as usual?
        No response? Does that mean there aren't any, or we don't
    know?
        Mr. Ottolenghi?
        Mr. Ottolenghi. I would make two points. One is we don't
    know. Three points, actually. One is we don't know, at least I
    don't.
        Two, I would make the point that that is why it is so
    important to ensure full transparency in all of the large
    business deals that are being negotiated and concluded with
    Iranian entities. This is a country that has been under
    sanctions for a decade, has engaged in some of the worst and
    most opaque illicit practices in the financial world. It is a
    country that is still the world's foremost sponsor of
    terrorism. We do deserve to have transparency in the types of
    financial arrangements characterizing the deal. The Boeing and
    Airbus deal are obviously an example.
        And my third point, if you allow me, is not necessarily
    directed to Iran, but Hezbollah. I mentioned that Hezbollah
    finances a lot of its operations from trade-based money
    laundering around the world. A lot of the areas where they draw
    financing from are weak financial institutions. They are
    jurisdictions rife with corruption and sometimes collusion. One
    place that comes to mind, of course, is the Republic of
    Paraguay. I think that the U.S. Government should look into
    these jurisdictions as possible 311 designations precisely for
    the reason that sufficient compliance controls are not in
    place. Thank you.
        Mr. Pittenger. This past year, FATF accepted an action plan
    from Iran to address the deficiencies that were found in 311.
    Do you think this was an advisable countermeasure? Was this an
    appropriate response? And do we anticipate Iran doing anything
    meaningful with their action plan? Yes, sir?
        Mr. Taleblu. Thank you very much. Great question. The FATF
    suspension of countermeasures for 1 year, a period of 1 year of
    review, I think was more political than based on economic or
    Iran's desires to produce more transparency in the companies
    that it owns, be they government of Iran-linked entities or
    private entities. I think the best argument for that would be
    the people who marshal the entities that Dr. Maloney mentioned,
    namely the banks that, in the fall of 2016, decided not to
    lend.
        But other than that, I believe it will be highly unlikely
    that you will see Iran comply with those countermeasures, and
    they might have to be put back on. And I think this is
    something that we should guard against and something that my
    colleagues have mentioned, which is don't suspend conduct-based
    sanctions and conduct-based labels and restrictions purely for
    political purposes.
        Mr. Pittenger. Recently, a Chinese-owned company based in
    the United States, ZTE, was fined a billion dollars for selling
    technology to Iran. What other countries are complicit in a
    like manner that we should be wary of? Yes, sir?
        Mr. Ottolenghi. I don't want to name countries necessarily,
    but I do want to point out that, in my written testimony, I
    submitted what I think is a very comprehensive open-source-
    based list of entities and companies that are providing
    material support and services to Mahan Air. Many of these
    companies are based in allied countries, friendly countries to
    the United States. I think that is a perfect example of where
    the United States can put companies and countries to a choice
    not to help a designated entity under 13224.
        Mr. Pittenger. Thank you.
        We are tracking the mining of diamonds in Africa going to
    Dubai and then back to India to be cut and through some measure
    of trade-based money laundering. What awareness do you have of
    this, and what countries would be complicit in this effort?
        Mr. Ottolenghi. Are you asking me specifically or--
        Mr. Pittenger. I am asking the four of you. If you want to
    respond, you have 20 seconds, please.
        Mr. Ottolenghi. I think that, once again, as you know,
    these networks are global. There is an established connection
    between West Africa and illicit trade-based money laundering
    activities by Hezbollah and the tri-border area and, more
    broadly speaking, Latin America. I think that that is where one
    should look, especially at the transport, both by ship and air
    connections, that move the merchandise from point A to point B.
        Mr. Pittenger. Thank you. My time has expired.
        Chairman Pearce. Thank you. The gentleman's time has
    expired.
        The Chair now recognizes the gentleman from Massachusetts,
    Mr. Lynch, for 5 minutes.
        Mr. Lynch. Thank you very much, Mr. Chairman, all the
    chairmen and all the ranking members. I think this is certainly
    a very deserving topic for the hearing.
        As part of the JCPOA, we agreed to lift sanctions on
    aviation equipment and aircraft. Specifically, it commits the
    U.S. to allow for the sale of commercial passenger aircraft and
    related parts and services to Iran, provided that licensed
    items and services are used exclusively for commercial
    passenger aviation.
        One of my contacts at the IAEA, Olli Heinonen, told me that
    one of the most dangerous things he did as an inspector in Iran
    was to fly internally in Iran. He said because of the
    sanctions, the quality of the aircraft was very, very poor. And
    the inspectors, to a person, thought they were putting their
    lives at risk every time they flew internally. They are okay
    flying from Frankfurt into Tehran, but if they had to fly
    inside Iran, very big problems.
        Now, as Dr. Ottolenghi has pointed out, today, at about
    4:00, Boeing has announced a $3 billion deal with Iran to
    provide, as you said, 30 737 MAX airplanes.
        Dr. Maloney--and I have heard--we will go back to you in a
    second. This is a big deal for Boeing in its commercial
    aircraft. Do you see any problems in this? I look at the assets
    that Iran has in terms of C-130s and other aircraft. They are
    still flying some of our F-14s that they bought under the Shah.
    If it is military aircraft we are worried about, they have
    that, and they have the ability to buy Russian aircraft as
    well. Is this a good thing for the U.S. or a bad thing?
        Ms. Maloney. I think clearly it is both. I have flown on
    Iranian aircraft inside Iran, and I can share the assessments
    that you shared, that it is quite hair-raising. And the sale of
    passenger aircraft and airline parts was something that the
    Iranian people, that Iranian leaders have talked about and
    attached great importance to. I have never quite understood,
    since it doesn't necessarily help their economy significantly,
    but certainly for ordinary Iranians, it was quite meaningful,
    given the history of commercial air disasters within Iran, but
    as Dr. Ottolenghi has cited, there is clearly some diversion of
    passenger aircraft for non-civilian purposes. The deal does not
    provide an adequate remedy for that. I think we need to
    continue to adhere to our obligations under the nuclear deal.
    Violating the deal would only leave us isolated from our
    diplomatic partners and make us less effective in trying to
    curtail Iran's worst behavior.
        The most effective way that we can respond to the sorts of
    nefarious activities that Iran is undertaking and using its
    commercial aircraft would be to work with our P5+1 partners to
    amend the deal to find specific provisions to add to the deal
    that in fact prevent Iran from undertaking these actions or
    enable us to curtail our sale of passenger aircraft in response
    to the specific sorts of instances that Dr. Ottolenghi has
    described.
        Mr. Lynch. Okay. The other aspect of this is I have always
    felt that having inspectors on the ground in Iran and having a
    tighter assessment of what their capacity is at a given moment
    was much better than what we were doing before, which was sort
    of trying to come up with a timeline, and several of those
    turned out to be completely false and inaccurate. Even our
    Israeli friends, the timelines they gave us turned out to be
    faulty, which is unusual. They usually have excellent
    intelligence. But I can't see how we are worse off by having
    inspectors on the ground there and being able to make that
    determination in a more precise manner. Do you agree, Dr.
    Maloney?
        Ms. Maloney. I do agree. At the end of the expiration of
    the provisions of the nuclear deal, we will have vastly greater
    information about Iran's capabilities and intentions than we
    would have had without it. We are significantly advantaged by
    the continuous presence of intrusive verification and
    monitoring.
        Mr. Lynch. Okay. Thank you. I see my time has expired. I
    yield back.
        Chairman Pearce. The gentleman's time has expired.
        The Chair now recognizes the gentleman from Pennsylvania,
    Mr. Rothfus, for 5 minutes.
        Mr. Rothfus. Thank you, Mr. Chairman.
        Dr. Ottolenghi, on page 9 of your testimony, you cited a
    story from The Jerusalem Post about Iran smuggling weapons to
    Hezbollah on commercial flights. You also listed 67 service
    providers to Mahan Air in Europe, East Asia, Central Asia, and
    the Middle East. Do you have any concern about the opportunity
    for Iran to smuggle weapons and technology beyond the Middle
    East?
        Mr. Ottolenghi. I do not have any evidence that they would
    be using Mahan Air for smuggling weapons, say, to Europe or to
    Asia, but certainly they have a history of suborning their
    civil aviation sector to nefarious activities, wherever those
    activities might be. Actually, we know it for a fact, because
    that was part of the reason why so many of their airlines were
    designated before the JCPOA, that Iran Air Cargo and other
    operators were being used to ship illicitly procured technology
    from Western destinations back into Iran. So I wouldn't rule it
    out, sir.
        Mr. Rothfus. Again, I would be concerned, given Hezbollah's
    international presence, including Latin America. Would that be
    of any concern for you?
        Mr. Ottolenghi. My main concern when it comes to
    Hezbollah's overseas activities is their deep, enduring
    involvement in all sorts of illicit criminal activities, first
    and foremost drug trafficking. There is an enormous amount of
    open-source evidence, including recent arrests in the tri-
    border region involving Hezbollah operatives trying to disguise
    drugs before shipping them overseas to Europe--mainly European
    and Middle Eastern markets. That is certainly the most pressing
    concern, but where you have mechanisms to disguise the shipment
    of drugs, you can also disguise weapons for sure.
        Mr. Rothfus. I want to talk a little bit about the
    announcement today with Boeing. Your testimony indicates that
    Iran has been talking about just replacing its aging fleets,
    and one might think they are arguing this is a way to increase
    their commercial capacity. Do you expect Iran to expand the
    number of nations it has service routes to through all these
    purchases?
        Mr. Ottolenghi. I do expect Iran to expand its commercial
    routes.
        Mr. Rothfus. Where would you expect them to be expanding
    to?
        Mr. Ottolenghi. Again, to go back to the point about Mahan
    Air, Mahan Air has already expanded its routes into European
    destinations, adding several destinations since the JCPOA was
    reached, despite the fact that Mahan Air is under sanctions.
        The problem I see is that a lot of these aircrafts that are
    being used in innocent, benign commercial routes to ferry
    civilian passengers are immediately repurposed once they come
    back to Iran to carry fighters and weapons to Syria or to Yemen
    or to potentially other destinations. They are used to carry
    back the wounded and the fallen in combat, and then, within
    hours, as the photographs showed, they are repurposed back for
    civilian use. That is something that just shouldn't happen. The
    Russians are conducting their own airlift into Syria. They are
    strictly using military aircraft that belongs to the Russian
    Air Force. They do not allow Aeroflot or other civilian
    carriers to participate. That is the very least we should
    expect.
        Mr. Rothfus. Do we know how Iran is going to be financing
    the purchases of these aircraft?
        Mr. Ottolenghi. That is part of the problem. A lot of
    these--by definition, the procurement by sanctioned entities
    was always opaque and hard to detect, but also when it comes to
    the deals that follow the JCPOA that have been based on
    licensing and are seemingly in compliance with the JCPOA, there
    is very limited public information available about the
    structure of the financing, the financial institutions
    involved, the leasing companies potentially involved, and I
    think that it behooves both Boeing and Airbus and potentially
    other aircraft manufacturers to actually come perhaps before
    Congress and make this information public and available. Thank
    you.
        Mr. Rothfus. Mr. Taleblu, you mentioned Iran's
    sophistication with money laundering through oil exports and
    precious metals on page 9 of your testimony. Given the Islamic
    Guard's past support for the Taliban in Afghanistan against the
    United States, is there any evidence of Afghanistan being used
    by Iran as a route for illicit trade and money laundering?
        Mr. Taleblu. Thank you very much for your question. I
    definitely assume so. And I definitely assume that there would
    be, given the drawdown in U.S. forces. It is known that in
    Afghanistan's westernmost city, Herat, where there is a
    population that speaks Dari, that one of the preferred
    currencies is the Iranian rial. I could totally see Iran
    offloading rials into Afghanistan and Iran looking to tap into
    those other networks, particularly precious metals in
    Afghanistan, but it would likely come at a time when it feels
    like it has the least to lose from an engagement with the U.S.
    there.
        Chairman Pearce. The gentleman's time has expired. The
    Chair now recognizes the gentleman from California, Mr.
    Sherman, for 5 minutes.
        Mr. Sherman. Thank you. I would like to bring the
    committee's attention to the No U.S. Financing for Iran Act. It
    passed this committee overwhelmingly, and it passed the House
    by a very significant margin, but it died in the Senate. It
    would provide that we would not allow U.S. banks to finance
    sales of airplanes to Iran. And I would ask the witnesses about
    it, but I think we have even more expertise on this side of the
    room in the sense of, do we really want Bank of America or
    Wells Fargo or Goldman Sachs to be lobbying Congress in favor
    of Iran, because otherwise, Iran may be unwilling or unable to
    pay the $10 billion, the $20 billion that they owe to U.S.
    banks.
        There is a tendency for us to believe in our normal affairs
    that if the lender has control over you--and I have had lenders
    that have had control over me--but in international affairs, it
    is almost the other way. The lender has to beg the borrower,
    please pay. And I have enough lobbyists on the Iranian side.
        I will ask each of our witnesses, is there any reason we
    wouldn't designate the Iran Revolutionary Guard Corps as a
    terrorist organization? And does it make sense to say the Quds
    Force is a terrorist organization, but its parent company, the
    Revolutionary Guard Corps, is not? Does that make any more
    sense than saying Osama bin Laden's right hand is a terrorist
    hand, but his left hand was not? Should we designate? Does it
    make any sense to designate one without the other? We will go
    to the first witness.
        Mr. Taleblu. Thank you very much for your excellent
    question. The United States Government actually had a similar
    debate in 2007, and they were worried about designating the
    IRGC versus the Quds Force, so they took a risk-averse approach
    and only designated the Quds Force. I think that was a mistake
    then, given the role of the IRGC, and I think it remains a
    mistake now. IRGC non-Quds Force assets, such as its ground
    forces, are active in Syria. I think Executive Order 13224
    designation for the IRGC is crucial more now than ever before.
        Mr. Sherman. Thank you for mentioning Syria because the
    face of this regime--or the face it would like the world to see
    is that of smiling, debonair Foreign Minister Zarif. The real
    face of this regime is Aylan Kurdi, that 3-year-old boy on the
    beach of the Mediterranean, who died along with nearly 500,000
    other people as a result of Assad, but Assad would not be there
    today if it was not for Iran.
        Let's go on to Mr. McInnis.
        Mr. McInnis. Yes. As I had stated previously, for moral
    reasons, I support a Foreign Terrorist Organization designation
    for the IRGC, but I recognize, given some of the potential
    repercussions of that at this point in time, an Executive Order
    13224 designation for the IRGC is probably the most appropriate
    route as we assess potential repercussions.
        Mr. Sherman. Dr. Maloney?
        Ms. Maloney. Iran is the leading state sponsor of
    terrorism. It is clear that its military is directly involved
    and complicit in those actions. It doesn't seem obvious to me
    what the designation of the Revolutionary Guard does in terms
    of deterring Iran's involvement in terrorism or deterring the
    IRGC from continuing the actions that it takes. I think that
    the Pentagon has greater influence over Iran's regional
    activities than a designation would have.
        Mr. Sherman. I am a bit confused by the answer, but I will
    go on to the last witness.
        Mr. Ottolenghi. If I may address the question, and thank
    you for your point. I completely agree with the notion that
    sanctioning the Quds Force without sanctioning the IRGC is
    basically making a distinction without a difference. They are
    one and the same. They are part of the same structure. And I
    would make the further argument that sanctioning the IRGC under
    Executive Order 13224, which goes after the terror finance and
    providers of material support to terrorism, would enable and
    open up the possibility of sanctioning hundreds of IRGC
    companies inside Iran. This would be beneficial to the business
    community as it looks into trying to identify legitimate
    interlocutors inside the Iranian economy while staying away
    from illegitimate interlocutors, the ability to designate--
        Mr. Sherman. Let me try to sneak in one more question.
        Dr. Ottolenghi, your testimony includes an annex supplying
    names of service providers that do business with Mahan Air. The
    U.S. has urged countries in Europe and Asia to disallow the
    airline to serve their airports and has applied some secondary
    sanctions to firms involved in aircraft transactions. Yet the
    airlines still operate in countries that are friendly to the
    United States, including Germany, France, and Japan. Is the
    Treasury doing enough, and should we be sanctioning those
    companies that service Air Mahan planes when they do land in
    Germany, France, or Japan?
        Mr. Ottolenghi. With your permission, very briefly, first
    of all, I think it is a very important question to ask Treasury
    what they have done so far to persuade these companies from
    stopping this type of service.
        Second of all, I think that the answer as to the
    effectiveness of these sanctions is very clear. When the United
    States imposed heavy fines on financial institutions that were
    allowing illicit transactions, the financial world got the
    message and stopped Iran from conducting illicit financing--or
    at least introduced very strict compliance standards. I think
    that a similar type of action with fines and penalties imposed
    on some of these companies would send a message across-the-
    board. Thank you.
        Mr. Sherman. I yield back.
        Chairman Pearce. The gentleman's time has expired.
        The Chair now recognizes the gentlelady from Utah, Mrs.
    Love.
        Mrs. Love. Thank you, Mr. Chairman.
        And thank you all for being here today. I am going to just
    jump into these questions as quickly as I can.
        Mr. McInnis, this is for you. Under the Obama
    Administration's watch, Russia sold and transferred to Iran the
    S-300 advanced anti-aircraft system. Why do you think that the
    Obama Administration refused to sanction those Russian entities
    under the U.S. law?
        Mr. McInnis. The S-300, those particular entities, in
    essence--and I am trying to remember the history here. I may
    need some help with this, but--
        Mrs. Love. One of the most advanced anti-aircraft systems
    in the world.
        Mr. McInnis. No, no. I am familiar with the S-300. I am
    trying to remember the specific--the companies involved in this
    from the Russian perspective, because this is part of where I
    think our sanctions policies need to be going in the future, in
    particular when it comes to the Russian companies as they look
    toward potentially trying to work around the current existing
    U.N. Convention on Weapons Sanctions, that I worry that we are
    going to need to take very aggressive actions in the future to
    prevent such major advanced technology transfers in the future.
    But I do think that was a particular leverage that we were able
    to use with the Russians during that timeframe to prevent the
    transfer of something that was going to--
        Mrs. Love. Did we miss the opportunity to use efforts to
    actually sanction?
        Mr. McInnis. The thing is that was something that the
    Russians could do at that point in time, and we--
        Mrs. Love. So they weren't--you don't believe that they
    were in violation of the Iran Sanctions Act or the Iran-Iraq
    Arms Nonproliferation Act?
        Mr. McInnis. At that point in time, I think that they
    were--their authority--and correct me if I am wrong here on the
    panel--the Russians were allowed to sell those particular
    conventional weapons at that point in time.
        Mrs. Love. Did you have a--you nodded your head at one
    point--
        Mr. McInnis. I mean, am I off on that?
        Mrs. Love. --Mr. Taleblu. Go ahead.
        Mr. Taleblu. Yes. He is correct. Unfortunately, the Russian
    counterargument to those proposals was they cited the U.N.
    Conventional Registrar of Arms, which, in category 7 omits,
    ``ground-to-air missiles,'' of which the S-300 SAM is one.
        Mrs. Love. Okay. And if we are going to--I just want to ask
    one more question, Mr. McInnis. In your testimony, you said
    that one way we can suppress the Iranian military modernization
    and growth is by deterring Russian and Chinese equipment sales
    to Iran. What would those sanctions or efforts look like, in
    your opinion?
        Mr. McInnis. And this is what I was referring to as we move
    forward, is that I am worried that we are going to need, as the
    JCPOA continue--under the implementation, that we are going to
    need to look at sanctioning and targeted sanctions against
    Rosneft and other subsidiaries that the IRGC--or that works
    with the IRGC or firms connected to the IRGC and the Iranian
    defense industry. That is where we need to focus and begin to
    look at secondary sanctions that affect the Russian defense
    industry to prevent Iran from gaining significant advanced
    equipment like that. That is what I am particularly worried
    about. And I think that those are things that we could
    construct here in the U.S.
        Mrs. Love. Mr. Taleblu, since the JCPOA was agreed to, how
    have Iran's efforts to export terrorism changed, in your
    opinion?
        Mr. Taleblu. Thank you very much for the question. I think,
    unfortunately, they have significantly been enhanced. The
    Iranian role, at least in Iraq and Syria and its ``near
    abroad'' has deepened. Iran now uses the argument in Iraq that,
    ``You need us more than you need the U.S.,'' which clearly
    isn't true. The U.S. is the one leading most of the strikes
    against ISIS. Shia militias often unfortunately engage in
    sectarian slaughter on the back ends of the cities that U.S.
    Forces combined with the Iraqi Army actually liberate. So there
    actually needs to be a way to keep Iran out of this equation,
    but Iran is able to marshal these arguments and say, ``No, you
    need us; we are in the region longer,'' and they will cite--you
    know, there is a quote from Qasem Soleimani that says, ``We are
    not like the Americans; we don't abandon our friends.''
        So I think now is the time to actually come to the aid of
    states like Iraq, the provincial government of Iraq in
    particular, to deny Iran this argument.
        Mrs. Love. Do you believe that there is a difference
    between conventional ballistic missiles and those which are
    designed to be nuclear-capable, a phrase which exists in the
    UNSCR?
        Mr. Taleblu. Thank you for this question too. This is
    unfortunately complex. The Iranians have used the word
    ``designed'' in the resolution to kind of pooh-pooh any
    attempts by the U.S. and the international community to go
    after its ballistic missile testing. I think when we look at
    the word ``nuclear-capable,'' that is a word that comes from a
    specific metric in this international regime--
        Mrs. Love. Right.
        Mr. Taleblu. --the MTCRs, 300 kilometers over 500
    kilograms. So it is range over payload. Most of the missiles
    that Iran has tested since the deal actually meet and far
    exceed that, but I think it is kind of an artificial metric to
    add, because there are many ballistic missiles that can carry a
    nuclear weapon, such as the Lance, which the U.S. sold to
    Israel; such as the Pakistani HATF IX; such as the French
    Pluton, which was deployed during the Cold War. These are
    important munitions that actually can carry a nuclear warhead
    that fall short of that metric, and I think limiting ourselves
    to that metric only concedes the argument to Iran.
        Mrs. Love. Thank you.
        Mr. Chairman, my time has expired. Thank you, Mr. Chairman.
        Chairman Pearce. The gentlelady's time has expired.
        The Chair now recognizes the gentleman from North Carolina,
    Mr. Budd, for 5 minutes.
        Mr. Budd. Thank you, Mr. Chairman.
        Mr. Taleblu, one of Iran's advantages, as you allude to in
    your testimony, is to provide weapons that acquire costly
    countermeasures from traditional forces in low-intensity
    conflicts. The U.S., while its allies are often disadvantaged
    by these tactics, has the ability to exert diplomatic leverage
    through additional sanctions in a way that Iran, which is a
    weak economy, does not. The question is, is it fair to think
    about a strengthened, more effective sanctions regime that
    includes additional measures to deny Iran access to the payment
    network as utilizing a primary U.S. advantage? Is that a
    primary U.S. advantage?
        Mr. Taleblu. Thank you very much. That absolutely is a
    primary U.S. advantage, and it is absolutely fair to seek those
    measures, but it is also absolutely fair to seek diplomacy with
    our partners' help to interdict the sales and transfers of
    these weapons too.
        Mr. Budd. So that is a soft power way that we could
    leverage Iran--I guess you could elaborate on that a little
    more how we could go about that?
        Mr. Taleblu. Sure. That it is soft power, I think, hits the
    nail on the head. We could target the entities that actually
    engage in the production or transfer of these weapons. There is
    another Executive Order we have been talking about, Executive
    Order 13224, all of today. There is another one, 13611, I
    believe, which came into force May 2012, and that blocks the
    property and assets of those threatening the peace and
    stability of Yemen. Iranian arms transfers to Yemen have been
    intercepted at least 4 times. There are Iranian antitank
    missiles, copies of Iranian antitank missiles being used in
    Yemen. So we could investigate, does the IRGC or any Iranian
    private entity which facilitates the transfer of weapons to the
    Yemeni theater deserve to be targeted pursuant to sanctions as
    defined in this new executive order?
        Mr. Budd. Sure. So are the benefits the Iranians get as a
    result of this Iran deal strong enough to keep them in the
    agreement if the U.S. dials up pressure in other areas?
        Mr. Taleblu. While it is important to look at both the
    costs and the incentives of Iran for it to keep the nuclear
    deal, I think it is also important to be aware of the domestic
    debates in Iran. Here I have an article from March 10, 2017, in
    a major Iranian newspaper, Kayhan, and the headline is a quote
    from Iran's Deputy Foreign Minister. And I am just translating
    it as I am reading it now, and it says, ``The JCPOA wasn't
    supposed to make Iran's economy blossom.'' So he is basically
    taking the exact opposite of the argument that he is going to
    international banks and to the Western world. Basically, he
    is--the argument he is making to the West is, no, you have an
    investment in the Iranian economy, but as Adam Szubin said,
    ``The JCPOA is an agreement, not a cashier's check.'' Just
    because we have agreed to waive sanctions doesn't mean we need
    to go actively advocate on behalf of the Iranian economy. That
    is something that they need to do by fixing their AML laws, by
    making their companies more transparent, and by getting the
    IRGC out of the legitimate private sector.
        Mr. Budd. So if they still have maneuvering room, bottom
    line, because the Iran agreement is so good for the Iranians,
    we could get tough on them and they would still--they wouldn't
    leave?
        Mr. Taleblu. To the best of my assessment, I believe that
    Iran has constantly cited in their domestic press that they
    feel that we need the deal, the United States needed the deal
    more than they do. I believe Mohammad-Javad Larijani, who is
    the brother of Iran's Parliamentary Speaker, made this point in
    the fall of 2016.
        Mr. Budd. The Iran deal hasn't worked. Iran remains the
    world's foremost state sponsorship of terrorism. And they
    capture and humiliate our soldiers. They are first-rate money
    launderers, as we have heard. They test ballistic missiles
    regularly. The IRG is now solidifying its place as one of the
    largest quasi-criminal syndicates, and the list just keeps
    going on. But the theory that Iran was a geopolitical
    equivalent of a lost sheep waiting for the international
    community to stop being mean to it, the theory that the Iran
    deal is based on, has been proven totally false. So are the
    options for additional sanctions you have laid out in your
    testimony, is that an option for the United States to recover
    some ground in light of the total failure of the Iran deal?
        Mr. Taleblu. It is definitely one of the many ways that the
    U.S. should deal with this. In fact, what is required is really
    a whole-of-government approach. I think there has been a
    significant informational leg in the campaign against Iran that
    has been missing, such as we have all been looking at Iran for
    decades now with this combined experience of this distinguished
    panel, but one thing that hasn't been said today is that one of
    the saddest things to see about Iran is the constant
    prioritization of the regime's interest over their national
    interest, over their own narrow ideological interest over the
    interests of their own people. You see it with the Boeing deal.
    You see it with military use of civilian airliners. This is
    something that should be highlighted in that informational
    campaign to supplement U.S. economic sanctions.
        Mr. Budd. Thank you, Mr. Taleblu.
        Mr. McInnis, in the remaining time we have, how would you--
    or how do we deter Russian and Chinese arms sales to Iran
    through a sanctions regime?
        Mr. McInnis. Yes. As I had alluded to before, I think,
    targeting increased designations of the IRGC, lowering the
    thresholds, as we discussed before, perhaps down to 25 percent
    and increasingly detoxify IRGC-related defense industries so
    that we have an increased secondary sanctions regime so that
    defense companies that want to work with the IRGC or sell to
    the IRGC particular types of weapons that we designate, we can
    continue to make it--financing and make those types of sales
    more and more difficult for the Russians, Chinese, and others
    to do.
        Mr. Budd. Thank you very much.
        I yield back.
        Chairman Barr. The gentleman's time has expired. And the
    gentleman from North Carolina will be advised that the shot
    clock on the floor was almost exactly in line with his, and so
    the time on the floor has run out like it ran out against
    Gonzaga last night.
        The Chair now recognizes the gentleman from Tennessee, Mr.
    Kustoff, for 5 minutes. And be advised we are expecting votes
    at any moment on the Floor. We will try to get in the
    questions, but if not, we will adjourn the hearing. So, the
    gentleman from Tennessee.
        Mr. Kustoff. Thank you, Mr. Chairman.
        Mr. McInnis, we know that last year, there was a payment
    from the Obama Administration of around $400 million on the
    same day or about the same time that Iran released five
    American prisoners. We also know that the Obama Administration
    stated a number of times that it would neither negotiate nor
    pay a ransom. This payment appears to be a contradiction of the
    remarks made by the Obama Administration, and people can judge
    that as they like.
        Specifically, though, is there any evidence that you see
    that Iran used this and any other cash payments following
    implementation of the JCPOA to further or worsen the conflicts
    in the region, such as the civil war in Syria or the conflicts
    in Yemen?
        Mr. McInnis. I believe that the moneys--especially in
    2016--that Iran accrued from the JCPOA, insofar as following
    their budget in particular, you saw a number of these types of
    allocations that particular--what ended up being $1.7 billion
    in total from that settlement. Many of those moneys were
    directed to be used by the IRGC for its overall military
    activities.
        How to discern exactly if that money went to specific
    activities in Syria or Iraq or to support terrorism elsewhere
    is hard to discern, but I think that it is pretty clear from
    analysis of their budget that the moneys that that came out of
    the JCPOA, a good portion of them was very clearly sent to the
    military and to the IRGC for their activities around the
    region.
        Mr. Kustoff. Thank you, Mr. McInnis.
        Mr. Taleblu, yesterday, there was a story that posted on
    The Wall Street Journal website, and it is entitled, ``Syria's
    Civil War Produces a Clear Winner: Hezbollah.'' And I don't
    want to read from the entire article, but if I could:
    ``Hezbollah today is stronger, more independent, and in command
    of a new Syrian militia that its officials say is ready to be
    deployed to other conflicts in the region. Hezbollah now fights
    alongside Russian troops, its first alliance with a global
    power. It was Hezbollah that devised the battle plan for Aleppo
    used by Syrian and Russian forces last year, according to Arab
    and U.S. officials who monitor the group.''
        One line that struck me: ``Thanks to money and arms from
    Tehran, Hezbollah now stands almost on a par with Iran as a
    protector of President Bashar al-Assad's government and as a
    sponsor of Shiite forces in Syria.''
        So, if we could, how specifically does Iran sponsor
    terrorism and other illicit activity with groups such as Hamas
    and Hezbollah, and is there any additional evidence that
    suggests Iran has taken additional steps to further destabilize
    the region?
        Mr. Taleblu. Thank you very much for that excellent
    question. I think that observation is key, because having been
    tracking the issue in Iran's war in Syria for a couple of years
    now, I have seen many testimonies where analysts have alleged
    that actually having Hezbollah fight deeper in the Syrian civil
    war could have a long-term positive effect because it would
    discredit them as a Lebanese political institution or a
    Lebanese political force.
        Unfortunately, the exact opposite thing has happened, as
    you had mentioned. In 2007, for instance, there were reports
    that Hezbollah was helping Iran train Shia militias on Iranian
    territory and then deploying them to Iraq. In 2013 through
    2016, as you mentioned, Hezbollah was active helping Assad take
    back territory. In 2015 through 2017, they were reporting that
    Hezbollah allegedly is helping Iran in Yemen. So, in fact, this
    force is growing its strength. It is not weak--it is not being
    diminished at all.
        And while the issue of exact number of payments to
    Hezbollah remains to be seen, Iran has furnished that group
    with everything from C-802 anti-ship missiles to a whole
    variety of different rockets, 107-millimeter rockets, 106-
    millimeter anti-tank shells. There is a whole slew of such
    munitions that continue to be sent to groups like Hezbollah.
        Mr. Kustoff. In this Wall Street Journal article from
    yesterday entitled, ``Syria's Civil War Produces a Clear
    Winner: Hezbollah,'' the statement that I just read to you,
    ``Thanks to money and arms from Tehran, Hezbollah now stands
    almost on a par with Iran as a protector of President Bashar
    al-Assad's government and as a sponsor of Shiite fighting
    forces in Syria,'' would you agree with that statement? Are
    they equal or almost equal?
        Mr. Taleblu. I continue to see Hezbollah as more of an
    Iranian proxy than anything else. While Hezbollah may have--
        Chairman Pearce. If the Chair could interrupt, we will ask
    for that in writing. Votes have been called. We are down to 10
    minutes. We are going to try to squeeze at least one more
    questioner in.
        Mr. Davidson is recognized for 3 minutes.
        Mr. Davidson. Thank you, Mr. Chairman.
        And thank you all for being here. I appreciate your
    testimony.
        I had a question about Hezbollah's activities, and
    Hezbollah's activities with the drug trade in particular. There
    has been a fair bit of their involvement, and so far that ties
    to Lebanon, but not directly to Iran. And, of course, there is
    correlation. Has there been any successful effort to tie the
    cash flows from the drug trade, particularly with the U.S. drug
    trade, not just in Central and Latin America more broadly, but
    at U.S. border trade? Dr. Ottolenghi?
        Mr. Ottolenghi. Yes. Thank you. It is a very important
    question, and I am very grateful you brought it up. The network
    that deals with drugs is truly global. The cocaine, of course,
    comes entirely from Latin America. It travels to its multiple
    designations, Western markets mainly, but also increasingly to
    the Middle East. And while I can't go into too much detail,
    there is plenty of open-source evidence indicating multiple
    connections between the Hezbollah people in Latin America
    involved in the drug trade on the one hand, operatives and
    cartels trading in criminal organizations in Europe and other
    places in Latin America and potentially all the way to the
    United States moving the drugs, connections with the Iranian
    network in Latin America. And most troubling, the financial
    links lead all the way to the United States. In other words,
    while the drugs may not be moved directly by Hezbollah into the
    United States, into the U.S. market, Hezbollah is using U.S.
    jurisdictions in order to launder the revenues from its illicit
    trade. So there is a threat to the financial integrity of the
    U.S. financial system from Hezbollah's illicit activities in
    Latin America that are linked to the drug trade.
        Mr. Davidson. Thank you.
        And, briefly, could you mention any tools that would be
    helpful that aren't already in place?
        Mr. Ottolenghi. Thank you. I think that one important tool
    is to empower the law enforcement agencies that are chasing
    these cases, especially down in Latin America, where the
    willingness by local government to cooperate is somewhat
    diminished by the level of collusion and complicity that some
    officials in these governments have with illicit activities to
    which Hezbollah is accessory.
        Of course, once again, I bring to your attention the
    ongoing activities of Hezbollah in the tri-border area. In the
    tri-border area, there is an enormous degree of complicity,
    collusion, or just benign neglect from local officials, from
    law enforcement authorities that overlook these activities.
        Chairman Pearce. The gentleman's time has expired.
        Mr. Ottolenghi. Pressure from the United States and its
    Government would be extremely helpful.
        Mr. Davidson. Thank you. My time has expired.
        Chairman Pearce. The gentleman's time has expired.
        The Chair now recognizes the gentleman from Indiana, Mr.
    Hollingsworth, for 3 minutes.
        Mr. Hollingsworth. Thank you, Mr. Chairman. And thanks to
    all of the witnesses for being here today. We have heard a lot
    of testimony and certainly a lot of great information about
    what may need to be done next, but could you walk a step
    further and tell me what success looks like? If you had all the
    tools at your disposal, you were able to put these sanctions
    on, you were able to do these things, what would success look
    like, and how would we measure whether we have been successful?
    And then I will go one step further. And that really goes to
    everybody if each of you wants to answer.
        Mr. Taleblu. I think that is an absolutely important
    question. One measure of success is no Iranian ballistic
    missile testing for the duration of the deal should the deal
    decide to hold. Another measure of success should be marshaling
    sufficient economic pressure to erode the ability for Iran to
    domestically produce some of these systems. Another measure
    could be forcing Iran or coercing Iran to stop sending men,
    money, and munitions to Syria. So while coercion is the primary
    goal, deterrence and punishment could be secondary and tertiary
    goals.
        Mr. McInnis. Yes. I would add to that that certainly you
    can measure that by a shrinking ability for groups like
    Hezbollah and others to be able to project any type of
    terrorist activity worldwide, but also I think that Iran's
    ability to be able to build and increase the reach of its
    proxies and their ability to project any type of weapons
    against us, I think, the increasing arming and ability to move
    their proxies around the region. For me, I want to be able to
    shrink that capacity to move this new integrated militia army
    that Iran has. If it can be broken and shrunk and slowly over
    time be able to be rolled back, that, for me, is what I am
    looking for most importantly.
        Ms. Maloney. The definition of success would be a more
    responsible government in Iran, one that is not interfering and
    sowing violence throughout the region, but a broader definition
    of success would include an end to the conflicts in Syria and
    Yemen, and U.S. support for broader political, social, and
    economic reform across the region.
        Mr. Ottolenghi. I fully subscribe to what Dr. Maloney has
    just said.
        Mr. Hollingsworth. You have the problem I do. As a
    freshman, I go last and so I get to say, ``I agree,''
    frequently. But is it too much--are we asking too much of these
    sanctions? Many of the answers that you put forth are very big,
    very broad, admirable goals nonetheless, but maybe too far a
    reach for sanctions or any political pressure that the United
    States can provide? Any thoughts on that?
        Mr. Taleblu. You know, I have the pleasure of working for
    Mark Dubowitz at the Foundation for Defense of Democracies, and
    he has coined this phrase, ``Sanctions aren't a silver bullet,
    but they are silver shrapnel.'' And I definitely think there is
    a lot of shrapnel that the Iranian body armor can afford to
    take right now. Again, it should be coupled with a whole-of-
    government approach.
        Chairman Pearce. The gentleman's time has expired.
        I would like to thank our witnesses for your testimony
    today and for answering our questions.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        This hearing is adjourned.
        [Whereupon, at 4:32 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 April 4, 2017

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