```

[Senate Hearing 113-266]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 113-266

 
                   ASSESSING THE P5+1 INTERIM NUCLEAR

            AGREEMENT WITH IRAN: ADMINISTRATION PERSPECTIVES
=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON

                   BANKING,HOUSING,AND URBAN AFFAIRS

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

            EXAMINING THE PROSPECTS FOR REACHING A LONG-TERM
   COMPREHENSIVE SOLUTION DESIGNED TO BRING AN END TO IRAN'S ILLICIT 
                           NUCLEAR ACTIVITIES

                               __________

                           DECEMBER 12, 2013

                               __________

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

                 Available at: http: //www.fdsys.gov /

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20402-0001

            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                  Laura Swanson, Deputy Staff Director

                    Colin McGinnis, Policy Director

                         Patrick Grant, Counsel

                 Riker Vermilye, Legislative Assistant

                  Greg Dean, Republican Chief Counsel

          John O'Hara, Republican Senior Investigative Counsel

                       Dawn Ratliff, Chief Clerk

                       Taylor Reed, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)

                            C O N T E N T S

                              ----------                              

                      THURSDAY, DECEMBER 12, 2013

                                                                   Page

Opening statement of Chairman Johnson............................     1

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     2
    Senator Tester
        Prepared statement.......................................    27

                               WITNESSES

Wendy Sherman, Under Secretary for Political Affairs, Department 
  of State.......................................................     4
    Prepared statement...........................................    27
    Responses to written questions of:
        Senator Tester...........................................    36
        Senator Toomey...........................................    38
David Cohen, Under Secretary for Terrorism and Financial 
  Intelligence, Department of the Treasury.......................     7
    Prepared statement...........................................    30

                                 (iii)

ASSESSING THE P5+1 INTERIM NUCLEAR AGREEMENT WITH IRAN: ADMINISTRATION 
                              PERSPECTIVES

                              ----------                              

                      THURSDAY, DECEMBER 12, 2013

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:06 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Tim Johnson, Chairman of the 
Committee, presiding.

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. I call this hearing to order.
    Yesterday all Senators had a chance to hear directly from 
Secretaries Lew and Kerry and senior intelligence officials on 
the first step nuclear agreement reached in Geneva between the 
P5+1 and Iran. Today we will delve into the agreement in 
greater detail, assess prospects for a final agreement, and 
explore the likely effects of congressional action on new 
sanctions legislation at this time, to which the President and 
his Secretary of State strongly object.
    I have talked with various Members of the Committee about 
these issues and ensured that all Members have had 
opportunities to be briefed repeatedly by Secretaries Kerry and 
Lew, and the intelligence community, on the ongoing Geneva 
negotiations.
    Let me be clear. I support strong sanctions and authored 
many of the U.S. sanctions currently in place. I have 
negotiated a new bipartisan sanctions bill with my Ranking 
Member that could be finalized and moved quickly if Iran fails 
to comply with the terms of the first step agreement in Geneva 
or if negotiations collapse. Sanctions have been an effective 
tool of coercive diplomacy, crippling Iran's economy, sharply 
curtailing its oil revenues, and helping to persuade the 
Iranian people to vote for new leadership.
    It now appears that some of Iran's leaders have recognized 
that the only way to relieve the economic pressure and lessen 
Iran's international isolation is to reach agreement with the 
West to halt its illicit nuclear activities. Time will tell if 
that is true--but only if Congress is willing to provide some 
time.
    Some have argued that acting on a bill now, as long as it 
does not become effective in 6 months, gives the Administration 
additional leverage in negotiations. The President disagrees, 
arguing that congressional action on new sanctions would be 
taken as a sign of bad faith by our P5+1 partners and by Iran, 
and could erode or even unravel the sanctions regime.
    The history of our relationship with Iran is littered with 
missed opportunities on both sides. I want to assess the formal 
analysis the Committee is to receive today from the Director of 
National Intelligence on the effects on negotiations and on our 
P5+1 partners of congressional action on new sanctions, but I 
agree that the Administration's request for a diplomatic pause 
is reasonable. A new round of U.S. sanctions now could rupture 
the unity of the international coalition against Iran's nuclear 
program. Existing sanctions will continue to bite, and to bite 
hard. Commentators from left to right and all of my colleagues 
involved in this effort have acknowledged this; it is not a 
matter of controversy.
    Now that Iran has come to the table and entered into this 
first step agreement, I believe this may well be the last best 
chance to resolve this crisis by diplomacy, and so the 
President is absolutely right to fully test Iran's leaders. And 
I will be vigilant to ensure that the Joint Action Plan is 
strictly enforced. I have requested, along with Chairmen Levin 
and Feinstein, regular briefings on compliance from the 
intelligence community. In the meantime, we should not do 
anything counterproductive that might shatter Western unity on 
this issue. We should make sure that if the talks fail, it was 
Iran that caused their failure. We should not give Iran, the 
P5+1 countries, or other Nations a pretext to lay 
responsibility for their collapse on us. Ultimately, while some 
of us might differ on tactics, it is clear we all share the 
same goal: to ensure that Iran does not achieve a nuclear 
weapon, and to do that diplomatically if possible, while 
recognizing that other alternatives remain on the table.
    I now turn to Ranking Member Crapo for his opening 
statement.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you, Mr. Chairman. I appreciate your 
comments and agree with you that although there may be some 
differences on tactics, we all have the same common goal in 
mind. And on this issue, as well as so many others in this 
Committee, I appreciate your friendship and our working 
relationship as we work together on sanctions legislation.
    This hearing provides us an opportunity to consider the 
Administration's perspective on negotiations, and perhaps it 
may better understand ours as well. Congressional sanctions 
designed in a completely bipartisan fashion have successfully 
worked to bring Iran to the negotiating table. We must maintain 
that leverage going forward.
    The impact of sanctions on Iran's economy is dramatic. In 
just the last 2 years, Iran's oil exports have dropped by about 
60 percent, to roughly 1 million barrels a day. Its gross 
domestic product shrunk by 6 percent while inflation shot up to 
45 percent, and to even higher levels on certain products. And 
unemployment currently hovers around the 35-percent mark.
    Iran faced a stark choice earlier this year: continue to 
live under dire economic circumstances that would only worsen, 
or dismantle its entire nuclear program in an effort to regain 
control over its economy.
    In recent weeks, our witnesses returned from Geneva to 
present us with an agreed-upon Joint Plan of Action among the 
P5+1 and Iran. As the ink lay drying on the agreement, voices 
in Congress and from among certain allies and friends could 
immediately be heard, raising objections and expressions of 
support alike. Most troubling is the reticence and concern our 
good friend Israel has with the deal.
    For my part, I was very disappointed to learn that the 
release of Idaho's own Pastor Saeed Abedini and other Americans 
unjustly held by the regime were not made part of the deal. I 
could not imagine a better confidence-building measure on 
Iran's part than for the regime to reflect some degree of 
humanity and principled justice by releasing these brave 
Americans. As the Administration embarks toward a final 
agreement, every effort must be made to bring Pastor Abedini 
and his fellow Americans home where they belong.
    I have several concerns with the plan of action. Language 
in the plan is vague on how the freeze, rollback, and sanction 
relief work together. I also have concerns about the enrichment 
and verification provisions. I worry that both the current plan 
and final agreement will permit Iran to maintain its enrichment 
program rather than direct it to join some 19 other Nations who 
purchase all of their nuclear fuel from traditional suppliers.
    I also worry that the plan does not seem to curtail Iran's 
development of advanced ballistic missiles, which, again, is 
troubling in conjunction with its enrichment program. This is a 
Nation that will require the strictest monitoring and most 
aggressive diplomacy on terrorism and human rights violations 
for decades to come. There can be no question about what we 
expect of Tehran. Iran cannot be allowed even the possibility 
of nuclear weaponization in the context of its history of other 
destabilizing activities.
    The eventual lifting of nuclear-related sanctions in a 
final deal also raises a number of questions. First, which 
sanctions are to be defined specifically as nuclear related? 
Second, how will those sanctions be separated from a complex 
web of sanctions intended to address Iran's sponsorship of 
terrorists, human rights violations, and certain kinds of 
advanced ballistic missiles? This lack of clarity may hamstring 
future U.S. policy options necessary to address Iran's 
destabilizing activities.
    I hope that today's witnesses can better clarify what 
precisely the mutual understanding is with Iran. Sanctions 
clearly worked to bring Iran to the negotiating table. I remain 
convinced that we must maintain that leverage moving forward. 
The United States must continue to vigorously enforce the 
existing core sanctions architecture and develop a sanctions 
plan of action in the event that negotiations do not produce 
the results that we all want.
    Should diplomacy fail in its mission to effectively control 
the apparent extent of the Iranian nuclear program, whether 6 
months or a year down the road, there is simply no time 
available to waste then on creating bills or Executive orders. 
The United States must maintain existing multilateral sanctions 
pressure, and Congress and the Administration each need to 
prepare now for the possibility that an effective, final, 
comprehensive agreement may not be reached.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Crapo.
    To allow for sufficient time for questions, we are limiting 
opening statements to the Chair and Ranking Member. All 
Senators are welcome to submit an opening statement for the 
record.
    Now I would like to introduce our witnesses. The Honorable 
Wendy Sherman is the Under Secretary for Political Affairs at 
the U.S. Department of State, and the Honorable David Cohen is 
the Under Secretary for Terrorism and Financial Intelligence at 
the U.S. Department of Treasury.
    Under Secretary Sherman, please begin your testimony.

   STATEMENT OF WENDY SHERMAN, UNDER SECRETARY FOR POLITICAL 
                  AFFAIRS, DEPARTMENT OF STATE

    Ms. Sherman. Thank you very much, and good morning, Mr. 
Chairman, Ranking Member Crapo, distinguished Members of the 
Committee. Thank you very much for inviting me and Under 
Secretary Cohen to discuss the details of the Joint Plan of 
Action agreed to by our P5+1 partners and Iran. I also want to 
especially thank you, Chairman Johnson, for your leadership on 
this issue over the past weeks and months and this Committee's 
support through many months and years in bringing Iran to the 
table through unprecedented sanctions.
    Our collaboration on sanctions is what has brought Iran to 
the table. However, it is important to underscore that what we 
do from this point forward is just as critical, if not more so, 
in terms of testing Iran's intentions. In that regard, I look 
forward to continued consultations over the coming weeks and 
months, and I am available to any Member of this Committee at 
any time for a conversation.
    Today I want to give you the facts about the Joint Plan of 
Action so you can judge its merits for yourself.
    The Iranian nuclear program is one of the most serious 
threats to U.S. national security and to our interests in the 
Middle East. Thanks to the sanctions and a firm and united 
position from the P5+1, we have reached an understanding that 
is the most significant step to curb Iran's nuclear program in 
nearly a decade. Put plainly, this understanding is profoundly 
in America's national security interest, and it does make our 
regional partners safer and more secure.
    The agreement establishes a sequenced 6-month framework 
designed to block near-term Iranian pathways to a nuclear 
weapon while creating space for us through a diplomatic process 
to reach a long-term comprehensive solution, which is what we 
all want. As the President has said repeatedly, we will ensure 
and he will ensure that Iran never obtains a nuclear weapon.
    The understanding ensures the development of Iran's nuclear 
program will halt and the program will be rolled back as we 
negotiate that comprehensive solution. Indeed, upon 
implementation in the coming weeks, the agreement immediately 
halts progress of the Iranian nuclear program, rolls back key 
elements of that program, and introduces unprecedented 
monitoring in Tehran's nuclear activities. Taken together, 
these measures will prevent Iran from progressing toward a 
nuclear weapon over the next 6 months and increase our ability 
to detect any move toward an Iranian nuclear breakout or 
diversion of materials to a covert program.
    Let me now walk you briefly through the key elements of 
this first step in detail.
    First, Iran has committed to halt meaningful progress of 
its enrichment program. Under the terms of this agreement, Iran 
cannot increase its enrichment capacity. It cannot build new 
enrichment facilities. Iran cannot install more centrifuges of 
any type, operate more centrifuges, or replace existing 
centrifuges with more advanced types. Iran must limit 
centrifuge production to only those needed to replace damaged 
machines, meaning Iran cannot expand its stockpile of 
centrifuges. And Iran's stockpile of 3.5 percent enriched 
uranium must be the same at the end of the 6-month period as it 
is at the beginning.
    Second, during this initial phase, Iran will roll back key 
aspects of its program. Specifically, Iran must cease all 
enrichment over 5 percent. Iran must remove certain equipment 
that is used to more efficiently enrich uranium over 5 percent, 
and Iran must neutralize its entire 20-percent stockpile, 
diluting it to a lower level of enriched uranium or converting 
it to oxide for fuel for the Tehran Research Reactor.
    Third, Iran cannot advance work on the plutonium track. 
Iran cannot commission the heavy water reactor under 
construction at Arak. Iran cannot transfer fuel or heavy water 
to the reactor site. Iran cannot test additional fuel or 
produce more fuel for the reactor. Iran cannot install 
remaining components for the reactor, and Iran cannot construct 
a facility for reprocessing spent fuel. That is critical 
because, without reprocessing, Iran cannot separate plutonium 
from the spent fuel and, therefore, cannot obtain any plutonium 
for use in a nuclear weapon.
    In sum, even in this initial phase, this first step, this 
plan halts each of the three potential pathways to a weapon 
that has long concerned us and our closest allies. It 
eliminates Iran's stockpile of 20-percent enriched uranium. It 
stops installation of centrifuges, especially Iran's most 
advanced centrifuge design, and prevents accumulation of more 
3.5 percent enriched uranium. And it ensures that the Arak 
reactor cannot be brought online.
    Some have said we should be skeptical that Iran will live 
up to these commitments. Quite frankly, we completely agree. 
That is why the foundation of the agreement is not built on 
trust but on verification. The verification mechanisms are 
unprecedented and comprehensive. Iran must permit daily access 
by the International Atomic Energy Agency inspectors to the 
facilities at Natanz and Fordow. They must permit more frequent 
inspections at the Arak reactor. Iran must allow access to 
centrifuge assembly workshops, including rotor production 
workshops and storage facilities.
    Iran must allow access to uranium mines and mills and 
provide design information for the Arak heavy water reactor. 
Significantly, these monitoring measures will provide 
additional warning of breakout and add significant new checks 
against the diversion of equipment for any potential covert 
enrichment program. It will also help us to verify that Iran 
is, in fact, living up to the commitments outlined in detail 
under the agreement.
    In exchange for these concrete actions by Iran, as Under 
Secretary Cohen will explain in detail, the P5+1 will provide 
limited, temporary, and reversible relief while maintaining the 
core architecture of our sanctions regime, including key oil 
and banking sanctions. Sanctions pressure, moreover, will 
continue to increase over the 6 months of this initial phase, 
and we will continue our vigorous enforcement of existing 
sanctions.
    Moreover, the U.S. trade embargo remains in place. U.N. 
Security Council sanctions remain in place. All sanctions 
related to Iran's military program, State sponsorship of 
terrorism, and human rights abuses and censorship remain in 
place.
    And if Iran fails to meet its commitments, we are prepared 
to ramp up sanctions, and we will have then the international 
consensus that is essential for any increased pressure to work.
    As the President has said, as the Chairman outlined, now is 
not, we believe, the time to introduce new sanctions because 
doing so could risk derailing the promising first step outlined 
above, alienate our allies, and risk unraveling the coalition 
that enabled effective sanctions enforcement.
    Finally, in assessing the agreement on its merits, it is 
important to compare where we will be under its provisions 
compared to where we would be without it.
    Without this plan, Iran's program would continue to 
advance: Iran would spin thousands of additional centrifuges; 
install and spin next-generation centrifuges that compress 
breakout times; advance its plutonium program by producing fuel 
for the Arak reactor and install remaining components; it could 
grow its stockpile of 20-percent enriched uranium--all without 
the powerful tools of intrusive and unprecedented inspections 
to help detect breakout.
    With this understanding, the Joint Plan of Action, as I 
have explained, we halt the progress of Iran's nuclear program, 
roll it back in key respects, block the most likely pathways to 
weaponization--all while creating space over the next 6 months 
to pursue the comprehensive solution we all want.
    Finally, let me conclude by making one thing clear. Our 
policy with regard to Iran has not changed. We will stop Iran 
from acquiring a nuclear weapon. We will support our friends 
and partners in the region and counter Iran's destabilizing 
activities around the world. And we will continue to support 
the fundamental rights of all Iranians. We are working hard, 
for example, to ensure the U.N. General Assembly condemns 
Iran's human rights practices this month. Our sanctions on Iran 
as a State sponsor of terrorism remain in place. Our sanctions 
on human rights abusers will continue. And we will also remain 
committed, Mr. Crapo and all other Senators, to reuniting Saeed 
Abedini, Amir Hekmati, and Robert Levinson with their families.
    As Secretary Kerry has said, 1 day is too long to be in 
captivity, and 1 day for any American citizen is more than any 
American, including this American, wants to see anyone endure.
    So I look forward to consulting closely with Congress, and 
I welcome this opportunity to discuss these important issues 
with you. After Secretary Cohen, I am happy to take your 
questions.
    Chairman Johnson. Thank you.
    Under Secretary Cohen, please begin your testimony.

  STATEMENT OF DAVID COHEN, UNDER SECRETARY FOR TERRORISM AND 
       FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY

    Mr. Cohen. Thank you, Chairman Johnson, Ranking Member 
Crapo, and distinguished Members of the Committee. I appreciate 
the opportunity to appear with Under Secretary Sherman today to 
discuss the impact of our sanctions on Iran, the limited, 
temporary, and reversible relief offered in the Joint Plan of 
Action, and the mounting sanctions pressure that Iran will face 
while the parties seek a comprehensive and long-term resolution 
to the international community's concerns over Iran's nuclear 
program.
    This Committee is well aware of the impact that our 
sanctions--in particular our oil, financial, and banking 
sanctions--have had on Iran, so I will highlight just a few 
data points that I think are particularly relevant.
    Iran today is in a deep recession. As Senator Crapo 
mentioned, last year its economy contracted by more than 5 
percent, and we expect Iran's economy to contract again this 
year. Its inflation rate was around 50 percent last year. Its 
currency has lost about 60 percent of its value in the last few 
years.
    Iran has about $100 billion in foreign exchange reserves 
that is mostly or entirely inaccessible or restricted. And it 
has lost roughly $80 billion in the last 2 years from oil that 
it has been unable to sell because of sanctions.
    This is the picture of powerful sanctions pressure, and 
this sanctions pressure has begun to bear fruit. It brought 
Iran to the negotiating table in Geneva and helped our team 
obtain key terms in the Joint Plan that halt and in several 
important respects roll back Iran's nuclear program, while also 
allowing increased transparency and monitoring. We were able to 
achieve these terms at very little cost. In fact, the relief 
package in the Joint Plan is economically insignificant to 
Iran.
    The package in the Joint Plan has several elements.
    First, we will grant Iran limited access in installments 
over the 6-month tenure of the Joint Plan to $4.2 billion of 
its own funds currently locked up in bank accounts outside of 
Iran.
    Second, during the 6 months of the Joint Plan, we will hold 
Iran's exports of crude oil flat rather than requiring further 
significant reductions by the six countries currently importing 
oil from Iran.
    Third, we will suspend--not remove, suspend--U.S. sanctions 
on Iran's petrochemical exports, its automobile sector, and its 
trade in gold. All together, this could be worth up to about 
$1.5 billion to Iran.
    Last, we will help facilitate humanitarian transactions, 
which are already permitted under U.S. law.
    I want to emphasize that in this relief not a single dollar 
of U.S. taxpayer money will be transferred to Iran. The relief 
is comprised mostly of allowing Iran access to its own money 
denied by sanctions.
    In light of the Iranian economy's deep distress, the 
approximately $6 to $7 billion value of the relief package, 
which would be realized over the half-year of the first step, 
simply will not move the needle on the Iranian economy. It is 
important to emphasize, moreover, that the Joint Plan does not 
affect the overwhelming majority of our sanctions on Iran. Most 
importantly, the core architecture of our oil, financial, and 
banking sanctions remain firmly in place. I want to highlight 
several important aspects of that architecture.
    First, the revenue Iran earns from its oil sales during the 
duration of the Joint Plan will remain subject to the financial 
sanctions which have so effectively locked up those revenues 
overseas. With the exception of the $4.2 billion that is part 
of the relief package, Iran will be unable to transfer or 
repatriate any additional oil revenues it earns during the 6-
month duration of the Joint Plan.
    Our banking sanctions and the EU's banking sanctions remain 
in place, continuing the near total isolation of Iran's 
financial sector. All U.N. and EU designations, as well as our 
sanctions on the more than 600 individuals and entities tied to 
the Government of Iran, its WMD programs, and its energy, 
shipping, and shipbuilding sectors remain in place. This 
includes our sanctions targeting Iran's support for terrorism. 
And our longstanding U.S. trade embargo, which precludes Iran 
from engaging in business with U.S. companies and U.S. 
subsidiaries overseas, remains in place.
    And as the Joint Plan is implemented and our negotiators 
continue to work toward a long-term solution, we will continue 
to take action to maintain sanctions pressure on Iran, to 
thwart Iran's efforts to evade sanctions, and to ensure that 
financial and commercial entities worldwide adhere to 
restrictions on dealing with Iran.
    Just this morning, Treasury and State announced the 
designations of more than a dozen companies and individuals 
around the global for evading sanctions and providing support 
to Iran's nuclear program. The targets of today's actions were 
involved in a variety of sanctionable activities, from illicit 
fund transfer to ship-to-ship oil transfers.
    No one should doubt our resolve to continue to hold 
accountable those involved in illicit conduct, and we will also 
continue to strictly enforce Iran's sanctions, including by 
imposing strict penalties on those who violate them.
    Today's designations as well as our recent enforcement 
actions emphasize that Iran is still off limits. Make no 
mistake. Foreign banks and businesses still face a choice. They 
can do business with Iran, or they can do business with the 
U.S.--just not both.
    We know there may be some who believe now might be a good 
time to test our resolve. I want to be clear. We are watching 
closely, and we are prepared to take action against anyone 
anywhere who violates our attempts to violate our sanctions.
    I look forward to continuing this important work with 
Congress and this Committee in particular as we pursue our 
shared objective to ensure that Iran does not obtain a nuclear 
weapon.
    Chairman Johnson. Thank you all for your testimony.
    As we begin questions, I will ask the clerk to put 5 
minutes on the clock for each Member.
    Ms. Sherman, we know Iran's foreign minister recently said, 
``The entire deal is dead if Congress adopts new sanctions now, 
even with a delayed trigger.'' But one of the most important 
factors in making sanctions effective against Iran has been the 
cooperation of our international partners.
    What do you expect would be the effect of a new round of 
sanctions now on our allies and other P5+1 countries? And what 
have they said to us recently about this?
    Ms. Sherman. Thank you, Mr. Chairman. Although I hear as 
well what Foreign Minister Zarif said, my real interest and the 
Administration's real interest in the Congress not pursuing new 
sanctions at this time has to do with our P5+1 partners and 
with our international partners around the world who have been 
enforcing sanctions.
    The reason sanctions have been effective is not just 
because you have taken the superb action you have and the 
President has moved Executive orders, and it is not only the 
terrific work that David and his colleagues have done on 
enforcement, it is because countries around the world have 
actually followed through on what, quite frankly, are 
unilateral sanctions on our part as well as the U.N. Security 
Council sanctions and the EU sanctions. And they have done that 
because we have said to them, if you, in fact, enforce the 
sanctions we have imposed, A, you will be able to continue 
doing business with the United States, the largest and most 
important economy in the world; but you will, more importantly, 
put pressure on Iran to change its strategic calculus and come 
to the negotiating table. And we are committed to negotiations 
as a first and best resort to resolve the concerns around their 
nuclear program. And so countries around the world did that.
    Now that we have this first step agreed to and are about to 
begin negotiations on the comprehensive agreement that we all 
want, if we indeed say, ``Well, we did not really mean it, we 
are going to now impose additional sanctions that you all will 
have to live with around the world,'' our partners are likely 
to say, ``Well, wait a minute here. You are changing the rules. 
We agreed to harm our own economies in service to diplomacy, 
and you are not giving diplomacy a chance.''
    So our greatest concern here is if this Committee--and I 
know this Committee is for diplomacy, then we must test that 
diplomacy, and the way to do that is to see through the 
compliance of this first step and to negotiate that 
comprehensive agreement. Congress always has the prerogative to 
act. It can act very quickly. I know that, particularly when it 
comes to sanctions on Iran. And that is why the Administration 
is asking the Congress to keep its powder dry for this moment 
so we can keep our partners on board to enforce all of our 
sanctions that remain, since the vast majority do, so we can 
give diplomacy a chance, so our P5+1 partners stay united, 
which has been key to our diplomacy with Iran.
    Chairman Johnson. A question for both of you. I am 
concerned that if Congress were to enact new sanctions now, not 
only could we hand a potential PR victory to Iran, it could 
also lead to other countries who are cooperating with us to 
peel away from their commitment to sanctions. How difficult 
would it be to reinstate sanctions if major countries decided 
to do that? And what effect would a breakdown in negotiations 
attributable to premature congressional action have on our 
broader diplomatic efforts and our standing in the world? Ms. 
Sherman, let us start with you.
    Ms. Sherman. On your first point, there is no question, 
Senator, that we do not want Iran to be in a position to say 
that the U.S. is the cause of the agreement not going forward. 
As I said, my greater concern is with our international 
partners and the P5+1, but there is no doubt that what you say 
is indeed the case, that Iran could use this as a propaganda 
point from their point of view. It does not mean we would 
accept it, of course, but, nonetheless, I am sure that they 
would, as Foreign Minister Zarif has already attempted to do.
    Chairman Johnson. Mr. Cohen.
    Mr. Cohen. Mr. Chairman, I think there would be a real risk 
to the effectiveness of our international sanctions regime if 
Congress were to pursue new sanctions legislation now, and it 
would be difficult, I think, if that regime frayed, to put it 
back together.
    Now, I am the last person to downplay the strength of our 
national sanctions. I think from our legislation to the 
Executive orders to the actions that we have taken, like the 
ones we took today, that has had real impact, and real impact 
around the world. But the overwhelming pressure on Iran today 
is due in part to what we have done and in part to what our 
international partners have done with us--some because they 
must, but many because they want to, because they are with us 
in this effort, as Under Secretary Sherman described, of 
pursuing a dual-track strategy of offering a diplomatic 
resolution while threatening increasing sanctions pressure as 
the alternative.
    And I am concerned that if we lose that international 
coalition, the effectiveness of our sanctions going forward 
will be weakened, and our ability to pull it back together, if 
our partners around the world think that we are not serious 
about pursuing a diplomatic resolution, will be difficult.
    Chairman Johnson. Thank you. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman.
    Ambassador Sherman, before we get into the plan itself, I 
want to talk with you about Saeed Abedini. I appreciate your 
comments this morning and the discussions we have had 
previously about the plight that Idaho's Pastor Abedini, who 
has been imprisoned for his Christian beliefs in Iran, is 
dealing with. And as you have discussed today also, we have 
other Americans who are being held wrongly in Iran in an unjust 
legal system.
    As you know, I have discussed this personally with 
Secretary Clinton and with Secretary Kerry and have received 
their assurances that this matter will be given the highest 
priority, that they will not be forgotten, and that everything 
will be done that we possibly can do to obtain their release 
and return them to their families and to freedom here in the 
United States. And, again, I appreciate your comments today 
about it.
    One of the questions I have is that in the run-up to the 
October talks, the United States released a convicted Iranian 
proliferator from a California prison, but had no relief for 
these detained Americans. And, in fact, during that time Pastor 
Abedini was transferred to one of the worst prisons in Iran, 
just prior to the bringing home of the Joint Plan.
    Can you tell me why we are not negotiating with regard to 
joint releases or why we have not made progress in the context 
of the release of our own citizens when we are releasing 
Iranian prisoners who are known proliferators?
    Ms. Sherman. Thank you very much, Senator Crapo. As I said, 
it is very hard to talk about these three Americans because it 
is heartbreaking and I have met with some of the families and I 
know what their lives are every day. So nothing I say is going 
to give them the comfort they need until Saeed Abedini, Amir 
Hekmati, and Robert Levinson are home. So I say that as a 
preface because I know it to be true.
    We vigorously pursue every avenue. Some of those avenues 
are best pursued in private to have a chance of success. The 
Secretary raised these cases directly with the Iranian foreign 
minister during their meeting at the U.N. General Assembly. 
President Obama raised all three Americans in his phone call 
with President Rouhani. On this last round in Geneva, I had a 
separate conversation with the deputy foreign minister 
responsible for this, going over each of these cases and trying 
to find out whether there might be some avenues for getting 
their release. And as I said, if there are, we will pursue them 
in every way possible.
    I also had breakfast with the Swiss State secretary who is 
our protecting power in Tehran, who has gone repeatedly and 
asked constantly for consular visits and went over some of the 
possibilities and some ideas that the Swiss had. We will pursue 
every idea that is brought to us.
    I know there is this notion about allegations of a prisoner 
exchange deal. They are, quite frankly, simply untrue. At this 
point we have asked for humanitarian release. We did not 
specifically talk about these three Americans in the context of 
the nuclear negotiation because, quite frankly, we do not want 
them to become pawns in the negotiation. We do not want Iran to 
up the ante either on the nuclear side or the American citizen 
side by mixing them up in this. Iran should free these three 
Americans because it is the right thing to do, it is the 
humanitarian thing to do. It should not be a deal regarding 
their nuclear program which they must deal with on its own 
terms. Their freedom should not be tied to the success or the 
failure of these negotiations.
    The three Iranians that you mentioned that had been 
released are not in any way related to the joint action, and 
the report that the two issues are connected is simply not 
true. These are folks who have gone through our judicial system 
and all of the judicial processes that we have.
    Senator Crapo. Well, thank you. I do appreciate the efforts 
that you have undertaken, although we have some differences on 
whether some opportunities could have been pressed further. But 
can you give me, again, your reassurance that our State 
Department and our country will take every advantage at every 
stage and in every forum to assure the release as soon as 
possible for these citizens?
    Ms. Sherman. I absolutely guarantee it, and you have my 
personal commitment to do so.
    Senator Crapo. All right. Thank you. I see my time has run 
out, so I will wait for the next round for the Joint Plan 
questions. Thank you.
    Chairman Johnson. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman, and thank 
you, Secretary Sherman and Secretary Cohen.
    Secretary Cohen, you made the point that just this morning 
additional enforcement actions were taking place, and it seems 
to me that it is absolutely critical that very vigorous--in 
fact, even more accelerated enforcement take place on those 
existing sanctions. Without that, you could, either unwittingly 
or wittingly, signal that there is going to be an erosion of 
sanctions, slowly but inevitably, and that would be disastrous 
in many different respects. So can you give us assurances that 
you will, in fact, ramp up the enforcement and contact us if 
you need additional legislative enforcement, if penalties have 
to be increased? Because I think we really have to make sure 
that they get the idea that they are not going to get a pass 
here. This is not just a subtle sort of way to ease and erode 
these sanctions.
    Mr. Cohen. Senator, I completely agree with you, and I 
think the actions we took this morning, these designations of 
more than a dozen persons and entities, is the first step to 
really reaffirm and demonstrate our very strong intent to 
continue to enforce our sanctions very, very vigorously. The 
President said this when he announced the Joint Plan 2 weeks 
ago, that we would continue vigorous enforcement of our 
sanctions. We are going to do so.
    The vast bulk of our sanctions architecture remains in 
place. The critical sanctions, on oil, on banking, on financial 
activity, remain in place. Sanctions on anyone who thinks, you 
know, to try to develop Iran's energy sector remain in place.
    We are going to very vigorously continue to enforce these 
sanctions, because I completely agree with you. One very 
important aspect of our effort going forward is ensuring that 
the pressure continues to mount on Iran, that they understand 
that the only way that they can get relief from the pressure on 
their economy is by negotiating over their nuclear program. 
That is the purpose of our sanctions, that has been the purpose 
of our sanctions from the beginning, is to create the leverage 
for the negotiations. And we are going to do everything 
possible to ensure that that sanctions pressure continues and 
mounts during this period.
    Senator Reed. In that vein, there are discussions in the 
press of the Iranians reaching out to international oil 
companies to start looking at their long-term future. 
Obviously, since they have been deprived of critical equipment 
and infrastructure improvements, they are going to have to get 
investments to increase their capacity.
    Are we actively dissuading these companies from doing this? 
Because it would seem to be sending a very, sort of, 
complicated message. We are saying these sanctions are really 
tough, but you can talk about them, you know, when the day is 
over.
    Mr. Cohen. Very actively dissuading international oil 
companies and others who think that now may be a time to test 
the waters in Iran. Secretary Lew has over the last several 
weeks met with over a hundred business and bank CEOs to make 
the point that our sanctions remain in place. We have been 
meeting with foreign Governments, foreign banks, foreign 
businesses around the world through our embassies and through 
teams from here going out. I am traveling next week to 
reinforce this point. We are doing everything possible to make 
sure that no one misunderstands that our sanctions remain in 
place and that we intend to enforce them, and that anybody who 
tests us will be taking a very, very serious risk.
    Senator Reed. Will you on a regular basis notify the Senate 
of countries or companies that are not complying strictly, or 
whose compliance is suspect? You might not have sufficient 
evidence for some type of enforcement action, but it would be 
extremely helpful if the information was public of which 
countries were standing with us and which were not.
    Mr. Cohen. I commit to being available to this Committee at 
any time and communicating with this Committee on these issues. 
I think it is enormously important that we all work together on 
this issue.
    Senator Reed. I have got very little time left, and, 
Secretary Sherman, this might be too big a topic, but in the 
issue of the preliminary agreement, there were suggestions 
about their military programs, particularly around Parchin. Can 
you very quickly give us a sense of where we are with that?
    Ms. Sherman. Actually, there are three places in the 
agreement that speak to the possible military dimensions of 
Iran's program. In the first paragraph, it talks about having 
the comprehensive agreement address all remaining concerns. 
That is a reference to their possible military dimensions. It 
talks about the need to address past and present practices, 
which is the IAEA terminology for possible military dimensions, 
including Parchin. The agreement also says that the U.N. 
Security Council resolutions must be addressed before a 
comprehensive agreement is agreed to, and the U.N. Security 
Council resolution specifically addressed their ballistic 
missile capability.
    So we have had very direct conversations with Iran about 
all of these. They understand completely the meaning of the 
words in this agreement, and we intend to support the IAEA in 
its efforts to deal with possible military dimensions, 
including Parchin.
    Senator Reed. Thank you, Madam Secretary.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman, and I thank each 
of you for your testimony and your work.
    I think all of us want to see a diplomatic solution to Iran 
and have been encouraged by the fact that the Administration 
has been dealing with them in this way.
    I think what has shocked folks has been the text of the 
interim agreement, and I think it calls many of us to want to 
become involved. Your own former nuclear czar has said that, 
based on the way this interim agreement was negotiated, what he 
actually sees is a series of rolling agreements that go on for 
a long, long time. And I think what Congress--the reason 
Congress has been wishing to weigh in is to try to make sure 
that we get to an end state that is appropriate and we do so 
over a very short amount of time, which to me seems to be a 
very reasonable place for Congress to want to be.
    I would like to ask you this. When does the clock, Wendy, 
actually start? Very succinctly, if you do not mind.
    Ms. Sherman. Sure. Senator, our experts are in Vienna this 
week working with the P5+1, the IAEA, and Iran to determine 
that start date and to make sure that the sequence happens in 
the order in which we all believe it should, which is----
    Senator Corker. So we have negotiated a 6-month agreement a 
month ago.
    Ms. Sherman. Yes.
    Senator Corker. But we do not know when the actual start 
date is.
    Ms. Sherman. It will happen in the next few weeks. I do not 
want to set a date today because they are finalizing the 
discussion.
    Senator Corker. Senator Levin in a meeting at the White 
House suggested that, to keep us from being in a series of 
rolling agreements, we ensure that this interim agreement has 
an end date in 6 months. Of course, that 6 months has not 
begun. But instead of that, you guys agreed to a 6-month deal. 
And I am just--again, you can understand why folks on our side 
would be concerned, because we understand sort of the elements 
of the program.
    Let me ask you this: Arak--I know that it cannot be 
commissioned, but it is my understanding based on the document 
that work can continue on elements of this plutonium facility. 
Is that correct?
    Ms. Sherman. None of the issues that would make Arak 
function as a nuclear reactor can move forward.
    Senator Corker. I understand.
    Ms. Sherman. None.
    Senator Corker. But there is still construction that is----
    Ms. Sherman. They could build a road. They could put up a 
wall. That is correct.
    Senator Corker. Let me ask you this: A country that is 
interested in peaceful activities only with a plutonium 
facility of its size that has no commercial purpose, does it 
not raise a little bit of an antenna that they are continuing 
to do those things? I mean, people generally act in their own 
self-interest. Why would an economically starved country blow 
money on a plutonium facility that has no commercial interest 
if their intentions are good?
    Ms. Sherman. Senator, we agree with you. There is no reason 
I can see that a 40-megawatt heavy water reactor has a peaceful 
purpose that I know of, and we have been very clear with Iran 
that this will have to be addressed in full in any 
comprehensive agreement.
    Senator Corker. Let me ask you this: The U.N. Security 
Council resolution that I think--I know this Administration 
negotiated one element, an agreement actually in 2010. Why 
within the four corners of this agreement are we already 
agreeing to things tacitly that are in opposition to the U.N. 
Security Council agreement? I think that is what has everybody 
alarmed, that we have tacitly agreed to the fact that Iran will 
be enriching down the road. And I think you know we negotiate 
all kinds of one-two-three agreements around the world. We try 
to get to a gold standard. Here we have a rogue Nation--a rogue 
Nation--that is wreaking havoc, that is using a portion of our 
sanctions proceeds that we are alleviating right now to kill 
people in Syria, and you know that. They are using a portion of 
this to funnel is to Hizballah to kill people in Syria.
    I guess I do not understand why you would already agree on 
the front end to them not having the gold standard, if you 
will, as it relates to enrichment. We do not let Vietnam and 
other countries that have been better actors do that. Why have 
we done that? And I think, again, that raises alarms that--you 
know, a lot of people think that Secretary Kerry is so anxious 
to make a deal for lots of legacy reasons that he is willing to 
overlook some of the details that are so important. Why have we 
done this?
    Ms. Sherman. Let me say several things, Senator. First of 
all, we have not conceded anything. The comprehensive 
agreement, nothing is agreed to until----
    Senator Corker. Let me, if I could, you do not think that 
in a preamble where we talk about--you do not think--well, let 
me just put it this way: Do the officials in Iran think that we 
have agreed to allowing them to enrich? I mean, every press 
statement they have made says that. How could there be such a 
big misunderstanding over such an important issue?
    Ms. Sherman. Right. What I was about to say, Senator, is 
nothing is agreed to in a final agreement until everything is 
agreed to. What we have said to Iran and what this says is 
that, yes, we will talk with them about the potential for a 
very limited enrichment program, matched to practical needs, 
with staggering constraints, monitoring, and verification, if--
if--they agree to everything else that we want agreed to. That 
is totally consistent with the U.N. Security Council 
resolution, which does not talk about stopping enrichment. It 
talks about suspending enrichment and saying that once the IAEA 
and others confirm that Iran has met all its responsibilities 
and obligations, it could be treated like any other NPT State. 
So it is not about ending. It is about suspending enrichment.
    That said, Senator, I completely agree with you, we all do, 
that there are many questions here about what Iran is up to. 
That is why the Secretary of State, the President of the United 
States in his address at the Saban Forum, as well as the 
Secretaries, said we are quite skeptical whether we will get to 
the comprehensive agreement that we all wish to see. But we 
must test Iran because that is how we keep the international 
community together; that is how, if we have to choose other 
options, we will have the international community with us to do 
so.
    Senator Corker. Mr. Chairman, I just want to make one quick 
statement in closing. I do think that we are stepping away from 
base U.N. Security Council agreements, and I think what 
Congress wants to see happen is that not occur. And I think 
that is why you have seen such a reaction. I realize we are 
sort of going through a rope-a-dope here in the Senate and that 
we are not actually going to do anything. I understand that 
that is sort of baked in, the blockage, and I know we are 
participating in a little bit of a rope-a-dope today. But I 
just want to say to David Cohen, I was just in the region, and 
I concur with Senator Reed. Once you begin loosening sanctions 
and people begin to see that Iran is now going to become not a 
rogue country but part of the international community--I mean, 
we are basically ceding much of Middle Eastern activities to 
them. We have been now for about a year. Once they see that 
there is a rush, as Senator Reed mentioned, to do business with 
them--and I think that is why we are all concerned, that we did 
an interim deal that has no sacrifice on their part whatsoever. 
None. They are still spinning 19,000 centrifuges every single 
day. And they are not going to violate this agreement. It is an 
outstanding agreement for them, because in 6 months they are 
going to be a normal international entity. I do not see any way 
you hold the sanctions. But, again, obviously we are 
disappointed, but hopeful that somehow you can put the genie 
back in the bottle and end up with some type of agreement that 
averts warfare, because all of us do want to see this succeed. 
We just do not know how we get there with an interim deal 
framed the way this one is. But thank you.
    Chairman Johnson. All Members are now required to report to 
the Senate floor for two votes.
    Senator Menendez has a Committee hearing, a markup, quite 
soon, and will the Senator----
    Senator Menendez. Mr. Chairman, I understand there are 15 
minutes on this vote, so my 5 minutes would be more than 
enough.
    Chairman Johnson. OK.
    Senator Menendez. Thank you, Mr. Chairman.
    You know, I have been pursuing Iran since 1996 when I 
learned as a member of the House Foreign Affairs Committee that 
the United States was sending voluntary contributions to the 
IAEA in addition to our membership dues, whose voluntary 
contributions were going for what? To create operational 
capacity at the Bushehr nuclear facility. That was not in the 
national interest and security of the United States, and I led 
an effort to stop that.
    Now, I have been continuing to pursue Iran for 17 years 
when it was not in the spotlight, and what I have seen is Iran 
deceive, delay, and over various administrations march forward 
to the point that it seems that we are now ready to accept some 
form of an enrichment program in Iran. And so some of us are 
very skeptical not because of wide-eyed skepticism but of 
reality of what is the history so far.
    And I have to say, part of my challenge in trying to listen 
to the Administration is some of the same statements I have 
heard in the past. I was looking at a transcript of the Senate 
Foreign Relations Committee on December 1, 1991, and many of 
the arguments I heard then against the pursuit of any sanctions 
regime are the ones I am hearing now. Let me quote from the 
transcript.
    ``Secretary Cohen. The concern we have with this 
amendment''--which was the Menendez-Kirk amendment--``is that 
we think it risks two things we want to avoid. One is that it 
risks fracturing the international coalition that has been 
built up over the last several years to bring pressure on Iran, 
and we would rather consider voluntary action against the 
Central Bank of Iran rather than the threat of coercion that is 
contained in your amendment.''
    You went on to say, ``We think that, to be clear, our 
judgment is that the best course to pursue at this time is not 
to apply a mechanism that puts at risk the largest financial 
institutions, the central bank of some of our closest allies.''
    And you went on to say, ``Our position is that the right 
course is not to adopt this amendment.''
    Now, you know, that is basically what I heard then. That 
amendment went on to pass 100-0, and it is one of the things 
that you all, the Administration, heralds today as the essence 
of what has gotten Iran to the negotiating table. So you will 
forgive me if I, having heard many of the same arguments--we 
will break our international coalition, we will not have 
partners--that has been the arguments as of 2 years ago, and it 
is the arguments today.
    I also look at the question of what is really this interim 
agreement or plan of action all about, and what we hear is 
versus what the Iranians say. The Iranians say in published 
reports--Iran said that, according to the agreement, the text 
of the agreement, Iran said it would not make any further 
advances of its activities--it did not say its nuclear core. It 
said any further advances of its activities at the Arak 
reactor. And then Zarif told the parliament in translated 
comments that it means no nuclear fuel will be produced, but 
construction will continue there.
    Now, you say a road or a wall. The reality is if you can 
continue to construct all the elements except for the nuclear 
core, that is a fundamental difference. And it is not 
insignificant. Especially if our view is that Arak really is 
not to be allowed, at the end of the day, why would we allow 
them to even move to any form of construction which puts a 
greater and greater investment on their part to achieve their 
ultimate goal?
    Then we see today that the Iranians are launching a rocket 
next week, and though this was supposedly made as their space 
program, it is well known that this is just a cover for a 
military ballistic weapons program. I think that is a 
provocative action in the midst of such negotiations, should be 
interpreted as a sign of bad faith, and only reaffirms in our 
mind why we need to proceed with some efforts here.
    So I am beginning increasingly--I know I have been a 
proponent of pursuing additional sanctions prospectively at a 
timeframe beyond the scope of the intended 6-month period that 
we think is an insurance policy, but I am beginning to think, 
based upon all of this, that maybe what the Senate needs to do 
is to find the end game, and at least what it finds as 
acceptable as the final status, because I am getting nervous 
about what I perceive will be acceptable to us as the final 
status versus what, in fact, I think the--when I say ``to us,'' 
meaning the Administration--versus what the Congress might view 
as acceptable. It may be defining that through a resolution, 
maybe a course of action that would affect the ultimate outcome 
here, which is obviously the most important one.
    So I just want to put on the record my skepticism based on 
the history that we have had here, one for 17 years, the other 
maybe more recent, that I have heard many of these arguments, 
and they are the arguments nonetheless that have had the Senate 
act and have actually helped the Administration achieve some of 
its goals.
    Chairman Johnson. We will resume the hearing immediately 
following the votes. This hearing is in recess.
    [Recess.]
    Chairman Johnson. I will give you an opportunity to respond 
to the remarks by Senator Menendez. Ms. Sherman and Mr. Cohen, 
would you like to respond?
    Ms. Sherman. If I may, Mr. Chairman, let Under Secretary go 
first, and then I will go second. Thank you.
    Ms. Cohen. And thank you, Mr. Chairman, and I know that 
Senator Menendez is not here, and so I would make the offer to 
Senator Menendez that I am happy to follow up with him 
directly. But what I would say is that I do not think anyone 
can deny the importance of the international coalition of 
countries that we have been able to put together and hold 
together. It has magnified enormously the strength of our 
sanctions, and we have been able to do that over the years 
working with Congress in a way that ensures that the 
legislation that is enacted strengthens rather than threatens 
that international coalition.
    After the testimony that Senator Menendez referenced, we 
met with Senator Menendez and others and expressed our concern 
with the provision that would impose sanctions on the Central 
Bank of Iran that was directed at Iran's ability to export its 
oil, and we worked with Senator Menendez and others and very 
much appreciate his working with us to modify the provision 
that gave us the greatest concern in a way that when it was 
ultimately enacted, it was enormously effective. This is the 
significant reduction provision that has over the course of the 
past 2 years resulted in Iran's ability to export its oil being 
significantly impaired. It was exporting 2.5 million barrels 
per day of oil at the beginning of 2012. It is now down to 
about a million barrels per day.
    We were able to implement that provision in a way that 
brought along our partners rather than leading them to fight us 
as we were trying to drive down Iran's oil revenues. So I 
appreciate Senator Menendez's work with the Administration in 
crafting that legislation in a way that was enormously 
effective.
    Today we have this very strong international coalition. The 
risk of legislating right now is that it weakens that 
coalition. Now, I cannot sit here and say that it will blow 
apart the coalition, but I do not think anyone can deny that 
there is a risk that if we legislate now, the coalition will 
weaken. If it weakens, the effectiveness of our sanctions 
weaken. And the concerns that Senator Corker and Senator Reed 
expressed about the interests of the business community, the 
international business community going into Iran become more 
real. And if our sanctions weaken, the leverage that our 
negotiators have is diminished, and our ability to reach the 
long-term agreement that is what we are all trying to achieve 
becomes more difficult.
    So I would just say that, given the absolute certainty that 
Congress can legislate if the Iranians do not fulfill their 
obligations under the Joint Plan or are unable to reach a long-
term agreement, as well as the certainty that the 
Administration will work with this Congress, with this 
Committee, with Senator Menendez, and others on legislation 
that could be enacted at the appropriate time, it just seems to 
me that it is not a risk worth taking right now.
    Ms. Sherman. Thank you, Mr. Chairman. Let me just add, I 
totally understand Senator Menendez's and all Senators' 
skepticism about Iran. Iran does not do good things around the 
world for the most part. We are concerned about what they have 
done regarding missing Americans. We are very concerned about 
their destabilizing activities, about their terror, about their 
human rights abuses, their censorship. We are very skeptical 
about whether we can reach a comprehensive agreement that fully 
addresses all of the international community's concerns about 
their nuclear program. But we are equally convinced that we 
must test and try to see whether, in fact, we can resolve this 
peacefully, because that is what the American people want, that 
is what the U.S. Congress wants, that is what the Senate wants, 
and that is the right thing to do.
    We are at a somewhat different place than we have been in 
the lead-up to this moment where sanctions have been so 
staggeringly effective. We now have a Joint Plan of Action. We 
now have an understanding with Iran of actions it is to take in 
order to get very limited, targeted, and reversible sanctions 
relief, and to enter into a comprehensive negotiation for a 
comprehensive agreement.
    Because we are at this different place, we should react and 
respond somewhat differently, which is to say we should test 
that agreement. And one of the provisions of the agreement is 
that the European Union, the U.N. Security Council, and the 
United States not impose new nuclear sanctions during the 6-
month period while we negotiate that comprehensive agreement. 
It seems to us that it is worth complying with the provisions 
of that understanding, testing Iran, and then coming to the 
Congress, to this Committee and the Senate, as Under Secretary 
Cohen has said, to take action if and when needed.
    Thank you.
    Chairman Johnson. Senator Tester.
    Senator Tester. Yes, thank you, Mr. Chairman.
    Very quickly, and if you could be as concise as possible, I 
have got a bunch I would like to get through. Mr. Cohen, 
following up on what Senator Reed had said, more than a dozen--
were these American companies that sanctions were put on?
    Mr. Cohen. The actions today were not against American 
companies, but within--yesterday we applied sanctions--applied 
an enforcement action in the settlements with World Bank of 
Scotland, and about 2 weeks ago, there was an action that was 
settled with an American company called----
    Senator Tester. OK. And just to be clear, is this public 
information?
    Mr. Cohen. Absolutely.
    Senator Tester. OK. And could you tell me, do any of these 
businesses do business with the U.S. Government?
    Mr. Cohen. I do not know. I would be very surprised if any 
did. But we will check into that.
    Senator Tester. OK. I just think that, you know, if we are 
going to do something, they ought not be doing business with 
us, the U.S.
    Mr. Cohen. I completely agree. I think it is very unlikely 
this company----
    Senator Tester. OK. To Wendy, I happened to be over in Iran 
when--in Israel, I am sorry, when this agreement was announced. 
Prime Minister Netanyahu was not happy, as you well know. In 
your estimation, though, it seemed like everybody in the Middle 
East was not happy with it--not just Israel but everybody. Why?
    Ms. Sherman. Senator, I understand everyone in the region's 
anxiety because it is our anxiety, and that is that Iran is a 
destabilizing influence in the region. They obviously are 
financing Lebanese Hizballah. They are sending their own 
military advisers into Syria. They are financing actions in 
Yemen. They are not good actors in the region, and so there is 
a concern among people in the region that this nuclear 
agreement or this understanding is going to lead to us 
normalizing our relationship with Iran. That is so many years 
off.
    Senator Tester. Yes. The hope is for that, but we are a 
ways off.
    Ms. Sherman. A long way off. A long way off.
    Senator Tester. OK. In relation to the IAEA inspectors, are 
they there on a daily basis or a weekly basis or----
    Ms. Sherman. Right now, the IAEA inspectors go to Fordow 
and Natanz I believe on a weekly basis, and this agreement now 
will require them to go daily.
    Senator Tester. OK. Do they have access to everything they 
need to see?
    Ms. Sherman. They do have and now will have additional 
access to things they need to see.
    Senator Tester. And do these inspections have to be 
preannounced?
    Ms. Sherman. They will have--because they are there every 
day, Iran will now know that they will be there every day.
    Senator Tester. OK. You had talked about the Iranian policy 
in regards to Hizballah and Hamas and, to be quite honest with 
you, pretty much the funding for a lot of the terrorism that 
happens in not only the Middle East but the world. Part of my 
concern is you have got Iran that is acting very improperly 
over on one side, and then a hope that on this side they are 
going to act separate from the rest of their foreign policy.
    What gives you any sort of confidence that that even could 
happen?
    Ms. Sherman. Well, it is not about confidence. It is not 
about trust. It is about verification in the first instance.
    Second, quite frankly, the MFA and Foreign Minister Zarif 
have responsibility for the nuclear negotiation. The IRGC Quds 
Force has the leadership on their activities that destabilize 
so much of the region in parts of the world. So President 
Rouhani has been given license by the Supreme Leader to then 
give license to Foreign Minister Zarif to try to address the 
concerns of the international community about the nuclear 
program. The reason for that is because of the horrific 
economic situation that Under Secretary Cohen outlined.
    Senator Tester. You know, one of the things that was kind 
of ironic to me--and I was not aware of what Ranking Member 
Crapo was talking about with folks being held hostage. One of 
the things that would seem--where is the good will that comes 
out of Iran? I mean, we have seen good will come out of this 
country. We always see good will come out of this country. 
Where is the good will--because these guys have been the ones 
that have been blowing up the world, not us.
    Ms. Sherman. Senator, I wish I could tell you that I 
thought that there was a lot of good actions coming our way. 
There was an American who was briefly held and then let go by 
Iran. They saw that as a good will gesture. They saw their 
letting go of our hikers as a good will gesture. But, quite 
frankly, there is a long way to go before we see the good will 
that you are referring to.
    Senator Tester. OK. Last question. Iran sits on the fourth 
largest oil reserves in the world, second largest natural gas 
reserves. Why should Iran even be interested in nuclear power?
    Ms. Sherman. This is an excellent question. It is one we 
have asked them repeatedly, and it is why this Joint Plan of 
Action says we want to understand what their practical needs 
are because, quite frankly, it is not clear to us why they need 
19,000 centrifuges, why they need a stockpile of 3.5 percent 
enriched material, why they need the Arak nuclear reactor. And 
so that is what we are going to have to work through to get to 
a comprehensive agreement.
    Senator Tester. Just in closing, I would just say I wish 
you the best. I think that there is not a soul at this table 
that does not want to see these negotiations work. On the other 
hand, we do not want to see Iran become more powerful either.
    Ms. Sherman. We quite agree. Thank you.
    Senator Tester. Thank you, Mr. Chairman.
    Chairman Johnson. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    You know, I thought I came to a hearing on sanctions, and 
what we are really having is a hearing on the legitimacy of the 
proposed agreement, which presents really kind of three 
categories of my kind of analysis.
    Number one, the Congress obviously plays a very large role 
in providing policy advice and certainly participating, and I 
think there is a lot of people, certainly in this room, who 
have expressed dissatisfaction with the agreement, 
dissatisfaction with whether we have mutuality of goals, 
whether we have kind of speaking with one voice, which is 
critically important if we are going to be successful.
    And so I understand and share your concern about the 
international community and your international sanctions. I 
share your concern about whether we can continue to test the 
waters, so to speak, in little interim steps. But I also share 
the concern of very many members we have heard today about not 
having mutuality about the end goal, about not really 
appreciating and understanding what--and, you know, we can all 
say we do not want them to have the capability, but the bottom 
line is the devil is in the details in any negotiation.
    And so I would really advise and caution the 
Administration--certainly both of you, through the Syria 
discussion you have been very forthcoming. I think you probably 
have an office somewhere in the United States Capitol you have 
been up here so much. But I just really believe that there 
needs to be better listening to the concerns that have been 
expressed here today.
    I want to cover something that has not really been covered 
yet, which is the internal conditions in Iran for the 
development of this agreement. There is a lot of discussion--
just as you are going through this process here internally, 
there is a lot of discussion about the internal politics of 
Iran and whether, in fact, there is a mature enough diplomatic 
situation in Iran to actually deliver anything that we might 
hope for as we pursue peace in the region.
    And so I would like comments from both of you about how you 
see the internal politics and how you see this--how fragile is 
this agreement in Iran?
    Ms. Sherman. Well, thank you very much, Senator. First of 
all, I take to heart your imprimatur to us to listen better and 
to understand the concerns here of the U.S. Senate, and we will 
work and endeavor to do so.
    Second, as regards the internal politics, I would urge you, 
if you have not had a classified briefing with our national 
intelligence manager for Iran, to avail yourself of that. I 
think you have heard some of it because you will get some 
insights into what is going on. But in this unclassified 
setting, let me say my own understanding----
    Senator Heitkamp. And I think I have a pretty good idea, 
but I also think it is really important for the American public 
to understand at least some characteristics of who we are 
negotiating with.
    Ms. Sherman. Thank you. The Supreme Leader is the only one 
who really holds the nuclear file, makes the final decisions 
about whether Iran will reach a comprehensive agreement to 
forgo much of what it has created in return for the economic 
relief it seeks. The Supreme Leader has, however, given to 
President Rouhani, who was elected to get that economic relief 
and was quite clearly not the Supreme Leader's first choice to 
be president of Iran, but was acceptable and is himself a 
conservative cleric. No one should misunderstand or believe 
that President Rouhani is not anything but a very conservative 
cleric. He is about preserving the regime, not changing it, not 
changing the Supreme Leader. So none of this is about regime 
change for him, nor is U.S. policy headed and about regime 
change. It is about addressing the concerns about Iran's 
nuclear program.
    So Rouhani was given a license by the Supreme Leader to go 
and try and see what he could do to get economic relief, with 
some red lines in place, including making sure that Iran could 
keep some of its capability. Indeed, then Rouhani passed off to 
Foreign Minister Zarif, who knows the United States very well, 
having lived here and studied here and worked for Iran here for 
nearly 30 years, to see whether, in fact, he could move the 
negotiation forward. So it is in that setting that we have 
begun to really make some progress because they want this 
economic relief.
    Additionally, I have to add that they do have differences 
among their country. There are hard-liners who are much more 
conservative than the conservative cleric president of Iran, 
President Rouhani, who do not think that they should be talking 
with the United States, or anyone else for that matter, about 
their nuclear program.
    There are some people who are more reform-minded, but there 
is a general belief among the Iranian people that they have a 
right to enrich. The United States does not believe any country 
has a right to enrich. But the Iranian people do, and they have 
a great deal of pride and a culture of resistance to change and 
do not particularly want to adopt all that the United States 
stands for, so they very much hold on to their own tenets.
    Under Secretary Cohen may want to add something from an 
economic point of view.
    Mr. Cohen. If I could just very briefly, Mr. Chairman, 
Senator Heitkamp, just picking up on what Under Secretary 
Sherman said about the election of Rouhani, it was, I think, 
generally understood as an expression by the Iranian people of 
a desire for relief from the economic conditions that they are 
currently facing. Among the skewed list of candidates, he was 
the one who was sort of most likely to try to bring about 
improved economic conditions through engagement with the West, 
understanding full well that the only way that he can get 
improved economic conditions in Iran is to get the sanctions 
lifted, and the only way to get the sanctions lifted is to 
address concerns with their nuclear program.
    This initial first step Joint Plan of Action will not 
improve the economic conditions in Iran, but it was greeted 
with excitement among the people of Iran, because I think they 
saw this as showing the potential, the prospect for economic 
improvement down the road. Frankly, I think this next 6 months, 
as the Iranian people see through this Joint Plan of Action 
that there is the potential if their Government negotiates in a 
serious fashion about the nuclear program to get real sanctions 
relief, can create additional internal pressure of the kind 
that we saw that led to the election of Rouhani, additional 
pressure to push their Government to do what is necessary to 
address the concerns.
    Chairman Johnson. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman. Thank you for 
being here.
    So America and its allies are committed to preventing Iran 
from obtaining nuclear weapons, and we are committed to 
protecting our allies throughout the region, including Israel. 
This dual-track policy that we are on now--imposing tough 
sanctions on Iran while engaging them diplomatically--I think 
reflects this commitment, and that approach has clearly brought 
Iran to the negotiating table, produced an interim deal that is 
a promising first step toward achieving our goals in the 
region.
    Of course, the interim deal does not give us everything 
that we want. That is the nature of a negotiation. Each side 
has to give a little. But it is certainly no giveaway to Iran. 
They made critical concessions. The core existing sanctions on 
their oil and banking sectors remain fully in force. And all 
the sanctions relief in the deal provide--are time limited and 
fully reversible. More importantly, it seems to me the interim 
deal is a necessary step in reaching a final deal.
    So I would like your view on that, Under Secretary Sherman. 
Could the U.S. plausibly hope to get a final agreement that 
prevents an Iranian nuclear weapons program without an interim 
deal of this kind?
    Ms. Sherman. Thank you very much, Senator. You know, I 
think Secretary Kerry has said, I have said, and the President 
of the United States has said we wish we could have gotten a 
comprehensive agreement in the first stage. There is no doubt 
we would all be happier to have a comprehensive agreement, but 
it simply was not available. It was not possible.
    And so what we thought was critical was to get this first 
step and stop the advance of their nuclear program, to put time 
on the clock to negotiate that comprehensive agreement--not too 
much time on the clock because we did not want them to play 
games, but enough time to really see if we could get that 
negotiation underway and fulfilled.
    So, in our view, we needed this first step to put that time 
on the clock. We understand that our very strong ally, 
partner--Israel--tactically believes we should have waited for 
a comprehensive agreement, that we should have kept sanctioning 
and hope that Iran would capitulate. But our concern with that 
is, because it is a culture of resistance, as we were just 
discussing, that it would take a very long time. And although 
it might ultimately happen, though it might not, all that while 
they would be advancing their nuclear program. And since the 
time for breakout was already short, it would become shorter 
and shorter, leaving us with very difficult options and 
diplomacy fading away.
    Senator Warren. Good. And if I can just follow up just a 
little bit here, to be clear, Under Secretary Cohen, the value 
of the temporary sanctions relief, I take it from all you have 
said, is minuscule in comparison to Iran's economy, even in its 
greatly weakened state. Is that correct?
    Mr. Cohen. Yes, Senator Warren. The total value of this 
deal is in the $6 to $7 billion range; that is about 1 percent 
of Iran's GDP. It does not come close to closing the budget 
deficit that Iran faces, which is in the $35 billion range. It 
does not come close to providing the funds necessary for Iran's 
foreign exchange needs, which run about $60 to $70 billion a 
year.
    So as I said, it is economically insignificant to Iran, and 
it is insignificant in particular because of what remains in 
place: the banking sanctions, the oil sanctions, the financial 
sanctions, the fact that their ports are largely cutoff. You 
know, this relief will not improve the economic situation in 
Iran in any significant way.
    Senator Warren. And then one last question that I want to 
ask about this. President Rouhani was elected in part because, 
unlike his predecessor, he was interested in negotiating with 
the international community. But he still has to contend with a 
significant number of hard-liners who oppose negotiations. So, 
Under Secretary Sherman, if Congress passes additional 
sanctions now, even sanctions that do not kick in unless the 
negotiators fail to reach final agreement in 6 months, would 
that make it more difficult or easier for President Rouhani to 
make a final deal?
    Ms. Sherman. I think there is no doubt that if, in fact, 
sanctions were passed, the hard-liners would say, ``See, you 
cannot deal with the United States. You cannot deal with the 
P5+1. There is no good faith.'' And although that might indeed 
tank the agreement, as I have said, our greater concern is 
keeping the P5+1 and the international coalition together for 
the enforcement of the sanctions that remain on the books, 
which are vast.
    Senator Warren. Thank you.
    Thank you, Mr. Chairman.
    Chairman Johnson. Ms. Sherman and Mr. Cohen, can you 
explain specifically how the U.S. will ensure that Iran 
complies with the terms of the first step agreement? And can 
you describe the different verification and monitoring roles 
played by the State Department, the intelligence community, and 
the IAEA? Ms. Sherman, let us start with you.
    Ms. Sherman. Sure. First of all, the IAEA will be working 
with us. We are a member of the Board of Governors of the IAEA, 
and so we are part of the regular meetings. They will help do 
the verification of the agreement--in fact, will lead the 
verification of the agreement; as I have stated, daily access 
to Fordow and Natanz, more frequent access to Arak, managed 
access to uranium mines and mills, to centrifuge production, 
getting the plans of the Arak reactor. So in many ways, they 
will provide the compliance oversight for this.
    In addition, of course, through our own means as a 
Government, both national intelligence means as well as 
diplomatic means, we will be monitoring the compliance, and we 
will, of course, be available to this Committee and to the U.S. 
Congress for ongoing briefings, consultations, and hearings to 
keep you apprised of compliance.
    Chairman Johnson. Mr. Cohen.
    Mr. Cohen. Yes, Mr. Chairman, with respect to compliance, I 
would just make one point. The relief that is afforded to Iran 
in this package does not begin until Iran begins to comply with 
its obligations under the agreement. So none of the relief in 
the petrochemical sanctions or the auto sanctions, any of that, 
begins until we see the Iranians complying with their 
commitments under this agreement. And, moreover, the financial 
aspect, this $4.2 billion that Iran will be allowed access to, 
that is doled out in installments over the 6-month duration of 
this deal. And so the Iranians will need to continue to comply 
with their obligations under this first step in order to get 
access to those funds.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman.
    Ambassador Sherman, the United States and the other members 
of the P5+1 are apparently bound in the agreement to the 
principle of no new nuclear-related sanctions. Can you or have 
you specifically defined what that means? What are ``nuclear-
related sanctions''?
    Ms. Sherman. Well, there are both practices and legal 
definitions that accrue with that, Senator, and I would be glad 
to get you a briefing from a team at State about how we will 
sort of work through those issues. But it is quite clear sort 
of in the nomenclature of how we proceed what are considered 
nuclear related versus what would be terror related or human 
rights abuses or censorship or military sales related.
    Senator Crapo. This just generates another series of 
questions for me, and let me pose it this way: Given that there 
are different kinds of sanctions and the agreement focuses on 
nuclear-related sanctions, assuming we can specify exactly what 
that is and distinguish between the different sanctions, does 
that mean that Congress would be free to pass other sanctions 
measures while we are considering the plan?
    Ms. Sherman. We have said to Iran that we will continue to 
enforce all of our existing sanctions, and we have said that 
this agreement pertains only to new nuclear-related sanctions 
in terms of what we, the European Union, and the U.N. Security 
Council will forgo.
    Senator Crapo. And you are confident that can be delineated 
as----
    Ms. Sherman. Yes. And, indeed, right now there are 
considerations by the Human Rights Council about a resolution 
on human rights abuses in Iran. We fully support that. So on an 
ongoing basis, in all of the international fora where we have 
ongoing concerns about counterterrorism, human rights, 
censorship, we will be active as we always have been.
    Senator Crapo. All right. Let me ask it in another context. 
Should we proceed and should Iran succeed in proving that it 
can run a purely civilian program and move forward with the 
resolution of the issue as you have discussed is our objective 
and as we all hope will be achieved, would the United States 
then be able to use all of the tools in its toolbox--and what I 
am referring to here is something such as petroleum sanctions--
to address the destabilizing nature of other aspects of Iran's 
conduct such as its State sponsorship of terrorism or its 
advanced ballistic missile production or its human rights 
abuses?
    Ms. Sherman. I think, Senator, we would have to look at 
what the specific language was attacking what specific problem, 
so I think the best I can do today, without specific language 
sitting in front of me and in front of our lawyers, is to say 
to you that the only commitment we have made in this agreement 
is no new nuclear-related sanctions, is the only commitment we 
have made.
    Senator Crapo. All right. I would like to pursue that a 
little further with you following the hearing to see how we 
distinguish between the two and what kind of limitations would 
be on the United States as we move forward in that context.
    Just another couple quick questions, and these questions 
relate to the U.N. Security Council resolutions and the U.S.-
UAE Civilian Nuclear Cooperation Agreement. Can we assume or 
can you confirm to us that those resolutions and agreements 
would be required to be complied with by Iran as we move 
forward in any final negotiations?
    Ms. Sherman. Indeed, the Joint Plan of Action says that all 
U.N. Security Council resolutions must be addressed before a 
final agreement is agreed to.
    Senator Crapo. All right. Thank you, Mr. Chairman. I have 
no further questions at this point.
    Chairman Johnson. Stopping Iran's illicit nuclear 
activities is vital to our national security and that of our 
allies, including Israel. If no final deal is reached, Iran 
fails to comply with the first step agreement, this Committee 
will act swiftly to impose a new round of sanctions. In the 
meantime, I agree with today's witnesses that a pause on new 
sanctions legislation is justified to see if such a deal is 
possible.
    I would like to thank the witnesses for their testimony, 
and this hearing is adjourned.
    [Whereupon, at 12:16 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
                PREPARED STATEMENT OF SENATOR JON TESTER
    Thank you Chairman Johnson and Ranking Member Crapo for convening 
this important hearing. I would also like to thank Ms. Sherman and Mr. 
Cohen, and Secretary Kerry, for their tireless diplomatic efforts. All 
of us here are deeply committed to preventing Iran from acquiring a 
nuclear weapon.
    Your hard work is a critical first step in this endeavor.
    I was in Jerusalem when this agreement was announced on November 
24th. That evening, I met with Israeli Prime Minister Netanyahu. For 
me, visiting Israel during this critical time highlighted the gravity 
of the issue before us.
    As Secretary Kerry said in the House yesterday, ``there's no more 
important issue in American foreign policy.'' I could not agree more. 
That's why we have to get this right.
    While I fully support diplomatic efforts to prevent Iran from 
getting a nuclear weapon, I remain deeply skeptical of Iran's 
leadership and their intentions. Simply put, the Iranian regime still 
poses a threat to American interests, our allies, and to the stability 
of the region.
    I look forward to hearing from each of you about the details of the 
agreement reached in Geneva, and the prospects of reaching a long-term 
comprehensive solution as we move forward.
    Again, I thank Chairman Johnson and Ranking Member Crapo for 
calling this hearing, and I look forward to the testimony of the 
witnesses.
                                 ______
                                 
                  PREPARED STATEMENT OF WENDY SHERMAN
       Under Secretary for Political Affairs, Department of State
                           December 12, 2013
    Good morning, Chairman Johnson, Ranking Member Crapo, distinguished 
Members of the Committee. Thank you for inviting me to discuss the 
details of the Joint Plan of Action (JPA) concluded with Iran and our 
P5+1 partners on November 24 in Geneva.
    Let me begin by noting that the diplomatic opportunity before us is 
a direct result of the cooperation between Congress and the 
Administration to put in place and implement a comprehensive and 
unprecedented sanctions regime designed to press Iran to address 
international concerns with its nuclear program.
    Our collaboration on sanctions is what brought Iran to the table. 
However, it is important to underscore that what we do from this point 
forward is just as critical, if not more so, in terms of testing Iran's 
intentions. In that regard, I look forward to our consultations over 
the important weeks and months ahead.
    Today, I want to give you the facts about what was agreed to in 
Geneva, so you can judge the merits of the JPA for yourself.
Iran Commitments
    We have long recognized that the Iranian nuclear program 
constitutes one of the most serious threats to U.S. national security 
and our interests in the Middle East. Thanks to the sanctions pressure, 
and a firm and united position from the P5+1 (China, France, Russia, 
UK, U.S., and Germany, in coordination with the EU), we have reached an 
understanding that constitutes the most significant effort to halt the 
advance of Iran's nuclear program in nearly a decade. As a consequence, 
the JPA agreed to in Geneva is profoundly in America's national 
security interest, and makes our regional partners safer and more 
secure.
    The JPA is sequenced, with a 6-month period designed explicitly to 
block near-term Iranian pathways to a nuclear weapon, while creating 
space for a long-term comprehensive solution. The goal of that 
comprehensive solution is to resolve the international community's 
concerns with Iran's nuclear program. What this initial plan does is 
help ensure that Iran's nuclear program cannot advance while 
negotiations towards that solution proceed.
    Upon implementation in the coming weeks, this initial step will 
immediately: halt progress of the Iranian nuclear program; roll it back 
in key respects; and introduce unprecedented monitoring into Iran's 
nuclear activities. Taken together, these measures will prevent Iran 
from enhancing its ability to create a nuclear weapon and increase the 
confidence in our ability to detect any move towards nuclear break-out 
or diversion of material towards a covert program.
    The details demonstrate why this is the case. First, as stated, 
Iran must halt the progress of its enrichment program. This means, 
under the express terms of the JPA, that Iran cannot increase its 
enrichment capacity. Iran's stockpile of 3.5 percent enriched uranium 
hexafluoride (UF6) cannot grow--it will be the same amount or less at 
the end of the 6-month period as it is as the beginning. Iran cannot 
build new enrichment facilities for the production of enriched uranium. 
Iran cannot install additional centrifuges of any type in their 
production facilities, operate more centrifuges, nor replace existing 
centrifuges with more advanced types. Moreover, Iran must limit 
centrifuge production to those needed to replace damaged machines; thus 
Iran cannot expand its stockpile of centrifuges.
    Second, during this initial phase, Iran will roll back or 
neutralize key aspects of its program. Iran must cease all enrichment 
over 5 percent. The piping at Fordow and Natanz that is used to more 
efficiently enrich uranium over 5 percent must be dismantled. Iran must 
neutralize its entire 20-percent stockpile of enriched uranium 
hexafluoride by diluting it to a lower level of enriched uranium 
hexafluoride or converting it to oxide for fuel for the Tehran Research 
Reactor.
    Finally, Iran cannot advance work on the plutonium track. At Arak, 
Iran cannot commission the heavy water reactor under construction nor 
transfer fuel or heavy water to the reactor site. Iran cannot test 
additional fuel or produce more fuel for the reactor nor install 
remaining components for the reactor. Iran cannot construct a facility 
for reprocessing spent fuel. Without reprocessing, Iran cannot separate 
plutonium from spent fuel and therefore cannot obtain any plutonium for 
use in a nuclear weapon. As such, this first step freezes the timeline 
for beginning operations at the Arak reactor and halts progress on any 
plutonium pathway to a weapon.
    Significantly, the monitoring measures outlined in the JPA will 
provide much more timely warning of a breakout at Iran's declared 
enrichment facilities and add new checks against the diversion of 
equipment for any potential covert enrichment program. Some have 
rightfully asked why we should trust Iran to live up to these 
commitments. As Secretary Kerry has said, the JPA is not based on 
trust, it is based on verification--and the verification mechanisms set 
forth in the JPA are unprecedented.
    Under its express terms, Iran must permit daily access by 
International Atomic Energy Agency (IAEA) inspectors to the facilities 
at Natanz and Fordow and allow more frequent access to the Arak 
reactor. Iran must allow IAEA inspectors access to sites related to 
centrifuge assembly and production of centrifuge rotors (both key 
aspects of the program). Iran must allow IAEA inspectors access to 
uranium mines and mills. Iran must provide design information for the 
Arak heavy water reactor. These monitoring mechanisms will provide 
additional warning of breakout or diversion of equipment all along the 
nuclear fuel cycle and would not be in place without the understanding 
reached in Geneva.
    In summary, even in its initial phase, the JPA stops any advances 
in each of the potential pathways to a weapon that has long concerned 
us and our closest allies. It eliminates Iran's stockpile of 20-percent 
enriched uranium hexafluoride. It stops installation of additional 
centrifuges at production facilities, especially Iran's most advanced 
centrifuge design, together with freezing further accumulation of 3.5-
percent enriched uranium hexafluoride. And it ensures that the Arak 
reactor cannot be brought on line while we negotiate a comprehensive 
solution.
P5+1 Commitments
    In return for these concrete actions by Iran and as Iran takes the 
required steps, the P5+1 will provide limited, temporary, and 
reversible relief while maintaining the core architecture of our 
sanctions regime--including key oil and banking sanctions. And we will 
vigorously enforce these and all other existing sanctions.
    We estimate that this limited relief will provide approximately $6-
7 billion in revenue.
    First, we will hold steady Iran's exports of crude oil at levels 
that are down over 60 percent since 2011. This means that Iran will 
continue to lose $4-5 billion per month while the JPA is in effect 
compared to 2011. Let me be clear, however. We will not allow Iran's 
exports to increase and we will continue collaboration with our 
international partners to ensure that they understand that any 
increases in Iranian oil purchases--or any new purchases of Iranian 
oil--remain subject to sanctions.
    Second, we are prepared to allow Iran to access $4.2 billion in its 
restricted assets, not in a lump sum, but in monthly allocations that 
keep up with verified Iranian progress on its nuclear commitments. 
Remember, Iran will continue to lose $4-5 billion a month due to our 
oil sanctions compared to 2011, so this access to funds is less than 1 
month of those losses. And this is a fraction of Iran's total needs for 
imports or its budget shortfall.
    Third, the P5+1 agreed to suspend certain sanctions on gold and 
precious metals, Iran's auto sector and on Iran's petrochemical 
exports. The suspension of the sanctions on gold and precious metals 
will not allow Iran to use restricted assets to purchase gold and 
precious metals, rather it allows Iranians to import and export gold 
and precious metals. The suspension of the sanctions on the auto 
industry will allow Iran to obtain support and services from third 
countries for the assembly and manufacturing of light and heavy 
vehicles. The suspension of sanctions on petrochemical exports means 
Iran will be able to sell petrochemicals and retain the revenues from 
these sales. We estimate that Iran will earn approximately $1.5 billion 
in revenue from the temporary suspension of these sanctions.
    We will also license the supply and installation of spare parts for 
the safety of flight for airplanes to occur in Iran. We will also 
license safety inspections and related services to occur in Iran. 
Notably, this will not apply to any airline subject to sanctions under 
our counterterrorism authorities.
    In addition, solely for the financing of humanitarian transactions 
and tuition assistance for Iranians studying abroad, we will facilitate 
access to Iran's overseas accounts for these specific transactions. 
Even before the JPA, we never intended to deprive the Iranian people of 
humanitarian goods, like food and medicine. In fact, Congress has 
explicitly exempted these transactions from sanctions.
    There have been some that have incorrectly represented the limited 
relief as being far more. So, let me reiterate. The total relief 
envisioned in the JPA amounts to between $6-7 billion--nowhere near the 
$20 or $40 billion that some have reported. The total relief for Iran 
envisioned in the JPA would be a modest fraction of the approximately 
$100 billion in foreign exchange holdings that are inaccessible or 
restricted because of our ongoing sanctions pressure. This sanctions 
pressure, moreover, will continue to increase over the 6 months of this 
initial phase through the continued enforcement of our sanctions.
Continued Enforcement of Sanctions
    It is important to understand that the overwhelming majority of our 
sanctions remain in place and we will continue to vigorously enforce 
those sanctions to ensure that Iran receives only the limited relief 
that we agreed to. This will include aggressive enforcement of 
sanctions under the Comprehensive Iran Sanctions Accountability and 
Divestment Act of 2010 (CISADA), the Iran Sanctions Act, the Iran 
Threat Reduction and Syria Human Rights Act of 2012, and the Iran 
Freedom and Counter-Proliferation Act of 2012. This means that 
sanctions will continue to apply to broad swaths of Iran's economy 
including its energy, financial, shipping, and shipbuilding sectors. By 
rigorous monitoring we will also prevent abuse of the relief that is 
part of the JPA. Were we to see increased purchases of oil or sanctions 
evasion, we are prepared to act swiftly to sanction the offenders.
    Moreover, the U.S. trade embargo remains in place and U.N. Security 
Council's sanctions remain in place. All sanctions related to Iran's 
military program, State sponsorship of terrorism, and human rights 
abuses and censorship remain in place. Our vigilance will continue.
    What is also important to understand is that we remain in control. 
If Iran fails to live up to its commitments as agreed to in Geneva, we 
would be prepared to work with Congress to ramp up sanctions. In that 
situation, we would be well-positioned to maximize the impact of any 
new sanctions because we would likely have the support of the 
international community, which is essential for any increased pressure 
to work
    In comparison, moving forward on new sanctions now would derail the 
promising and yet-to-be-tested first step outlined above, alienate us 
from our allies, and risk unraveling the international cohesion that 
has proven so essential to ensuring our sanctions have the intended 
effect.
The Way Ahead
    In assessing this deal on the merits, we must compare where we 
would be without it.
    Without the JPA, Iran's program would continue to advance: Iran 
could spin thousands of additional centrifuges; install and spin next-
generation centrifuges that reduce its breakout times; advance on the 
plutonium track by fueling and commissioning the Arak heavy water 
reactor and install remaining components ; and grow its stockpile of 
20-percent enriched uranium hexafluoride. It could do all of that, 
moreover, without the new inspections that are part of this deal and 
give us new tools to help detect breakout.
    With the JPA, we halt the program in its tracks, roll it back in 
key respects, and put time on the clock to negotiate a long-term, 
comprehensive solution with strict limits and verifiable assurances 
that Iran's nuclear program is solely for peaceful purposes.
    In a perfect world, we could get to such a comprehensive solution 
right away. But the reality is that in the absence of the JPA, we would 
have had an Iranian nuclear program that could double its enrichment 
capacity, grow its stockpile of enriched uranium, and make progress on 
starting up the Arak reactor.
    We are now moving forward to prepare for implementation. This week, 
our experts are in Vienna discussing with their P5+1 counterparts, 
Iran, and the IAEA, the mechanisms and timeframes for beginning 
implementation and setting a start date. These are technical and 
complex discussions, and it is critical that we do them well and 
right--working to protect our national security interests at every step 
along the way.
    At the same time, the JPA and its implementation is only a first 
step. There are still many issues related to Iran's nuclear program 
that must be addressed, and in the process, Iran must work with the 
IAEA to resolve all past and present issues of concern. That is why our 
ultimate aim is a comprehensive agreement that fully addresses all of 
our longstanding concerns.
Conclusion
    Finally, let me be clear about one thing: Our policy with regard to 
Iran has not changed. The President has been clear that he will not 
allow Iran to acquire nuclear weapon. While his strong preference is 
for a diplomatic solution, he is prepared to use all elements of 
American power to prevent that outcome.
    Our commitment to working with our partners, in the region and 
elsewhere, to hold Iran accountable for all its actions also remains 
firm. These negotiations will solely focus on Iran's nuclear program. 
So we will continue to counter Iran's destabilizing activities in the 
region. We will continue to hold Iran accountable for its support for 
terrorism. Iran remains listed as a State Sponsor of Terror and our 
sanctions for their support of terror remain in place.
    Our sanctions on Iran's human rights abusers will also continue and 
so will our support for the fundamental rights of all Iranians. Last 
week, National Security Advisor Rice reiterated our support for the UN 
Special Rapporteur on Human Rights and called on Iran to allow him to 
visit Iran. We will continue to speak forcefully for the oppressed 
inside Iran, including through our support, later this month, for a 
resolution before the UN General Assembly condemning Iran's human 
rights practices.
    We call on Iran to release Saeed Abedini and Amir Hekmati and 
support our efforts to bring Robert Levinson home. As Secretary Kerry 
has said, one day is too long to be in captivity, and one day for any 
American citizen is more than any American wants to see somebody 
endure. Mr. Abedini, Mr. Hekmati, and Mr. Levinson have been gone too 
long and we will continue to do everything we can, using quiet 
diplomacy.
    And we will prevent Iran from obtaining a nuclear weapon. That is 
what these negotiations are all about. We have been encouraged that 
nearly 70 countries have expressed support for the understandings 
reached in Geneva, including statements of support from our partners in 
the Gulf Cooperation Council, with whom we remain closely engaged. The 
sentiment from our partners has been clear: give this process a chance. 
If Iran lives up to its commitments then the world will become a safer 
place. If it does not, then we retain all options to ensure that Iran 
can never obtain a nuclear weapon. The coming months will be a test of 
Iranian intentions, and of the possibility for a peaceful resolution to 
this crisis.
    Throughout, and as always, we look forward to working closely with 
the Congress to ensure that U.S. national security interests are 
protected and advanced.
    Thank you.
                                 ______
                                 
                   PREPARED STATEMENT OF DAVID COHEN
Under Secretary for Terrorism and Financial Intelligence, Department of 
                              the Treasury
                           December 12, 2013
Introduction
    Chairman Johnson, Ranking Member Crapo, and distinguished Members 
of the Committee: Thank you for the opportunity to appear before you 
today to discuss the Department of the Treasury's ongoing efforts, 
along with our colleagues throughout the Administration, to isolate and 
pressure the Iranian economy; the temporary, limited and reversible 
relief offered Iran in the Joint Plan of Action (JPA); and the mounting 
sanctions pressure that Iran will face while the parties seek a 
comprehensive and long-term resolution to the international community's 
concerns over Iran's nuclear program. Our continued collaboration with 
Congress and this Committee in particular, is critical to our success 
in addressing this pressing national security issue.
The Impact of Sanctions
    From the outset of the Obama administration, we have pursued a 
dual-track strategy that pairs an offer to Iran to reclaim its place 
among the community of Nations with increasingly powerful and 
sophisticated sanctions if it continues to refuse to satisfy its 
international obligations with respect to its nuclear program.
    As this Committee is well aware, for several years Iran resisted 
and refused multiple opportunities to engage in a meaningful fashion. 
And so, as we made clear from the outset, the Administration, working 
alongside our international partners, has imposed on Iran the most 
comprehensive, powerful, and effective set of sanctions in history. 
Today, Iran stands isolated from the international banking and 
financial system with slashed oil revenues, a withering energy 
production infrastructure, and a significantly diminished economy.
    The enormous pressure presently applied on the Iranian economy did 
not come about overnight. We have worked hand-in-hand with Congress--
including with this Committee--to construct a complex and comprehensive 
set of sanctions that focuses on those supporting Iran's nuclear and 
ballistic missile programs and, more broadly, Iran's key sources of 
economic strength. We maximized the impact and efficacy of our 
sanctions' framework through robust engagement and outreach to foreign 
Governments and the private sector. And we have aggressively enforced 
these sanctions by targeting illicit actors and their networks both 
inside and outside Iran.
    While sanctions have proved to be a very potent tool, we have not 
imposed sanctions for sanctions' sake. One of the key purposes of 
sanctions always has been to induce a shift in the policy calculus of 
the Iranian Government and to build the necessary leverage for serious 
negotiations about Iran's nuclear program.
    Our dual-track strategy has begun to bear fruit. Sanctions pressure 
brought Iran to the negotiating table in Geneva and provided our 
negotiators with bargaining power to secure important limitations on 
Iran's nuclear program in the JPA. These limitations are the first 
meaningful limits Iran has accepted on its nuclear program in nearly a 
decade. But the deal is only a first step.
    The limitations on Iran's nuclear program under the JPA create the 
time and space to test whether Iran is prepared to negotiate a 
comprehensive, solution that would give us assurance that Iran is not 
producing a nuclear weapon. Over the next 6 months, while we test this 
proposition, we will continue to apply intense pressure on Iran's 
economy by aggressively enforcing the vast majority of our sanctions 
that will remain in place. Unless Iran takes concrete and verifiable 
steps to prove that its nuclear program is exclusively peaceful, it 
will face increasing sanctions pressure and deeper isolation.
Limited, Temporary, and Reversible Relief
    My colleague, Under Secretary Sherman, provides a detailed 
description in her testimony of the various commitments made by Iran in 
the JPA to halt, and in several important respects roll back, its 
nuclear program, while also allowing increased transparency and 
monitoring.
    In short, Iran has committed to neutralize its entire stockpile of 
near 20-percent enriched uranium; cap its stockpile of 3.5-percent low-
enriched uranium; halt all enrichment of uranium above 5 percent; limit 
its production and installation of centrifuges; and not make any 
further advances in its activities at the IR-40 Heavy Water Reactor 
near Arak. Tehran further committed to open its nuclear facilities to 
increased IAEA inspector access to give the world confidence that it is 
meeting its commitments under the JPA and is taking the required steps 
to halt its weapons program. And it committed to this in exchange for 
limited, temporary, and reversible relief.
    Let me explain what I mean by ``limited, temporary, and reversible 
relief.''
    The relief offered Iran is limited in several important respects. 
First, under the JPA, we will allow Iran access to a set amount of its 
own money--$4.2 billion in installments over the 6-month course of the 
JPA--in a carefully controlled manner. Second, we will suspend some 
sanctions to allow Iran to engage in specified additional commercial 
activity--petrochemical exports, imports for its automobile industry, 
and gold trade--that altogether have at best marginal economic value to 
Iran. And third, the vast bulk of our sanctions, including the core 
oil, financial, and banking sanctions that have had such a dramatic 
impact on Iran's economy, remain in place and will continue to exert 
pressure on Iran's decision makers over the next 6 months.
    The relief offered Iran in the JPA is also temporary in that it 
expires at the end of 6 months. At the end of 6 months, no additional 
funds will be made available to the Iranians, and the suspended 
sanctions will snap back into place. Because the JPA is renewable only 
``by mutual consent,'' at the 6-month mark we could then consider 
whether, and to what extent, to provide additional relief to the 
Iranians in light of the circumstances. But if we decide not to provide 
additional relief, the relief described in the JPA expires at the end 
of 6 months.
    And the relief in the JPA is reversible. If Iran fails to fulfill 
its commitments under the JPA, or refuses to enter into a 
comprehensive, long-term solution, we can stop the gradual release of 
funds, reimpose the suspended sanctions, and impose new and enhanced 
types of sanctions.
The Relief Package
    The relief package described in the JPA is composed of several 
discreet elements, as follows:
Access to Restricted Funds
    The majority of the relief will come from granting Iran access, in 
installments over the 6-month tenure of the JPA, to $4.2 billion of its 
own funds currently held in bank accounts outside of Iran--funds to 
which Iran has limited access and which right now can only be used for 
bilateral trade or humanitarian purchases. Let me underscore this 
point. These funds already belong to Iran, but under the international 
sanctions framework cannot be moved to third countries (except to 
facilitate humanitarian trade) nor repatriated to Iran. Not a single 
dollar of U.S. taxpayer money will be provided to Iran.
Temporary Pause in Reduction of Iran's Crude Oil Sales
    We have agreed to hold Iran's exports of crude oil flat for a 
period of 6 months rather than requiring further significant reductions 
in the amount of Iranian oil purchased by oil-importing countries. To 
be clear, this will not allow Iran to increase its oil exports. To the 
contrary, Iran will be held to its currently depressed levels, down 60 
percent from what it was selling in early 2012. This provision, 
moreover, will apply only to Iran's six current crude oil purchasers--
Japan, Republic of Korea, China, Taiwan, India, and Turkey. They will 
not be allowed to increase their purchases and no other country will be 
allowed to begin importing Iranian oil.
Temporary Suspension of Petrochemical Sanctions
    U.S. sanctions on Iran's petrochemical exports will be temporarily 
suspended as part of this first step deal. We estimate that this will 
allow Iran to generate a maximum of $1 billion in new revenue over the 
next 6 months, but only if Iran is able to produce additional 
petrochemicals for export (some of its petrochemical plants have been 
retrofitted to boost gasoline production capacity for the domestic 
market) and only if Iran is able to find additional petrochemical 
customers--who typically prefer stable, long-term supply contracts--
willing to sign contracts with Iranian exporters knowing that the 
sanctions are suspended under the JPA for only 6 months.
Temporary Suspension of Sanctions on Iran's Auto Industry
    We will also temporarily suspend U.S. sanctions on exports by third 
countries to Iran's automobile industry. We estimate that this could 
provide Iran some $500 million in revenue, assuming Iran can resume 
prior levels of production and revitalize its car exports. Iran's 
automobile industry, however, is riddled with structural problems and 
was in steep decline even before our auto sanctions were put in place. 
Moreover, if Iran hopes to revive its auto sector, it would need to 
spend some of its limited foreign currency to pay for car kits from 
abroad.
Temporary Suspension of Gold Sanctions
    Sanctions on Iran's ability to buy and sell gold will also be 
temporarily suspended. However, we expect that this provision will be 
of limited value to Iran because the only funds Iran can use to buy 
gold are its limited unrestricted hard-currency reserves. Because of 
the sanctions architecture that remains in place, Iran will be 
permitted to use neither its restrained foreign reserves nor its own 
currency, the rial, to buy gold. As a consequence, any gold Iran 
purchases would be offset by the hard currency it would spend to buy 
it, resulting in negligible economic benefits.
Limited Access to Funds for Tuition Purposes
    Under strict guidelines, we will allow Iran to transfer $400 
million of restricted Iranian funds to defray tuition costs for Iranian 
students studying outside of Iran, and will ensure that these funds are 
used for their intended purpose.
License Safety-Related Repairs and Inspection for Certain Airlines in 
        Iran
    We will license the supply and installation of spare parts for 
safety of flight, as well as safety-related inspections and repairs for 
certain Iranian aircraft, to occur in Iran. Previously, we had licensed 
these activities for Iranian aircraft only outside of Iran. Notably, 
Mahan Air, an Iranian airline that has been designated by Treasury for 
providing financial, material and technological support to Iran's 
Islamic Revolutionary Guard Corps-Qods Force and Lebanese Hizballah, 
will not be permitted to benefit from these repairs, nor would any 
other entity subject to sanctions under our counterterrorism 
authorities.
Financial Channel To Facilitate Humanitarian Trade
    Finally, we will assist in establishing a financial channel to 
facilitate humanitarian trade in food, agricultural commodities, 
medicines, medical devices for Iran's domestic needs, and to pay for 
the medical expenses of Iranian citizens incurred abroad. This will not 
provide Iran access to any new source of funds, because humanitarian 
trade with Iran is not targeted under existing sanctions authorities 
and because we intend that funds for medical expenses will come from 
Iran's limited stores of unrestricted hard currency. Humanitarian 
transactions have been explicitly exempted from sanctions by Congress 
and U.S. law places limits on the President's ability to regulate such 
trade.
The Relief Package in Context
    The total value of the relief package--approximately $6 billion to 
$7 billion--will not materially improve the condition of the Iranian 
economy. Indeed, at the end of the 6-month period, we expect that Iran 
will be even deeper in the hole economically than it is today due to 
the continuing and mounting impact of the sanctions we have in place 
and that we will continue to energetically enforce.
    Indeed, the limited relief offered Iran in the JPA is dwarfed by 
the depths of Iran's economic distress. Our oil, financial and banking 
sanctions, in particular, have driven Iran into a deep recession. Since 
2011, oil sanctions imposed by the EU and the U.S. have forced Iran's 
oil exports to decline from about 2.5 million barrels per day at the 
end of 2011 to about 1 million barrels per day today--costing Iran 
roughly $80 billion in lost sales. In that same period, Iran's 
currency, the rial, has lost around 60 percent of its value against the 
dollar. Approximately $100 billion of Iran's foreign exchange holdings 
are restricted or inaccessible due to our financial and banking 
sanctions. Over the last year, inflation in Iran has been about 40 
percent. All told, last year Iran's economy contracted by more than 5 
percent, and we expect Iran's economy to contract again this year. By 
contrast, according to the IMF, the economies of Iran's neighboring oil 
exporting competitors expanded last year by an average of over 5 
percent and are expected to grow by an average of almost 4 percent this 
year.
    These macroeconomic indicators reflect the impact of sanctions on, 
and the deep structural problems with, Iran's economy, none of which 
will be solved by the limited relief agreed to in Geneva. Indeed, over 
the 6-month duration of the JPA, our oil sanctions alone will cost Iran 
an additional $30 billion (i.e., 4-5 billion per month) in lost 
revenue, which far surpasses the total sum of the relief package. Even 
taking into consideration the modest relief package, these staggering 
figures represent a bleak reality for Iran's economy, which we expect 
will continue to deteriorate over the next 6 months.
The International Sanctions Regime Remains Robust
    We and our international partners will continue to impose 
increasing pressure on Iran's economy through the implementation and 
enforcement of sanctions, the overwhelming majority of which are not 
affected at all by the JPA. This includes the core architecture of our 
oil, financial, and banking sanctions, which remain firmly in place.
    Throughout the duration of this first-step deal, we will continue 
to enforce sanctions to ensure that Iran's oil sales are held down at 
their current, greatly depressed levels. Moreover, our financial 
sanctions remain fully in place, in particular the sanctions imposed by 
section 504 of the Iran Threat Reduction and Syria Human Rights Act of 
2012, which became effective on February 6, 2013, and that ``locks up'' 
Iran's oil revenue in the few jurisdictions that still import oil from 
Iran.
    As a result, with the exception of the $4.2 billion in funds that 
we will allow Iran to access in stages over the next 6 months, the 
revenue that Iran earns from its oil sales during the 6-month duration 
of the JPA will remain subject to our financial sanctions. Those 
sanctions prevent Iran from using those funds for any purpose other 
than paying for goods from the oil importing country or humanitarian 
transactions. And any financial institution that facilitates a payment 
to Iran for oil imports beyond what is provided for in the JPA risks 
being cut off from the United States financial markets. In other words, 
over the next 6 months Iran cannot sell any more oil than its current 
levels, and any additional oil revenue it does earn (other than the 
limited funds to be made available under the JPA) will be locked-up and 
unavailable for transfer or repatriation.
    In addition, the key banking sanctions imposed by the U.S. and the 
EU, which have resulted in the near-total isolation of Iran's financial 
sector, remain fully intact. That means that under Section 104 of the 
Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, 
any foreign bank that engages in a significant transaction with Iran's 
designated banks risks losing its correspondent account access to the 
U.S. And it also means that all the banks designated by the EU will 
remain cut off from specialized financial messaging services, denying 
them access to critical networks connecting the rest of the 
international financial sector. Taken together, these sanctions--which 
remain fully in force--will ensure the continued isolation of Iran from 
the global banking system, and will continue to make it extraordinarily 
difficult to do business with Iran.
    We also are focusing on enforcing additional elements of the U.S. 
sanctions program that deprive Iran of other sources of revenue. For 
example, sanctions will continue to constrict Iran's energy sector. Not 
a single prohibition or sanction on investment in Iran's energy sector 
will be suspended--for U.S. or international companies. All of the 
United States' sanctions on long-term investments in Iran's energy 
sector will remain in effect, as will the related sanctions on 
providing technical goods and services to the energy sector. This will 
ensure that Iran's oil and gas infrastructure remains severely impaired 
and increasingly obsolete.
    Furthermore, all UN and EU designations, as well as our targeted 
sanctions on the more than 600 individuals and entities tied to the 
Government of Iran, its nuclear and ballistic missile programs, and its 
energy, shipping, and shipbuilding sectors, remain in effect. Among 
other things, these sanctions mean that selling Iran cargo ships and 
tankers, providing insurance services or support for most Iranian 
shipping activities, providing flagging and classification services to 
Iranian ships, and helping Iran build port terminals or other 
facilities remain sanctionable activities.
    In addition, sanctions remain in place against Tidewater Middle 
East Company, an IRGC-owned port operating company that manages the 
main container terminal at Bandar Abbas--which has been responsible for 
some 90 percent of Iranian container traffic and has operations at six 
other Iranian ports. These sanctions will continue to deter the export 
of products to Iran as well as the import of products from Iran.
    This first-step deal also does not affect the longstanding U.S. 
trade embargo, meaning that Iran will continue to be shut out of the 
world's largest and most vibrant economy and precluded from engaging in 
business with U.S. companies and U.S. subsidiaries overseas.
    Finally, it remains the case that Iran is the leading State sponsor 
of terrorism in the world today. Nothing in the JPA affects our 
continued efforts to contest and combat Iran's support of terrorism, 
its abhorrent human rights practices, or its destabilizing activities 
in Syria. All of our sanctions programs aimed at undermining this 
loathsome Iranian conduct remain active and energetic.
Vigorous Enforcement of Existing Sanctions
    As President Obama said when he announced the JPA on November 23, 
``the broader architecture of sanctions will remain in place and we 
will continue to enforce them vigorously.'' This vigorous enforcement 
will be accomplished through the continued dedicated, resolute and 
creative work of professionals in our intelligence community, in the 
Treasury and State Departments, and across the Administration. We 
understand well the important role that sanctions pressure on the 
Iranian economy played in the lead-up to the JPA, and how important 
maintaining that pressure will be over the next 6 months as we explore 
the possibility of a long-term, comprehensive solution.
    As I have just discussed, the vast majority of our sanctions remain 
in place, which we will continue to vigorously enforce, even as 
implement the JPA. We are determined to continue--in the days, weeks, 
and months ahead--to respond to Iran's evasion efforts, wherever they 
may occur, and to continue to aggressively enforce our sanctions.
    For example, just yesterday, Treasury reached a $33 million 
settlement with the Royal Bank of Scotland plc for, among other things, 
apparent violations of U.S. sanctions on Iran and other sanctioned 
parties, including removing material references to U.S.-sanctioned 
locations or persons from payment messages sent to U.S. financial 
institutions. A few weeks ago we announced Treasury's largest 
settlement outside of the banking industry for violations of U.S. 
sanctions on Iran. As part of a combined $100 million settlement with 
several Federal Government partners, Weatherford International, Ltd. 
agreed to pay $91 million to settle its potential liability for 
extensive oilfield services provided in Iran from 2003 to 2007.
    We believe our actions have put the international business 
community on notice: Iran is still off limits, including designated 
Iranian banks and businesses. Foreign banks and businesses still have 
to make a choice--they can do business with Iran, or they can do 
business with the U.S.--not both. I can assure this that we will 
continue to take action against those who evade, or attempt to evade, 
our manifold sanctions on Iran.
    New designations and enforcement actions, moreover, are only one 
part of our strategy to ensure that the international business and 
banking community understands that now is not the time to expand 
activity in Iran. We have already begun a global campaign to ensure 
that foreign Governments and the international private sector 
understand that the relief in the JPA is limited and targeted and that 
we and our partners are committed to ensuring that the pressure brought 
to bear on the Iranian economy remains robust. This campaign will 
continue in the weeks and months ahead, so that no one makes the 
mistake of believing that Iran is now open for business. It is not.
    I have a clear message for every Government, bank, business, or 
broker that thinks now might be a good time to test our resolve: We are 
watching closely, and we are prepared to take action against anyone 
anywhere who violates, or attempts to violate, our sanctions.
Conclusion
    As our negotiators seek a comprehensive solution to ensure that 
Iran's nuclear program is exclusively peaceful, Treasury and our 
partners across the Administration will continue to forcefully 
implement our sanctions programs to maintain crucial leverage at this 
pivotal moment. I look forward to continuing our work with Congress and 
this Committee as we pursue this vital objective.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER
                       FROM WENDY SHERMAN

Q.1. There's a concern that in the past the Iranian regime has 
used negotiations as cover to advance their nuclear program. 
How will the Interim Agreement prevent Iran from using 
negotiations to continue advancing their nuclear program?

A.1. The Joint Plan of Action (JPOA) halts progress of Iran's 
nuclear program and rolls it back in key respects. These are 
the first meaningful limits that Iran has committed to on its 
nuclear program in close to a decade and, without them, Iran 
would have otherwise continued to advance critical aspects of 
its program. The limits established under the JPOA begin to 
address our most urgent concerns, including Iran's enrichment 
capacity; existing stockpiles of enriched uranium; and Iran's 
prospective ability to produce plutonium using the Arak 
reactor. Iran committed in the JPOA to provide increased 
transparency and allow for intrusive monitoring of its nuclear 
program. Taken together, these measures will prevent Iran from 
using the cover of negotiations to continue advancing its 
nuclear program, as we negotiate a long-term, comprehensive 
solution that addresses fully the international community's 
concerns regarding Iran's nuclear program.

Q.2. A key component of the Interim Agreement is that Iran 
provides International Atomic Energy Agency (IAEA) inspectors 
with access to Natanz and Fordow, as well as other facilities, 
mines, and mills. Given the size of Iran, a concern is whether 
the IAEA has the capacity to handle the task. Are there enough 
inspectors to provide daily visits to the wide range of nuclear 
sites across Iran?
    Also, let's imagine IAEA inspectors are denied access to an 
Iranian nuclear facility. Are there measures in the 
implementation plan of the Interim Agreement to report this? 
Please provide the Committee with the oversight process and 
authorities in the implementation plan of the Interim 
Agreement.
    Finally, if Iran's actions on granting access to inspectors 
are inconsistent with the letter or spirit of the Interim 
Agreement, what measures can the P5+1 take?

A.2. The International Atomic Energy Agency (IAEA) will be 
responsible for verifying and confirming that Iran is complying 
with all nuclear-related measures under the Joint Plan of 
Action (JPOA). The IAEA has confirmed it has the technical 
capacity to provide the necessary verification, and we are 
confident the IAEA will carry out its JPOA-related activities 
with the highest degree of professionalism and impartiality.
    The JPOA established a Joint Commission to monitor 
implementation of the JPOA near-term measures and address 
issues that may arise, with the IAEA solely responsible for 
verification of nuclear-related measures. The Joint Commission 
will be composed of technical experts of the P5+1 countries, 
the EU, and Iran. The Joint Commission will meet to discuss the 
implementation of the JPOA and any issues that may have arisen 
during the preceding month. Any problems will be referred to 
the Political Directors of the P5+1 and Iran to resolve, as 
appropriate.
    The enhanced monitoring measures contained in the JPOA will 
enable the IAEA to provide regular updates to the Joint 
Commission on the status of Iran's implementation of its 
commitments. The IAEA said it would need to nearly double the 
staff resources devoted to Iran, and several member States, 
including the United States, have pledged additional 
contributions to support this effort.
    If Iran does not meet its JPOA commitments, backslides, or 
does not negotiate in good faith, we can reimpose all of the 
sanctions. And since we are not allowing Iran lump-sum access 
to its funds, we can turn off that flow during the 6-month 
duration of the JPOA. As we have noted, we will continue to 
watch closely to ensure Iran complies with the nuclear-related 
provisions in a timely and faithful manner.

Q.3. While speaking at the Saban Center on December 7, 2013, 
President Obama said that there was a ``fifty-fifty chance'' 
that an end-deal with Iran could be reached. He said, ``[it] is 
not the choice between this deal and the ideal, but the choice 
between this deal and other alternatives.'' Addressing the 
``fifty-fifty'' remarks, what is causing such doubt? Is it 
Iran? Moreover, could you please define the ``alternatives'' 
mentioned in President Obama's statement?

A.3. We are approaching these negotiations in good faith and 
with the intent to reach a comprehensive agreement in the 6-
month timeframe. We acknowledge this will not be an easy task. 
We also remain concerned about any effort to undercut the 
negotiations and the prospect of reaching a comprehensive 
resolution, particularly from hardline elements in Iran. If 
Iran does not meet its JPOA commitments, backslides, or does 
not negotiate in good faith, we can reimpose all of the 
sanctions. And as President Obama has repeatedly stated, we 
remain committed to preventing Iran from acquiring a nuclear 
weapon.

Q.4. You have said that the Interim Agreement for the P5+1 and 
Iran is, essentially, a trust-building exercise. As you are 
well aware, since 1984 Iran has been designated a State sponsor 
of terrorism. Iran has armed, trained, and financed terrorist 
groups and is the leading sponsor of Hezbollah and Hamas. 
Additionally, Iran has armed insurgents who have fought and 
killed U.S. troops in Afghanistan and Iraq.
    In your hearing, you mentioned that the Iranian Ministry of 
Foreign Affairs and Foreign Minister Zarif have responsibility 
for the nuclear negotiations, while the Iranian Revolutionary 
Guard Corps Quds Force leads Iranian activities that 
destabilize the region. Do you see Iran's foreign policy 
evolving as a result of the P5+1 negotiations over their 
nuclear program? Also, do you see the P5+1 negotiations leading 
to other diplomatic openings with Iran?

A.4. Our discussions with Iran through the P5+1 and bilaterally 
throughout this process have focused exclusively on the nuclear 
issue. We believe that the Supreme Leader empowered President 
Rouhani to negotiate with the United States and the 
international community to resolve the nuclear issue. However, 
we assess that there are other Iranian elements outside the MFA 
that have influence and control over other aspects of Iran's 
foreign policy.
    Progress on the nuclear issue does not change our resolve 
in pushing back against Iranian support for terrorism, threats 
against our friends and partners, and violations of human 
rights. However, progress on the nuclear issue may lead to 
progress in other areas. As the President said on September 24 
at the United Nations, ``I do believe that if we can resolve 
the issue of Iran's nuclear program, that can serve as a major 
step down a long road towards a different relationship, one 
based on mutual interests and mutual respect.''
    If Iran wants to move in a different direction as part of 
the reorientation of its foreign policy, we would welcome that 
change. However, the international community must see concrete 
actions to that effect.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                       FROM WENDY SHERMAN

Q.1. When the interim agreement with Iran was announced, I 
understood there to be a 6-month clock to work towards a final 
deal.
    When does the 6-month clock begin, and is this date the 
same for all parties?

A.1. Pursuant to the Joint Plan of Action (JPOA) and related 
technical understandings between the P5+1 and Iran, the 
International Atomic Energy Agency (IAEA) on January 20 
verified that Iran had initiated or completed a number of 
technical steps required for the JPOA to be implemented. As a 
result of Iran's meeting its initial commitments, 
implementation of the JPOA began on January 20. In return for 
important steps to constrain Iran's nuclear program, the P5+1 
committed to provide Iran with limited, temporary, and targeted 
sanctions relief for a period of 6 months, starting on January 
20, 2014, and concluding on July 20, 2014.

Q.2. Iran has insisted on the international community 
recognizing its right to enrich, while United Nations Security 
Council resolutions require that Iran verifiably suspend all 
enrichment-related activities.
    With the Geneva agreement essentially permitting Iran to 
enrich uranium up to 5 percent, how will future agreements deal 
with this inconsistency?
    Can you explain what sort of enrichment program Iran will 
have if you get what you consider to be a good final deal?

A.2. The United States has not recognized that Iran has a 
``right'' to enrich, and the Joint Plan of Action (JPOA) in no 
way conveys recognition of any ``right to enrichment.'' As 
negotiations on a comprehensive solution are set to begin later 
this month, we are prepared to consider in the end state a 
strictly limited enrichment program, but only if the Iranians 
accept rigorous limits on and transparent monitoring of the 
scope and level of enrichment activities, capacity, where it is 
carried out, and stocks of enriched uranium. The JPOA specifies 
that the comprehensive solution would involve a ``mutually 
defined enrichment programme with practical limits and 
transparency measures to ensure the peaceful nature of the 
programme.'' Therefore, any Iranian enrichment capability would 
be entirely conditional on reaching agreement on its scope. If 
we can reach an understanding with Iran on strict constraints, 
then we can contemplate an arrangement that includes a very 
modest amount of enrichment that eliminates Iran's capacity to 
obtain a nuclear weapon in any reasonable way. Moreover, it is 
also important to stress that Iran must satisfy the United 
Nations Security Council (UNSC) as part of any comprehensive 
solution. The UNSC sanctions will continue until the United 
States and P5+1 judge that Iran has resolved all concerns 
satisfactorily.

Q.3. If the 6-month moratorium expires and no permanent deal is 
struck, do you believe that it will be possible to reorganize 
effective global sanctions to prevent Iran from achieving 
nuclear capability?

A.3. To be clear, the Joint Plan of Action suspended sanctions 
on only a handful of very specific activities for the 6-month 
period. All of those suspensions are reversible, and on July 
20, the full range of sanctions will snap back into force 
absent progress on negotiation of a comprehensive solution. 
Moreover, the vast majority of our sanctions, including those 
on Iran's energy sector, its connections to the international 
financial system, and its access to sensitive technologies, 
remain in place. In addition, if the Iranians prove unwilling 
to negotiate credibly toward a comprehensive solution, then we 
will be in a much stronger position to lead the world to impose 
an even tougher set of sanctions on Iran than we would be if we 
had not negotiated the JPOA and given it a credible, reasonable 
chance to succeed.

Q.4. Hard currency frozen by sanctions in overseas bank 
accounts may soon be transferred back to Tehran under the deal. 
President Rouhani may be aiming to gain time and money to 
advance Iran's nuclear program. Multiple IAEA reports, 
including those from March 2011 and November 2011, have 
provided extensive descriptions of Iranian research involving 
activities related to the development of a nuclear explosive 
device and noted that some research may still be ongoing.
    How has the recent deal addressed such concerns?

A.4. The Joint Plan of Action (JPOA) is clear that Iran, in 
conjunction with the Joint Commission, will ``work with the 
IAEA to facilitate resolution of past and present issues of 
concern,'' which is a reference to the possible military 
dimensions (PMD) of Iran's nuclear program. In parallel, the 
International Atomic Energy Agency (IAEA) and Iran adopted the 
``Joint Statement on a Framework for Cooperation'' that is also 
aimed at resolving these past and present issues of concern, 
including PMD. Finally, Iran must also address relevant United 
Nations Security Council resolutions related to its nuclear 
program--which call for Iran to cooperate fully with the IAEA 
to resolve all outstanding concerns as part of any 
comprehensive solution. During the next 6 months of 
negotiations, all sanctions on more than 600 individuals and 
entities targeted for supporting Iran's nuclear or ballistic 
missile program will remain in effect.
    As we have made clear, issues related to the possible 
military dimensions of Iran's nuclear program must be resolved 
to the satisfaction of the United States and P5+1 in 
negotiations on a comprehensive solution. We continue to urge 
Iran to work with the IAEA to resolve the Agency's 
investigation into past and present concerns without delay.

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