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PROGRESS OF THE OBAMA ADMINISTRATION’S

POLICY TOWARD IRAN

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL SECURITY,

HOMELAND DEFENSE AND FOREIGN OPERATIONS

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

NOVEMBER 15, 2011

Serial No. 112–99

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL SECURITY, HOMELAND DEFENSE AND FOREIGN

OPERATIONS

JASON CHAFFETZ, Utah, Chairman

RAU ́ L R. LABRADOR, Idaho, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PAUL A. GOSAR, Arizona

BLAKE FARENTHOLD, Texas

JOHN F. TIERNEY, Massachusetts, Ranking

Minority Member

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

STEPHEN F. LYNCH, Massachusetts

MIKE QUIGLEY, Illinois
(III)

C O N T E N T S

Page

Hearing held on November 15, 2011 ...................................................................... 1

Statement of:

Dubowitz, Mark, esq., executive director, Foundation for Defense of Democracies; Kenneth M. Pollack, Ph.D., director, Saban Center for Middle East Policy, Brookings Institution; and Suzanne Maloney, Ph.D.,

senior fellow, Saban Center for Middle East Policy, Brookings Institution ................................................................................................................. 6

Dubowitz, Mark, esq. ................................................................................ 6

Maloney, Suzanne, Ph.D. .......................................................................... 44

Pollack, Kenneth M., Ph.D. ...................................................................... 23

Szubin, Adam J., Director, Office of Foreign Assets Control, U.S. Department of the Treasury; Henry T. Wooster, Acting Deputy Assistant

Secretary, Bureau of Near Eastern Affairs, U.S. Department of State;

and Colin H. Kahl, Ph.D., Deputy Assistant Secretary of Defense for

the Middle East, U.S. Department of Defense ........................................... 66

Kahl, Colin H., Ph.D. ................................................................................ 86

Szubin, Adam J. ........................................................................................ 66

Wooster, Henry T. ..................................................................................... 77

Letters, statements, etc., submitted for the record by:

Dubowitz, Mark, esq., executive director, Foundation for Defense of Democracies, prepared statement of ................................................................ 9

Kahl, Colin H., Ph.D., Deputy Assistant Secretary of Defense for the

Middle East, U.S. Department of Defense, prepared statement of .......... 89

Maloney, Suzanne, Ph.D., senior fellow, Saban Center for Middle East

Policy, Brookings Institution, prepared statement of ................................ 46

Pollack, Kenneth M., Ph.D., director, Saban Center for Middle East Policy, Brookings Institution, prepared statement of ..................................... 25

Szubin, Adam J., Director, Office of Foreign Assets Control, U.S. Department of the Treasury, prepared statement of ............................................. 69

Wooster, Henry T., Acting Deputy Assistant Secretary, Bureau of Near

Eastern Affairs, U.S. Department of State, prepared statement of ......... 79

(1)

PROGRESS OF THE OBAMA

ADMINISTRATION’S POLICY TOWARD IRAN

TUESDAY, NOVEMBER 15, 2011

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NATIONAL SECURITY, HOMELAND

DEFENSE AND FOREIGN OPERATIONS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:03 a.m., in room

2247, Rayburn House Office Building, Hon. Jason Chaffetz (chairman of the subcommittee) presiding.

Present: Representatives Chaffetz, Issa, Tierney, Cummings,

Welch, and Quigley.

Staff present: Thomas A. Alexander, senior counsel; Brien A.

Beattie, professional staff member; Molly Boyl, parliamentarian;

Mark D. Marin, director of oversight; Rafael Maryahin, counsel;

Nadia A. Zahran, staff assistant; Jaron Bourke, minority director

of administration; Ashley Etienne, minority director of communications; Paul Kincaid, minority press secretary; Adam Koshkin, minority staff assistant; and Scott Lindsay and Carlos Uriarte, minority counsels.

Mr. CHAFFETZ. Good morning. The committee will come to order.

I would like to begin this hearing by stating the Oversight Committee’s mission statement.

We exist to secure two fundamental principles: First, Americans

have the right to know that the money Washington takes from

them is well spent; and, second, Americans deserve an efficient, effective government that works for them. Our duty on the Oversight

and Government Reform Committee is to protect these rights.

Our solemn responsibility is to hold government accountable to

taxpayers because taxpayers have a right to know what they get

from their government. We will work tirelessly in partnership with

citizen watchdogs to deliver the facts to the American people and

bring genuine reform to the Federal bureaucracy.

This is the mission statement of the Oversight and Government

Reform Committee.

Appreciate everyone being here this morning. And I would like

to welcome Ranking Member Tierney and members of the subcommittee and the people joining us in the audience and on television.

The hearing today is ‘‘Progress of the Obama Administration’s

Policy Toward Iran.’’ Today’s proceedings will examine whether the

President’s strategy is effectively deterring Iran’s nuclear program

and bringing an end to human-rights abuses there.
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During his campaign for the Presidency, President Obama promised that his administration would pursue an aggressive strategy

to end Iran’s nuclear program. In his ‘‘Blueprint for Change,’’ he

stated that the Obama administration would, ‘‘use aggressive and

direct diplomacy to prevent an Iranian regime from developing a

nuclear program. It will put an end to the failed policy that has

let Iran develop its nuclear program and strengthen its position in

the region, and present the Iranian regime with a clear choice: end

your nuclear program, support for terror, and threats toward Israel

or face increased U.S. and multilateral pressure.’’

In his inaugural address, President Obama reiterated his preference for open diplomacy and the use of soft power by saying, ‘‘To

those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history

but that we will extend a hand if you are willing to unclench your

fist.’’

After a year and a half in office, the administration began applying new pressure to Iran’s leadership. In July 2010, President

Obama signed into law the Comprehensive Iran Sanctions Accountability and Divestment Act [CISADA]. It expanded the U.S. Government’s authority to target Iran’s energy and financial sectors. It

targeted those who commit human-rights abuses. To date, the U.S.

Government has imposed sanctions on 10 companies for violations

of this act.

Through the sanctions and other frameworks, has the United

States inflicted economic hardship on Iran? Is this enough? Is that

pressure being applied in the right way? If the goal is to prevent

Iran from obtaining a nuclear weapon, then apparently not.

Just last week, the IAEA released their report indicating that

Iran has taken actions consistent with the manufacturing of a nuclear weapon. The IAEA report stated the following: ‘‘The agency

has serious concerns regarding possible military dimensions to

Iran’s nuclear program. After assessing carefully and critically the

extensive information available to it, the Agency finds the information to be, overall, credible. The information indicates that Iran has

carried out activities relevant to the development of a nuclear explosive device.’’

Iran remains undeterred despite the various sanctions and U.N.

Security Council resolutions imposed against it. In fact, Iran’s rhetoric is more reckless than ever, especially toward Israel. In sum,

the aggressive and direct diplomacy against Iran’s nuclear program

doesn’t seem to be working very well.

What is the new plan? Is the administration pursuing another

strategy, or is it standing behind the current failed approach? I

look forward to hearing from our government witnesses about

whether the administration is revising its approach.

A nuclear-armed Iran is an unacceptable outcome for the United

States and its allies. Unfortunately, Iran’s destructive behavior is

not limited to its nuclear program. Over the years, they have been

known to provide material support to militias in Iraq. Its covert

war against the United States is designed to bring instability to

Iraq and the region. Fortunately, our military has been a protective

force and has been a significant deterrent. It remains to be seen
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how that may change after military withdrawal on December 31st

of this year.

Will the State Department be prepared to defeat direct or indirect military action by Iran? Will Secretary Clinton’s army of private contractors be able to protect the 16,500 personnel under her

care? I look forward to hearing from our witnesses about the extent

of the threat and how the administration plans to confront it.

Before I recognize the ranking member, I would like to note the

absence of senior policymakers from the State Department, Defense

Department, and the Treasury Department. I extended invitations

to Deputy Secretaries of those agencies, but they declined to make

time in their schedule and appear today. The Under Secretaries of

those agencies were invited, but they are either busy or away from

the office.

I find it inexcusable that we continue to be rebuffed by the administration for providing the witnesses most pertinent to these

types of hearings. It is imperative that they show up before these

hearings, and yet there is a continued pattern here that is just unacceptable to the American people and to this committee. I find it

inexcusable.

The issues surrounding Iran are complex. The solutions are difficult and dynamic. There is no excuse to hide from oversight. Senior policymakers should be here to answer questions about the

President’s strategy, and taxpayers deserve nothing less than a full

accounting for their investment in these programs. I look forward

to hearing from our witnesses.

I will also add, it was our initial request to have the Members

all appear on one panel so we could have a candid discussion and

it would be a better use of Members’ time and, I think, a better

discussion for the American people. The administration refused to

sit next to people who weren’t in the government, and so, consequently, they have elected to be on a separate panel. We will

hear from them after, on panel number two.

I would now like to recognize the distinguished ranking member,

the gentleman from Massachusetts, Mr. Tierney, for his opening

statement.

Mr. TIERNEY. Thank you, Mr. Chairman.

And thank all of our witnesses for being here today. We appreciate the advice and insight that you will provide for the committee.

You know, the United States obviously has a difficult relationship with Iran, and it has faced some significant new strains in

that relationship just in the past month. On October 11, 2011, the

Department of Justice indicted an Iranian-American for allegedly

attempting to orchestrate the assassination of the Saudi Ambassador to the United States on American soil. Just last week, the

International Atomic Energy Agency [IAEA], released a report

making the case that, over the past 10 years, ‘‘Iran has carried out

activities relevant to the development of a nuclear explosive device.’’

How we respond to such threats to our national interest, the security of Israel, and the stability of the Middle East is a major

question. Some have called on the United States to punish Iran

through harsher sanctions.
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I do want to point out that President Obama made comments

during his election that he would make efforts to reach out to the

Iranian people and their government to try to work out some solution to the problems that existed there. He made extraordinary efforts to reach out. They were rebuffed. And I think the only good

thing that came of that, obviously, was that the rest of the international community understood that this President was at least

making a good-faith effort and this country was making a goodfaith effort. And that international community, and with our allies,

have worked with the President to put in more effective sanctions

since that point in time than any previous administration has put

in place.

So I agree that we have to continue the pressure on Iran’s leaders, and we have to get them to comply with their treaty obligations, and we also have to be sure to weigh all the consequences

of those sanctions. These are serious matters.

International sanctions should be narrowly focused to inflict

maximum pain on the ruling regime in Tehran while minimizing

the impact of the people of Iran and on global markets. For example, many have suggested increased sanctions on Iran’s oil industry. Although this is an obvious target given that oil accounts for

80 percent of Iran’s exports and 70 percent of the government’s revenue, any sanctions would likely lead to a significant increase in

global oil prices.

We have to weigh that and determine whether or not that means

we should move forward with those sanctions or take some other

course. Given our current economic conditions, any significant increase in oil prices is likely to harm any fragile recovery in the

world and increase living expenses for families both in Europe and

Asia as well as the United States.

I have also been concerned by recent attempts by Congress to tie

the hands of the administration by mandating sanctions of a particular nature without leaving suitable flexibility. Although I believe Congress has an important role to play in authorizing executive action and determining the scope of potential sanctions, I think

the Congress must also provide the President with the authority to

exercise sanctions and the flexibility to determine when and how

to use them in conjunction with international partners. Only with

this flexibility will the President be able to continue to ensure the

support of the international community and ultimately facilitate a

change in Iranian policies, we hope.

I look forward to hearing from all of our witnesses today. I hope

they can help us explore our options at this critical point in American-Iranian relations. As we discuss these options, we must carefully evaluate all of the risks and all of the potential benefits of

each policy option and ensure an effective approach.

I want to thank you again, all of our witnesses. I look forward

to hearing your testimony.

Mr. CHAFFETZ. Thank you.

I would now like to recognize the chairman of the Oversight and

Government Reform Committee, the distinguished Member from

California, Mr. Issa.

Mr. ISSA. Thank you, Mr. Chairman. And I will be brief.
5

I came here to show solidarity over your concern that the administration continues to rebuff any attempt at real oversight by this

and other committees of the Congress.

I could not fail to note the gentleman from Massachusetts’ opening statement that somehow there is a price of oil linked to whether or not we have effective enforcement against Iran.

Mr. TIERNEY. If the gentleman will yield?

Mr. ISSA. Of course.

Mr. TIERNEY. That was a question about whether or not there

ought to be and whether or not we ought to consider it.

Mr. ISSA. Right.

Mr. TIERNEY. So I don’t mind you quoting me; just please do it

accurately.

Mr. ISSA. And in light of that full disclosure, I think it is only

fair that we understand that this committee has, and other subcommittees, worked very hard to recognize what the potential for

replacement of Saudi Arabia, Iranian, and other oil and natural

gas. We are now becoming a net exporter of natural gas, and Pennsylvania alone has more proven known reserves of oil than Iran

could possibly export. The fact is, we can, in fact, become oil and

natural gas self-sufficient and even become an exporter, as we are,

of natural gas.

So I do believe that we should go to the basic question. The basic

question before us today is not, ‘‘What is Iran’s intentions?’’ I was

a first lieutenant in 1979. I have lived through Iran’s intentions for

longer than most people in this room have been alive. It is very,

very clear that Iran’s intentions are to continue being a disruptive

force to peace and security in a region in which they live and extended well beyond.

The only exception that I would make is for those who say that

what they might do miss the point that, every day, Lebanon is held

captive by a Hezbollah financed by Iran. Every day, the Palestinian

people find themselves having those who do not support peace and

coexistence with Israel financed by Iran. Every day, the Syrian regime is kept together by money from Iran. And that is only the tip

of the iceberg. As the chairman noted and the ranking member

noted, the attempt to assassinate a seated Ambassador from Saudi

Arabia on U.S. soil is another example of an Iranian connection

that is ongoing.

So as we look today at what Iran will do with a nuclear weapon,

I would suggest strongly that this committee recognize that Iran

will do with a nuclear weapon, even if it never uses it, everything

it has done for more than three decades and more. A nuclear weapon gives impunity to a government to be taken by force—something

that Iran has not had to face. Iran has had to look at the existential threat of going to war with one or more other nations.

Once they have a nuclear weapon, they simply will do more of

what they have been doing. They will fund terrorism around the

world. They will be, in fact, a greater threat to Israel than they are

today. I find that sometimes hard to believe, but I believe that they

simply will look and say, ‘‘Now we can arm in a higher way

Hezbollah and Hamas.’’

So the attempts to limit the economic capability of Iran to fund

that are woefully inadequate. I do reserve the right and the author-
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ity of Congress to dictate to the President what he or she can do

with taxpayer dollars. And I think it is extremely important that

the American people understand that as long as we allow $1 to be

exported to Hamas or Hezbollah or other terrorist organizations by

Iran, we have not done all we can do to limit the scope of their terrorism around the world.

I yield back.

Mr. CHAFFETZ. Thank you.

Members will have 7 days to submit opening statements for the

record.

I would now like to recognize our first panel. Mr. Mark Dubowitz

is the executive director of the Foundation for Defense of Democracies. Dr. Kenneth Pollack is the director of the Saban Center for

Middle East Policy at the Brookings Institution. And Dr. Suzanne

Maloney is a senior fellow at the Saban Center for Middle East Policy at the Brookings Institution.

We appreciate you all being here and taking time in preparation

for this hearing.

Pursuant to committee rules, all witnesses will be sworn before

they testify. If you will please rise and raise your right hands.

[Witnesses sworn.]

Mr. CHAFFETZ. Thank you. You may be seated.

Let the record reflect that the witnesses all answered in the affirmative.

In order to allow us time for discussion, please limit your testimony to 5 minutes. Your entire written statement will be part of

the record, and we will move to questioning.

We will now recognize Mr. Dubowitz for 5 minutes.

STATEMENTS OF MARK DUBOWITZ, ESQ., EXECUTIVE DIRECTOR, FOUNDATION FOR DEFENSE OF DEMOCRACIES; KENNETH M. POLLACK, PH.D., DIRECTOR, SABAN CENTER FOR

MIDDLE EAST POLICY, BROOKINGS INSTITUTION; AND SUZANNE MALONEY, PH.D., SENIOR FELLOW, SABAN CENTER

FOR MIDDLE EAST POLICY, BROOKINGS INSTITUTION

STATEMENT OF MARK DUBOWITZ, ESQ.

Mr. DUBOWITZ. Well, thank you, Chairman Chaffetz, Ranking

Member Tierney, and Chairman Issa, for the honor of testifying before you today.

Now, many rightly question the effectiveness of economic sanctions as the primary tool to frustrate or even thwart Tehran’s nuclear plans. Sanctions, indeed, have led to the slow-motion demise

of the Iranian energy industry as Iranian oil production continues

to materially decline. However, their medium- to long-term impact

is insufficient because Iran will likely cross the nuclear threshold

before these sanctions have time to work. There is also no evidence

yet to suggest that economic pressure has made the Iranian regime

rethink its decisions to develop nuclear weapons.

U.S. sanctions policy has been crafted in a way that reduces Iranian oil investment while giving the market time to adjust to a reduction in Iranian production. The downside of this medium-term

sanctions strategy is continued near-term annual export revenue of

approximately $80 billion. These funds provide sufficient resources
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to buttress the regime against sanctions and its economic and political challenges and to fund its nuclear and other nefarious activities.

To have any chance of success, sanctions need to target Iran’s oil

sales, which account for up to 75 percent of the government budget,

80 percent of export earnings. And they need to do this without

causing a significant increase in petroleum prices. Otherwise,

Tehran can sell less and make more money.

But effective energy sanctions don’t have to raise oil prices. They

actually can do the opposite if Washington learns how to leverage

the self-interest of companies that won’t adhere to U.S. sanctions.

The objective of sanctions targeting Iran’s oil sales ought to be to

discourage white-hatted companies—European and some Asian

companies that have no desire to risk their access to the American

market—from dealing in Iranian oil while allowing black-hatted

companies—mainly Chinese firms and some others—to continue to

buy Iranian crude in whatever quantity they desire. We should

want to reduce the number of potential buyers of Iranian petroleum without reducing the quantity of oil on the market. With

enough white-hatted companies out of the market, black-hatted

companies can drive ruthlessly for price discounts from Tehran.

The Chinese, in particular, are aggressive businessmen with an interest in securing cheap oil.

I recommend the following three policies to accomplish this goal:

Number one, sanction companies buying oil from the Iranian

Revolutionary Guard Corps. The Obama administration can greatly

intensify the hassle factor in buying Iranian crude by designating

IRGC entities in the crude oil supply chain, including the National

Iranian Oil Co.

Number two, establishing the United States as an Iranian-oilfree zone. Right now, there is a loophole in U.S. law. American consumers are filling up their gasoline tanks with refined petroleum

made from Iranian crude oil. The Iranian-oil-free zone would close

this loophole by requiring that all European refineries exporting refined petroleum to the United States must certify that those products do not contain Iranian oil and be subject to penalties for false

certification.

We have done detailed economic modeling that indicates an Iranian-oil-free zone would have a negligible impact on the price of oil

and gasoline but deny the regime between $2.8 billion and $39 billion in annual oil revenues. Even at the lowest end of this range,

this adds an additional 20 percent to Treasury Department estimates that all sanctions will cost Iran $14 billion in annual oil revenues over the next 5 years.

Number three, targeting the Central Bank of Iran. The administration should designate the CBI in its entirety but provide at least

6 months before implementation begins in order to give oil companies time to find alternative suppliers and calm oil markets.

This will be a critical 6-month period, however. In order to take

advantage of this period, Washington should immediately and selectively prohibit certain oil transactions where the CBI plays a

role involving IRGC-affiliated companies and oil buyers. Sanctions

need not be enforced against Chinese energy firms buying Iranian

oil. Treasury will have more flexibility to selectively enforce against
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some buyers and not others based on evidence of IRGC involvement.

Energy traders will quickly sense that the quantity of oil on the

market remains unchanged while Iran watches its oil revenues decline. This avoids price spikes as oil trades will continue; only the

number of buyers for Iranian oil will be reduced.

This approach will be very costly for the CBI. It would reinforce

an important message, as well. The CBI is a critical link in the

IRGC-dominated oil supply chain and a key enabler of IRGC activities. This will help Washington build international support for a

blanket designation of CBI, give markets more time to adjust to the

possibility of more severe sanctions, and persuade oil purchasers

and financial institutions to assess carefully the risks of doing business with the Central Bank.

These three approaches are mutually reinforcing and designed to

achieve one goal: shrink the pool of buyers for Iranian crude and

give the remaining buyers enough negotiating power to extract significant discounts from Tehran. If oil sanctions fail, no one could

argue that countries threatened by Iran did not exhaust all peaceful alternatives.

Thank you.

[The prepared statement of Mr. Dubowitz follows:]
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Mr. CHAFFETZ. Thank you. And an impressive 2 seconds left on

the clock.

Dr. Pollack, my challenge to you is to—we appreciate your testimony. We will now recognize you for 5 minutes.

STATEMENT OF KENNETH M. POLLACK, PH.D.

Dr. POLLACK. Thank you very much, Mr. Chairman, Congressman Tierney, Congressman Cummings. It’s a great pleasure to address the subcommittee on this incredibly important topic.

Although I’m ready and willing to discuss the totality of U.S. policy toward Iran and Iranian policy toward the United States as we

understand it, I would like to focus my remarks on Iran’s role in

Iraq, especially in the wake of the mutual decision by the United

States and the Government of Iraq to end the American military

mission to Iraq at the end of this year.

For now, I would simply like to make three main points about

this extremely important topic—a topic that will have profound influence on Iraq itself, on American policy toward Iraq, and on the

wider U.S.-Iranian competition throughout the Middle East.

The first point is that Iranian influence in Iraq is largely determined by how confident and strong the Iraqis feel, principally with

regard to their own internal politics.

Ambassador Ryan Crocker, when he was Ambassador to Iraq,

used to remark that there is a natural limit on Iran’s influence in

Iraq. This is a true statement, but it is also a relative statement;

it is not an absolute. The ability of the Iraqis to resist Iran is heavily dependent on their own sense of self-confidence, the strength

that they feel in themselves, and the strength of their own political

process moving forward.

To use an analogy from the cold war, I think that it is safe to

say that there was a natural limit on Russian influence in Finland

that was no less great than the limit on Iranian influence in Iraq.

But when the Finns felt that there was no one who could come to

their defense after the Second World War, they unfortunately allowed the Soviets to dictate their foreign policy. Again, this was

simply a function of the inability of the Finns to push back, of their

sense that there was no one who could help them do so.

We’ve seen the same thing in Iraq. When Iraqis have been

strong, when they have been confident, in 2003 and 2004, Iranian

influence has been extremely limited. This was perhaps no greater

than in 2008 to 2010, the period after the American surge and

Iraq’s own Operation Charge of the Knights, in which Iranian

forces were largely routed from Iraq. Jaish al-Mahdi and other Iranian-backed insurgencies and militias in Iraq were driven from the

country in a series of operations. From Basra to Sadr City, the

Iraqi people stepped out, demonstrated they wanted nothing to do

with Iran, and, as a result, Iranian influence was greatly limited.

In contrast, Iran’s influence was greatest in the period 2005–

2006, when Iraq was descending into civil war and was able to pry

apart the many divisions within Iraq to play different Iraqi groups

off against one another and use the influence that it has most of:

weapons, intelligence, violence, money—all of the things that Iraqis

needed in that period of time.
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My second point is that Iran is now, unfortunately, stronger than

it has ever been in Iraq before. And its influence, unfortunately, is

likely to increase, rather than decrease, after the American withdrawal.

Iraq’s 2010 elections were in and of themselves very good elections, but the aftermath was very poor. They have led to the formation of a national unity government in Iraq that is deeply paralyzed, that is riven by its own divisions. And this has allowed the

Iranians to once again pry apart Iraq, isolate different groups,

make inroads with a variety. Ultimately, it was Iran that put together this government in Iraq, not the United States.

In speaking to senior Iraqi leaders in recent months, I am struck

by how many of them have said, mostly in resignation, never with

any sense of joy, that today no Iraqi can become Prime Minister

without Iranian approval.

Ultimately, Iran is the chief backer of violent extremist groups

like Asaib Ahl al-Haqq, Khataib Hezbollah, who are running rampant in southern Iraq, who are recreating the violence there. They

are the patrons of the Sadrists. They have exerted tremendous influence on a variety of Kurdish groups and others in Iraq. And, ultimately, Iran is now becoming the dominant external force in Iraqi

politics.

My third and final point is that the best way that the United

States can help remedy this current situation is—and it should follow from my previous two—by strengthening Iraqi domestic politics. Unfortunately, our ability to do so has been greatly limited.

The withdrawal of American troops from Iraq will be a tremendous

limitation on American influence moving forward. Ideally, the

United States would massively ramp up its aid to Iraq in the wake

of the withdrawal of American forces, but in the current budgetary

climate this seems unlikely. Moreover, the White House has signaled a desire to pull back from the Middle East, not to move forward. This certainly is the perception in the region.

Ultimately, the most useful thing that the United States could do

would be to find it in its heart to provide some assistance to Iraq.

The more that Iraqis feel that the United States is helping them,

guiding their politics, the stronger they will feel, they will push

back on Iraq—excuse me, on Iran. And what we have seen is that

they are far more able to push back on Iran and to prevent Iran

from exerting influence in Iraqi affairs than we ever are.

Thank you very much.

[The prepared statement of Dr. Pollack follows:]
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Mr. CHAFFETZ. Thank you.

Dr. Maloney, you are now recognized for 5 minutes.

STATEMENT OF SUZANNE MALONEY, PH.D.

Dr. MALONEY. Thank you very much, Chairman Chaffetz, Representative Tierney, and the entire subcommittee, for the opportunity to discuss this very important issue of U.S. policy toward

Iran.

I’m going to focus my remarks on the central question of today’s

hearing, and that is the track record of the current administration

in addressing the challenges posed by Tehran. I will tell you that

I see a sort of a good-news/bad-news story. And so I will talk a little bit about both the elements of success and the elements where

we need tremendous improvement and talk about a few principles

that one might consider in moving forward in terms of looking at

policy toward Tehran.

It’s notable that the Obama administration has come full circle,

from a tentative embrace of diplomacy and engagement to a much

more robust and effective international effort to pressure Tehran

than has ever existed. This transformation is, in fact, quite typical.

Every administration since that of President Carter, since the 1979

Islamic Revolution in Iran, has used a variety of tactics and implements at its disposal, everything from diplomacy to sanctions,

under every single administration from both parties.

The good news is that the Obama administration has really

achieved unprecedented success. We have seen the assembling of

the widest and deepest international coalition of countries to deal

with the threat of Iran. And I think what we have seen, particularly since 2010, is a real sense of momentum, that the international community has come together, that there is a real partnership, not simply between the United States and Europe but also

between the United States and Russia and other countries as well,

with China playing effectively a sort of nonconfrontational, more

passive role with respect to sanctions.

I think that it’s important to recognize, despite the fact that we

have not yet achieved our objectives with respect to changing Iranian policy, that assembling this kind of a coalition is no small

achievement. Never before in the history of the Islamic Republic,

despite 32 years of egregious policies and offenses against both its

own people and its neighbors as well as U.S. interests in the region, never before have we seen the willingness of the international

community to jeopardize its economic relationships with the Islamic Republic in anywhere near the degree that we have today.

And we know that these sanctions are having an impact on Iran.

The Iranians themselves, from the supreme leader on down, are

saying so in a very public fashion. And they’re taking actions to

deal with it.

That, of course is the bad news, that the sanctions have imposed

a financial—heavy financial and political cost, but they haven’t yet

convinced Iranian leaders to change their policies, to relinquish

their nuclear ambition, and abandon their other reckless policies,

or to engage in a really serious dialog with Washington.

There are a variety of reasons why this is the case: the political

climate within Tehran, where we have seen the elevation of a
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group of policymakers who, in fact, see sanctions as part of an

international conspiracy and who believe, in fact, there is an existential demand on the regime to resist these sanctions. They are

less prone than ever to bending under economic pressure or accepting the cost-benefit logic of sanctions.

And the Iranians also have tremendous capacity and a long history of working to mitigate and subvert sanctions. They are also

quite adept at encouraging sanctions busting. And they have done

quite a bit to exploit the disparity that exists in the international

sanctions regime, whereby companies from countries such as

China, which adhere to the bare minimum of U.N. Security Council

sanctions but have yet to enact their own individual unilateral

sanctions on energy investment in Iran, effectively have free rein

to continue to invest in Iran today.

So, as a result, I think that the difficulty that we face is, sanctions are not going to have the impact that we want, that the kind

of dual-track, carrot-and-stick effort to bring Iran to the negotiating

table is less likely to work today than ever before.

For that reason, let me lay out five principles very quickly that

I think are essential to moving forward, as we reassess U.S. policy

at a time where it is, I think, a very opportune moment for doing

so.

First, we must have multilateral cooperation. That is what has

made such an important psychological and economic impact over

the past 2 years since the latest U.N. sanctions, U.N. Security

Council sanctions, and unilateral measures by a variety of countries. It’s incredibly important in doing so that we bring and keep

China on board in a much more robust way than we have to date.

China plays the indispensable role in terms of shaping the Iranian

future.

Second, we have to acknowledge and we have to articulate publicly, both to the American public and to our allies and partners

abroad, that tough measures will entail tough tradeoffs. There is

a lot of talk about crippling sanctions, but there is too often, I

think, an optimistic presumption that we can—that those sanctions

would have negligible impact on the very economic parameters of

the U.S. market or of the international market. Oil markets are

worldwide; oil supply is fungible. As a result, anything we do to impact Iran’s ability to export its crude will have an impact on the

price of oil here at home.

Third, we should never unilaterally take diplomacy off the table.

Every administration has used diplomacy, and every future administration will. Measures that tie any administration’s hand are irresponsible and counterproductive.

Fourth, the invocation of threats does little to advance our interests with respect to Iran. It, in fact, empowers the very people who

we are looking to disempower in Iran.

Finally, we need to rethink the universe of possibilities for advancing political change within Iran. And to do so, we need to have

a conversation that goes beyond the standard discussion around

the discredited terrorist organization, the Mujahedin-e Khalq.

With that, I cede the floor. Thank you.

[The prepared statement of Dr. Maloney follows:]
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Mr. CHAFFETZ. Thank you.

I know you all had much more to say, but I appreciate the concise nature. And 5 minutes is difficult with such a broad and complex issue such as this.

I’m now going to recognize myself for 5 minutes, and then we

will have other Members proceed with the questioning.

And, Dr. Maloney, I really appreciate the comments you made.

I think I agreed with a lot of your points.

To suggest that there has been, in your words, unprecedented

success, I just—I beg to understand or I just don’t understand

where you think there has been unprecedented success, other than,

you know, maybe getting some European countries to say, hey, we

support you.

Even when we list the five key points, one of the critical nature—you mentioned China. China is not coming along. China has

not been helpful and persuasive in this. Do you see any sense that

China, being such a pivotal role in close proximity, obviously, to

Iran, that they are in any way, shape, or form helping us in any

way?

Dr. MALONEY. I think, first, that the U.N. sanctions Resolution

1929, which was approved in June 2010 was, in fact, much more

robust and much more meaningful. It includes a conventional arms

ban. It included measures that facilitated European Union sanctions that effectively preclude any European investment in the Iranian energy sector. That is unprecedented. It’s important. It has a

real impact, both economically and psychologically. The Iranians

would much prefer to deal with European companies, ultimately.

In terms of Chinese cooperation, I think, in fact, we have seen

quite a bit. They were cooperative during the process of the negotiation of U.N. Security Council Resolution 1929. They have gone

slow with their investment. They have refused to sign new deals

with Iran. But they do continue to do business; they’re not legally

prohibited from doing so.

And that is, I think, where all the upside potential is in dealing

with Iran, in making the point that the international community

is united. It’s very, very important that we persuade the Chinese

to go beyond the current U.N. Security Council sanctions measures.

Mr. CHAFFETZ. Thank you. And I guess my concern is, I don’t

think that we’ve been doing that.

Mr. Dubowitz, let me go to you. In your testimony, you list 18

firms connected to the Islamic Revolutionary Guard Corps [IRGC],

which form part of the crude oil supply chain.

These firms’ activities were detailed in a report from the Foundation for Defense of Democracies to the administration back in February. To the best of your knowledge, has the administration taken

any action against the 18 firms noted in that report?

Mr. DUBOWITZ. You’re starting to see some action. They sanctioned Tidewater, which is the largest ports operator in Iran. I

think that’s important, it’s consequential.

But there are literally hundreds of IRGC firms that are dominant players in the oil supply chain, including the largest Iranian

energy front company in the world, the National Iranian Oil Co.

[NIOC], which is presented as a state-owned institution and is usu-
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ally the counterparty on an oil trade, but the IRGC is a dominant

player in the Iranian energy industry, including in NIOC.

And so I think that the administration should move ahead and

sanction NIOC and other IRGC players in the oil supply chain and

send a message to what I call white-hatted companies—those who

have U.S. interests, who care about their reputation, who don’t

want a front-page story in the Financial Times that they’re doing

business with the Revolutionary Guard Corps—and send a message

that if you’re buying oil from Iran, you’re buying it from the Revolutionary Guard Corps. And that’s bad for business, it’s bad for

your exposure, it’s bad for your reputation.

We could rapidly accelerate the pace of designations. The administration could do much more and do it very quickly and, in doing

so, send a message that we will not impact supply of oil, but we

will go after price. We will put the remaining buyers, including the

Chinese buyers, in a position where they will have stronger negotiating leverage to force a discount on the price of oil without taking

one barrel of Iranian oil off the market.

I agree with Dr. Maloney, we shouldn’t be going after physical

supply, we shouldn’t be spooking oil markets, we shouldn’t be doing

anything that sends a message that we’ll be taking 2.3 million barrels of Iranian oil off the market, but put the remaining buyers in

a stronger negotiating position. I have a lot of confidence in Chinese oil traders that they will drive ruthlessly for price discounts

if they have the Iranians, figuratively and literally, over a barrel.

Mr. CHAFFETZ. Thank you.

Dr. Pollack, let’s talk about what is going to happen at the end

of the year and the concerns that the Iranians will redirect many

of their attacks. You know, we got 16,500 people that will be left

there starting January 1st, many of these contractors. Let’s talk a

little bit more, if you will, about the ramifications of what you see

Iran doing now.

Dr. POLLACK. Thank you, Mr. Chairman. I think this is a critical

question moving forward.

Having spent quite a bit of time in Iraq and been rocketed, been

mortared, this is not something to take lightly. Muqtada al-Sadr

has already announced that the American Embassy should be considered a residual occupying force and should be resisted as

staunchly as the American troop presence was.

What we have seen is a growth in Iranian-backed capabilities

among groups like Asaib Ahl al-Haqq, Khataib Hezbollah, the

Promised Day Brigades. And what we have seen is very little willingness on the part of the Iraqi Government to actually crack down

on these because of its own complicated internal politics.

I don’t see any of that changing moving forward except that our

ability both to influence the Iraqi Government to get the things

they need to do is going to be dramatically diminished. It took

intervention by the administration and, in particular, General Austin to get the Iraqis to do anything over the summer, and even that

has tapered off since then. And what’s more, our ability to respond

directly is going to be dramatically undermined. No matter how

many Black Hawk helicopters Triple Canopy may have, they are

not going to have the same capability that the Apaches, that our

current forces have.
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Mr. CHAFFETZ. Okay. Thank you. My time has expired.

I will now recognize the gentleman from Massachusetts, Mr.

Tierney, for 5 minutes.

Mr. TIERNEY. And with your deference, Mr. Chairman, I am

going to defer to the ranking member of the full committee. I think

his schedule——

Mr. CHAFFETZ. Absolutely. Rather than do that, we will recognize

the ranking member, Mr. Cummings, for 5 minutes.

Mr. CUMMINGS. Thank you very much for yielding.

Dr. Maloney, in your written statement, you say that there is

simply no mechanism for exerting game-changing pressure on Iran

without imposing unpredictable and probably unpleasant consequences for the global energy balance and the worldwide economic recovery.

Dr. Maloney, what do you think of Mr. Dubowitz’s claim that his

approach to tougher sanctions on Iran’s oil sales does not risk driving up the price of oil?

Dr. MALONEY. I haven’t investigated the modeling that he has

compiled, but what I have seen and read of the mechanism that he

proposes is that many experts on oil markets suggest that it would

have an escalatory impact on the price of oil both here and around

the world.

Mr. CUMMINGS. And, Dr. Maloney, do you think that significant

new sanctions on Iran’s oil sales are worth the risks of endangering

the global economic recovery?

Dr. MALONEY. I think we have yet to see that this regime in

Tehran is susceptible to economic pressure in terms of changing its

foreign policy.

I was testifying before this subcommittee 2 years ago, and people

said that refined petroleum products, cutting off supply of gasoline

to Tehran would be an Achilles’ heel and change its posture. We

did not see that, in fact, occur.

I am not optimistic that incremental measures, even if they

make Iran’s fiscal conditions more difficult, will alter their approach to their security policy.

Mr. CUMMINGS. So you just think they are hard-nosed?

Dr. MALONEY. I think that this regime and this current leadership in Tehran is tied to—its approach to the world is deeply paranoid and defensive. Looking at the regional environment, looking

at what’s happened in Libya, they are unlikely to bargain away

their nuclear advantage or any of their other policies. They see

these as existential defense mechanisms against a world which is

aligned against them.

Mr. CUMMINGS. Now, the Obama administration can make a persuasive claim to unprecedented successes in dealing with Iran, and

yet the ultimate objective of U.S. policy—eliminating threats posed

by the regime’s pursuit of nuclear capability, support for terrorism,

and abuse of its own citizenry—remains as distant as ever.

Dr. Maloney, do you believe that further economic sanctions are

necessary for the United States to make progress in achieving this

goal?

Dr. MALONEY. I think sanctions which bring the entire world together to send a message to Tehran will have an impact over time,

but I think we also have to recognize that they also have an impact
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on our own economy. Iran is capable of change, but the level of impact that we need to have is one that will involve the entire international community coming together in a united fashion.

Mr. CUMMINGS. Speaking of that international community, I

think you said that the fact that all of these nations have come together with regard to this effort is unprecedented. Do you see any

threat to that cohesion?

Dr. MALONEY. I think as sanctions endure and the fact that the

Chinese can continue to do business in Iran, even if they have been

relatively cooperative to date in terms of not expanding their posture in Iran since the 2010 U.N. Security Council resolution, that

will encourage other countries and companies to sanctions-bust.

In particular, I would look toward Russia, which is also not susceptible to other sanctions at the moment. The leadership is not inclined to accept them, and they have no unilateral sanctions which

preclude their energy companies from investing in Iran’s energy

sector. I would suspect that over time, as China continues to do

business in Iran, the Russians will look to expand their own position there.

Mr. CUMMINGS. Well, would unilateral sanctions by the United

States undermine the progress that was made in convincing the

international community to participate in a comprehensive sanctions regime?

Dr. MALONEY. Sanctions that make the price of oil more expensive for customers of Iranian crude will alienate those customers,

in particular China and India.

Mr. CUMMINGS. Uh-huh. And therefore?

Dr. MALONEY. And, therefore, they will make it much more difficult for us to attain the level of international cooperation that’s

necessary to drive a decisive message to Tehran.

Mr. CUMMINGS. Well, in the wake of the assassination of the

Saudi Ambassador to the United States and the recent report by

the International Atomic Energy Agency, some have called on Congress to pass strict sanctions against and to limit diplomatic communications with Iran.

Mr. Dubowitz, do you believe Congress should pass strict sanctions legislation that eliminates the administration’s ability to

apply sanctions when needed and prevents further attempts at diplomacy?

Mr. DUBOWITZ. Well, Ranking Member Cummings, I’m very

much focused on whether sanctions can actually work. Whether the

United States should be talking to the Iranians and what they

should be talking about is up to the administration. What I want

to do is respond to the point about sanctions.

I ultimately do not think sanctions will force the Iranian regime

to change its risk-reward calculus with respect to a nuclear weapon. Let me be clear and on the record on that. I do think that we

have a moral and strategic responsibility to try and to exhaust all

peaceful alternatives. Otherwise, perhaps everybody on this panel

will agree, we may have to move to more coercive methods.

What I want to suggest with respect to oil sales is that there is

a way to do this. Instead of only punishing greed—our sanctions regime is always designed to punish greed, to punish the self-interest

of companies that want to continue to do business with Iran—what
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I am suggesting is that there may be an opportunity to leverage

greed; in other words, to shrink the number of buyers for Iranian

oil using a variety of methods, both unilateral and multilateral, designed to actually put the Chinese and others in a position where

they can buy all the oil they want from Iran, but they have stronger negotiating leverage because the pool of potential buyers of Iranian oil is shrunk.

And we can do that through a variety of ways that have already

been used multilaterally. For example, the Iranian Revolutionary

Guard Corps. The idea of designating IRGC companies that are active in the Iranian economy is something that has received overwhelming international support, from the United Nations, from the

EU, the United States, Canada, Japan, South Korea.

In fact, former Under Secretary Stuart Levey, his successor,

Under Secretary David Cohen, are using exactly this method to

persuade international financial institutions to stop doing business

with IRGC banks. I’m suggesting we do the same thing in the

crude oil supply chain: Designate IRGC entities and then threaten

sanctions against companies that do business with the IRGC.

The reality is white-hatted companies—Europeans, Japanese,

some South Korean refineries—will respond to that pressure. The

Chinese and others will not. But that’s fine. Let them continue

buying Iranian oil, let them drive for price discounts, let them not

impact physical supply. If the Congress and the administration is

too aggressive in calling for sanctions against physical supply, then

I agree with Dr. Maloney, what you’re going to see is a spike in

oil prices. But if we make the case that this is about price, not

about supply, I think we can have a much better alternative. And

if it doesn’t work, no one could argue that countries threatened by

Iran have not exhausted all peaceful alternatives.

Mr. CUMMINGS. Thank you very much.

Mr. CHAFFETZ. Thank you.

I now recognize the gentleman from Massachusetts, Mr. Tierney,

for 5 minutes.

Mr. TIERNEY. Thank you.

Dr. Pollack, President Bush entered a deal or arrangement, contract with the Iraq Government that we would have our troops out

at the end of 2011, and President Obama has been trying to fulfill

that commitment, I believe.

So, given that background, you know, the President Bush agreement to get the troops out by that point and the Iraqis’ apparent

unwillingness to amend that in any sense of the way, am I hearing

that your response to this is that, at this point, the best that we

can do in terms of that is to try and give some useful and robust

assistance from the United States to Iraq to try to help them resolve their internal problems and strengthen their government and

their ability to withstand pressures from Iran?

Dr. POLLACK. First, Congressman, I would certainly agree that

there have been a long, painful litany of mistakes made in American policy toward Iraq, and they begin from the very early days

of the Bush administration’s focus on Iraq. It is certainly the case

that the hand left to the Obama administration was a weak one.

Nevertheless, I think that we have made—we have created additional problems for ourselves since then.
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There’s no question that we are where we are. There is no question that Iran’s influence in Iraq has increased and will likely increase as our troops withdraw. The best that we can hope for is to

help moderate Iranian behavior, and the best way to do that is to

strengthen Iraq’s own internal politics.

That is going to be difficult in an era of declining American resource commitments to Iraq. And, therefore, we have to act as creatively as we possibly can. Much of what I have proposed, much

of what is in my written testimony is about how we find creative

ways to do that, to do things by giving things other than just

money: know-how, diplomatic assistance. But one that’s also worth

thinking about, the position the Iraqis will likely have the ability

to buy it at some point in time, is military assistance, which the

Iraqis need and, as we have seen in Egypt, can play an extremely

important role in helping shape Iraq’s political development, which,

as I have stressed, is the key to keeping Iran out.

Mr. TIERNEY. Thank you for that.

Mr. Dubowitz, now I am going to call on your integrity to help

us out here. We don’t have a witness up here who can apparently

counteract your theory. You know from having put your position

out there that other people have rebutted it in some sense. I am

sure you are fully aware of that.

Do us the favor, if you would, of presenting what those rebuttals

are, you know, what issues do people raise with your argument.

And then again I will offer you the chance to rebut them back and

give your position again. But I am curious to know what people

say. When you say this is the way to do it, how do they couch the

way that they think it is going to drive up international prices and

why? Is it because oil is fungible on the market? Is it because they

just think that China will come in and buy up the 2.3 billion and

it won’t be any big deal?

If you would.

Mr. DUBOWITZ. Yeah, no, there are certainly some weaknesses to

the argument. I think the first is that the assumption is that the

Chinese will actually use their trade and negotiating leverage to

force a discount. The Chinese may have other strategic objectives,

and they decide they’re going to pay a premium for oil in order to

support the Iranian regime and undermine American security. I

think that’s perhaps one weakness.

I think a second weakness of the argument is that it presupposes

that our short-term sanctions policy is to stop this Iranian nuclear

weapon. If you believe that our sanctions policy should be designed

as a containment strategy, then a medium- to long-term sanctions

strategy is sufficient. And I think that the administration has done

a good job of putting in place a medium- to long-term sanctions regime. And I think Dr. Maloney articulated what that looks like.

Unfortunately, I think we should stop the nuclear bomb. I think

President Obama has made it very clear that an Iranian nuclear

weapon is unacceptable.

And I fear that we are in a bit of a sanctions sleepwalk, where

we have done a very good job—or the administration has done a

very good job of designing a regime that has decreased foreign investment in the Iranian energy sector, that has shrunk gasoline

imports by about 90 percent, that has led to many companies ter-
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minating their business ties, including providing technology to

Iran’s massive natural gas industry. And so the medium- to longterm sanctions strategy is working. It’s gone after investment, it’s

shrinking oil production. And I think, in that respect, it’s giving energy markets time to adjust so that there isn’t a reactionary or

alarmist response to the sanctions.

Part of the weakness of the argument is, if you’re pursuing a

short-term strategy, it is not 100 percent clear how energy markets

will respond. And I think it is up to the administration and Congress, when speaking about this, to speak about oil sanctions responsibly and to make it very clear to energy markets that the goal

is not to go after physical supply but, in fact, to keep every barrel

of Iranian oil on the market but at a discounted price.

So it’s really a question of short-term to long-term strategy. I

fear, again, that we’re in a bit of a sanctions sleepwalk, where we

all recite positive talking points about how sanctions are working,

but I think we’re all beginning to acknowledge that sanctions have

not worked.

Mr. TIERNEY. So it appears that, once again, under your proposal, China would hold the key again, depending on whether or

not we could convince China to not pay a premium, whether or not

they would find out that their goal was to, sort of, give it to us by

just paying the premium and watch the prices go up and watch the

West countries sort of figure out how they are going to deal with

that in the middle of an economic problem, or they are going to just

have their own self-interest in mind on economics.It is both self-interest, I guess——

Mr. DUBOWITZ. Right.

Mr. TIERNEY [continuing]. But pick one over the other. Is that

fair to say?

Mr. DUBOWITZ. Well, I think it’s fair to say. I mean, it may be

that the Chinese actually don’t want to see a nuclear-armed Iran.

It may not be good for Chinese energy and national security. So it

may be an opportunity for them to actually support both their economic self-interest and their political self-interest. But I think that

is an open question.

Mr. TIERNEY. So it would be useful for us to get some Chinese

experts in here to explore that further about what their reaction

may be?

Mr. DUBOWITZ. I think, certainly, from a political economy perspective, in terms of their strategic objectives, I think it is very

useful to have Chinese experts who can elucidate that.

Mr. TIERNEY. Thank you very much.

Mr. CHAFFETZ. Thank you.

We will now recognize the gentleman from Illinois, Mr. Quigley,

for 5 minutes.

Mr. QUIGLEY. Thank you, Mr. Chairman.

Sorry, I was in another committee meeting. I understand you

touched on the issue of the Central Bank of Iran. I would just reference the letter from the 92 Senators to President Obama urging

him to sanction the Central Bank and Mr. Geithner’s response,

which was, ‘‘All options to increase the financial pressure on Iran

are on the table, including the possibility of imposing additional

sanctions against the CBI.’’
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Is there a timetable for doing this? And have we discussed this

possibility with our allies?

Mr. DUBOWITZ. I believe those discussions are taking place right

now. There are amendments that have been offered in both the

House and the Senate to include a CBI designation in the current

legislation. I think there is certainly a lot of discussion about how

to do this.

I absolutely support a blanket designation of the CBI. I think it

needs to be done in a way, however, that’s targeted, incremental,

and implemented rapidly.

In other words, if you today call for a blanket designation with

the view that you’re going to strictly enforce that designation,

thereby essentially cutting off the possibility that people buying

Iranian oil can use the CBI to settle those oil transactions, you

may be sending a message to the markets that there is no way to

financially settle an oil trade. On the other hand, if today the administration were to target the CBI to make this very case, ‘‘If you

are buying Iranian oil, you are buying it from the Revolutionary

Guard Corps, and if you’re settling that transaction with the CBI,

then we will sanction that transaction,’’ that’s the selective, targeted way of doing it.

And, again, it builds into this theory that there will be some oil

buyers who will respond to that pressure and will look for alternative suppliers. There will be other oil buyers who will believe the

administration will never sanction them and will continue settling

those transactions through the CBI.

I think if we did that, number one, we could move today targeting the CBI, instead of waiting for a blanket designation; number two, we could lay the predicate for a much tougher CBI designation down the road; and, number three, I do think we need to

give time to markets for markets to adjust to a CBI designation.

Again, there are major buyers of Iranian oil using the CBI because

the U.S. Treasury Department has done such an effective job of

shutting down other financial avenues to settle an oil transaction.

Again, incremental steps, implemented rapidly, with a view to

minimize the opportunity or the risk of a reactionary or alarmist

response from oil markets.

Mr. QUIGLEY. The reaction from the other doctors?

Dr. MALONEY. I think it’s simply just a fallacy that you can begin

to reduce the opportunities for companies to purchase crude coming

out of Iran and it will have no impact on the price of oil anywhere

else. You know, if it increases the leverage of Chinese companies

to drive other competitors from the market for purchasing Iranian

crude, then it will thereby decrease the leverage of those other

companies which are no longer then available as purchasers of Iranian crude as they deal with other countries and companies.

Right now, in fact, what we see is that the Iranians are, in fact,

gaining advantage. When the Greeks have had difficulty making

purchases elsewhere, they have turned to the Iranians. This sort

of idea that somehow the Iranians can become a kind of niche market for only bad countries and bad companies to purchase crude oil

from simply doesn’t reflect the realities of the international marketplace.
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And the idea that somehow we can inspect every barrel of crude

that comes into this country to ensure that not a drop of oil was

produced in Iran is, you know, simply inconsistent with the way

the international oil market works.

Mr. QUIGLEY. Doctor.

Dr. POLLACK. Thank you, Congressman.

I would like to take this to a slightly higher level and say, you

know, what I think we have all been saying is that it is a mistake

to believe that sanctions alone are going to achieve our goals with

Iran. I completely agree with my colleague Dr. Maloney’s statement. The sanctions have had an unprecedented impact, and yet

they are not achieving our goal, and we should not assume that

they will.

By the same token, it would be a mistake to scale back the sanctions. That would send absolutely the wrong message to Iran, to

the Iranian people, to the rest of the international community, to

other would-be proliferators.

I think the real question is, first, can we in some way find ways

to help do a little bit more with sanctions, because we do want to

keep the pressure on, but, in particular, how do we find other ways

to bring pressure against Iran on issues that this regime actually

believes are important to it. The sanctions have not been able to

accomplish that. And I would urge this subcommittee to hold additional hearings on other ways that the United States might bring

pressure on Iran on other areas beyond its economy—which, again,

are not unimportant; they are important, but they clearly are not

going to get us to where we want to be.

Mr. QUIGLEY. Mr. Dubowitz.

Mr. DUBOWITZ. If I could follow on what Dr. Pollack said, I think

that’s absolutely right. I mean, we talk about sanctions, we talk

about economic sanctions. I think human-rights sanctions have actually played a very important and consequential role, particularly

in focusing world attention on the vast system of oppression that

the Iranian regime has set up and the egregious human-rights

abuses that it has perpetrated.

I think human-rights sanctions are also important because,

under U.S. law today, we should be sanctioning companies that are

providing tools of oppression to the Iranian regime. That authority

exists under CISADA. We have not sanctioned any companies for

doing so. They are providing technology and parts and components

for the Iranian nuclear industry.

So it’s counterproliferation sanctions, it’s human-rights sanctions.

We have the ability to be much more rigorous in enforcing existing

law. And I think let’s start with cutting the tools of oppression that

are being sold to the regime, the United States and international

companies that are selling multimillion-dollar hardware units and

software that help the regime target Iranian dissidents, roll them

up, torture them, and kill them. And that would be a good place

to start in expanding our view of sanctions beyond energy and economic sanctions.

Mr. QUIGLEY. Thank you, Mr. Chairman.

Mr. CHAFFETZ. Thank you.
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With the concurrence of the rest of the Members, I think what

we will do now is we will move to the second panel, unless Members had any additional questions.

We want to thank you for your expertise, for your participation

here today. Again, if you have any additional comments you care

to share with the committee, we would certainly welcome those.

Thank you again.

We will stand in recess for just a few minutes while we change

to the second panel.

[Recess.]

Mr. CHAFFETZ. The committee will now come back into session

and come to order.

We are going to move to our second panel. And we are going to

recognize Mr. Adam Szubin, who is the Director of the Office of

Foreign Assets Control at the Department of Treasury; Mr. Henry

Wooster, who is the Deputy Assistant Secretary with the Department of State; and Mr. Colin Kahl is the Deputy Assistant Secretary with the Department of Defense.

Pursuant to committee rules, all witnesses will be sworn in before they testify. If the witnesses will please rise and raise their

right hands.

[Witnesses sworn.]

Mr. CHAFFETZ. Thank you. You may be seated.

Let the record reflect that all the witnesses answered in the affirmative.

In order to allow time for discussion, we would appreciate it if

you would limit your verbal testimony to 5 minutes. We will certainly submit your full testimony into the record.

We will now start with recognizing Mr. Szubin for 5 minutes.

STATEMENTS OF ADAM J. SZUBIN, DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL, U.S. DEPARTMENT OF THE TREASURY; HENRY T. WOOSTER, ACTING DEPUTY ASSISTANT SECRETARY, BUREAU OF NEAR EASTERN AFFAIRS, U.S. DEPARTMENT OF STATE; AND COLIN H. KAHL, PH.D., DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR THE MIDDLE EAST,

U.S. DEPARTMENT OF DEFENSE

STATEMENT OF ADAM J. SZUBIN

Mr. SZUBIN. Thank you very much, Chairman.

Chairman Chaffetz, Ranking Member Tierney, distinguished

members of the subcommittee, thank you very much for the opportunity to appear before you today to discuss the Treasury Department’s contributions to the Obama administration’s strategy to address Iran and the threat posed by Iran’s nuclear program and its

extensive support for terrorism.

I am pleased to be here with Deputy Assistant Secretary Wooster

and Deputy Assistant Secretary Kahl because the progress that we

have made has been due to a strong interagency collaboration to

confront the threats that we face from Iran. And those threats are

very real.

The administration is pressing Iran hard across multiple fronts.

Since just the fall of last year, the Treasury Department has imposed sanctions against over 230 individuals and companies tied to
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Iranian human rights violations, WMD proliferation, and terrorist

facilitation; and we have extended the impact of these actions with

concerted outreach to our allies in the jurisdictions where Iran has

operated historically.

We have focused particular pressure on key actors and commercial sectors that advance Iran’s illicit activities internationally and

therefore represent real vulnerabilities for Iran: the IRGC, Islamic

Revolutionary Guard Corps, and its expanding network of companies within and outside of Iran; those Iranian banks that have

served as agents for Iran’s proliferation and terrorist activities; and

Iran’s international transportation arms, including its national

maritime carrier, IRISL, and its two largest airlines, which have

facilitated the movement of weapons, funds, and personnel for the

IRGC and its external operations arm, the IRGC Qods Force.

Our efforts were powerfully advanced by Congress with the enactment last year of the Comprehensive Iran Sanctions Accountability and Divestment Act [CISADA]. CISADA presented a stark

choice to foreign financial institutions that were still willing to do

business with designated Iranian banks or the IRGC. You can do

business with these rogue actors or you can do business in the

United States. You cannot do both.

We have taken this message to over 45 countries now and

pressed this choice with over 80 foreign financial institutions, making the successful point that these actors should have no access to

the formal financial system. The message has been heard. Whereas

a few years ago the United States was the only jurisdiction in the

world to restrict dealings with Iranian banks, today Iran’s largest

banks are struggling to maintain accounts and access in any bank

in any country.

The European Union, Japan, South Korea, Canada, Australia,

Norway, and Switzerland have all imposed sanctions with real bite

against Iranian financial institutions above and beyond the four

successive U.N. Security Council resolutions; and banks across the

rest of the world have severed their ties with Iranian blacklisted

entities to protect themselves and their reputations.

In the meantime, we at OFAC have intensified our enforcement

efforts at home to ensure that our sanctions are being fully implemented by U.S. persons and by companies doing business here. In

August, OFAC concluded the largest sanctions settlement in our

history with a U.S. financial institution in which J.P. Morgan

Chase agreed to pay over $88 million to settle alleged violations of

Iran and other OFAC sanctions programs. And, increasingly, OFAC

is acting in concert with other U.S. Government and law enforcement agencies to penalize and deter sanctions violators.

In February, we joined in a public announcement with the Justice Department, the Commerce Department, the FBI, and other

agencies in the criminal indictment and designation of Milad Jafari

and his network for their illegal supply of specialized metals from

the United States to entities involved in Iran’s ballistic missile program.

In another coordinated action, we took public action with the Department of Commerce and the Justice Department against Balli

Aviation and the Balli Group for its illegal export of a Boeing 747
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aircraft from the United States to Iran and obtained a $15 million

settlement with that company.

Finally, this past month we announced a joint civil and criminal

resolution with Commerce’s Bureau of Industry and Security and

the Justice Department against Sunrise Technologies, which had

exported computer-related goods from the United States to Iran via

Dubai.

These coordinated multi-agency enforcement actions demonstrate

the concerted impact that we can have when we harness our authorities across the government.

Overall, our strategy is yielding significant results. Iran has

never before been as isolated, and its leaders are worried. I would

be glad to expand further on these impacts if the committee so desires.

But, of course, there is still much to be done. We have yet to see

the needed action by Iran to comply with its international obligations. In the weeks ahead then, working with our colleagues across

the administration and with Congress, we will seek to further

deepen Iran’s isolation and increase the pressure on its leadership

to alter their course.

We thank you for your continued support in seeking to apply the

most effective pressure possible. Thank you.

[The prepared statement of Mr. Szubin follows:]
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Mr. CHAFFETZ. Thank you.

Mr. Wooster, you are recognized for 5 minutes.

STATEMENT OF HENRY T. WOOSTER

Mr. WOOSTER. Chairman Chaffetz, Ranking Member Tierney,

distinguished members of the subcommittee, thank you for inviting

me here to discuss the administration’s policy toward Iran and the

progress we have made since January 2009.

The key objectives of this administration’s Iran policy remain to

prevent it from acquiring nuclear weapons, our foremost priority;

from supporting terrorism; from committing human rights abuses;

and from destabilizing the region. We have enacted the toughest

sanctions Iran has faced. Our policy is making Iran’s current

course unsustainable, reducing its options and deepening its isolation. Indeed, Iran is an outcast among nations.

The U.S. Comprehensive Iran Sanctions Accountability and Divestment Act [CISADA] as we all know it, has been vital to

ratcheting up pressure on Iran. With CISADA as a tool, we have

shut down important sources of funding to Iran’s nuclear program

and related illicit activities. Investment in technical assistance in

Iran’s upstream oil and gas sector have dropped dramatically. We

have sanctioned 10 foreign companies involved in Iran’s energy sector and dissuaded energy firms like Shell, ENI, Total, and INPEX

from continuing or undertaking sanctionable activities in Iran.

Major energy traders from Russia, India, Switzerland, Kuwait,

Turkey, France, and the Netherlands have stopped sales of refined

petroleum products to Iran.

As my OFAC colleague has described, we have used executive orders to designate entities that support or facilitate terrorist or proliferation activity, including Mahan Air, Iran Air, and Tidewater

Middle East Co.

Last month, we designated five individuals for their involvement

in Iran’s plot to assassinate the Saudi Ambassador in the United

States. Others, including the European Union and Canada, have

already taken or will take similar actions against these individuals.

Our policies have been effective in sharpening the choices before

the regime. As Iranian President Ahmadinejad recently admitted

in a speech to the Majlis, the Iranian parliament, ‘‘Which government can work under so much pressure? This is the heaviest economic onslaught on a nation in history.’’

We are committed to the P5+1 framework to engage with Iran,

provided it is prepared to discuss seriously its nuclear program.

Until then, we will work with other nations on new sanctions

measures.

The latest IAEA Director General’s report on Iran’s nuclear program deepens our concerns, and we are consulting with allies on

how to respond at this week’s board of Governors meeting in Vienna.

The Iranian regime’s unacceptable behavior extends to its human

rights abuses. In response to the regime’s systematic campaign of

violence and intimidation against protesters in 2009, we designated

eleven individuals and three entities for egregious human rights

violations, and we continue to compile evidence to designate the

worst abusers. For the past 8 years, we have co-sponsored a U.N.
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resolution calling Iran to account for its human rights abuses. Last

year, this resolution passed with the largest margin to date. In

March, we helped create the position of the Special Rapporteur on

Iran, whose recent reporting has shone a spotlight on the regime’s

repression of its own citizens.

We also equip Iranian civil society with capacity building programs, training, media access, counter-censorship tools, and exchanges to help Iranians defend their fundamental rights and freedoms.

Turning to the broader region, we acknowledge the concerns that

our military withdrawal from Iraq will allow Iran to expand its influence. However, we also know most Iraqis reject Iran’s interference. Iraqi leaders have rebuffed Iranian political pressure, and

Prime Minister Maliki has said he will not tolerate the violent activities of Iran-backed militant groups.

Iraq is diversifying its foreign relations and developing relationships with EU countries and regional players. In October, Iraqi

Foreign Minister Zebari stressed in a press conference with his Iranian counterpart, ‘‘No other party can fill the vacuum in Iraq except the people of Iraq and the Government of Iraq.’’

We are working with Iraqi Security Forces to strengthen their

capabilities beyond 2011, an aspect that Colin can speak to more

directly. We are helping Iraq establish credible public institutions

to protect its sovereignty and independence.

In closing, this administration has expanded the varieties of tools

and partners to deter Iran from developing nuclear weapons, continuing its human rights abuses, and destabilizing the regime—excuse me, the region. Sanctions are having an effect. With the aim

of compelling the Iranian regime to change its strategic calculus,

we will work with Congress and our allies to increase pressure. It

is Iran’s responsibility and its self-interest to join the international

community of nations. Until then, it only faces growing isolation

and condemnation.

Thank you once again. I look forward to your questions.

[The prepared statement of Mr. Wooster follows:]
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Mr. CHAFFETZ. Thank you, Mr. Wooster.

We will now recognize Dr. Kahl for 5 minutes.

STATEMENT OF COLIN H. KAHL, PH.D.

Dr. KAHL. Chairman Chaffetz, Ranking Member Tierney, distinguished committee members, I appreciate the opportunity to appear before you today to discuss the Department of Defense’s role

in the administration’s policy toward Iran.

As you know, the President has made Iran one of his very top

national security priorities. The Defense Department plays a supporting role in our whole-of-government dual track approach of engagement on the one hand and pressure on the other, which is led

by the State Department and the Treasury Departments.

However, a supporting role for DOD should not be interpreted by

anyone as a minor role. In support of interagency efforts to prevent

Iran from acquiring nuclear weapons and to counter its destabilizing efforts and activities in the region, the Defense Department

focuses on four main lines of effort: first, ensuring Israel’s security;

second, building partnership capacity in the region; third, developing a regional security architecture, especially in the Gulf; and

four, prudent defense planning.

Let me begin with the first one, Israel. Iran’s nuclear and missile

programs and its sponsorship for terrorism represent a significant

threat to Israel. In the face of this threat, we, the United States,

are working closely with the Israelis to develop multi-layered ballistic missile defenses, and we continue our efforts to ensure

Israel’s qualitative military edge.

The U.S.-Israel defense relationship is strong and enduring. Indeed, based on joint military exercises like JUNIPER COBRA, and

continued cooperation, both Secretaries Panetta and Secretary

Gates before him have called the relationship with Israel, ‘‘stronger

than ever.’’ We regularly consult with Israel and maintain a close,

extensive, and very frank defense dialog.

We also continue unprecedented cooperation with the Israeli Defense Forces to ensure that the qualitative military edge extends

to all present and future threats. As you know, Israel is the only

nation in the region that will receive fifth-generation aircraft in the

form of the Joint Strike Fighter. Another example is your support

for President Obama’s request to provide an additional $205 million to Israel for the Iron Dome short range rocket and mortar defense system. As you are probably aware, Iron Dome has already

proved effective in the field, successfully striking down rockets that

would have otherwise landed on Israeli civilian targets.

These efforts to buttress Israel’s security help underline our general message to Iran, which is pursuing nuclear weapons offers

Iran no true benefits and efforts to destabilize the region through

proxies and support through terrorism ultimately will not succeed.

We also continue to work with our partners elsewhere in the region to build capacity to defend them against Iran’s destabilizing

activities. By the end of next month in Iraq, we will complete the

drawdown of U.S. forces in accordance with the U.S.-Iraq Security

Agreement. Some have expressed concerns that we are leaving behind a vacuum for Iran to fill. However, we are not disengaging

from Iraq, and there is no vacuum for Iran to fill.
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Due to the extraordinary sacrifices of U.S. Armed Forces, civilians, and Iraqis, Iraq has emerged as an increasingly stable, sovereign, and self-reliant nation. Iraq has no desire to be dominated

by Iran or anyone else. Iraqi nationalism is strong, and the Iraqis

have consistently shown their willingness to resist the Iranians

when they have overreached. Moreover, as Iraq’s economy continues to grow, particularly its oil industry, we expect that Iraqi

self-confidence will grow as well.

The Iraqis have also made clear that they have a strong desire

for an enduring relationship and strategic partnership with the

United States, including robust security cooperation, as we will

pursue this partnership under the 2008 U.S.-Iraq Strategic Framework Agreement.

The recent decision, for example, for the Iraqis to purchase U.S.

F–16 aircraft is just one example of Iraq’s interest in a long-term

defense relationship with us. Iraq is now our ninth largest customer in terms of foreign military sales and the fourth largest in

the region. Continued security ties through our Office of Security

Cooperation in Baghdad and security assistance activities such as

Foreign Military Sales [FMS], and theater engagement activities

that U.S. Central Command will engage in, will deepen this partnership in the years ahead.

Similarly, in Lebanon we are working to strengthen Lebanon’s

national institutions and its ability to exercise its sovereignty and

authority over all of its territory. Central to this work is the development of the Lebanese Armed Forces through our continued training, assistance, and military efforts. Since 2008, the United States

has been committed to helping the Lebanese Armed Forces effectively counter the operations of terrorists within Lebanon, secure

Lebanon’s borders, and work alongside the U.N. to implement all

Lebanon-related U.N. Security Council resolutions.

DOD is also working closely with its Gulf partners to develop a

common regional security architecture, one that includes both bilateral and multilateral elements. These initiatives include a regional

network of air and ballistic missile defense, shared early warning

systems, counterterrorism and counterpiracy efforts, programs to

build partner capacity, and projects to harden and protect our partners’ critical infrastructure.

We currently have substantial missile defense assets in a number of Gulf partner nations to protect U.S. forces and partners from

the threat of Iranian missiles, and U.S. Central Command maintains robust theater engagement and exercise schedules to buttress

these partnerships.

As we improve our bilateral and multilateral cooperation, we are

also working to build the defense capabilities of our partners. Indeed, the Middle East accounts for a large portion of U.S. military

worldwide FMS activity, particularly with Saudi Arabia, UAE,

Egypt, Israel, and Iraq. Indeed, in the past 10 years these five

countries account for more than $66 billion in active FMS cases.

Last, let me turn to DOD planning. When it comes to Iran, we

know that there are no overnight solutions; and we also know that

many of our diplomatic, economic, and security cooperation efforts

are just now beginning to bear fruit, as evidenced by the Iranian

President Ahmadinejad’s recent statements that Henry mentioned.
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At the same time, we know that Iran has not ceased its proliferation activities, nuclear activities, or support for terrorism. For that

reason, the Department continues to prepare for all contingencies.

On this point, let me be clear. It is the Department of Defense’s

responsibility to plan for all contingencies and to provide the President with a wide range of military options should they become necessary. That’s a responsibility we take very seriously; and when it

comes to the threat posed by Iran, the President has not taken any

options off the table. But I also want to emphasize our continued

belief that, at this time, diplomacy and pressure remain the most

effective tools for changing Iran’s behavior.

With that, I thank you once again, and I look forward to answering your questions.

[The prepared statement of Dr. Kahl follows:]
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Mr. CHAFFETZ. Thank you.

I know this is a very complicated and deep subject. To try to

summarize in 5 minutes is difficult, but we do appreciate it.

I would now like to recognize myself for 5 minutes.

Mr. Szubin, you are the Director of the Office of Foreign Assets

Control [OFAC] as it is often referred to. How many people do you

have in your group or your department?

Mr. SZUBIN. It is about 165.

Mr. CHAFFETZ. And how many of them actually work on this particular issue?

Mr. SZUBIN. Iran has been the number one priority for us. It is

difficult for me to give you an FTE number because we divide up

our functions by the operations. So we have licensing officers, enforcement officers, people who prepare the designation——

Mr. CHAFFETZ. If you had to guess, how many people would you

guess are actually working on this?

Mr. SZUBIN. It would be hard to put a number on it. I can go

back and try to come back to you with an estimate. But it is our

number one priority and has been for as long as I have been at

OFAC, which is 5 years.

Mr. CHAFFETZ. According to Mr. Dubowitz, who testified on the

panel just before us, China is the largest importer of Iranian oil behind the European Union. Companies owned by the Chinese Government are also suppliers of illicit materials in support of Iran’s

nuclear weapons program. Is the United States enforcing sanctions

against the Chinese Government or any Chinese entity?

Mr. SZUBIN. Absolutely. And I will defer in a moment to Mr.

Wooster, who can speak to the State Department sanctions, but we

at Treasury have imposed sanctions against Chinese companies, including some state-owned firms that were providing parts and

equipment to Iran’s missile procurement efforts.

Mr. CHAFFETZ. And how many companies are you investigating

at the current time? What does the universe of that look like?

Mr. SZUBIN. Chinese companies?

Mr. CHAFFETZ. Uh-huh.

Mr. SZUBIN. I am not at liberty to disclose that.

Mr. CHAFFETZ. Let me go to another part here.

Following the exposure of the Iranian plot to potentially assassinate Saudi Arabia’s Ambassador to the United States, the Obama

administration actually floated the idea of sanctioning the Iranian

Central Bank. In fact, 92 U.S. Senators out of a hundred signed a

letter suggesting in support of that. Where is that in its progress?

What would be the effect of that? Is that something that the

Obama administration has abandoned?

Mr. SZUBIN. As Under Secretary Cohen has mentioned, including

in testimony recently, the point is that proposal or idea has not

been abandoned. It is very much on the table, as are all options

that we could take that would credibly and meaningfully impact

Iran and deter its efforts.

Mr. CHAFFETZ. But why not do it? Why not do it?

Mr. SZUBIN. The issues are several. We need to analyze any prospective option in terms of the evidence that is available to us, of

course, the impact that it would have on Iran, and the impact that

it——
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Mr. CHAFFETZ. But we want to have the maximum effect on Iran,

right? So are we just—I mean, is there a spectrum here that says,

well, we don’t want to be too hard?

Mr. SZUBIN. No, no, no.

Mr. CHAFFETZ. Okay. So why—I mean, you listed that as your

second consideration. Why is——

Mr. SZUBIN. Well, I think it needs to be measured against my

third consideration, which is what would the impact be on the

United States and our allies and other countries around the world.

If we are considering an action——

Mr. CHAFFETZ. So give me an example of how that would impact

the United States.

Mr. SZUBIN. I am happy to. If we are considering an option that

would have a low-to-moderate impact on Iran and would have a serious negative impact on the United States or our allies, then that

is a way——

Mr. CHAFFETZ. What would be this serious? Can you give me an

example of where that would be a serious impact to the United

States?

Mr. SZUBIN. I am happy to. I would just apologize in advance. I

am not an economic analyst, and so my familiarity with economic

modeling may not be up to your satisfaction. But in the oil discussions in particular, there are very real scenarios in which an oil

price spike might hit that could result in somewhat of a

decrease——

Mr. CHAFFETZ. So we are not willing—this is what is mystifying.

It came out in the first panel, too. But this is the concern, that you

are somehow gauging—the Treasury Department is somehow gauging the price of oil—and I am trying to figure out what price per

gallon are we not willing to pay? I mean, why is the price of a gallon of gas the primary driver in the Obama administration’s quest

to supposedly make sure that they don’t get a nuclear bomb, for

goodness sake? Why is the price of gas one of those? Twice you

have listed it off right near the top of the list. Is that really the

concern?

Mr. SZUBIN. The price of oil is not the primary driver. It is certainly a consideration, because it is a primary driver of the recovery that is going on worldwide and the strength of our economy

and that of many of our allies.

Mr. CHAFFETZ. When will you make a decision about whether or

not to pursue this Iranian Central Bank sanction? What is the

timeline here? When are we going to have a decision?

Mr. SZUBIN. I can’t answer that.

Mr. CHAFFETZ. Why not? Who makes that decision?

Mr. SZUBIN. The decision will be made by the administration as

a whole.

But I do want to challenge the notion that it is a question of how

much of a price uptick are we willing to take on ourselves in exchange for a profound impact on Iran. If there is a hike in the price

of oil, Iran gains. If there is a spike in the price of oil, Iran could

be facing a windfall. And so there are scenarios in which—and they

are plausible scenarios—in which there could be profound harm to

the global economic recovery and a windfall to Iran. I don’t think
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that is what any of us are looking for. It is a scenario we need to

proceed I think with——

Mr. CHAFFETZ. My time has expired. We need to get to the other

Members.

But the fact you have 92 U.S. Senators, in a very bipartisan

way—and this is something, an idea that was floated out there by

the Obama administration, and now we are pulling back on it, is

really quite stunning.

I will yield now 5 minutes to the gentleman from Massachusetts,

Mr. Tierney.

Mr. TIERNEY. Thank you.

Mr. Szubin, I didn’t hear you say that you were pulling back on

it. Are you pulling back on it?

Mr. SZUBIN. No. As I said, the option remains on the table.

Mr. TIERNEY. That is what I thought I heard you say. And I suspect you are considering whether or not doing it would have an adverse effect of causing Iran to get enriched by that action, therefore

totally disregarding the effect on it and making it useless, in effect.

Mr. SZUBIN. That is correct. And potentially worse than useless,

potentially resulting in a boon to Iran.

Mr. TIERNEY. Emboldening them even more on that. So that

would seem to me a useful thing to consider before you went and

did that. But others might feel differently on that.

So it seems to me that people that want to be critical first on the

one hand say what a great job this administration has done on

sanctions and internationalizing them and having it move forward

and then they qualify that by saying in the medium and the longrange, but they don’t think it is a going to be immediate enough

to actually reach the goal, which is to somehow impede the development of nuclear power capacity on that. So are we doing all that

should be done to impede that in time so that one doesn’t always

outstrip the other? And what else ought we be doing?

I want to ask each of you that.

Mr. SZUBIN. First, I do think that experts across the spectrum

have acknowledged that the pressure on Iran, especially in recent

months, has grown to an unprecedented level. Iran is more isolated

than ever financially in terms of trade, in terms of investment in

its oil sector, and politically. And the IAEA Board of Governors report and the revelation of the Arbabsiar plot to assassinate the

Saudi Ambassador to the United States have greatly compounded

Iran’s isolation and its problems.

In terms of are we doing everything? We are certainly trying.

This is my number one priority. And we are trying to identify every

possible option we can take. Whether it is a U.S. unilateral action

in the form of an OFAC or a State Department designation, whether it is a multilateral concerted effort we can take with allies, or

whether it is action in New York pursuant to a U.N. Security

Council resolution, we are trying to identify every possible lever

that we can push that would exert additional impact; and I commit

to you that we will continue to be relentless about that.

Mr. TIERNEY. Thank you.

Mr. Wooster.

Mr. WOOSTER. Congressman Tierney, in response to your question about what we are doing, as Adam has rightly said, it cer-
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tainly occupies the bulk of my life and that of my team. And we

have 39 people in the Office of Iranian Affairs, 17 of them overseas,

22 domestically. We are engaged on this all the time. We are engaged on it in Washington. We are engaged on it in terms of contributions that reporting officers are making in the field well beyond the ones I named in terms of the office’s own assets. This is

a whole-of-government approach. I believe Under Secretary Sherman has been emphatic in declaring that aspect of it.

Yesterday, I know Adam and I spent probably more time with

than we would care to with one another at the White House going

over the particular details of this issue with a host of other actors

as well.

On the diplomatic front in terms of the Department of State,

what we keep a particularly close eye on, of course, is the point

where we can obtain optimal leverage, maximum leverage, and at

the same time we are not alienating key people that we need to

work with in a coalition. Where these are stronger, they are more

effective, they are more fearful, even if it is just the optics of it as

well, and in actuality the bite is much deeper when we have a

united front, when we have a coalition.

To date, we can report success, notwithstanding the points that

Representative Chaffetz has mentioned, in terms of China. I know

it is a continuing concern with the Congress. There just aren’t easy

responses to that. But, nonetheless, we have six U.N. Security

Council resolutions where they, too, have put ink on the paper;

they, too, have assented to this; and they agree on the fundamentals, as do the Russians, that the idea of this regime having a nuclear weapon is not a good one.

Mr. TIERNEY. We have had people make the argument to us that

at some point you could take an action that in fact would go beyond

hurting the Guard, the Qods Force, the regime, and hurt the Iranian people and make their lives so miserable that at some point

they start to support a government that right now many of them

might be inclined to resist. Is there such a tipping point, in your

view, and do you take that into account in your calculations?

Mr. WOOSTER. Yes, sir. In terms of a tipping point, I can’t offer

you an exact point on the curve where that is located. But there

is.

I mean, we have witnessed, most particularly around the issue

of the nuclear question, a lot of this data is available through—in

fact, the overwhelming amount of is it is available through public

polling, Iranian polling, third government polling, academic institutions, think tanks, and, of course, in terms of resources that each

government has, particularly our allies.

But it comes up resoundingly with the conclusion that the nuclear issue is very much one of those events. There is a lot of nationalism behind the notion of a nuclear Iran. There, of course, are

deleterious effects as well. But the fact is that a good number of

Iranians are very much united around the issue of their country,

too, being a member of the, if you will, nuclear club. So it is something that we keep an eye on.

Our—as I mentioned at the outset of my remarks, the paramount

objective for us is ensuring that the regime does not obtain a nu-
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clear weapon. Between that point, the apex, if you will, and the

area below it, there is considerable room for maneuver.

Mr. TIERNEY. Thank you.

Thank you, Mr. Chairman.

Mr. CHAFFETZ. Now recognize the gentleman from Illinois, Mr.

Quigley, for 5 minutes.

Mr. QUIGLEY. Thank you, Mr. Chairman.

Dr. Kahl, the International Atomic Energy Agency report that

just came out, obviously quite sobering but not a surprise to anyone. We have been at this a little while now. A window to do something seems to be narrowing. What is the plan? It seems tough to

say here, but it seems almost inevitable. What is the plan? What

do we do if we have a nuclear Iran?

Dr. KAHL. Well, first of all, it is obviously our policy to prevent

Iran from getting a nuclear weapon. The administration sees that,

the acquisition of a nuclear weapon, as unacceptable. You know,

how much time we have, I think there is some debate in that.

Obviously, the IAEA report is troubling. I think that, though,

there is still time to keep on the path that we are on now, which

is to turn up the heat diplomatically and through economic pressure.

Meanwhile, ensuring that the President has all options available

to him so that when he says all options are on the table, those options are viable. So the Defense Department’s activities currently

are oriented in the region to convey to Iran our resolve to counter

their destabilizing activities and their aggression, to defend our

partners, and to deny the benefits of their nuclear and ballistic

missile program through our defense activities.

But I think it is our view that we still have some time and that

any discussion of military action or something else has to be

viewed very much as a last resort, given the highly uncertain consequences that that action would have.

Mr. QUIGLEY. I get it. But I have only been here a short time

now. I am in my second term. But I feel like Bill Murray in

Groundhog Day, right?

I mean, I have been at this meeting before. And we could save

the tapes—and no disrespect—we could have this meeting again

next year, and we could be talking—last year, I believe we were

talking about years. Now we are talking about a year from a very

credible agency.

And what we have also seen is that the window tends—every

time we hear something else, the window is narrower. There is exponential growth. It is very scary.

So this last year went by very quickly since we had a significant

discussion about that. So I get it. And I voted for sanctions, and

I am up for all options. But, you know, I am not sure we are—

Monty Hall is pointing to door number two or door number three

at some point in time.

Are we ready, facing what is—whether there is a debate or not—

a very credible agency is less than a year now. We have our allies,

we have our troops, we have destabilization. Prime Minister

Netanyahu talked about exporting a very strong threat. So, beyond

all that—I know you don’t want to talk about it—but is there a

plan? Are we ready?
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Dr. KAHL. So I think we need to treat all these timelines with—

kind of put an appropriate context around them. So when you have

groups estimating 1 year, 2 years until they could have a testable

nuclear device, the important caveat in that is from a decision by

the Iranian Government to dash for a nuclear device. There is no

evidence that that decision has been made. So that 1 year in a

sense is sliding.

So part of the reason why you have this Groundhog Day is a couple of years ago you might have heard a similar estimate, but that

was also based on the notion that the Iranians hadn’t made a decision. So what’s clear is what the Iranians are doing is trying to put

themselves into a position in which the Supreme Leader can make

a decision, and we do have to be worried that when and if that decision is ever made the time to actually complete a testable device

could shrink over time. So we are watching that very, very, very

carefully.

But I think we still do have some time. But it is the responsibility of our Department to do prudent planning to ensure that all

options are available when and if we detect that Iran has made a

decision to do this.

Mr. QUIGLEY. That’s as good as it gets, Mr. Chairman. I thank

you, and I yield back.

Mr. CHAFFETZ. Thank you.

I now recognize the gentleman from Vermont, Mr. Welch, for 5

minutes.

Mr. WELCH. Thank you very much.

Mr. Wooster, I am wondering, can you describe what the competing arguments are within Iran, as you see it, on this question

of proceeding aggressively toward the development of a nuclear

weapon?

Mr. WOOSTER. I can comment, if you will, or make some observations about the national level discussion. Is that what you mean?

Mr. WELCH. Right. And I am assuming there is some internal debate, that there are forces that are arguing for an aggressive approach. There are probably some forces that are arguing against

that. I am wondering about your Department’s assessment of what

those arguments internally within Iran are, who is making them,

and who is prevailing.

Mr. WOOSTER. Thank you.

Well, the party lines, if you will, are drawn fairly clearly. They

have been for some time. Some of the names and personalities have

changed, but there remains a hard core inner circle who are keen

to develop a nuclear program. That has been demonstrated for

years.

The IAEA report demonstrates also what the United States has

known for a long time, that Iran had a nuclear weapons program.

We have continuing concerns about that. That is emphatically clear

to all of you. As one of your colleagues mentioned, we have all seen

that before.

In terms of the debate within the country, a good number—remember, the astonishing—one of the astonishing facts about Iran

is that we have an extraordinary demographic, 70—75 million people, 70 percent of whom are 30 something or under. It is really extraordinary. So you have a lot of folks who look toward the future
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and who think about what their prospects are. And when they do,

the notion of living in a pariah state, where options are foreclosed

to them in terms of business, travel, education, that’s not a heartening prospect for them. And they’ve demonstrated that.

Those folks obviously are keen, notwithstanding whatever sympathy they may have to see their nation, if you will, belly up to the

bar with other nuclear powers, to be recognized as a great country

or a great power. Nonetheless, they haven’t demonstrated that element that I am speaking of, hegemonic tendencies. They wouldn’t

fit into the camp of what we would call those with desires for destabilizing regional influences. Many of them are keen on rapport

with the West, particularly with the United States. But—and this

is a big but—they don’t hold the power.

So the folks who have the power, the predominant power, this

is—again, you are familiar with the host of characters: the Supreme Leader, the IRGC, its constituent elements such as the Qods

Force, and various other deeply conservative political figures. But

again, beyond that circle—and that is a relatively small circle, but

it is a very powerful circle—there is room for maneuvering.

Mr. WELCH. That being what?

Mr. WOOSTER. I am sorry?

Mr. WELCH. What would that room for maneuver be?

And then Dr. Kahl can comment on that as well.

Mr. WOOSTER. We find that the Iranians remain extraordinarily

interested in the United States. It is the aspiration of a good number of Iranians, the older Iranians, to send their children here to

be educated, to visit, to travel, to have the opportunity to enjoy aspects of American culture and education that they knew in another

era. That’s not an option. They show up——

Mr. WELCH. I am going to be out of time. I would just like to

hear a little bit from Dr. Kahl. I hate to interrupt, but it is a time

issue.

Mr. WOOSTER. Certainly. Please.

Dr. KAHL. I think in general, again, our role is to try to convince

the Iranian leadership that they will be less safe, not more, if they

keep going on this nuclear weapons path. So we are doing that,

again, by trying to deny them the benefits of those activities

through our security cooperation relationships in the Gulf, our ballistic missile defense architecture, our efforts to build up their capabilities, our efforts to work with Israel on their defenses and provide for their qualitative military aid.

So all of that is oriented, again, against—about sending the Iranians a very clear signal that not only are they facing increasing

diplomatic and financial isolation but they are aligning the rest of

the region against them in a way that’s going to make them profoundly unsecure. And so this is trying to create an incentive structure that leads them to one conclusion, which is they should stop

doing this. So that’s our number one objective.

I would just say, on the young people in Iran, you know, there

is a lot of evidence that they think—many of them think very favorably of the United States. So I think we need to be careful in

a lot of what we do to make sure that we are not alienating a

group of individuals that we want to work with and have a rela-
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tionship with over the long term, as long as they can stop being

held hostage by their government.

Mr. WELCH. Thank you very much. Yield back.

Mr. CHAFFETZ. Thank you.

I now recognize myself for an additional 5 minutes.

Mr. Wooster, I want to make sure I heard you properly. When

talking about the IAEA report, you said that Iran had a nuclear

program. They currently have one, though. Is that correct? They

have had one, and they have one.

Mr. WOOSTER. Sir, it was that they had a nuclear weapons program. Not a nuclear program but a nuclear weapons program.

Mr. CHAFFETZ. Do you believe that they have one now?

Mr. WOOSTER. They provided no assurance that they have abandoned the pursuit of a nuclear weapon.

Mr. CHAFFETZ. I am asking what—do you believe the report that

was just issued or not?

Mr. WOOSTER. Sir, the administration’s position is—and has been

for years—reflected in what you see in the report. The report remains a restricted document, although I am aware that it has been

leaked to folks and it is available on the Internet.

The limits—because we are having a conversation about these

issues with ministers today—excuse me, Thursday and Friday in

Vienna, there are limits on what I can say in this setting. I can’t

offer my personal opinion.

Mr. CHAFFETZ. I am trying to get—I am sorry, I wasn’t trying to

get your personal opinion. I want to understand the administration’s opinion as to whether or not they believe that they have a

nuclear weapons program. No or yes?

Mr. WOOSTER. We remain concerned that the Iranian regime has

obfuscated on precisely this issue. We don’t have transparency. We

want to know, we want certainty that they do not have a weapons

program. That’s what we are seeking.

Mr. CHAFFETZ. Mr. Dubowitz listed 18 firms—I will come back

to Mr. Szubin here. Mr. Dubowitz listed 18 firms connected to the

Islamic Revolutionary Guard, IRGC, which formed part of the

crude oil supply chain. These firms’ activities were detailed in a report from the Foundation for the Defense of Democracies to the administration in February. So I want to come back to this issue and

say where are you at in sanctioning these particular 18? And

what’s happening with this report? This has been since February.

Mr. SZUBIN. And we have that report. And we have had our analysts take a very careful look at it.

As you have seen, if you have been following the releases from

our Department, we have made sanctions against the IRGC and its

entities the key plank in our Iran strategy on the reasoning that

the IRGC is one of the most culpable actors for supporting terrorism, supporting WMD development, and including repression,

including in Syria. But also on the reasoning that IRGC is becoming increasingly unpopular in Iran. And so it plays into this domestic discontent which I think is going to be key if these sanctions

do have the impact we are looking for.

We have announced sanctions against lots of IRGC fronts, including their largest port operator and a whole host of companies; and

we have also designated companies in Iran’s oil infrastructure. And
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we have been able to get the United Nations as well to act in this

area by restricting petroleum imports into Iran.

Mr. CHAFFETZ. What about these particular 18?

Mr. SZUBIN. On these particular 18, I can’t comment on which we

are poised to designate. We don’t comment on upcoming designations. But I can say that to designate any and all IRGC companies

is very much consistent with what has been our strategy.

Mr. CHAFFETZ. I guess the concern is you have had this report

since February, and I just would appreciate an update as one becomes more publicly available.

Let me go back to you again, Mr. Szubin, here. Is the administration prepared to sanction Chinese firms like—I am going to pronounce this improperly—Zhuhai Zhenrong, a subsidiary of

NORINCO, which is openly flouting these sanctions at this time?

Are you familiar with this organization? I am sorry. My pronunciation is terrible.

Mr. SZUBIN. I believe that is an energy firm; is that right?

Mr. CHAFFETZ. Yes, correct.

Mr. SZUBIN. So I would defer to my colleague from the State Department, who administers the energy sanctions.

Mr. CHAFFETZ. Mr. Wooster, are you familiar with this firm and

where we are at on this?

Mr. WOOSTER. I am not so familiar with the particulars of the

firm. I am familiar with the concerns about China and the energy

sector.

Primarily, our concern there is that, because the Chinese have

in fact been pulling back in this area and because we have engaged

at the highest levels, the President has engaged, the Secretary of

State and others, we have also wanted them not to in particular

backfill behind any other energy firms that have left. And to date—

and to date we can report that what we are seeing is satisfactory.

We continue to keep an eye on it. We continue to discuss it. It was

discussed in Beijing less than a week ago with Deputy Secretary

of State Burns, and we continue to keep a close eye on this.

Mr. CHAFFETZ. And the last point I would like to make here before we wrap up, Mr. Wooster, there is deep concern about our

presence in Iraq after the 31st of December, with the Department

of Defense pulling out, 16,500 people there under the control of

Secretary Clinton. How prepared are we for what may or may not

happen come January 1st?

Mr. WOOSTER. Sir, I have limited capability to give you a good

response about the management particulars of the Department in

terms of its Iraq-particular preparations. However, what I can say

from the policy perspective is that we are committed to a long-term

relationship with Iraq. No one should doubt the U.S. Government’s

commitment to that country.

We have a transition now in our relationship with Iraq. It is

tempting to see it as going from black to white, but in fact it is not.

It is a transition. We’re moving from one phase in our relationship

to another phase in that relationship. Again, our commitment to

the region and to Iraq is longstanding, and it endures.

Mr. CHAFFETZ. Thank you.
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I appreciate your all being here, for your testimony here today,

and the work that you do on behalf of our country. Again, we appreciate your presence.

The committee now stands adjourned.

[Whereupon, at 11:48 a.m., the subcommittee was adjourned.]

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