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22–556 PDF 2016

S. HRG. 114–442 

UNDERSTANDING THE ROLE OF SANCTIONS 

UNDER THE IRAN DEAL: ADMINISTRATION PERSPECTIVES 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

ON 

EXAMINING THE NATURE OF THE SANCTIONS RELIEF THAT IS BEING 

PROVIDED TO IRAN, INCLUDING THE RECENT FOCUS ON THE POTENTIAL FOR GIVING IRAN ADDITIONAL ACCESS TO THE U.S. FINANCIAL 

MARKET IN RETURN FOR ITS PREVIOUSLY NEGOTIATED TEMPORARY 

NUCLEAR-RELATED COMMITMENTS SET FORTH IN THE ‘‘JOINT COMPREHENSIVE PLAN OF ACTION’’ 

MAY 25, 2016 

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

( 

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

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman 

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

WILLIAM D. DUHNKE III, Staff Director and Counsel 

MARK POWDEN, Democratic Staff Director 

DANA WADE, Deputy Staff Director 

JELENA MCWILLIAMS, Chief Counsel 

JOHN O’HARA, Senior Counsel for International Terrorist Finance 

LAURA SWANSON, Democratic Deputy Staff Director 

GRAHAM STEELE, Democratic Chief Counsel 

COLIN MCGINNIS, Democratic Policy Director 

DAWN RATLIFF, Chief Clerk 

TROY CORNELL, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

WEDNESDAY, MAY 25, 2016 

Page 

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

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2 

WITNESSES 

Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence, Department of the Treasury .................................................................. 3 

Prepared statement .......................................................................................... 34 

Responses to written questions of: 

Chairman Shelby ....................................................................................... 39 

Senator Cotton ........................................................................................... 44 

Senator Warner ......................................................................................... 46 

Stephen D. Mull, Lead Coordinator for Iran Nuclear Implementation, Department of State ........................................................................................................ 5 

Prepared statement .......................................................................................... 36 

Responses to written questions of: 

Chairman Shelby ....................................................................................... 48 

Senator Brown ........................................................................................... 50 

Senator Toomey ......................................................................................... 51 

Senator Cotton ........................................................................................... 52 

Senator Warner ......................................................................................... 55 

(III)

(1) 

UNDERSTANDING THE ROLE OF SANCTIONS 

UNDER THE IRAN DEAL: ADMINISTRATION 

PERSPECTIVES 

WEDNESDAY, MAY 25, 2016 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 2:31 p.m., in room SD–538, Dirksen Senate Office Building, Hon. Richard C. Shelby, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The hearing will come to order. 

Yesterday here in this Committee, we received testimony from a 

panel of experts on the challenges and the consequences of suspending economic sanctions on Iran as agreed to in the Iran deal. 

They discussed, among other things, several issues in implementing the deal and the risks posed by granting Iran additional 

concessions in light of its demand for more economic relief. 

And while the Administration has been campaigning for Iran’s 

rapid reintegration into the world economy, there is nothing preventing Iran from using funds made available under the deal to 

further destabilize the region. This includes further contributions 

to known terrorist organizations such as Hezbollah. 

It also includes additional investment in Iran’s ballistic missile 

system, which could be a conduit for restricted nuclear activities 

should Iran back away from the deal. 

Given these and other serious threats, which Iran has made clear 

will persist, the Administration must have the ability and the will 

to reimpose swift punitive measures should Iran not uphold its end 

of the agreement. And I believe Congress must ensure that the 

statutory authority is in place to reapply strong economic sanctions 

against Iran if need be. 

I look forward to hearing our witnesses’ testimony today on how 

the Iran deal is being implemented and, in particular, the actions 

the Administration is taking to further facilitate Iran’s access to 

the global financial system. 

Our first witness is Mr. Adam Szubin. He is no stranger to this 

Committee. He is Acting Under Secretary of the Treasury for Terrorism and Financial Crimes of the Office of Terrorism and Financial Intelligence, and his nomination is pending on the Senate floor 

for the permanent job. 

2 

He will be followed by the Honorable Stephen D. Mull, Lead Coordinator for Iran Nuclear Implementation at the U.S. Department 

of State. 

I welcome both of you gentlemen. Your written statements will 

be made part of the record in their entirety, and at this point I will 

recognize Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman. Mr. Szubin, Mr. 

Mull, welcome to both of you. 

Yesterday we heard a range of witnesses discuss the Joint Comprehensive Plan of Action and the application of the existing sanctions architecture to combat Iran’s malicious activity. Those remaining sanctions target Iran’s sponsorship of terrorism, its human 

rights abuses, its ballistic missile activity, all inconsistent with 

U.N. Security Council resolutions. 

Today we hear from two senior Administration officials who play 

key roles in Iran policy. They will share their perspective on the 

progress of implementation, the effectiveness of our broader strategy to combat Iran’s dangerous and destabilizing behavior in the 

region, and how we might strengthen it consistent with our JCPOA 

commitments. 

Ambassador Stephen Mull is the State Department’s Lead Coordinator for the Iran Nuclear Agreement. Thank you for the work 

you are doing. 

Our chief sanctions enforcer in the U.S., Adam Szubin, serves as 

Acting Under Secretary for Terrorism and Financial Crimes in the 

Treasury Department. As our witnesses unanimously reaffirmed 

yesterday in response to a question from Senator Donnelly, he is 

eminently qualified, and when we went down the line whether they 

liked the agreement or did not like the agreement, whether they 

were supportive of it today or still critical of it today, they all 

agreed that Mr. Szubin should be confirmed. He is eminently qualified having served initially in the Bush administration and the 

Obama administration in key national security roles related to economic sanctions and countering terrorist financing. It is inexcusable that Mr. Szubin’s nomination was pending in this Committee 

for almost a year. For no apparent reason was it not acted on. Finally, we acted on it, and now it is being held up by the Republican 

leadership, again, for no apparent reason—this despite the fact 

that the Under Secretary for Terrorism and Financial Crimes is 

one of the most important national security posts in our Government. When I hear colleagues on this Committee and in the Senate 

overall so critical of the JCPOA, even writing letters to the leadership of a country that is not our friend, and then some of those 

same people block his nomination for one of the most important national security posts in our Government, I am just perplexed. 

As we heard again yesterday, allowing this proven leader to remain unconfirmed undermines America’s influence in our efforts to 

track terrorists and stop them from raising money on the black 

market or elsewhere. 

Mr. Szubin’s job is focused on leading our country’s effort to disrupt terrorist financing by al Qaeda, by ISIS, by other groups, and 

especially important to today’s hearing, he leads U.S. efforts to 

3 

combat Iran’s malicious activity in the region. The Senate should 

vote to confirm him today. 

As we heard in our hearing yesterday, Iran has so far complied 

with its JCPOA commitments. The U.S., Israel, and other allies in 

the region are safer and more secure because of that. Whether we 

support it or oppose the JCPOA, we all recognize the need to continue to combat the persistent threat that Iran poses to the U.S. 

and our allies. It requires the Administration to enforce existing 

sanctions, to designate new sanctions targets, to block Iran’s pursuit of military technologies, and to take other steps to confront 

Iran and its terrorist proxies like Hezbollah. 

It also requires continued coordination with the international coalition whose joint actions make the sanctions regime effective 

enough to bring Iran to the negotiating table and force it to agree 

with the JCPOA in the first place. I look forward to hearing our 

witnesses today describe our strategy in each of these fronts. 

Last, Mr. Chairman, in addition sanctions and JCPOA oversight, 

Congress must also support robust military and other aid to regional partners like Israel. We should be focused on ensuring strict 

implementation of the agreement and on the most effective ways 

to pressure Iran’s leaders to change their destabilizing behaviors in 

the region. 

I welcome our distinguished Administration witnesses this afternoon. I look forward to hearing their perspectives. 

Chairman SHELBY. Mr. Szubin, you may proceed. 

STATEMENT OF ADAM J. SZUBIN, ACTING UNDER SECRETARY 

FOR TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY 

Mr. SZUBIN. Thank you very much. Chairman Shelby, Ranking 

Member Brown, Members of the Committee, it is a pleasure to be 

back with you today, and thank you for inviting me to discuss our 

implementation of the JCPOA. 

Very shortly after I started at the Treasury Department, in 2004, 

we saw with alarm the progress that Iran was making in its covert 

nuclear program and understood that this was a national security 

threat of the highest order. From that time, the talented women 

and men in my office have devoted literally tens of thousands of 

hours to addressing this threat. It has been an effort like nothing 

I have ever seen or been a part of, working with the intelligence 

community to identify and track Iranian front companies and their 

movements of funds, working with the private sector and banks 

here and abroad to strengthen the vigilance posed with respect to 

the activities carried out by Iran, working with law enforcement 

and regulators to hold sanctions violators accountable, and working 

alongside our diplomats and foreign counterparts to make clear to 

Iran that the price of its illicit nuclear program was complete isolation from the international community. Partly, and probably most 

importantly, we worked very closely with the Congress, including 

Members in particular of this Committee, to secure tough legislation, bipartisan legislation, that sharpened our sanctions tools, 

deepened their impact, and, I believe, brought Iran to the bargaining table. 

4 

After nearly a decade, the accumulated pressure had its intended 

effect, bringing Iran to the table, convincing it to accept far-reaching constraints on its program. The JCPOA was a tremendous 

breakthrough. It is a peaceful means of eliminating one of the 

world’s most persistent national security threats. 

Iran was a few months from having enough fissile material for 

a potential nuclear weapon, and it was advancing. Today Iran’s 

breakout time has been extended to beyond a year, and we are all 

safer for it. 

Since Iran has kept its end of the deal, we must uphold ours. It 

is in our national security interest to ensure that the JCPOA works 

as intended and stands the test of time. And it is, therefore, important to fulfill all of the commitments that we made in the deal. 

Iran is already seeing benefits under the deal. It has opened new 

banks accounts around the world. It has gained access to billions 

of dollars in reserves. And its oil exports to Europe have recovered 

to about half of their presanctions levels. 

That said, we still see companies and banks around the world 

who are hesitating based on concerns about doing business in Iran. 

Some are concerned about Iran’s financial transparency and the 

designation of Iran by the FATF, the Financial Action Task Force, 

because of its anti-money laundering and counterterrorist financing 

deficiencies. 

Others are noting concerns about corruption, as well as regulatory and other obstacles to doing business in Iran. And still others cite Iran’s provocative behavior outside the nuclear file, including its active support for terrorism and its ballistic missile testing. 

As President Obama said recently, ‘‘Iran has to understand what 

every country in the world understands, which is businesses want 

to go where they feel safe, where they do not see massive controversy, where they can be confident that transactions are going 

to operate normally.’’ 

As Iran pursues more business, I believe it is incumbent on Iran 

to address these problems, to undertake meaningful reforms, and 

create an environment in which businesses feel secure. 

I have talked a little bit about the sanctions relief that we have 

delivered under the JCPOA. But I also want to make clear what 

the deal does not mean. 

First, with only limited exceptions, the primary U.S. embargo on 

Iran remains in place, including the prohibitions on U.S. persons 

investing in Iran and the prohibitions on Iran accessing U.S. financial markets. 

Along these lines, let me say clearly, we have not promised nor 

do we have any intent to give Iran access to the U.S. financial system or to reinstate what has been known as the ‘‘U-turn’’ authorization. 

Additionally, we have maintained all of our sanctions designed to 

counter Iran’s malign activities outside of the nuclear file. 

Iran continues to be the world’s leading sponsor of terrorism and 

to play a significant and unhelpful role in the region. It supplies 

funding and weapons to Hezbollah, to the Assad regime, and to the 

Houthis in Yemen, and it continues to develop its ballistic missile 

program, in contravention of U.N. Security Council resolutions. 

And it continues to violate human rights within Iran. 

5 

Under our current sanctions regime, we have designated more 

than 200 Iranian-linked firms and individuals along these grounds. 

Thanks to Congress, those designations continue to have effect beyond our borders. Secondary consequences attach for any foreign financial institution that does business with any Iranian party that 

we have designated and any that we will designate in the coming 

days. 

We have kept at it. Indeed, since the implementation of the 

JCPOA, we have targeted new actors, including key actors in their 

ballistic missile program, agents of Mahan Air, which has acted as 

the Qods Force’s airline, and a central Hezbollah money-laundering 

network. Ultimately, we must remain clear-eyed about the nature 

of the non-nuclear threats posed by Iran, and we will continue to 

do so. 

Thank you again for inviting me to appear today. I look forward 

to our continued work with this Committee and to taking your 

questions. 

Chairman SHELBY. Secretary Mull. 

STATEMENT OF STEPHEN D. MULL, LEAD COORDINATOR FOR 

IRAN NUCLEAR IMPLEMENTATION, DEPARTMENT OF STATE 

Mr. MULL. Thanks very much, Chairman Shelby, Ranking Member Brown, and other distinguished members of the panel. It is a 

great pleasure to appear with you today for the first time for me 

before this Committee to brief and hear your questions and concerns about the Joint Comprehensive Plan of Action. It is a special 

honor to appear with my colleague Adam Szubin, who does such an 

extraordinary job every day defending America’s security as America’s chief sanction enforcer at the Treasury Department. 

I am pleased to report that as of today, 4 months after the implementation of the agreement, the agreement, in fact, has been fully 

implemented by all the parties to it, and I think it is important 

that we as a country recognize the contribution that that has made 

to making ourselves and our allies and friends, especially in the 

Middle East, more secure. 

As of Implementation Day under the Joint Comprehensive Plan 

of Action, which was on January 16th, Iran had completed dozens 

of specific actions to constrain its nuclear program and subject it 

to greater transparency from the International Atomic Energy 

Agency. It reduced by 98 percent its holding of enriched nuclear 

material that could have been used to build a bomb, shipping about 

25,000 pounds of enriched material out of Iran. It cut its installed 

centrifuges by about two-thirds, and agreed to tight controls on future enrichment activities. It destroyed the core of the heavy-water 

reactor at Arak which could have produced weapons-grade plutonium, another pathway to a nuclear weapon that this deal has foreclosed. And its implementation of these commitments has not increased the time Iran would need to produce a nuclear weapon— 

from about 2 months before the agreement took place to about a 

year today, so a multifold increase in the amount of time, the socalled breakout time, that Iran would need to produce a nuclear 

weapon. 

These actions were complemented by the historically comprehensive verification and monitoring measures that we specified in the 

6 

JCPOA. And thanks to those, Iran is now subject to the greatest 

monitoring and verification regime in the entire history of nuclear 

power. That gives us the confidence that, if Iran should decide to 

break out of its commitments, we would detect that attempt immediately, and we would have ample time to respond. 

In the event of Iran’s noncompliance, at the same time we have 

preserved our ability to snap back the penalties that Under Secretary Szubin described that brought Iran to the negotiating table 

in the first place. 

As you know, in exchange for Iran’s meeting its nuclear-related 

commitments under the JCPOA, we met our commitments by lifting the nuclear-related secondary sanctions on Iran. In an effort to 

provide greater clarity to the public and private sectors on what 

sanctions were lifted and what sanctions remain in place, we have 

been participating in outreach activities with the public and private sectors and Governments, at the request of other Governments, in order to explain U.S. commitments under the JCPOA. As 

long as Iran continues to meet its nuclear commitments, we will 

continue to meet our commitments in the deal as well. 

While we are encouraged by Iran’s implementation of its nuclear 

commitments thus far, we have always recognized that the JCPOA 

would not resolve all of our concerns with Iran. And, in fact, it has 

not resolved our concerns with Iran. Instead, the JCPOA was specifically aimed at addressing the most urgent issue of verifiably ensuring that Iran does not obtain a nuclear weapon. Thanks to our 

efforts to date, we have made significant progress toward that goal, 

and the United States and our partners are safer because of those 

efforts. 

I very much look forward to your comments and questions. 

Thank you. 

Chairman SHELBY. Mr. Szubin, there are a lot of us here, so I 

will try to be as brief as I can. One of Iran’s priorities is to be able 

to engage in international trade in dollar-denominated transactions, which would not only give it access to the world’s strongest 

and most liquid currency, but would also further legitimize its financial system. 

Can you confirm that there are no plans now or in the future for 

this Administration to allow Iranian, U.S., or foreign persons at 

any point to engage in either direct or indirect dollar-denominated 

transactions or dollar clearing in any form, including offshore facilities or through interbank bookkeeping or other conversions or 

transfers? 

Mr. SZUBIN. Well, thank you, Chairman Shelby. The question addresses quite a lot. 

Chairman SHELBY. It does. 

Mr. SZUBIN. And I will do my best to answer every aspect. 

First, you are absolutely right that the dollar is, and thankfully 

remains, the international currency of choice. Yes, I am sure Iran 

would like to be able to do its trade through the dollar through 

U.S. financial institutions. That is the gold standard when it comes 

to how international trade is done. That is not a part of the 

JCPOA. 

Iran is not given relief from the prohibition on accessing U.S. financial institutions under this deal. We have been very clear about 

7 

that throughout, and we have not restored anything like the Uturn transaction that once allowed Iran to do offshore-to-offshore 

clearing with a U.S. bank in the middle. 

Now, your question touched on two different types of activity: one 

is transactions in the U.S. dollar, which typically take place 

through a U.S. bank; the other is offshore dollar clearing. On the 

first, that is what I was just clarifying. Secretary Lew has said so; 

I have said so repeatedly. U.S. financial institutions are off limits 

to Iran. 

If there is a foreign institution that is doing business with Iran, 

our sanctions do not prohibit that, by and large, unless they are 

dealing with the IRGC actors I referenced in my opening statement, so long as they steer clear of our banks and our financial system. And that is true regardless of the currency. So if there is a 

bank in China that is doing transactions with Iran, it can do those 

in renminbi, in the local currency, in euro, in yen. It can do them 

in U.S. dollars based on the dollars that it has on hand. And every 

major international bank, of course, has some access to dollars in 

its own vaults and on its own books. 

But that is not the same thing as gaining access to, as you described it, the prestigious U.S. financial system and all that comes 

with it. 

Chairman SHELBY. But with their assets they could buy dollars 

anywhere in the world and move them, could they not, and use the 

dollars? 

Mr. SZUBIN. I am sorry, Senator? 

Chairman SHELBY. I said they could still use the dollars as a medium of exchange if they had them. 

Mr. SZUBIN. If they are holding U.S. dollar bills, yes. They can 

do with them what they want. 

Chairman SHELBY. Sure. 

Mr. SZUBIN. You know, it is an interesting question. We do not 

treat the U.S. dollar bill as a controlled commodity. If there is a 

U.S. sensitive good, a nuclear good, we treat that as a controlled 

commodity, and even once we have exported it offshore, we assert 

jurisdiction on that if it is ever going to be reexported or reexported 

again. We do not treat dollar bills in that way, and I think that 

is a good thing. I think that is part of what has allowed the U.S. 

dollar to emerge as the primary currency of choice. 

Chairman SHELBY. Secretary Mull, what is your answer to that 

question? 

Mr. MULL. Which question, about the dollars or the—— 

Chairman SHELBY. The whole question I asked him. I directed it 

at both of you. 

Mr. MULL. Yes, well, we completely agree there is absolutely no 

plan to open the U.S. financial system to the Government or businesses from Iran. The U.S. financial system is off limits. We very 

tightly guard access to the U.S. financial system through the programs that the Treasury Department has. We reinforce the Department of Treasury’s efforts diplomatically in our engagement with 

our foreign partners, and we completely agree with Acting Under 

Secretary Szubin’s analysis. 

8 

Chairman SHELBY. I have a little time left. I want to yield my 

time to Senator Toomey because he has got to preside over the Senate. Senator? 

Senator TOOMEY. Thank you very much, Mr. Chairman, and 

thanks for having this hearing. As you know, the JCPOA, more 

commonly known as the ‘‘Iran Nuclear Deal’’, I thought this was 

a terrible deal at the time. I thought then it was a bad idea to turn 

over $100 billion to the world’s leading State sponsor of terrorism 

while, among other things, allowing them to retain a significant 

nuclear infrastructure. And, of course, a bipartisan majority of Senators disapproved of this. But I would like to focus on what has 

happened since then and the Administration’s response to it since 

the deal was announced. 

To this day, my understanding is the Iranians have still refused 

to sign or ratify the agreement. They have delivered weapons to 

the Assad regime. They have taken 10 American sailors hostage at 

gunpoint and used the event for propaganda purposes, fired missiles near U.S. surface ships in the Strait of Hormuz. They took delivery of advanced surface-to-air missiles from Russia, fired several 

ballistic missiles in flagrant violation of U.N. Security Council Resolutions 1929 and 2231. And despite all of this bad behavior postJCPOA conclusion, it seems to me the Administration is, nevertheless, conferring more benefits upon the Iranians than the JCPOA 

even requires. 

We learned the Administration has some plans, I believe, to reward Iran with $8.6 million U.S. taxpayer dollars in return for getting rid of the heavy water that they are obligated to get rid of anyway without American compensation under the JCPOA. And despite laws that prohibit Iran from having access to U.S. banking, 

we hear that the Treasury explores loopholes that could permit 

them, notwithstanding the prohibition, as I understand, on the Uturn transactions. We have Secretary Kerry actively lobbying 

banks in Europe to do business with Iran. And according to the 

Iranian Government, the Obama administration is asking the Iranians to keep quiet about missile tests. 

Now, it seems, the way it looks to me, that the Administration 

has taken it upon itself to be responsible for the reintegration of 

the Iranian economy with the global economy. And that strikes me 

as a very bad idea. 

Just yesterday, Juan Zarate, who is proximately your predecessor at Treasury, laid out several reasons why it is a bad idea 

for the Administration to take this role, and I am paraphrasing, 

but one is that it certainly looks like it is the Administration 

condoning bad behavior. 

Second, it creates a dual standard. On the one hand, we are 

fining European banks and U.S. banks for engaging in questionable 

transactions with entities including Iran and others, but yet here 

we are encouraging those very same banks to do this business with 

Iranian banks. And, most importantly, it seems to me we are giving up the strategic opportunity to put the onus on the Iranians to 

convince the rest of the world that they should not be subject to 

any further sanctions because they have gotten their act together, 

because they are behaving, and yet we are not doing that. 

9 

So I guess my question is directed mostly to Ambassador Mull. 

Why does it seem that the Administration has appointed itself as 

the party responsible for Iran’s reintegration into the world economy, despite the fact that the JCPOA does not require that? 

Mr. MULL. Senator, thanks very much for your question. With respect, I would not agree that we have appointed ourselves in that 

role. As I alluded in my opening comments, Iran engages in seriously destabilizing behavior that threatens our security, that 

threatens the security of our friends in the region and around the 

world. However, as a result of this deal, Iran is not able to perform 

those threatening activities with the credible threat of a nuclear 

weapon to back it up. 

So while we confront Iranian behavior on all of these issues, 

whether it is on missile, whether it is on regional destabilization 

activities, support for the Houthis in Yemen and elsewhere, we can 

feel more comfortable that Iran does not have nuclear weapons to 

back that up. 

Senator TOOMEY. I get that, but just so that I understand, is it 

the policy of the Administration to pay Iran for the heavy water? 

Mr. MULL. The United States decided to purchase heavy water 

when it became—— 

Senator TOOMEY. And that is not required by the JCPOA. 

Mr. MULL. It is certainly not. 

Senator TOOMEY. Has Secretary Kerry been visiting European 

banks and encouraging them to do business with Iran? 

Mr. MULL. Secretary Kerry, at the request of our foreign allies, 

has met with foreign businesses and banking communities to explain the extent of U.S. sanctions that are still in effect and those 

that have been lifted because—— 

Senator TOOMEY. It has been characterized by some European 

banks as him actively encouraging them to do business with 

Iran—— 

Mr. MULL. No, he—— 

Senator TOOMEY. ——despite the outrageous behavior. 

Mr. MULL. Sir, I actually participated with Secretary Kerry in 

one of those meetings. He was not doing that at all. He was explaining and making clear what the impact of U.S. commitments 

under this deal were. Obviously, it is a bank’s responsibility, businesses’ responsibilities to make their own decisions. We cannot 

force them into it. And as Secretary Kerry has made clear publicly, 

Iran bears the major brunt of responsibility, if it wants to be integrated with the rest of the world, in making itself an attractive 

destination for investment by complying with standard laws and 

practices and banking transparency, anti-money laundering, and 

anticorruption efforts. 

Chairman SHELBY. Thank you, Senator. 

Senator TOOMEY. Mr. Chairman, thank you very much. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

Ambassador, you outlined, I thought very well, the progress we 

have made on implementation and compliance on reducing uranium levels, on restrictions on R&D and centrifuge production on 

the redesign of the Arak reactor, the conversion of the Fordow facilVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
10 

ity, ongoing inspections, verification. Has there been concern expressed by the IAEA so far of cheating on Iran’s part? 

Mr. MULL. No, sir, there has not been. The IAEA issued a report 

at the end of February, the first required after Implementation 

Day, in which it confirmed that Iran was in full compliance. It will 

issue another report very soon. The preliminary information is that 

they will again make that determination. 

Senator BROWN. Thank you. And as you know, the P5+1 came together obviously in support of the agreement, as we built consensus 

through really over a decade-long period, from Condoleezza Rice to 

Hillary Clinton to John Kerry and the work that Acting Secretary 

Szubin did. Are there significant—holding that coalition together 

and moving forward and making the world safer, making the region safer, are there significant disputes of interpretation or implementation among the P5+1? 

Mr. MULL. No, sir. I think that there has been remarkable unity 

among the P5+1 in approaching this deal from the outset. We meet 

regularly, we converse regularly. I am in regular contact with my 

counterparts among all the P5+1 to make sure that we stay on the 

same page, and there are ample opportunities to raise differences 

in interpretation. Frankly, there have not been any serious differences between—— 

Senator BROWN. Are there major political challenges made by the 

majority party in some of these countries the way there is now, the 

majority party in the legislative branch where there seems to be almost no support, even though—from one of the political parties in 

this city for an agreement that all six countries have come together 

unified? 

Mr. MULL. My impression is in traveling to the countries of the 

negotiating parties, some of which are obviously more democratic 

than others, nevertheless there is strong, broad-based political support in each of those countries. 

Senator BROWN. OK. Thank you for that. I think it is important 

to put this in political context. Under Secretary Szubin, I wanted 

to ask you a question. The long-term goal, obviously, is to keep 

Iran from building a nuclear weapon. For years, the U.S. Government, regardless of Administration, beginning in the Bush administration, Secretary Rice, then the Obama administration, Secretaries Clinton and Kerry, have moved—have woven together this 

consensus with the P5+1 in sort of an unprecedented way when so 

often there are few issues that all of those countries can agree on 

the way they have here. 

You said at the FDD Washington Forum recently, at their conference, you expressed concern that new mandatory non-nuclear 

sanctions legislation would risk undermining our unity with those 

international parties. What did you mean by that? 

Mr. SZUBIN. As you point out, Senator Brown, that consensus 

was hard won, and there were some very difficult patches, to be 

honest. Our sanctions, in particular the sanctions that Congress 

passed, with huge bipartisan majorities, to tough our sanctions on 

Iran, that really did succeed in putting the squeeze to them, their 

banks, their oil exports. Those were not popular overseas, even 

among some of our closest partners. And the fact that we were able 

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ment and to some persistent diplomatic work to come to the table 

and say we have got this leverage, Iran is saying they want to negotiate, let us do so and let us craft a tough deal that holds them 

to their commitments. 

With respect to new sanctions legislation, what I was referring 

to is new sanctions that would restore the sanctions that have 

come off, by which I mean, for example, new sanctions saying Iran 

cannot sell its crude oil or Iran cannot access its foreign reserves. 

Sanctions of that type, obviously, if they are nuclear sanctions, 

would be contrary to the letter and the spirit of the agreement. If 

they were premised on other non-nuclear conduct, the agreement 

is silent on that. But certainly our allies around the world would 

see us taking back major chunks of the sanctions relief as bad 

faith, and I do not think we want to isolate ourselves in that way. 

Senator BROWN. And they made that clear to you? 

Mr. SZUBIN. Yes, and to my colleagues at State. 

Senator BROWN. Thank you. 

Chairman SHELBY. Senator Reed. 

Senator REED. Thank you very much, Mr. Chairman. Thank you, 

Senator Brown. 

You have made it very clear, Mr. Szubin, that the Iranians do 

not have direct or indirect or U-turn access to the American financial system. I presume that the only way they would get such access would be to meet every objection we have to their terrorist behavior, to their missile technology activities, the whole host of legislative provisions and Administration policy that prevents their 

access. Is that fair? 

Mr. SZUBIN. That is correct, Senator, and that is a very effective 

piece of continued leverage that we, the U.S. Government, hold. 

Senator REED. And, indeed, some of the reluctance you described 

of dealing with Iran is the economic culture, the lack of legal clarity, but one is the fact that this denial of access to the American 

financial system concerns some people who otherwise might do 

business with Iran. Is that correct? 

Mr. SZUBIN. Yes, sir. 

Senator REED. So we still have some leverage, in fact, significant 

leverage on how Iran can enter the international financial market, 

correct? 

Mr. SZUBIN. That is correct, Senator. 

Senator REED. And, Mr. Ambassador, there is a rather complex 

resolution system in the JCPOA. Has that been used so far? Have 

we got to a point where we had to call upon the resolution process? 

Mr. MULL. No, Senator, we have not, because the parties to the 

agreement all agree, and affirmed by the IAEA, that on the nuclear 

side Iran is in full compliance with the deal. We have received no 

reports of denied access to attempts to inspect in Iran by IAEA inspectors. 

On the sanctions relief side, it is clear, I think there is no secret, 

that various Iranian officials have complained that sanctions relief 

has not come as quickly as they have expected, but they have not 

charged that there has been a formal violation of the agreement, 

so there has been no conflict to resolve as of yet. 

Senator REED. Very good. For both of you—Mr. Szubin, you can 

start—have we seen Nations like Russia, China, and other counVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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tries attempt to circumvent the issue of connection to the U.S. financial system by setting up sort of specialized boutique institutions, or they are not doing that, they are simply, you know, continuing in their usual manner? 

Mr. SZUBIN. It might useful, although I always hesitate to bring 

up analogies, but it might be useful to bring up the analogy of tax 

avoidance and tax evasion. There are ways to do business internationally that avoid the U.S. financial system. The U.S. financial 

system is still the primary way. It is, as I said, the gold standard, 

but there are ways to do international trade without it, and places 

like China and Russia, as you mentioned, are certainly looking to 

develop more robust alternatives. And, you know, in no small part, 

that might be a reflection of the fact that we have been a leader 

in putting sanctions on Russia due to their very unhelpful activities 

in Crimea, eastern Ukraine. 

But with respect to actions that would circumvent our banks, 

that would violate our sanctions, no, we have not seem them actively doing that on behalf of Iran. 

Senator REED. Thank you very much. 

Mr. Ambassador, any comments? 

Mr. MULL. No, we have not seen any activity like that either at 

the State Department. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Corker, thank you for your indulgence. 

Senator CORKER. No. Thank you, sir. Thanks for having the 

hearing. 

Ambassador, you mentioned the snapback provisions in your 

opening comments, and, of course, for a snapback provision to 

work, you have got to have something to snap back to that is in 

place. And so I assume per your statement you agree with most of 

us here that extending the Iran Sanctions Act before it expires is 

something that would be good for this agreement. 

Mr. MULL. Senator Corker, obviously, the Iran Sanctions Act is 

in place until the end of this year. And, of course, we have—— 

Senator CORKER. We leave here, you know, pretty soon, and we 

are not coming back. And so in order for there to be sanctions to 

snap back to, you would agree we need to get on with our business, 

would you not? 

Mr. MULL. Well, having the ISA in place or not is not necessary 

for snapping back. We have sufficient authority through various 

Executive orders already in place. 

Senator CORKER. But you would not object to it because you realize there has to be a regime to snap back to, and so you would support us doing our job and extending it, would you not? 

Mr. MULL. Well, the Administration is ready to work with the 

Congress on that question. We would have to see what form it 

would take. I know earlier this year there had been—— 

Senator CORKER. Well, you know what form it would take. We 

have already passed it. It expires. And if we extend it, it would be 

in the same form. 

13 

Mr. MULL. Yes, sir, there have been various, slightly different 

variations in how it would be renewed, so we are certainly willing 

to have that conversation with the Senate. 

Senator CORKER. Yeah, but you seem very wishy-washy on this, 

just for what it is worth, as you have been in multiple settings and 

it is very off-putting. Either you support the Iran Sanctions Act 

being extended or you do not. I would like a yes or no, because you 

cannot snap back to something that does not exist after January 

1st. 

Mr. MULL. Well, sir, yes, we can fully snap back to the sanction 

regime that was in place prior to the deal whether or not the ISA 

is in place. We have—I will try not to be wishy-washy. There are 

different forms of renewal of the ISA, some of which might have 

an impact on keeping our commitments under the JCPOA. So the 

Administration is very open to working with the Congress in approaching that question. 

Senator CORKER. Mr. Szubin, at the end of the day, Iran wants 

access to U.S. dollars most. Is that correct? 

Mr. SZUBIN. I would say the dollar and the euro are the two currencies that they want the most. 

Senator CORKER. So I know that we, per the sanctions we have 

in place relative to terrorism and human rights and other kinds of 

things, are precluding U.S. banks from participating, and you have 

discussed thoroughly the fact that U-turn transactions are not 

going to be allowed. But isn’t it a little strange that we are out 

marketing—and we are doing that—to other foreign banks, telling 

them that if they have dollar reserves, that is not going to affect 

their ability to do business with us, and they are more than free 

to do that. It is kind of a weird—it is strange to be so adamant 

about the fact that U.S. banks cannot do it, and yet you are out— 

you are doing this, we know this. I mean, Stuart Levey, who preceded you, has written a great op-ed and has said that HSBC is 

not going to be doing business because of the continued problems 

that Iran poses to the world and the activities they have been involved in. 

But is it not somewhat duplicitous for us to be carrying out our 

diplomacy in the way that we are doing it, where we are encouraging other people around the world to use their dollar reserves to 

make sure that Iran’s economy does come back, but over here 

smugly saying that we, in fact, are not doing that U.S. banks? 

Mr. SZUBIN. Senator, we are not encouraging foreign businesses, 

foreign banks to do this business. We try to steer clear of encouraging banks to take on any business. It is just not our place as the 

Treasury Department to be encouraging that type of work, certainly least of all with a country like Iran where we have active 

sanctions against them here in the U.S. 

What I think is fair and actually is our responsibility is that 

when we get the questions—and we get a barrage of questions 

every week, ‘‘Can I do this without getting into trouble with U.S. 

law? Can I do that?’’—we need to be able to call it right down the 

line. 

Senator CORKER. But it is strange policy, is it not, that we have 

foreign banks that we are clearing to use their dollar reserves to 

do business with Iran and not our own? 

14 

Let me move to another topic because my time is running out. 

If a bill were to pass the House and the Senate that in no way reimposed the nuclear sanctions that were in place but used other 

sanctions to deal with the fact that, let us face it, I mean, Iran is 

not complying with UNSCR, the U.N. Security Council Resolution, 

relative to ballistic missile testing, right? I mean, they are not in 

compliance—would you agree with that?—with the spirit of that. 

Mr. SZUBIN. I would agree. 

Senator CORKER. Well, that is a fact, and nothing has happened. 

And one of the things about this snapback provisions is we know 

they are ineffective because we know that Russia and China will 

do the same thing that they have done relative to ballistic missiles. 

They are not going to allow sanctions to be put in place. 

So if Congress were to pass sanctions—not the same sanctions 

that were utilized for the nuclear deal—on ballistic testing, on 

human rights, on terrorism, and those types of things, it would 

seem as if you all have not precluded that, and you all would not 

stand in the way of us doing that if we felt it was an important 

thing to do. Is that correct? 

Mr. SZUBIN. So, first, I would say the deal was structured in a 

way so that Russia and China, no matter how belligerent they 

want to be, cannot stand in the way of the U.S., even by ourselves, 

even if the Europeans are not with us, ensuring the full snap back 

of U.N. sanctions, and I think that is a very powerful aspect of leverage in terms of keeping Iran to its commitments. 

Senator CORKER. Except that none of them would be involved in 

it. It is not very powerful, but keep going. In other words, we would 

be, but they would not. 

Mr. SZUBIN. But we would have the ability to reinstitute all of 

the U.N. Security Council sanctions. I am not talking about U.S. 

sanctions, which, of course, we retain the ability—— 

Senator CORKER. I know, but they would not participate in that. 

But keep going. We know they are not going to participate in that, 

and that is a ridiculous thought to think that if they do not agree 

with it, they are going to go ahead and put sanctions in place. It 

is very naive and sophomoric. But keep going. 

Mr. SZUBIN. I would dispute the characterization, but let me 

keep going. 

With respect to new sanctions to be put in place, as I mentioned 

in response to an earlier question, I think from Chairman Shelby, 

we would have to look at what are the sanctions affecting. If the 

sanctions are predicated on missile, on terrorism, that is all fair 

grounds. And we have said that consistently. In fact, we have not 

only said that to Congress; we have done that. We have imposed 

sanctions on—— 

Senator CORKER. So we could do that, too. If we wanted to put 

additional sanctions in place that were not the nuclear-related 

sanctions, on human rights, on terrorism, and on ballistic testing, 

you would be OK with that? 

Mr. SZUBIN. What I would say is there is nothing in the JCPOA 

that would preclude that. Now, in terms of the Administration’s 

views, what it would go to is: What are those sanctions doing? If 

the impact of those sanctions is to say no dealings with Iran’s central bank, no purchasing Iran’s crude oil, no purchasing Iran’s peVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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trochemicals—the whole list of things that Congress engineered in 

order to get Iran to the table on the nuclear deal—if we were to 

put all of those back but call them terrorism or missile sanctions 

or human rights sanctions in lieu of calling them nuclear sanctions, 

I am confident that would be viewed as bad faith, not by Iran but 

by—— 

Senator CORKER. But if there were sanctions different than—— 

Mr. SZUBIN. ——our colleagues around the world. 

Senator CORKER. Sanctions different than that are not an issue, 

is what I am hearing. So I thank you for—— 

Mr. SZUBIN. I think there would be a lot of room for discussion 

on sanctions different than that, but that would be the analysis we 

would bring to the question. 

Senator CORKER. Thank you. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Mr. Secretary, first of all, my deepest condolences on the passing 

of your father. Rabbi Szubin was an extraordinary religious and 

community leader in Teaneck, New Jersey, and we all mourn his 

loss. 

And as someone who has been following Iran for a quarter of a 

century in the Congress and obviously did not support the JCPOA, 

I must say that I cannot think of anybody better to be in your position than you. And I think you are critical, your permanent appointment is critical to the national interest and security of the 

United States. And even when we disagree on policy, I have no 

question that you vigorously pursue the law. And so I hope we will 

get to that point. 

Now, that is the easy part. I have a real concern, Ambassador, 

the way you answer the question, so let me put it more succinctly. 

If we take the Iran Sanctions Act as it was passed in law and do 

not change it at all, are you telling me that renewal of the law as 

it exists is in any way a violation of the JCPOA? 

Mr. MULL. Senator Menendez, what I am saying is that the Administration is ready to work with the Senate—— 

Senator MENENDEZ. No, that is not my question. Please, do not 

give me State Department legalese. It is a very simple question. Is 

reauthorization of the Iran Sanctions Act that I and others were 

the architect of, as is, without any changes, reauthorizing it, and 

it expires in 7 months in an election year where we will be here 

very little, is such a reauthorization a violation of the JCPOA? Yes 

or no. It is either a violation or it is not—one of the two. 

Mr. MULL. Sir, we would have to look at that at the time that 

it was submitted for—— 

Senator MENENDEZ. OK. So then that contravenes everything 

that we were told at the Senate Foreign Relations Committee that, 

in fact, the existence of the reauthorization and the reauthorization 

itself is not a violation of the JCPOA. And if you are going to herald that you are going to snap back to something, you have to snap 

back to what Secretary Szubin in his opening remarks admitted, as 

well as the Administration has at different times, that it was the 

sanctions regime that Congress was a significant part of strucVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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turing that helped bring Iran to the negotiating table. It either is 

or it is not. You cannot embrace it in one moment and then throw 

it away in another. 

So we have 7 months before its expiration, and I cannot fathom 

for the life of me how we do not embrace authorizing it as it is so 

that at the end of the day the Iranians know that if in the outyears there is any violation, there is immediate snap back to the 

most significant sanctions that exist. 

Now, Secretary Szubin, let me ask you this: You recognize that 

the sanctions were a driving force at bringing Iran to the table. At 

the same time, those sanctions were never originally embraced by 

the international community. We had to work at it. America had 

to lead. It had to bring people in common cause. And that is normally the case. Is that a fair statement? 

Mr. SZUBIN. It certainly is in this case, Senator. 

Senator MENENDEZ. OK. So now, if U.S. leadership is important—and it is always going to be important. We are never going 

to get the world to automatically say, ‘‘Oh, yes, let us have sanctions.’’ We have had to lead. And if sanctions on non-nuclear issues 

with non-nuclear remedies to those sanctions, meaning not oil, not 

access to their reserves, but other consequential sanctions to individuals and entities for violations of missile technology, in violation 

of U.N. Security Council resolutions for terrorism, for destabilizing 

the region, for human rights were pursued, that is not in violation 

of the JCPOA. 

Mr. SZUBIN. That is right, Senator, and we, I think, need to be 

very clear, not just in our words but in our actions, that we are 

going after those aspects of Iran’s activities. 

Senator MENENDEZ. And here is my concern: So Stuart Levey, 

who was the Under Secretary for Terrorism and Financial Intelligence from 2004 to 2011, is an op-ed piece said, ‘‘On the one hand, 

Washington is continuing to prohibit American banks and companies from doing Iran-related business. In February, FATF reaffirmed its prior concerns about the ‘serious threat’ Iran poses to 

the international financial system, urging countries to apply effective countermeasures. The U.S. Treasury Department’s designation 

of Iran, including its central bank and financial institutions, as a 

primary money-laundering concern also still stands. As part of that 

designation, Treasury determined that ‘the international financial 

system [is] increasingly vulnerable to the risk that otherwise responsible financial institutions will unwittingly participate in 

Iran’s illicit activities.’ ’’ 

And so he goes on to say that Secretary Kerry ‘‘is asking international banks to do what U.S. banks cannot do, even though those 

are admitted risks.’’ 

So it is difficult to understand that—I understand that we have 

met all of our obligations under JCPOA. Is that not correct? 

Mr. SZUBIN. Yes, Senator. 

Senator MENENDEZ. The process and whatever we had to do has 

been met. So if I have met all of my obligations, I do not understand why I have to go above and beyond and to suggest to other 

financial institutions outside of the United States that they should 

take a risk that, in fact, U.S. financial institutions do not. 

17 

And, finally, how is it that with the IRGC being such an incredible part of the very essence of business in Iran, so to speak, that 

we in essence are suggesting that you can have encouraging foreign 

entities to do business with Iranian entities yet threatening sanctions for possibly dealing with the IRGC on the other hand? 

Mr. SZUBIN. There is a lot in those questions, and I will do my 

best to be succinct. 

First, we are not encouraging foreign banks to take on this line 

of business, we are not encouraging foreign businesses to do so, and 

we are not try to minimize in any way all of those concerns outside 

of the nuclear file that you have cited. In fact, we have been calling 

attention to them through public remarks from the State Department and through designations from Treasury against these missile actors, against human rights actors, against those supporting 

Hezbollah. So we are not trying to sweep any of that under the 

table. We know that it is a very complicated risk assessment if a 

foreign bank is looking at Iran and deciding whether or not to go 

in. And we are not trying to pretend that is otherwise. 

What we are doing is being very clear about what the sanctions 

scenario looks like, and so while it may be a very risky proposition, 

dealing with Iran in the sense of allowing their foreign reserves to 

flow, purchasing crude oil from them, purchasing petrochemicals, 

exporting car kits was once sanctionable. Even if it was as foreign 

actor whose business did not touch our shores, you could get in 

trouble with my office for doing that. And that is no longer the case 

after Implementation Day. 

That is what we need to do. We need to just be calling it right 

down the line. And I would pick up on Senator Corker’s comments 

that that is a strange posture to be in where we have got tough 

U.S. sanctions in place but foreign actors are allowed to do the 

business. I concur. It is also the norm when it comes to our sanctions. Our sanctions on al Qaeda, on ISIL, our sanctions on Hamas, 

U.S. companies are held to our standards; foreign companies are 

held to different standards, and typically their sanctions regimes 

are not quite as high. That does not mean we are not working to 

raise them, but that difference and perhaps that awkwardness is 

one that we live with every day at Treasury. 

I am sorry. Now I am forgetting the final piece of your question. 

Senator MENENDEZ. IRGC. 

Mr. SZUBIN. Yes, so the IRGC does have a foothold in a lot of sectors in Iran’s economy, and that is something that we are pushing 

back against. I think right now this moment is actually a moment 

of great potential because we are hearing for the first time not just 

U.S. Government officials saying, ‘‘You have to look at what the 

IRGC is doing. It is a pernicious influence within your economy.’’ 

You are hearing foreign banks, foreign companies, foreign potential 

investors saying to the Iranians, ‘‘I cannot come in. This looks like 

the IRGC is in that sector, and I am not comfortable with that.’’ 

That produces, I believe, very constructive pressure within the 

Iranian system, and believe me, there are those within the Iranian 

system who would like to see the IRGC pushed out, who would like 

to see real economic reform occur. And the fact that we now have 

international voices, commercial voices with money who Iran is tryVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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ing to incentivize saying that same message is very helpful right 

now. 

Chairman SHELBY. Senator Kirk. 

Senator KIRK. Thank you. 

Mr. Szubin, I wanted to take you back to May 12th when Mr. 

Levey published an important op-ed in the Wall Street Journal. As 

he said, the Administration is pressuring foreign banks to do more 

business with Iran. In the op-ed, Mr. Levey explains why HSBC 

and many U.S. banks have absolutely ‘‘no intention of doing . . . 

business involving Iran.’’ 

Mr. SZUBIN. Yes, thank you, Senator. Obviously, Mr. Levey is not 

just a former mentor of mine but a close friend. 

Senator KIRK. He was your boss for 7 years. 

Mr. SZUBIN. That is right, and remains a close friend, and it is 

nice to see his picture up behind you, to have a friendly face up 

there on the dais. 

Mr. Levey is speaking for HSBC, and he has been very clear 

about what HSBC is going to do with Iran and, more importantly, 

what they are not going to do with Iran, and that is their prerogative. It is every bank’s prerogative to decide what they are comfortable doing and what they are not comfortable doing. And it is 

not for us in the U.S. Government to try to substitute our judgment 

for theirs or try to push on their calculus. 

What we do have to do and will continue to do is set out what 

our sanctions guidelines are right down the line. 

Senator KIRK. When you testified, I wrote down your words here: 

‘‘unhelpful,’’ ‘‘not good.’’ You sound like you are an advocate for 

sanctions against Iran. 

Mr. SZUBIN. I am also an implementer of sanctions against Iran. 

Senator KIRK. You keep up with the intelligence, don’t you, as 

Under Secretary for Intelligence and Terrorism? Could you please 

tell me what the Iranians reported to have written on the side of 

the Shahab-3 missile that they just launched? Do you even know 

what they said? 

Mr. SZUBIN. Yes, Senator, and here I want to be clear: I am not 

referencing intelligence but, rather, open press reports appropriate 

for this setting, which said that they wrote, I believe, ‘‘Death to 

Israel.’’ That is not the exact quote, but something to that effect on 

the side of the missile. 

Senator KIRK. They wanted to say to wipe Israel off the face of 

the Earth. For such a distinguished religious scholar such as your 

dad, what would he have thought about that sentiment? 

Mr. SZUBIN. He would have been appalled but not surprised. 

That, sadly, lamentably, is not a new statement coming out of Iran. 

And it is one that we have heard from previous Iranian administrations. It is the reason why we were all so concerned that their nuclear program was proceeding unchecked and they were bringing 

more and more centrifuges online. 

When I came to Treasury in 2005–06, I frankly did not think we 

had a more serious, more pressing National security threat than 

Iran’s advancing, unchecked nuclear program because of, in part, 

the attitudes that you are describing. 

Senator KIRK. Let me go to another subject. We understand from 

various sources that the Iranians have now executed over 1,000 

19 

just for being gay. What is your comment on that record of human 

rights? 

Mr. SZUBIN. Iran has a deplorable record of human rights, and 

it is not just with respect to gay people. They have been persecuting religious minorities—— 

Senator KIRK. So you would agree they have killed about 1,000 

people just for being gay. 

Mr. SZUBIN. I do not know the statistics on that, but the record 

is pretty clear with respect to their abuse of human rights within 

Iran. It is against political dissidents. It is against religious minorities, against their gay population. And Iran needs to be held accountable for that. It is something that the State Department has 

been very vocal about, not just in their public reports but in private 

meetings with Iran. I do want to note the very important success 

that my State Department colleagues had in bringing back a series 

of American detainees who had been held in Iran for a very long 

time and getting them back here to their families. And I think we 

are all very grateful for the hard work that—— 

Senator KIRK. I might point out that ransom tends to work in 

bad situations and incur more kidnappings. 

Mr. SZUBIN. Well, there was no ransom paid. There were—— 

Senator KIRK. I would beg to differ. 

Mr. SZUBIN. There was a prisoner exchange with respect to Iran, 

and I was very glad to see that carried out and to see those Americans come back home. 

Senator KIRK. A hundred billion bucks a guy is a high ransom 

payment. We would pretty much run out of money quickly if we 

were paying ransom rates at that rate. 

Mr. SZUBIN. So the $100 billion I believe you are referencing is 

a figure that states Iran’s total foreign reserves. That is not money 

we gave them. That is Iran’s total foreign reserves. In reality, 

about $50 billion of that is gone. It has been committed to bad 

loans or to propping up their banks. Iran does not have access 

to—— 

Senator KIRK. I am glad you mentioned bad loans because I 

wanted to go in how you do not speak for us here in the Senate, 

that we have views about what good practices should be. I would 

say on this Committee I will be encouraging our members to further define the subject of what a good fiduciary does, and investing 

in Iran is not that. And if you are seeking to do more and more 

business, we will see you as more of a systemic risk here in this 

Committee. 

Mr. SZUBIN. We certainly hear you loud and clear, Senator, and 

agree—— 

Senator KIRK. Because of killing of gay people left and right, you 

are kind of an unstable personality. 

Mr. SZUBIN. Yeah, so we will ensure that we enforce our sanctions, that American companies are not investing in Iran, and that 

we keep this embargo in place, as the Senator was saying, until we 

see Iran complying with a whole host of concerns that the U.S. 

Government and our Congress maintain. 

Senator KIRK. Thank you. 

Chairman SHELBY. Thank you, Senator. 

Senator Tester. 

20 

Senator TESTER. Thank you, Mr. Chairman, and I want to echo 

what so many on this panel have said and that I believe you, Mr. 

Szubin, need to be confirmed if we are going to talk about really 

bearing down on terrorism. You do play a critical role in that and 

the many other trafficking things that happen out of Iran. So I do 

not get it, quite frankly, why you still are in limbo, but you are still 

in limbo, and I think it is an incredible disservice to a person of 

your talent and your ability, and I apologize for that, and hopefully 

we can get you across the finish line sooner rather than later. I 

want to thank you both for your service. You both do not have to 

answer these questions, but if you disagree with one another, let 

me know. 

Mr. Levey had said, as was said earlier, that we are encouraging 

other banks to do what we cannot do in Iran. Is that correct? 

Mr. SZUBIN. No, Senator. 

Senator TESTER. OK. Is the Administration in any way, Kerry or 

otherwise, encouraging other banks to do business in Iran? 

Mr. MULL. No, sir. We are explaining U.S. sanctions law. 

Senator TESTER. Is Kerry lobbying banks, not our banks—or our 

banks, any bank, to do business in Iran? 

Mr. MULL. No, sir. 

Senator TESTER. OK. This is the damnedest hearing I have ever 

been at in my life, quite frankly, because I have heard accusations 

being made right and left, and you guys have refuted them. Now, 

it is one of two things. Either the information is not good, or you 

guys are not telling the truth. I am assuming the information is 

not good, because I appreciate what you are doing. 

I want to ask you something, Mr. Mull. The snapback provisions 

that were talked about by my friend Bob Corker and my friend Bob 

Menendez, is it your intention to snap those previous sanctions 

back in total if Iran violates this agreement? 

Mr. MULL. Sir, I think if Iran violated the agreement, we would 

first apply a very careful and quick analysis to how severe the violation is. The gold standard that we apply in making decisions is 

the concept of breakout time: How long would it take Iran to 

produce a nuclear weapon? If Iran inadvertently exceeds a limit, as 

briefly happened in the heavy-water account earlier this year—— 

Senator TESTER. Yes. 

Mr. MULL. Then we talked to them. They brought it under. They 

came quickly back into compliance. 

If, however, Iran took steps to violate the core requirements of 

the agreement that affected its ability to rapidly build a nuclear 

weapon, I can assure you we would move very swiftly to reimpose 

the appropriate degree of sanctions that had existed before. 

Senator TESTER. OK. Can you tell me, there was a statement 

made earlier by one of the Senators that we have allowed Iran to 

maintain a significant part of their nuclear infrastructure. Could 

you shed some light on that, either one of you? 

Mr. MULL. I will be happy to take that question, Senator. In fact, 

Iran has significantly reduced and constrained its nuclear program 

by removing more than 12,000 centrifuges and dismantling them 

and putting them into permanent storage as well as removing 

25,000 pounds of enriched nuclear material that could have been 

used to build a bomb. 

21 

There are some elements of an enrichment program that are allowed to exist under the deal, under very tight control. Its entire 

nuclear program is under 24/7 monitoring by the IAEA through inspections, cameras, and other monitoring capabilities, unlike any 

other in the world. 

Senator TESTER. OK. There was some discussion here on the 

snapback provisions that Russia and China would not be a part of 

them. Mr. Szubin, I think you agreed with that, And, regardless, 

that does not mean we could not bring those sanctions back on. Is 

that correct? 

Mr. SZUBIN. Yes, Senator, my point was, first, on the procedural 

aspect that the deal is set up in a way that any one country—obviously, we would try to build a coalition of countries—— 

Senator TESTER. Sure. 

Mr. SZUBIN. ——including, ideally, all the P5+1 were Iran in 

breach to say we need to snapback sanctions. But in the absence 

of that, any one country, if it finds Iran to be breaching its commitments, can ensure the full snap back of the U.N. Security Council 

sanctions. 

Senator TESTER. I have got it. So if we could take a step back, 

it seems to me that same argument could be used, could have been 

used when this was in front of us, when we had the P5+1 who all 

thought this agreement should go forward. If we would have said 

no, do you think those other countries would have gone forward regardless? 

Mr. SZUBIN. It would have been, from a sanctions perspective, 

impossible to go forward with this deal without the U.S. 

Senator TESTER. Right. 

Mr. SZUBIN. Because the U.S. obviously as a member of the Security Council needs to approve changes to any Iran resolutions in 

the United Nations, and any changes to our own sanctions obviously require us as well. 

Senator TESTER. OK. Thank you very much, Mr. Chairman. 

Chairman SHELBY. Senator Cotton. 

Senator COTTON. I want to return first to an exchange that Senator Kirk had. We did not have a prisoner exchange. We released 

duly convicted prisoners in our courts of law, and we waived warrants that were outstanding. They released hostages. I agree with 

Senator Kirk that the money that was associated with those payments was ransom, but we do not have to get into semantics. 

I would like to know this: That $1.7 billion that was released in 

close proximity to Iran’s release of our hostages, how did we pay 

that? With dollars? 

Mr. SZUBIN. I do not believe that dollars were used in those payments. 

Senator COTTON. Does the Treasury Department just have billions of Iranian rials sitting around the basement? 

Mr. SZUBIN. No, but Iran has accounts in Europe and in other 

third countries, and we can certainly make currency available in 

other denominations. 

Senator COTTON. And what was that? What currency was it? 

Mr. SZUBIN. I would need to go back and check on that, but I 

would be happy to get you those answers afterwards. 

22 

Senator COTTON. I would like that for the record, please. I would also like for the record the currency in which we will pay $8.6 million for Iran’s heavy water, the purchase of which was announced 

recently. 

Ambassador Mull, are we obligated under the JCPOA to buy 

Iran’s heavy water? 

Mr. MULL. No, sir. 

Senator COTTON. If we had declined to purchase that heavy 

water, do you believe that would be a legitimate reason for Iran to 

withdraw from their obligations under the JCPOA? 

Mr. MULL. No, sir. Iran was compelled under the terms of the 

deal to stay below the cap of 130 metric tons of heavy water. They 

had the responsibility to dispose of that excess heavy water by offering it for sale and delivering it to a foreign buyer. 

Senator COTTON. Secretary Moniz stated that purchase was 

going to be a one-time purchase, so I offered an amendment that 

would merely codify that commitment. Yet the President issued a 

veto threat of the amendment. Is the Energy Department planning 

on making further purchases of Iran’s heavy water? 

Mr. MULL. Secretary Moniz has explained to me that, no, he does 

not—the Energy Department does not plan any future purchases at 

this time. However, heavy water is something very important to 

our scientific and medical research community. The market supply 

is unpredictable, and so the Administration is reluctant to foreclose 

the possibility of buying heavy water where we are able to. 

Senator COTTON. Which is why we frequently buy it from allies 

like Canada and India. 

Moving on, I want to return to questions that Senator Corker 

and Senator Menendez had and just get a clear answer. Will the 

Administration commit to a pure extension of the Iran Sanctions 

Action, yes or no? 

Mr. MULL. Senator, all I can say is that the Administration is 

ready to work with the Congress in studying that question. 

Senator COTTON. You also would not commit to Senator Menendez that such an extension, not a substantive change, just striking 

the date and extending the current terms, might be a violation of 

the JCPOA. 

Mr. MULL. No, I did not say yes or no that it would—— 

Senator COTTON. To use Senator Corker’s language, you were 

wishy-washy in replying to Senator Menendez. 

Mr. MULL. Well, there have been—— 

Senator COTTON. Let me put it this way: Does the Iran Sanctions 

Act currently violate the JCPOA? 

Mr. MULL. Well, the JCPOA came into effect with the Iran Sanctions Act still in place. 

Senator COTTON. I find it hard to believe that a simple extension 

of it, changing nothing but the date, would, therefore, be a violation. 

Has the State Department designated any Iranians as human 

rights violators since the JCPOA was finalized? 

Mr. MULL. Since the JCPOA was finalized last July, there have 

not been—although there has been a history of multiple sanctions 

on human rights grounds, especially since the passage of the 

CISADA Act in 2010, there have not been any sanctions imposed 

23 

for human rights grounds since July of last year. However, the 

State Department continues to fight very hard to shine a spotlight 

on human rights violations in Iran through the United Nations, the 

Human Rights Committee, also through our regular reporting on 

the International Religious Freedom Report, the Human Rights Report, Trafficking Persons Report. 

Senator COTTON. So I understand all that, but I will infer that 

Iran’s human rights record has miraculously changed in the last 

year then. 

Mr. MULL. No, sir. 

Senator COTTON. Mr. Szubin, I want to move to the question 

which is in some controversy here but also in public debate: the 

total value of sanctions relief that Iran will receive. For the record, 

I know the answer from private briefings on my other committees. 

I would like to know from you, though, in public here, what is the 

total value of sanctions relief Iran will receive from the JCPOA? 

Just top line. I do not need to know how much debt they have or 

bad contracts or anything else. What is the amount of sanctions relief they will receive? 

Mr. SZUBIN. Senator, our top-line figure in terms of their new access to reserves is around $50 billion. That is—— 

Senator COTTON. $50 billion, 5–0? 

Mr. SZUBIN. Yes, Senator, that is what I have testified here before this Committee and what we have said publicly. Your question, though, is asking a bigger question, which is: How much relief 

will Iran get, not how much of their foreign reserves are coming 

out from under escrow? Relief obviously takes the form of new oil 

sales. Iran is selling more oil than they were when they were under 

those sanctions restrictions that Congress put in place. Iran is selling more petrochemicals. Iran is able to import autokits to try to 

get its auto industry back online. 

Senator COTTON. So $50 billion, though, that is the gross sanctions relief that they might receive? Not net. Not net of any bad 

contracts or debt they have to other countries. The gross sanctions 

relief they will receive. 

Mr. SZUBIN. No, sir—— 

Senator COTTON. President Obama suggested in an interview 

with Jeffrey Goldberg in The Atlantic last month that it might be as high as $150 billion, 1-5-0. 

Mr. SZUBIN. Senator, I want to be very precise. I am happy to 

answer as many questions as you have on this. But I think it is 

important to be specific about our terms. Fifty billion is not new 

money that we or the P5+1 are giving Iran. That is Iran’s own foreign reserves that were bottled up in escrow accounts under the 

sanctions. As of Implementation Day, those restrictions came off. 

Iran has access to those today. 

That is not the total value of the deal to Iran. Iran is also looking 

to the deal to provide new trade, new investment. It has been 

slow—— 

Senator COTTON. No, I get that. Barack Obama has brought 6- 

percent economic growth to Iran even though he has only brought 

2 percent to the United States. I am talking about the gross value 

of sanctions relief. CIA Deputy Director David Cohen last year, 

when he was still at the Treasury Department, testified that $100 

24 

billion in Iranian foreign currency reserves were blocked by sanctions before the JCPOA. 

Mr. SZUBIN. That is correct. 

Senator COTTON. Is that an accurate figure? 

Mr. SZUBIN. Yes. 

Senator COTTON. So now they are no longer blocked. 

Mr. SZUBIN. That is right. Those restrictions on Iran’s foreign reserves have been released, which means Iran can now access its 

foreign reserves. The total amount of those reserves that are accessible is $50 billion at most, and that is our conservative estimate, 

but that continues to be our estimate. 

Senator COTTON. Mr. Mull, you look like you would like to respond. 

Mr. MULL. No. I completely agree with my—— 

Senator COTTON. OK. Well, for the record, I would like to say 

that this Administration continues a longstanding pattern of misleading the American people in public settings and telling the Congress the truth in private settings. 

Chairman SHELBY. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. And once again I 

will go on the record saying that I sleep easier knowing, Mr. 

Szubin, that you are on the job. I greatly appreciate that you take 

your enormous talents and incredible ability to serve our country 

in a role that is so incredibly critical to our security. I think it is 

hard sometimes when we are home to explain how a position at the 

Department of Treasury could be so critical to our national security 

interests. And I also stand appalled, quite honestly, that your confirmation is pending. Yesterday, I do not know if you had an opportunity to see the testimony of—or the questioning of my friend Joe 

Donnelly who questioned a number of people very critical of the 

Iranian deal basically all saying what high regard they had for you. 

And since your father was mentioned earlier, I want to express our 

regrets at his passing in March. He was quite an enormous figure 

in his community and, I know, a great inspiration to you. And anyone who questions your patriotism on this issue, shame on them. 

I know where your heart is. We have spent a lot of time. 

But I want to get to the questions. Ambassador Mull, in the last 

7 months since the deal was reached and the 4 months since the 

IAEA verified that Iran had met their commitments required to 

trigger implementation of the deal, how would you assess Iran’s 

level of follow-through on its commitments? Are there any areas 

that you believe Iran has not been forthcoming? And the great concern that we expressed during our trip to the IAEA was that we 

do not want erosion of this deal, and it is the steady—you know, 

kind of like when somebody is a little kid and they just take an 

inch, take an inch, and take an inch and pretty soon have a mile? 

We do not want them taking an inch. And so we need to know from 

you what you are doing. Have you seen any incremental creep in 

terms of noncompliance and what currently is being done? And 

what is the appetite at the International Agency to make sure we 

do not see that creep? 

Mr. MULL. Yes, ma’am, thank you. That is an excellent question. 

I have to tell you, when Secretary Kerry asked me to take this job 

last summer, he was very clear that we must have zero flexibility 

25 

in interpreting the very strict and very specific requirements of this 

159-page deal, and we take that operating instruction to heart 

every single day that my team and I show up for work. 

I can tell you—and the IAEA has confirmed this in its reporting 

since Implementation Day—that, in the main, Iran is compliant 

with the requirements. It undertook all of the measures it committed to do during the negotiations of this deal. 

Senator HEITKAMP. And it is your testimony today that there has 

been no, even, as you would see it, immaterial breach of this agreement? 

Mr. MULL. So what I would say, Senator, is that there have been 

a handful of occasions since this deal was agreed to last July in 

which Iranian activities raised some questions about Iran’s intent 

in undertaking those activities. For example, the IAEA documented 

in February that for a very short time since Implementation Day, 

Iran slightly exceeded the cap on the amount of heavy water it is 

allowed to have. The monitoring system worked perfectly. The 

IAEA immediately alerted all of the agreement parties that this 

had happened. We engaged with Iran. Iran responded, saying, 

‘‘Yes, we will bring it under immediately,’’ and within a matter of 

days, shipped out 20 tons of the material to bring it under compliance again. 

As I mentioned, there have been a few other—a handful of other 

instances like that. We have briefed the Senate privately, in closed 

session, every time that those have happened. Every single time, 

Iran has responded to those conversations to bring itself in compliance according to our understanding. 

Senator HEITKAMP. OK. Mr. Szubin, I think that there is a narrative that is being written sometimes—and it depends on who you 

are—up here that we no longer are interested in any sanctions 

against Iran because we do not want to upset the internal political 

structure of that country resulting in maybe a less friendly or more 

conservative election. Can you respond to that? Because I think a 

lot of what we are talking about here is human rights violations, 

obviously antiballistic missile. You know, how are we going to 

maintain a sanction regime on those things that go outside or have 

never been part of this deal? And is there an attitude within the 

Administration that we are not going to sanction based on concern 

about internal politics in Iran? 

Mr. SZUBIN. Not at all, Senator. The guidance I have been given 

from Secretary Lew and from the Administration is to keep at it 

when it comes to Iran’s non-nuclear behavior. And if that were not 

the case, you would not have seen us coming out with designations, 

new asset freezes, new sanctions, even since this agreement was 

entered, even since Implementation Day in January. 

Since the beginning of January, we have gone after ballistic missile procurement rings. We have gone after the liquid fuel and propellant industry within Iran and those who are procuring on their 

behalf. We have gone after Hezbollah money launderers, who are, 

after all, an Iranian proxy. And we have gone after Mahan Airlines 

and their procurement agents. That is an Iranian airline that is 

being used by the IRGC Qods Force to ferry munitions and military 

advisers to places like Syria and Yemen. We would not be doing 

26 

any of that if we were trying to take a soft-glove or a hands-off approach with respect to Iran. 

Finally, I just wanted to thank you, Senator Heitkamp, and Senator Menendez for the very kind words about my father. I deeply 

appreciate them. 

Senator HEITKAMP. Thank you. 

Chairman SHELBY. Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman. 

Mr. Szubin, I am not sure that there is a better placed individual 

in the executive branch than you to speak authoritatively on sanctions relief, and I would like to just address two items because I 

really would like to see if we cannot get to a factual agreement on 

what has happened so far. I want to just begin. I understand—and 

we have asked the Secretary about the Iran sanctions which will 

expire in December, and I understand that you have been involved 

in explaining to individuals who ask questions about what is in violation and what is not in violation of the JCPOA. And part of that, 

I would imagine, is under the sanctions which are currently in effect that will expire in December. And I am just curious. I think 

Senator Menendez was on the right track when he was not asking 

whether or not the Administration would consider it but, rather, if 

it would be in violation of the JCPOA. And I would like to give you 

the opportunity as well to respond in your role and interpretation 

of these. If we were to extend the Iran sanctions in December, 

would that be in violation of the JCPOA? You are probably the best 

person out there that has looked at this. 

Mr. SZUBIN. Well, I appreciate the confidence, Senator. I think 

with respect to what the international agreement says, I would 

defer to the State Department. But what I can tell you from a sanctions implementation perspective is that when we are out there explaining to foreign Governments, foreign banks, not just what the 

sanctions landscape looks like through the end of this year, 

through the end of December, but what the sanctions landscape 

will look like going into 2017, 2018, and beyond. We presume that 

those authorities will be there to be put back in place. In other 

words, that the sanctions that have been lifted or relieved as part 

of the JCPOA, when we talk about snap back, we talk about snapping all of them back. And that does not mean snapping a portion 

of them back. 

Senator ROUNDS. So your understanding is you explain it to 

other entities that are asking specific questions so they stay in 

good graces with our Government and with the Treasury Department, you basically explain to them, based upon having these sanctions in place? 

Mr. SZUBIN. Yes. 

Senator ROUNDS. Thank you. Let me ask another question then 

as well, and that is, we are talking a little bit, and you have tried 

to be specific, but I think there are still some misunderstanding 

with regard to the assets that Iran has access to. I will try to put 

this in a way so that you can answer in a public setting based upon 

publicly available information. 

First of all, does the Administration count committed assets to 

the sanctions relief total? We have got some assets which are comVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
27 

mitted. They are held. All right. But also those have been—they 

are perhaps—another word would be ‘‘pledged’’ assets? 

Mr. SZUBIN. Exactly. 

Senator ROUNDS. All right. 

Mr. SZUBIN. So we would count those as among the 100 billion 

that exist no paper, but those are not accessible, in the same way 

that my house, which is under a heavy mortgage, is not accessible 

to me. If I wanted to sell that on the open market, I could not. It 

belongs to the bank. 

Senator ROUNDS. I think part of where the question comes in is 

that if you tell someone that you have restricted their ability to 

that asset now—and by that I mean the asset may be a business, 

and it is mortgaged, and you say we are going to release our hold 

on it, even if someone else also has a hold on it, you have now 

made it more liquid than what it was before. Is that a fair statement? 

Mr. SZUBIN. I do not know that I would agree with that. In other 

words, if you are talking—and we can be very specific even in this 

setting. If you are talking about collateral that Iran has put down 

in a third country to basically serve as the collateral for extensions 

of credit or foreign trade from that country, that is not liquid. Iran 

cannot get it back. 

Now, the fact that there might have once been two restrictions 

on that and there is only one now, I do not view it as liquid. We 

do not view those as accessible. 

Senator ROUNDS. But our relief for them of sanctions on assets 

they had are $100 billion or more? 

Mr. SZUBIN. The total Iranian foreign reserves, if you are talking 

from the books perspective, was $100 billion. 

Senator ROUNDS. OK. 

Mr. SZUBIN. The amount of that that is accessible now after Implementation Day—— 

Senator ROUNDS. Is $50 billion. 

Mr. SZUBIN. ——we put at $50 billion. And I also want to add, 

because Senator Cotton raised sort of a reference to the fact that 

he might be hearing something different in a closed-room setting, 

in a classified setting—I obviously cannot talk about intelligence 

today, but I can tell you that that figure is the same, whether we 

are briefing in a SCIF or whether we are briefing in this setting. 

So I do not know what Senator Cotton was referring to. Obviously, 

he has left, and I am sorry for that, but we would be happy to talk 

with you, Senator, or with any others on this Committee. 

Senator ROUNDS. There is a discrepancy there because I have attended the same meetings, and I have heard different numbers as 

well. 

Mr. SZUBIN. OK. Then I would be very eager to follow up with 

you there. 

Senator ROUNDS. OK. Now, if I could, and I recognize that my 

time has expired, but I am just curious if these—no, I will—thank 

you, Mr. Chairman. I appreciate it. My time has expired. 

Chairman SHELBY. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

28 

I want to say, Mr. Szubin, I am very sorry to hear about your 

father. I know this is a difficult time for you and your family. I appreciate your being here with us. 

Last July, the United States and its applies reached an agreement with Iran to roll back its nuclear program in exchange for relief from some economic sanctions, and skeptics of the deal at the 

time predicted that it would yield a giant payday for Iran. But a 

recent report by former Treasury officials and other sanctions experts concluded that, and I am going to quote here, ‘‘Contrary to 

myriad public claims, the implementation of the Joint Comprehensive Plan of Action did not lead to a $100 to $150 billion immediate 

windfall for the Iranian regime and a rapid groundswell of new investment revenue.’’ 

So, Under Secretary Szubin, I just want to highlight this point. 

How much relief has Iran actually received from previously frozen 

assets so far under the nuclear deal? 

Mr. SZUBIN. There is about $50 billion in previously escrowed assets that Iran now has full legal access to as a result of coming into 

compliance with their nuclear commitment. 

Senator WARREN. OK. So they have $50 billion that they will 

have legal access to. Have they accessed all of that yet? 

Mr. SZUBIN. So that is a trickier question to answer because it 

is not Iran’s goal to move all those 50 to someplace new. 

Senator WARREN. Fair enough. But we are looking at 50. That 

is all I needed. 

Mr. SZUBIN. Yes, we are looking at—— 

Senator WARREN. We are looking at 50. That is kind of the top 

number there. And how does that number compare to Iran’s domestic economic needs. 

Mr. SZUBIN. It is dwarfed by those economic needs. We have testified in the past and we continue to assess that Iran is facing 

about $500 billion in economic needs just to bring their economy 

back to ground level. 

Senator WARREN. So at least ten times the amount that they received in the frozen—— 

Mr. SZUBIN. Yes. Yes, Senator. 

Senator WARREN. From the previously frozen assets. 

Mr. SZUBIN. Including things like unpaid pensions and raided 

funds that Iran needs to now reconstitute. 

Senator WARREN. OK. So it seems like it is a very small amount 

in comparison to their full economic needs. 

Mr. SZUBIN. I would agree with that characterization. 

Senator WARREN. OK. Iranian officials are complaining about 

what they see as the slow pace of sanctions relief and the lack of 

additional foreign investment that they expected as a result of the 

nuclear deal. But Iran faces barriers to foreign investment that go 

well beyond the complexities of longstanding nuclear-related sanctions that were recently lifted. Iran has a long history of money 

laundering, terrorist financing, corruption, all of which deter foreign investment and contribute to Iran’s bad reputation globally. 

So, Under Secretary Szubin, instead of blaming the United 

States for its failure to emerge from economic isolation, what steps 

should Iran be taking if it wants to become a responsible member 

of the international financial and commercial system? 

29 

Mr. SZUBIN. Well, that is a critically important question, and the 

answer it calls for is quite a long one because, as you note, there 

are concerns about Iran’s behavior across a whole range of conduct. 

Obviously, being designated by the international standard-setting 

body on money laundering and corruption, the FATF, as on their 

black list is not a good place to be if you are trying to attract investment, if you are trying to attract trade. 

To the credit of President Rouhani in Iran, I think they are finally internalizing the fact that if they do not start addressing 

these areas, they are not going to see the foreign business come in; 

they are not going to see the investment pour in. And so we do see 

Iran probably for the first time grappling with some of these issues. 

Senator WARREN. So Iran may comply with the nuclear deal and 

get the sanctions lifted, but if they fail to grapple with their other 

problems, with terrorist financing, with the lack of transparency in 

their economy, then you are saying they really are not going to be 

able to rejoin the Nation’s economic system and not be able to build 

much of a future for themselves. 

Mr. SZUBIN. There is a lot of truth to that, Senator. I do try to 

resist sort of the black or white—— 

Senator WARREN. Fair enough. 

Mr. SZUBIN. ——analysis here because I think the reality is 

somewhere in between. And we are accused in some corners of having generated a windfall for Iran. That is not the case. We are accused by the Iranians of having provided zero sanctions relief and, 

therefore, reneging on our commitments. That is not the case. 

First of all, we have fulfilled every one of our commitments. With 

respect to the business climate, it is complicated, and there are a 

lot of factors that are causing banks and institutions to pause. As 

I said, there is some progress that we see from Iran, but there is 

a long way for them to go. And I think your bottom-line conclusion 

that it is going to take some time is accurate. I think Iran has a 

lot of work to do. 

Senator WARREN. Well, I think it is very important to know, as 

Congress goes from, because, you know, it is no secret that there 

are some people in Congress who are committed to seeing the Iran 

nuclear arrangement fail at any price, and we are hearing a lot of 

rumbling about holding up sanctions relief even if Iran complies 

with the deal, which may be good politics for some Senators, but 

it seems to me that it plays directly into the hands of the 

hardliners in Iran who want to blame the West for their economic 

woes. 

As you rightly point out, Iran must implement serious structural 

reforms, crack down on money laundering, stop sponsoring terrorism, if it wants to attract sustained investment. But the best 

way to change Iran’s behavior is to keep the pressure on. The worst 

is to try to score political points in a way that gives the Iranians 

an excuse not to make the changes that they need to make. 

It seems to me that our job is to make sure that if Iran rejects 

comprehensive reforms, then it has no one to blame for its economic problem except itself. Thank you. 

Thank you, Mr. Chairman. 

Mr. SZUBIN. I agree, Senator. 

Chairman SHELBY. Senator Vitter. 

30 

Senator VITTER. Thank you, Mr. Chair. Thank you both for being 

here. 

As you know, a bipartisan majority of this Committee and of the 

Senate opposed the Iran deal, thought it was a bad deal. But I 

think what you are hearing today is an additional major concern 

that I share. Since the deal, a lot of us are seeing two things: Iran 

taking horrible, negative, bad actions against us, against our allies, 

since then, in many areas, terrorism, human rights, ballistic missiles, on the one hand; on the other hand, we have helped them beyond our obligations under the deal. And that, in addition to the 

deal, is very concerning to a lot of us, what Senator Toomey talked 

about, what Senator Cotton talked about. Is that characterization 

not correct? 

Mr. SZUBIN. Senator, I certainly agree that we have seen Iran 

come into compliance with their commitments under the deal. 

What I would say from our end is we have done the same. I do not 

see us encouraging foreign companies, foreign banks to do business. 

That is not something we do in any context, least of all in this one. 

Senator VITTER. What about the heavy water transaction? You 

all have testified that was not an obligation of ours under the deal, 

correct? 

Mr. MULL. Yes, sir, that is right. It was not part of the deal. 

Senator VITTER. So what did we get for that? They clearly wanted it. They wanted that outlet. They wanted those dollars. What 

did we get out of it? 

Mr. MULL. We got out of it a supply of heavy water that is very 

important to scientific and commercial research. 

Senator VITTER. For which we have had multiple other avenues 

from allies, correct? 

Mr. MULL. Not exactly true. For example, the principal producers, we do not have an heavy water production capabilities, our 

own in the United States. The principal—— 

Senator VITTER. Mr. Mull, you are not really suggesting that we 

did that deal because we needed the heavy water and we could not 

get it elsewhere. You are not really suggesting that. 

Mr. MULL. Yes, sir, for example, there are only two countries 

that regularly export heavy water: Canada and India. Canada 

ceased production of heavy water in 1997 and only sporadically 

makes it available. The quality of the Indian water, the other 

source of supply, does not completely fit with our domestic requirements here in the United States. So in the marketplace, Iran was 

obligated to reduce its holding of heavy water, and—— 

Senator VITTER. Let me just move on and say that the response 

that we did it because we needed that supply of heavy water, I do 

not think anyone believes that. It was helpful to Iran. It was helpful as an outlet. It was helpful for their dollars. This notion that 

Secretary Kerry is meeting with these foreign banks for informational purposes, when calls come into the State Department about 

what different treaty obligations are and what they mean, are all 

those calls put through to John Kerry’s desk? Does he field all 

those calls? Does he do all those meetings? Surely the Secretary of 

State did not have to hold those meetings. 

Mr. MULL. Certainly not, and the Secretary of State is not the 

only person doing that. However, when foreign ministers of close 

31 

allies of the United States make personal requests to Secretary 

Kerry to explain U.S. law, he feels it is part of being a good ally 

to be responsive to those requests. 

Senator VITTER. Well, I think it is clear that the tone and tenor 

of those meetings was to explain clearly exactly how those foreign 

institutions could deal with Iran. A similar situation with State 

sanctions. A lot of States have sanctions against Iran. Those can 

continue if they are based and premised on terrorist and other activities non-nuclear related. Is that correct? 

Mr. MULL. Yes, sir. The same is true at the Federal level as well. 

Senator VITTER. Correct. And yet the Federal Government has 

sent out on a letter to States, and the way I read it is lobbying 

States to lift those sanctions. 

Mr. MULL. Senator, I, in fact, signed that letter because the U.S. 

Government committed to all of its partners in this deal that we 

would explain the impact of the Iran nuclear deal to all of our 

State and relevant local authorities. So the purpose of that letter 

was to explain what the deal was about, what the deal had accomplished, and asking—offering this information to those authorities 

that made sanctions decisions on the basis of nuclear concerns 

about Iran, to offer this information for their consideration in deciding whether or not to move forward. 

Senator VITTER. Well, let me ask this: Is our Government, are 

you or any person in our Government, going to do anything beyond 

the letter in terms of acting against State sanctions? 

Mr. MULL. There are certain constitutional questions at play 

there. I certainly have no plans to do that. Each State and local 

authority has its own—— 

Senator VITTER. So the Administration has no plans to go beyond 

that letter? 

Mr. MULL. I am not aware of any at this time, no. 

Senator VITTER. Another example is further restrictions we 

passed on visa waivers related to terrorist concerns. Iran balked at 

that, and Secretary Kerry’s immediate response was to write them 

and explain that he will make sure they get the waivers they need 

and want under other categories. Was that an obligation under the 

deal? 

Mr. MULL. No, certainly not, and there were questions about the 

impact of that legislation. Again, when we get questions from foreign partners, we try to answer the mail. 

Senator VITTER. Well, again—and my time is up—just to summarize, the picture a lot of us see, a majority of us see since the deal 

that we disagreed with was Iran taking negative actions, horrible 

actions in some cases against us and our allies, particularly in the 

categories of terrorism, human rights, ballistic missiles, and us 

bending over backwards in a positive way toward them beyond the 

obligations even of the deal we disagreed with. 

Thank you. 

Chairman SHELBY. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. 

Mr. Szubin, sorry to hear about your father’s passing as well. 

Many of my friends in the community held him in high regard. 

32 

A specific question on the ballistic missile testing that occurred 

on November 21st, March 8th, and May 9th. Weren’t those in violation of the JCPOA? 

Mr. MULL. No, sir. Missile launches are not governed by the 

JCPOA. They are not addressed at all by the JCPOA. They are 

governed by a U.N. Security Council resolution. 

Senator SCOTT. So those ballistic missile testings were not in violations of the JCPOA. 

Mr. MULL. No. No, sir. 

Senator SCOTT. Thank you. 

Mr. Szubin, one of the concerns I have is when I listen to Susan 

Rice and NSA talk about what would happen with the access to the 

$50 billion, her comments on Wolf Blitzer, CNN, was that we 

should expect more nefarious behavior to be funded through the resources that will be—have access to from the Iranians. Looking 

back over the history, certainly the CRS has said that between 

$100 and $200 million of funds goes to Hezbollah to fund terrorist 

activities from Iran. In my State of South Carolina, there are— 

back in 1983, the Beirut bombing, generally believed to have been 

perpetrated by Hezbollah, took the lives of five South Carolinians 

who were faithfully serving their country at the time, and I will 

read the names of those five South Carolinians: Hospital Corpsman 

First Class Ronny Bates, Sergeant Freddie Haltiwanger, Staff Sergeant Richard Holberton, Lance Corporal Michael Solz, Gunnery 

Sergeant Scipio Williams. Those families are still in the midst of 

a lawsuit, Peterson v. Islamic Republic of Iran, along with 50 other 

plaintiffs who all live in South Carolina. It is difficult for me to understand and appreciate how we have a lingering lawsuit with so 

many lives being impacted, at least five South Carolinians having 

lost their lives, and we are creating more access to more money to 

continue, as Susan Rice has said, nefarious behavior, i.e., in my 

words, terrorism activity. It concerns me that we have done so little to engage in a process of stopping that behavior. Comments? 

Mr. SZUBIN. Absolutely, and, Senator, the concerns with respect 

to Iran, its support for terrorism, groups like Hezbollah are ones 

that I share deeply. And I spend a tremendous amount of my time 

and that of my colleagues across the Government in trying to track 

those funds and trying to put substantially greater pressure on 

Hezbollah. I will say that we were aided in this effort by Congress 

in passing recent legislation, which the President signed, which 

says any foreign institution that is knowingly doing business with 

Hezbollah can get into trouble with us as well. And we are seeing 

the impact of that already, even in the few weeks since it was 

passed. 

I will note that, despite some very alarmist predictions before the 

deal went into effect and as we were talking about the deal up in 

Congress, we have not seen a windfall of money coming into 

Hezbollah. In fact, today Hezbollah, we believe, is in the worst financial condition it has been in decades, and that is not just a U.S. 

Government assessment. That is the assessment I hear from our 

allies around the world, including in the Middle East, who share 

our concerns with Hezbollah in a very palpable way. 

That does not mean we should be, you know, sitting back and 

being complacent. Far from it. What it means is that our conVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
33 

tinuing efforts in the law enforcement channel, in the sanction 

channel, in the other channels that I should not talk about in this 

setting, to put pressure on Hezbollah are bearing fruit and that we 

should redouble those efforts. 

Senator SCOTT. But you do not disagree with the fact that, according to the Congressional Research Service, the deal has provided up to $100 million of funds for Hezbollah through the Iranian 

deal? 

Mr. SZUBIN. I do not know that statement in the CRS. I would 

be happy to go back and look at it. If that was a statement as to 

what historically Iran’s support to Hezbollah has been, we actually 

put the number higher than $100 to $200 million. But I have not 

seen any estimates that that would be a contribution coming out 

of this deal to Hezbollah. I would be happy to look at that, Senator. 

Senator SCOTT. I would appreciate that. Thank you. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator Scott. 

Gentlemen, I thank you both for your appearance today. It has 

been a long hearing, and I wish you well in combating terrorism. 

Thank you. 

Mr. SZUBIN. Thank you, Chairman. 

[Whereupon, at 4:10 p.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions supplied for the record follow:] 

34 

PREPARED STATEMENT OF ADAM J. SZUBIN 

ACTING UNDER SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, 

DEPARTMENT OF THE TREASURY

MAY 25, 2016 

Chairman Shelby, Ranking Member Brown, and Members of the Committee, 

thank you for inviting me to appear today to discuss implementation of the Joint 

Comprehensive Plan of Action (JCPOA), the nuclear deal we reached with our key 

partners and Iran. I am pleased to be here with my colleague from the State Department, Ambassador Mull. 

I’ll begin by explaining how the JCPOA has removed the threat posed by Iran’s 

nuclear program—and how our persistent sanctions and diplomatic efforts helped 

achieve that result. I’ll then outline the role non-nuclear sanctions continue to play 

in our approach to Iran, and describe our strategy to enforce those sanctions going 

forward. 

The JCPOA 

Since I started at the Treasury Department, in 2004, preventing Iran from acquiring a nuclear weapon has been a national security priority of the highest order. For 

more than a decade, we worked to ensure that Iran had no potential pathway to 

a nuclear weapon. 

We did that by designing a sophisticated, targeted sanctions regime, and combining it with sustained diplomatic efforts to achieve multilateral support for our 

sanctions. Together with our partners in Congress and the international community, 

we imposed sanctions that put massive costs on Iran. That helped bring Iran to the 

negotiating table, and culminated in the JCPOA. 

The JCPOA is a tremendous diplomatic breakthrough. It is a peaceful means of 

eliminating one of the world’s most persistent national security threats—a nuclear 

armed Iran. And it has already paid huge dividends. 

On January 16, the IAEA confirmed that Iran had completed its nuclear-related 

commitments in the deal. The IAEA has verified that Iran has reduced its stockpile 

of enriched uranium by 98 percent, removed 2⁄3 of its centrifuges, permanently disabled its reactor at Arak, and removed all fissile material from its underground facility at Fordow. 

Iran has also accepted an unprecedented and comprehensive transparency and 

verification regime, including continuous monitoring of all of its declared nuclear facilities. In addition, Iran has committed to under no circumstances ever seek, develop or acquire any nuclear weapons, and agreed to prohibitions on activities that 

could contribute to the design and development of a nuclear explosive device. 

Our diplomacy bore fruit. Iran was a few months from having enough fissile material for a potential nuclear weapon, and it was steadily advancing. Now, Iran’s 

breakout time has been extended to beyond one year, and we are all safer because 

of it. 

The JCPOA represents a sea change. It ensures that Iran’s nuclear program is 

and will remain exclusively peaceful. And it is the most powerful example we have 

of how a multilateral sanctions effort, coupled with tough and principled diplomacy, 

can succeed. 

Our JCPOA Commitments 

Since Iran has kept its end of the deal, we must uphold ours. 

We’ve done so by lifting the sanctions we committed to lift, once the IAEA verified 

that Iran delivered on its nuclear-related commitments under the JCPOA. 

Let me reiterate what President Obama, Secretary Lew, and Secretary Kerry 

have all made clear: we are not standing and will not stand in the way of permissible business activities involving Iran. Nor are we blocking Iran’s access to funds 

that are no longer restricted following the implementation of the JCPOA, or encouraging others to do so. 

That will remain true for as long as Iran upholds its end of the bargain. Because 

creating economic pressure, on its own, was never the purpose of our nuclear-related 

sanctions. Instead, the goal was to help bring Iran to the negotiating table, where 

Iran would accept far-reaching constraints on its nuclear program in exchange for 

certain sanctions relief. 

Iran has verifiably implemented its nuclear commitments. We, in turn, have kept 

our commitment to lift the nuclear-related secondary sanctions that had been in 

place. We’ve also issued clear and specific guidance explaining what that means— 

just as we do when we make significant changes to any sanctions program. 

35 

It is in our national security interest to ensure that the JCPOA works as intended 

and stands the test of time. And it is therefore important to fulfill all of the commitments we made in the deal. 

To do otherwise would not only undermine Iran’s incentive to comply with the 

deal’s terms. It would also undermine our own international credibility, and our corresponding ability to use sanctions to change behavior in the future across the range 

of national security threats we target with our sanctions programs. 

The Impact Thus Far 

Iran is already seeing the benefits of this deal. It has opened new banks accounts 

around the world. It has gained access to billions of dollars in reserves. And its oil 

exports to Europe have recovered to about half of presanctions levels. 

That said, some are still hesitant in dealing with Iran. That was to be expected. 

That does not mean that we have failed to live up to our end of the bargain. We 

have kept every single commitment we’ve made in the JCPOA, lifting all nuclearrelated secondary sanctions as promised. 

What it does indicate is that, even with the nuclear concerns resolved, international companies still have concerns about doing business in Iran. Many of these 

concerns are not about sanctions. 

Some are concerned about Iran’s financial transparency standards, and the designation of Iran as a high-risk jurisdiction by the Financial Action Task Force, the 

world’s standard-setting body for anti-money laundering and counterterrorist financing. Others have noted concerns about corruption, as well as regulatory and other 

obstacles to conducting business in Iran. And still others are concerned by Iran’s 

provocative non-nuclear behavior, including its active support for terrorism and ballistic missile testing. 

As President Obama said recently: ‘‘Iran has to understand what every country 

in the world understands, which is businesses want to go where they feel safe, 

where they don’t see massive controversy, where they can be confident that transactions are going to operate normally.’’ 

As Iran pursues more business, it is incumbent on Iran to address such problems—to undertake meaningful reforms, and create an environment in which businesses feel secure. 

The Sanctions That Remain 

I’ve talked about the sanctions relief commitments we have delivered under the 

JCPOA. But I also want to be clear about what the deal does not mean. 

First, with certain limited exceptions, we have not changed the primary U.S. embargo on Iran. 

The embargo long predates our concerns with Iran’s nuclear program. In addition 

to longstanding humanitarian exceptions, the JCPOA includes limited exceptions to 

the embargo, covering the case-by-case licensing of the sale of commercial passenger 

aircraft, parts, and services, the import into the United States of Iranian-origin 

foodstuffs and carpets, and certain activities of foreign subsidiaries of U.S. companies. But the embargo otherwise remains as is. 

That means we will continue to prohibit U.S. persons from investing in Iran, importing or exporting to Iran most goods or services, or otherwise engaging in commercial or financial dealings with most Iranian persons or companies. Iran will also 

continue to be denied access to U.S. markets. 

Along these lines, let me also say clearly that we have not promised, nor do we 

have any plans, to give Iran access to the U.S. financial system, or to reinstate 

what’s called the ‘‘U-turn’’ authorization. 

Additionally, we have not lifted any of our sanctions designed to counter Iran’s 

destabilizing activities outside the nuclear file. As we made clear to Iran and our 

international partners all along, the JCPOA does not affect our non-nuclear sanctions. 

These sanctions are not just words on paper. We are vigorously enforcing them. 

As we do so, we bear in mind that such sanctions are not means to punish or 

vent frustration. They are intended, together with other tools, to pressure Iran to 

change its strategic calculus on terrorism and regional destabilization, on ballistic 

missiles, and on human rights—just as our now-lifted nuclear sanctions helped to 

push Iran to change its calculus on its nuclear program. And if Iran makes such 

a change, then these sanctions, too, could one day be lifted. 

Yet, Iran continues to be the world’s leading State sponsor of terrorism, and to 

play a significant role in destabilizing the region. It supplies funding and weapons 

to Hizballah, to the Asad regime, and to the Houthis in Yemen. It continues to develop its ballistic missile program, in contravention of UN Security Council provisions. And it continues to violate human rights. 

36 

Thanks to Congress and the President, we already have the sanctions authorities 

necessary to counter this type of activity. And I can tell you, as someone who has 

spent his career designing and enforcing sanctions against Iran—our existing authorities are extremely powerful. 

Any Iranian or Iran-related person that we have sanctioned and put on our SDN 

List—or that we add to the list in the future—is subject to secondary sanctions. 

That is a stark threat: a foreign bank that does business with such a person could 

face a total cutoff from the U.S. financial system. 

Under our current sanctions regime, more than 200 Iran-linked firms and individuals remain sanctioned on non-nuclear grounds. That number includes the Islamic 

Revolutionary Guards Corps, or IRGC, the Qods force, and their subsidiaries and 

senior officials—all of whom we will continue to target and expose. 

That number also includes major Iranian defense entities, which have done much 

of Iran’s ballistic missile work. Indeed, since the implementation of the JCPOA, we 

have continued to impose sanctions on supporters of Iran’s ballistic missile program. 

Since the implementation of the JCPOA, we have also continued to impose sanctions targeting Iran’s support for terrorist proxies. 

Hizballah is a key example. In late January, we sanctioned a major Hizballah financial support network, which was laundering criminal proceeds to support 

Hizballah’s terrorism and destabilizing activity. And just last month, we published 

new sanctions regulations to implement the Hizballah International Financing Prevention Act of 2015—a law which gives us yet more tools in our campaign to destroy 

Hizballah’s financial networks. 

After many years of sanctions targeting Hizballah, today the group is in its worst 

financial shape in decades. And I can assure you that, alongside our international 

partners, we are working hard to put them out of business. The JCPOA has no impact on our efforts on this front. 

Ultimately, we are clear-eyed about the nature of the non-nuclear threats posed 

by Iran. We will continue to combat these threats using a range of tools at our disposal—including by enforcing existing sanctions, and by designating new targets 

when appropriate. 

Conclusion 

In closing, I want to reiterate that, thanks to the JCPOA, we can now counter 

such threats with the nuclear threat off the table—putting us, our allies, and the 

world in a safer position. 

I also want to assure this Committee that the Treasury Department will continue 

to work closely with Congress as we implement our existing sanctions to counter 

Iran’s non-nuclear activity, and to serve our overall national security goals—just as 

we did in the years preceding the JCPOA. 

Thank you again for inviting me to appear today. I look forward to your questions. 

PREPARED STATEMENT OF STEPHEN D. MULL 

LEAD COORDINATOR FOR IRAN NUCLEAR IMPLEMENTATION, DEPARTMENT OF STATE

MAY 25, 2016 

Chairman Shelby, Ranking Member Brown, and distinguished Members of the 

Committee I am pleased to appear before you to discuss the status of implementation of the Joint Comprehensive Plan of Action, or the JCPOA. Thank you for the 

opportunity. 

The finalization of the JCPOA in July 2015 was the culmination of a years-long 

process of tough and clear-eyed diplomacy. It also marked the beginning of a new 

process which will require similar vigilance and focus, the goal of which is to ensure 

the JCPOA is fully and effectively implemented and therefore that Iran is not able 

to obtain a nuclear weapon. I know that is a goal that we all share equally and I 

appreciate your continued interest in learning about our efforts. 

I am happy to report today that, so far, the JCPOA has been implemented by all 

participants. It is important that we recognize what an accomplishment that is towards advancing our national security, and that of our allies and partners, particularly those in the Middle East. Because of our efforts to date, the security of the 

United States and our partners has been immeasurably enhanced and in conversations with allies and partners around the world, we regularly hear support for the 

JCPOA. 

As of ‘‘Implementation Day’’ under the JCPOA, which was January 16 of this 

year, Iran had completed dozens of specific actions to limit, freeze, or roll back its 

nuclear program and subject it to greater transparency by the IAEA. It is worth 

highlighting a few of these actions, given their significance: 

37 

• Iran disconnected, removed, and placed in IAEA-monitored storage two-thirds 

of its installed centrifuge capacity, going from over 19,000 centrifuges to 5,060 

used for uranium enrichment at Natanz. These 5,060 centrifuges are the most 

primitive in Iran’s inventory. 

• At its previously clandestine Fordow facility, Iran terminated all uranium enrichment and removed all nuclear material. 

• Iran reduced its stockpile of up-to-five percent low enriched uranium by 98 percent, going from roughly 12,000 kilograms, where it was when we reached the 

JCPOA last July, to 300 kilograms or less with an enrichment limit of no more 

than 3.67 percent, where it must stay. 

• Iran removed the core of the Arak heavy water research reactor and filled it 

with concrete, rendering it permanently inoperable. 

Iran’s implementation of these and other key nuclear-related commitments increased the time it would take to produce enough fissile material for a nuclear 

weapon—the so-called ‘‘breakout time’’—from roughly two-to-three months prior to 

the JCPOA to at least one year. 

These actions were complemented by the enhanced verification and monitoring 

measures specified in the JCPOA. Among them were increased IAEA access to 

Iran’s uranium mines, continuous monitoring of Iran’s uranium mills, and continuous monitoring of Iran’s centrifuge production, assembly, and storage facilities. 

Moreover, Iran is provisionally applying the IAEA Additional Protocol (AP), which 

allows for much broader IAEA information and access in Iran, and implementing 

Modified Code 3.1, requiring early notification of construction of new nuclear facilities or modification of existing ones. 

In other words, Iran is now subject to even greater IAEA scrutiny, providing us 

with confidence that, should Iran seek to break out of its commitments, such an attempt would be detected and we would have ample time to respond. 

Since Implementation Day, we have maintained focus on ensuring Iran is fulfilling all of its nuclear-related commitments in a complete and verifiable manner. 

We were pleased to see that, when the IAEA issued its first JCPOA monitoring report in February, it reflected the many steps Iran is taking to implement the 

JCPOA. And without question, Iran’s continued implementation of its nuclear-related commitments under the close watch of the IAEA is in the national security 

interest of the United States and our partners and allies. 

As you know, in exchange for Iran meeting its nuclear-related commitments under 

the JCPOA, we met our JCPOA commitments by lifting nuclear-related secondary 

sanctions on Iran. As Acting Under Secretary Szubin has explained, non-nuclear 

sanctions remain and are an important tool, among others, to respond to Iran’s 

harmful activities. 

As long as Iran continues to meet its nuclear commitments, we will continue to 

meet our JCPOA sanctions commitments. And it is in our interest and that of the 

international community to ensure that the JCPOA works for all participants, and 

that the Iranian people begin to experience the benefits of sanctions lifting. The 

JCPOA has already started to deliver benefits, as evidenced by public reports of 

trade deals and increasing international commercial and economic activity with 

Iran. 

Some of you may have seen Iranian statements about the United States not living 

up to its commitments. Let me state unequivocally, the United States has fulfilled 

all of our commitments under the JCPOA—the lifting of sanctions is working. 

Today, Iran is able to do far more than it was able to under the crushing pressure 

of sanctions impacting nearly every sector just several months ago. 

However, business decisions are complex. They take into account a variety of factors. As Secretary Kerry has stated repeatedly, every bank or business will make 

its own decisions about whether to do business in Iran, and the United States will 

not stand in the way of business that is now permitted. From a U.S. legal perspective, international firms or financial institutions may engage with Iran, as long as 

they do not involve the U.S. financial system or U.S. persons and avoid working 

with entities that remain on our sanctions list. 

We understand that firms continue to have specific sanctions-related questions or 

concerns about doing business in Iran. In an effort to provide greater clarity to the 

public and private sectors on what sanctions were lifted and what non-nuclear sanctions remain in place, the Departments of State and Treasury have been participating in extensive outreach with the public and private sectors, mostly at the request of other Governments, in order to explain U.S. commitments under the 

JCPOA. Our engagement is focused on providing clear information about U.S. sanctions laws in order to assist companies in ensuring that their activities are consistent with the JCPOA and U.S. law and therefore not sanctionable or prohibited. 

38 

Under the JCPOA, we lifted our nuclear-related secondary sanctions. The lifting 

of nuclear-related secondary sanctions created the foundation for a new future and 

direction for Iran, but Iran must make its own decisions on pursuing this path. To 

take full advantage of the economic opportunities created, Iran must address domestic issues that also influence international business decision making—including the 

lack of transparency in its financial and business sectors as well its own provocative 

actions, such as the repeated testing of ballistic missiles, State sponsorship of terrorism, and unjust detention of dual-nationals. 

Looking ahead, we will remain committed to ensuring the successful implementation of the JCPOA because it makes us all safer. We will continue to monitor its 

full implementation through, among other mechanisms, the Joint Commission it established. In April, I joined Under Secretary of State for Political Affairs Tom Shannon at the third meeting of the Joint Commission. The meeting provided an opportunity to review the full range of nuclear and sanctions implementation issues. 

While we are encouraged by Iran’s implementation of its nuclear commitments 

thus far, we have always recognized that the JCPOA would not resolve all of our 

concerns with Iran. Instead, the JCPOA was specifically aimed at addressing the 

most urgent issue of verifiably ensuring Iran does not obtain a nuclear weapon. 

Thanks to our efforts to date, we have made significant progress toward that goal, 

and the United States and our partners remain safer because of these efforts. However, more work remains. We will continue to watch closely to ensure Iran does everything it committed to do. I also pledge to continue consulting with you as these 

efforts continue. Thank you again for the opportunity. 

39 

RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY 

FROM ADAM J. SZUBIN 

Q.1. Due Diligence Requirements—The Wall Street Journal reported that Secretary Kerry told a group of non-U.S. banks in May 

that he would like ‘‘ . . . to make it clear that legitimate business 

. . . is available to banks as long as they do their normal due diligence and know who they’re dealing with . . . they’re not going to 

be held to some undefined and inappropriate standard.’’ 

Given that a number of Iran’s economic sectors are virtually controlled by the Revolutionary Guard and its front companies, and 

that Iran is still a primary money laundering concern, do you agree 

with Secretary Kerry that ‘‘normal due diligence’’ would satisfy a 

bank’s customer screening process? 

A.1. Treasury’s Financial Crimes Enforcement Network has labeled 

Iran a jurisdiction of primary money laundering concern, and the 

Financial Action Task Force (FATF), an international financial 

standard setting body has issued numerous advisories regarding 

Iran, most recently in June, highlighting the country’s elevated 

risks. While the statement noted that FATF was suspending 

counter measures against Iran for 12 months, based on Iran’s high 

level political commitment to an action plan meant to remediate its 

anti-money laundering and counter financing of terrorism deficiencies, it emphasized that Iran remains on the blacklist of highrisk and noncooperative jurisdictions. Furthermore, FATF called on 

all jurisdictions to advise their financial institutions to apply enhanced due diligence to business relationships and transactions 

with Iran and emphasized that FATF remains concerned with the 

terrorist financing risk emanating from Iran and the threat this 

poses to the international financial system. 

For financial institutions dealing with Iran, whether in Europe, 

the Middle East, or Asia, detailed scrutiny and in depth reviews of 

Iran-related transactions, accounts and account holders, are already part of normal due diligence practices, as referenced by Secretary Kerry. 

Q.2. Gaming the Global Finance Regime—The Financial Action 

Task Force since 2009 has warned countries of its exceptional concern with Iran’s failure to address its terrorist financing risk. Recent statements by Iranian officials, however, have indicated that 

it is taking first steps to improve its anti-money laundering regime. 

Can an active State sponsor of terror ever be considered a legitimate participant in the international financial system? 

Are you concerned that Iran can game the FATF system to make 

it look like it is complying on paper without significant improvements that would put it on par with a legitimate financial system? 

Why or why not? 

A.2. Iran is the world’s leading State sponsor of terrorism, and it 

will not be able to fully reintegrate into the global financial system 

until it ceases such activity. We have a number of sanctions and 

measures to target Iran’s financing of terrorism, including comprehensive U.S. sanctions against Iran. This means that U.S. persons, including U.S. financial institutions, are broadly prohibited 

from dealing with the Government of Iran, individuals and entities 

in Iran, including the Islamic Revolutionary Guards Corps (IRGC). 

40 

Iran’s financing of terrorism, proliferation activity and lack of 

transparency are all part of the reasons why Treasury’s Financial 

Crime Enforcement Network has found Iran to be a jurisdiction of 

primary money laundering concern and issued regular advisories 

warning the public of financial risk associated with Iran. 

The Financial Action Task Force (FATF), an international financial standard setting body has issued numerous advisories on Iran, 

most recently in June, highlighting risks associated with Iran. The 

June statement noted that the FATF remains concerned with the 

terrorist financing risk emanating from Iran and the threat this 

poses to the international financial system. Therefore, Iran will remain on the FATF blacklist. Accordingly, the FATF called on all 

jurisdictions to advise their financial institutions to apply enhanced 

due diligence to business relationships and transactions with Iran. 

Iran has made some progress in meeting international antimoney laundering and counterterrorist financing (AML/CFT) 

standards, but it remains deficient in many areas. While this June 

the FATF welcomed Iran’s high-level political commitment to an 

action plan meant to remediate its AML/CFT deficiencies, and suspended its call for counter measures against Iran for 12 months, 

if the FATF determines that Iran has not demonstrated sufficient 

progress in implementing the action plan at the end of that period, 

the FATF’s call for countermeasures will be reinstituted. 

Moreover, the FATF stressed that Iran will remain on the FATF 

blacklist and the FATF will maintain its call for enhanced scrutiny 

until Iran addresses all of FATF’s AML/CFT concerns, a process 

that is expected to take years. 

Q.3. Classes of Licensed Transactions—At the May 24th hearing, 

the Committee was warned about Treasury using classes of licensed transactions as an inroad to the dollarization and legitimacy 

of Iranian transactions. Examples of such classes would be the return of Iran’s restricted oil escrow funds, aircraft purchases, humanitarian transactions, and heavy water transactions. 

What other classes of transactions is Treasury considering for licenses and dollarization of Iranian transactions? 

Would you commit to discussing these with Congress before approving them? 

A.3. We have not committed to provide, and are not providing, Iran 

with access to the U.S. financial system. There is no intent to issue 

licenses for classes of transactions for the purpose of dollarizing or 

legitimizing Iranian transactions. 

OFAC has issued general and specific licenses authorizing transactions that would otherwise be prohibited under the Iran sanctions, when doing so is consistent with broader national security 

and foreign policy interests of the United States. For example, 

OFAC has a history of licensing exports of food, medicine, and medical devices to Iran. A long-standing general license authorizes 

funds transfers to or from Iran that are ordinarily incident and 

necessary to give effect to licensed transactions, provided that the 

transfer does not involve debiting or crediting the account of (1) a 

person who is ordinarily resident in Iran, except when such person 

is not located in Iran, (2) of the Government of Iran, (3) an Iranian 

financial institution, or (4) any other person whose property and inVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00044 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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terests in property are blocked pursuant to the Iranian Transactions and Sanctions Regulations, maintained on the books of a 

U.S. financial institution. Because specific license applications include information submitted by private parties that may be protected by law, including the Trade Secrets Act and the Privacy Act, 

we are unable to discuss pending specific license applications. 

Q.4. Beneficial Ownership—Treasury recently issued its final rules 

on customer due diligence and beneficial ownership. The rule is intended to make banks keep better track of the owners of companies 

with accounts at their institutions. 

Does Treasury intend to provide specific guidance on how to 

apply the rule with regard to Iran’s IRGC and other clerical-controlled and regime businesses? 

Given the influence and control the IRGC can wield, wouldn’t 

any degree of IRGC ownership of a company suggest elevated 

risks? 

A.4. It is important to note up front that the new rule on customer 

due diligence and beneficial ownership concerns the opening of new 

accounts in the United States. The United States’ comprehensive 

economic sanctions program against Iran remains in place, meaning that U.S. financial institutions are prohibited from opening accounts for Iranian entities—including Iranian entities with any 

level of IRGC ownership. This is because our sanctions prohibit 

U.S. persons, including U.S. financial institutions, from dealing 

with the Government of Iran, individuals and entities in Iran (including the IRGC), and Iranian Government-owned entities outside 

of Iran. 

These prohibitions have been in place since 1995, and U.S. financial institutions have a long and successful track record of not 

banking Iranian entities in compliance with these sanctions. 

The IRGC remains sanctioned by the U.S. and the EU for its proliferation activities and in the U.S. for its role in human rights 

abuses. Its covert action arm, the IRGC–Qods Force, is designated 

in the U.S. for terrorism and in the EU for its support to the Syrian regime. Activities undertaken by the IRGC and the IRGC–QF 

are part of the reasons why Treasury’s Financial Crimes Enforcement Network (FinCEN) has found Iran to be a jurisdiction of primary money laundering concern and issued regular advisories 

warning the public of financial risk associated with Iran. The Financial Action Task Force (FATF), an international financial standard setting body has also issued numerous advisories regarding 

Iran, most recently in June, highlighting elevated risks associated 

with in Iran. The June statement noted that the FATF remains 

concerned with the terrorist financing risk emanating from Iran 

and the threat this poses to the international financial system. 

Furthermore, the FATF called on its members and urged all jurisdictions to advise their financial institutions to apply enhanced due 

diligence to business relationships and transactions with Iran. 

Q.5. Treasury Outreach—I understand Treasury does various types 

of outreach to the international financial industry either to explain 

a new regulation or perhaps to deliver a warning of a significant 

threat. 

42 

What countries beyond the UK is Treasury visiting to conduct 

similar rehabilitative outreach on Iran’s behalf? 

A.5. Over the last 6 years, we have engaged in extensive outreach 

to communicate clarity on our Iran-related sanctions architecture 

to our partners. Consistent with this approach as well as our longstanding practice with respect to outreach, we have met with business groups and Governments here in Washington, DC, and have 

traveled with our State Department colleagues to meet with Governments and businesses abroad to provide clarity regarding U.S. 

sanctions as they apply to dealings with Iran after Implementation 

Day. In such meetings, we explain both the scope of the sanctions 

lifting that occurred on Implementation Day and what can and 

cannot be done under remaining U.S. sanctions. Treasury has undertaken this type of travel and outreach in the past when major 

changes have been made to the sanctions programs administered 

by OFAC, including during the period of escalating sanctions that 

brought Iran to the negotiating table. So far, we have visited more 

than 20 countries to explain the scope of the remaining Iran sanctions. We are ensuring that businesses are fully aware that U.S. 

primary sanctions remain in place and understand what that entails going forward. In such engagements, we have made clear that 

U.S. persons and the U.S. financial system cannot be involved in 

Iran-related transactions, unless they are exempt from regulation 

or authorized by OFAC (e.g., licensed sales of medicine, medical devices, food and agricultural commodities). We also have explained 

that our sanctions authorities targeting Iran’s support for terrorism, human rights abuses, ballistic missile program, and destabilizing activities in the region were outside of the scope of the 

JCPOA and remain in place. 

Q.6. With regard to Iran, should financial institutions be at all 

wary of doing business in Iran given the utter lack of transparency 

in its financial system? 

A.6. Iran’s systemic money laundering and terrorist financing deficiencies will continue to be an important factor in foreign financial 

institutions’ decisions to engage with Iran. Treasury’s Financial 

Crime Enforcement Network (FinCEN) has found Iran to be a jurisdiction of primary money laundering concern and issues regular 

advisories warning the public of financial risk associated with Iran. 

The Financial Action Task Force (FATF), an international financial 

standard setting body has also issued numerous advisories regarding Iran, most recently in June, highlighting elevated risks associated with in Iran. The June statement noted that Iran remains on 

the FATF the black list, and that the FATF remains concerned 

with the terrorist financing risk emanating from Iran and the 

threat this poses to the international financial system. Furthermore, the FATF called on all jurisdictions to advise their financial 

institutions to apply enhanced due diligence to business relationships and transactions with Iran. 

In addition to considering FinCEN and FATF advisories, U.S. financial institutions are subject to many remaining restrictions and 

prohibitions on engaging with Iran, including comprehensive U.S. 

sanctions. This means that U.S. persons, including U.S. financial 

institutions, are broadly prohibited from dealing with the GovernVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00046 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
43 

ment of Iran, individuals and entities in Iran, including the Islamic 

Revolutionary Guards Corps (IRGC). 

Q.7. ‘‘Dollarized’’ Transactions—One of Iran’s priorities is to be 

able to engage in international trade in dollar-denominated transactions, which would not only give it access to the world’s strongest 

and most liquid currency, but would also further legitimize its financial system. 

Can you confirm that there are no plans now or in the future for 

the Administration to allow Iranian or U.S. or foreign persons at 

any point in a transaction to engage in either direct or indirect dollar-denominated transactions, or dollar clearing in any form, including offshore facilities or through intrabank bookkeeping or 

other conversions or transfers? Please do not neglect to specifically 

address the possibilities of offshore facilities, and intrabank transfer book entries and any other type of conversion opening itself to 

a dollarized transaction. 

A.7. The Administration has not been and is not planning to enable 

Iranian access to the U.S. financial system or to reinstate the so 

called ‘‘U-turn’’ general license. Until Iran has addressed other concerns we have with its behavior outside of the nuclear file, the U.S. 

financial system (including the branches of U.S. financial institutions abroad) will remain off limits to Iran and U.S. persons will 

not able to provide financial services or products to Iran without 

explicit authorization. 

To be clear, Treasury does not possess legal jurisdiction over 

transactions denominated in U.S. dollars that do not involve U.S. 

persons and occur outside of the United States; rather, we exercise 

jurisdiction over transactions involving U.S. persons or that transit 

the U.S. financial system. The free flow of the U.S. dollar, as the 

international currency of choice for international trade, works in 

the broader economic, financial, and strategic interests of the 

United States. As a practical matter, though, most U.S.-dollar-denominated transactions worldwide transit the United States and 

therefore come under our jurisdiction. 

We have publicly stated this position in public guidance we 

issued on the JCPOA Implementation Day. We would draw your 

attention in particular to the frequently asked questions (FAQs) 

A.3, C.6, C.7, C.14, and M.9, which reiterate the sanctions that remain in place (A.3 and C.14), and that (i) U.S. persons remain 

broadly prohibited from engaging in transactions or dealings with 

Iran unless the activities are exempt from regulation or authorized 

by OFAC (A.3 and M.9), (ii) the U-turn is not being reinstated 

(C.6), and (iii) foreign financial institutions cannot clear U.S. dollar 

transactions involving Iranian persons through U.S. persons or the 

U.S. financial system (C.7). These FAQs have been on OFAC’s Web 

site since Implementation Day and can be found here: https:// 

www.treasury.gov/resourcecenter/sanctions/Programs/Documents/ 

jcpoafaqs.pdf. 

Q.8. Iran Sanctions Act of 1996 Reauthorization—The Iran Sanctions Act of 1996, as amended, has been a pivotal piece of sanctions 

architecture since its inception. It is set to expire on December 31st 

of this year. 

44 

What set of circumstances would have either of you advise the 

President to veto a Congressional reauthorization of the Iran Sanctions Act at any time before December 31st? 

Would the President veto a Congressional reauthorization of the 

Iran Sanctions Act at any time before December 31st? 

A.8. I would refer you to my colleagues at the State Department 

as the Iran Sanctions Act (ISA) is administered by them. 

We would note that when Treasury discusses the post-JCPOA 

sanctions landscape and the potential for sanctions snap back with 

foreign Governments, financial institutions or businesses, we make 

clear that all sanctions—including those in the ISA—are subject to 

snap back at any time, throughout the duration of the JCPOA. ISA 

does not need to be extended in order to continue to be able to 

issue sanctions designations when warranted, as we have ample 

authorities to target missile-related actors, as well as activity related to human rights violations, malicious cyberactivity, and other 

activity of concern. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON 

FROM ADAM J. SZUBIN 

Q.1. What is the top-line gross amount of Iranian assets that have 

been unblocked as a result of sanctions relief under the JCPOA? 

A.1. The Central Bank of Iran (CBI) has recorded itself on paper 

as having the equivalent of about $100 billion dollars total in foreign exchange assets, which were inaccessible under congressional 

sanctions. On Implementation Day, the United States fulfilled its 

JCPOA commitments to remove the secondary sanctions that restricted the use of those funds. The actual amount that CBI has 

access to today, however, is about half as large. Iran has committed 

over $20 billion as collateral for projects with China, which cannot 

be moved or freely spent. Tens of billions in additional funds were 

disbursed as loans to Iran’s energy and banking sectors, but those 

are nonperforming loans with no expectation of repayment. Accordingly, the actual amount of foreign reserves available to Iran today 

is approximately $50 billion. 

Q.2. In January of last year—when he was the Treasury Under 

Secretary for Terrorism and Financial Intelligence—CIA Deputy 

Director David Cohen testified that $100 billion in Iranian foreign 

currency reserves were blocked by sanctions. Was his testimony accurate? Have those foreign currency reserves now been unblocked? 

A.2. As noted, the CBI records itself on paper as having the equivalent of about $100 billion dollars total in foreign exchange assets. 

On Implementation Day, the United States fulfilled its JCPOA 

commitments to remove the secondary sanctions that restricted the 

use of those funds. The actual amount of foreign reserves available 

to Iran is the equivalent of approximately $50 billion. Foreign financial institutions that host accounts where these funds are located are free to continue to hold, transfer, or process transactions 

at Iran’s request without exposure to secondary sanctions, provided 

that the transactions do not involve persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List). 

45 

Q.3. In May of last year, President Obama told Jeffrey Goldberg 

of The Atlantic that ‘‘Iran has $150 billion parked outside the country,’’ and suggested this would be made available to Iran under 

sanctions relief. Was this statement accurate? What type of assets 

make up the $150 billion to which President Obama referred? 

A.3. Iran has approximately $100 billion worth of foreign reserves. 

Iran was only able to access approximately $50 billion after we lifted sanctions on Implementation Day. This is because over $20 billion is already dedicated to projects with China, where it cannot be 

freely spent, and tens of billions in additional funds are effectively 

nonperforming loans to Iran’s energy and banking sector—or loans 

that Iran has already provided. 

Q.4. Please explain how and in what currency the United States 

paid the $1.7 billion settlement to Iran in connection with the freeing of U.S. hostages in January. Please include a description of how 

any U.S. dollars or U.S. financial institutions were involved in facilitating the transaction, whether directly or indirectly. 

A.4. The $1.7 billion that the United States paid to Iran represented the settlement of a long pending claim at the Iran–U.S. 

Claims Tribunal in the Hague. The funds were paid to Iran in nonU.S. dollar currencies in a manner consistent with OFAC’s regulations. The payment was made by the U.S. Department of Defense 

from the Foreign Military sales account and the Department of the 

Treasury from the Judgement Fund. Iran was not given access to 

the U.S. financial system to complete this transaction. 

Q.5. Please explain how and in what currency the United States 

will pay $8.6 million to Iran in exchange for heavy water. Please 

include a description of how any U.S. dollars or U.S. financial institutions will be involved in facilitating the transaction, whether directly or indirectly. 

A.5. Payment by the Department of Energy’s Isotope Program was 

made in euros in a manner consistent with OFAC’s Iran regulations. 

Q.6. I understand that after the signing of the initial JPOA, the 

Treasury Department was involved in establishing various ‘‘humanitarian channels’’ to facilitate exports to Iran of humanitarian 

goods. I understand that these channels still operate. 

Please explain how these channels operate, which financial institutions are involved, and whether and how U.S. dollars are involved in the channels, whether directly or indirectly. 

A.6. In furtherance of the JPOA, the P5+1 committed to establish 

a mechanism to further facilitate the purchase of, and payment for, 

the export of food, agricultural commodities, medicine, and medical 

devices to Iran, as well as medical expenses incurred abroad by Iranians. The mechanism, known informally as ‘‘humanitarian channels,’’ remained in place during the JPOA period. Foreign financial 

institutions whose involvement was sought by Iran in hosting this 

new mechanism were provided guidance by OFAC. Companies interested in using this financial mechanism coordinated with their 

Iranian counterparties. Transactions for the export of U.S.-origin 

food, agricultural commodities, medicine, and medical devices to 

46 

Iran were already authorized by general license 31 CFR 560.530, 

and were not required to be processed through this mechanism. 

The institutions that operated humanitarian channels pursuant 

to the JPOA may continue to do so at their discretion even after 

Implementation Day for transactions for the sale of food, agricultural commodities, medicine, and medical devices to Iran. Following Implementation Day, it is no longer sanctionable for nonU.S. entities—including foreign financial institutions—to conduct 

transactions with the Government of Iran or Iranian entities, as 

long as the transactions do not violate the U.S. domestic trade embargo on Iran and do not involve persons that remain on the SDN 

List or sanctionable conduct described in FAQ A.3.ii-iii of the FAQs 

issued by Treasury in connection with the JCPOA (https:// 

www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoalfaqs.pdf). 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM ADAM J. SZUBIN 

Q.1. In the past, the Administration has said it would support reauthorization of the Iran Sanctions Act (ISA) only once certain 

events passed, including the JCPOA Implementation Day passed 

and then the Majles elections in February 2016. I hope there are 

not any new reasons for further postponing any movement on this 

matter. Would the Administration support Congressional reauthorization of the Iran Sanctions Act? Would reauthorization violate 

the JCPOA? If there is a timing concern about reauthorizing the 

sanctions, what is that concern, and when will the Administration 

be comfortable with reauthorization? 

A.1. I would refer you to my colleagues at the State Department 

as ISA is administered by them. 

We would note that when Treasury discusses the post-JCPOA 

sanctions landscape and the potential for sanctions snap back with 

foreign Governments, financial institutions or businesses, we make 

clear that all sanctions—including those in the ISA—are subject to 

snap back at any time, throughout the duration of the JCPOA. ISA 

does not need to be extended in order to continue to be able to 

issue sanctions designations when warranted, as we have ample 

authorities to target missile-related actors, as well as activity related to human rights violations, malicious cyberactivity, and other 

activity of concern. 

Q.2. Why has the Administration not pursued cyberspecific sanctions against Iran, especially given that the Department of Justice 

has already indicted seven Iranian hackers for the dam and bank 

attacks? 

A.2. Treasury cannot comment about potential sanctions targets or 

ongoing sanctions investigations. Treasury has, however, already 

imposed financial sanctions on Iranian actors for their malicious 

cyberactivities. For example, in December 2014, Treasury sanctioned Douran Software Technologies, an information technology 

firm involved in an Iranian Government project to monitor computer activity, under Executive Order (E.O.) 13628, which targets 

censorship and the use of information technology to mask grave 

47 

human rights abuses conducted by the Iranian Government against 

its citizens. At the same time, Treasury imposed sanctions on Iranian company Abyssec for its support to the IRGC under E.O. 

13553, which targets human rights abuses perpetrated by officials 

of the Iranian Government and persons acting on behalf of the Iranian Government since the June 2009 election. Abyssec assisted 

the IRGC with hacking projects and was used by the IRGC to train 

its employees in cybertradecraft and to develop offensive information operations capabilities. 

The Administration is pursuing a comprehensive strategy to confront malicious cyberactors, of which Treasury’s sanctions authorities, including the cyberfocused E.O. 13694, is one part, along with 

diplomatic engagement, trade policy tools, and law enforcement 

mechanisms. We work closely with other Federal departments and 

agencies to assess the options available to respond to ever-evolving 

cyberthreats, and we will continue to defend our interests and act 

to address these threats in line with our national security objectives. 

Q.3. We continue to see provocative behavior around ballistic missile testing and launch from Iran, even after we have levied sanctions for the behavior. Have ballistic missile sanctions succeeded in 

materially obstructing Iran’s missile component procurement networks or in deterring future Iranian test-launches of ballistic missiles? There have been suggestions that additional sanctions on entities that provide financing for and logistical support, such as 

transportation, in support of Iranian ballistic missiles would be 

useful to apply additional pressure to address this behavior. What 

discussions have you had within Treasury about how to expand 

ballistic missile sanctions, and what Iranian activities would warrant additional sanctions? 

A.3. We agree that targeted sanctions are a key element of our 

strategy to disrupt and pressure Iran’s missile program and procurement. Accordingly, Treasury continues to vigorously target 

Iran’s ballistic missile program using its domestic authorities, including Executive Order 13382, ‘‘Blocking Property of Weapons of 

Mass Destruction Proliferators and Their Supporters’’ (E.O. 13382), 

and will continue to do so. E.O. 13382 provides a broad basis for 

designating individuals and entities contributing to proliferation 

activities and networks, including those providing financing for or 

logistical support to Iran’s ballistic missile program. 

Treasury remains concerned about Iran’s ballistic missile program and its continued testing and launches, and we have responded by continuing to designate core entities and key networks 

involved in, or provide support for, such activity—including in designations in January and March of this year. For example, the designations on January 17, 2016, exposed and targeted individuals 

and entities involved in procurement activity on behalf of Iran’s 

ballistic missile program, including the financial transactions for 

procurement of goods for Iran’s carbon fiber production line. These 

designated individuals and entities are now subject to asset-blocking sanctions, effectively cutting them off from the U.S. financial 

system. Additionally, if a foreign financial institution conducts or 

facilitates a significant transaction with, or provides significant fiVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00051 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
48 

nancial services for, any Iranian or Iran-related persons who remain on our SDN List, including those designated on January 17, 

2016, and March 24, 2016, it risks losing its access to the U.S. financial system. 

Q.4. As you are talking to international firms and financial institutions about what is and is not permissible under our current sanctions regime, are you also reiterating your message that Iran, not 

the United States, is responsible for how much economic relief they 

receive from the JCPOA? If so, what has their reaction been to that 

statement? If not, what are you saying in these meetings to push 

back against the Iranian accusation that the U.S. is to blame for 

their economic woes? 

A.4. In our outreach to international firms, financial institutions, 

and foreign Governments, we have reiterated that the United 

States has met all of its commitments under the JCPOA, including 

by lifting the sanctions it committed to lift under the JCPOA. 

OFAC has been clear in its outreach that U.S. commitments do not 

go beyond those outlined in the JCPOA. We hear from some foreign 

firms and financial institutions that U.S. sanctions laws are sufficiently complex that they hesitate engaging with Iran for fear of 

running afoul of U.S. sanctions. There are complex business decisions to be made, but we have made clear the firms and financial 

institutions must make those decisions, and that Treasury and 

OFAC do not seek to influence those decisions. Rather, it is our responsibility to ensure that they know the rules of the road and are 

making decision with a clear understanding of our regulations. Foreign firms and financial institutions have generally acknowledged 

that their hesitancy to engage with Iran is due in large—and sometimes predominant—part to issues related to the business conditions and investment climate in Iran that are wholly unrelated to 

sanctions, including: corruption; lack of corporate transparency; antiquated accounting standards; and Iran’s designation as a highrisk jurisdiction by the Financial Action Task Force, the world’s 

standard-setting body for anti-money laundering and counterterrorist financing, due to Iran’s deficiencies in countering money 

laundering and terrorism finance. In addition, as the President has 

stated, Iran’s own behavior is important to generating confidence 

that Iran is a safe place to do business, and provocative actions 

such as missile launches calling for the destruction of Israel make 

businesses nervous. We have made clear, time and again, that it 

is up to Iran to address these concerns. 

RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY 

FROM STEPHEN D. MULL 

Q.1. On May 24th, the Committee received testimony that Iran’s 

ballistic missile arsenal—the largest in the region—can reach any 

part of the Middle East, including Israel, and that Iran has conducted five ballistic missile tests. 

How important is it to U.S. national security interests that Iran 

terminate its ballistic missile program? 

Of the five recent missile tests, how many of those were sanctioned or sanctionable? Should Iran be allowed to continue testing? 

How does the Administration intend to stop future tests? 

49 

A.1. Iran has long had the largest ballistic missile program in the 

Middle East, and has deployed over the past 30 years hundreds of 

conventionally armed ballistic missiles—including its Shahab-3 medium range ballistic missile. Iran deploys such ballistic missiles to 

project power regionally and deter potential adversaries. These 

missile programs remain one of our most significant nonproliferation challenges, contributing to regional tension and posing a serious risk to international stability. 

Because these activities pose a significant threat to U.S. national 

security, we use a wide range of multilateral and unilateral tools 

to address Iran’s ballistic missile program. For example, we use our 

participation in the Missile Technology Control Regime (MTCR) to 

prevent the spread of critical missile technologies and to raise 

awareness among the 33 other MTCR Partners (members) of the 

proliferation concerns posed by Iran’s missile development, procurement, and proliferation activities. Bilaterally, we continue to work 

with other countries to interdict missile-related shipments intended 

for Iran. Additionally, we have called attention to Iran’s missile 

testing activities that are inconsistent with and in defiance of 

UNSC Resolution 2231; including by reporting Iran’s March 2016 

missile launches to the Security Council and requesting the Council 

review this matter to determine an appropriate response. These bilateral and multilateral efforts are critical to persuading countries 

to prevent transfers of sensitive technology to Iran and also to raising the political costs to Iran for its missile development and testing activities. 

We bolster these multilateral and bilateral efforts with unilateral 

authorities to impose sanctions on entities connected to Iran’s ballistic missile programs, procurement network, or testing activities. 

Following Iran’s missile tests in March 2016, the United States 

designated two Iran-based entities directly involved with Iran’s ballistic missile program under Executive Order (E.O.) 13382. These 

sanctions follow our actions in January 2016, when the United 

States designated three entities and eight individuals involved in 

a network that procured materials and equipment for Iran’s ballistic missile program. These measures were also taken pursuant 

to E.O. 13382 and reflect our continued concerns about Iran’s missile program, including its October 2015 missile launch. 

Q.2. One of Iran’s priorities is to be able to engage in international 

trade in dollar-denominated transactions, which would not only 

give it access to the world’s strongest and most liquid currency, but 

would also further legitimize its financial system. 

Can you confirm that there are no plans now or in the future for 

the Administration to allow Iranian or U.S. or foreign persons at 

any point in a transaction to engage in either direct or indirect dollar-denominated transactions, or dollar clearing in any form, including offshore facilities or through intrabank bookkeeping or 

other conversions or transfers? Please do not neglect to specifically 

address the possibilities of offshore facilities, and intrabank transfer book entries and any other type of conversion opening itself to 

a dollarized transaction. 

A.2. The Administration is not planning to reinstate the authorization for ‘‘U-turn’’ transactions or give Iran access to the U.S. finanVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00053 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
50 

cial system. The Administration fully stands by our previous statements, and on Friday, April 1, President Obama confirmed during 

a press conference that reports that the Administration will grant 

Iran access to the U.S. financial system are inaccurate. 

We will continue to vigorously enforce remaining sanctions on 

Iran, including our primary sanctions that generally prohibit U.S. 

financial institutions from clearing U.S. dollars through the U.S. financial system for Iran-related transactions, holding correspondent 

account relationships with Iranian financial institutions, or entering into financing arrangements with Iranian banks. 

Q.3. The Iran Sanctions Act of 1996, as amended, has been a pivotal piece of sanctions architecture since its inception. It is set to 

expire on December 31st of this year. 

What set of circumstances would have either of you advise the 

President to veto a Congressional reauthorization of the Iran Sanctions Act at any time before December 31st? 

Would the President veto a Congressional reauthorization of the 

Iran Sanctions Act at any time before December 31st? 

A.3. It is not necessary to extend the Iran Sanctions Act (ISA) at 

this time, since it does not expire until the end of 2016. Right now 

our focus is on continuing to verify that Iran is implementing its 

nuclear-related commitments under the Joint Comprehensive Plan 

of Action (JCPOA). Further, it is not necessary to renew the Iran 

Sanctions Act in order to retain the ability to snapback sanctions. 

The President could utilize his authorities under the International 

Emergency Economic Powers Act (IEEPA) and other statutes to impose a variety of economic sanctions that would allow us to recreate sanctions currently required under ISA, if necessary. Indeed, 

much of our Iran sanctions architecture has been created through 

the use of Executive Orders that were issued pursuant to IEEPA. 

These E.O.s can be issued in as little as a few days, which means 

that we could quickly reimpose sanctions in a snapback scenario. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM STEPHEN D. MULL 

Q.1. Ambassador Mull, you said that the U.S. purchase of Iran’s 

heavy water was in our commercial interest, even though there are 

other suppliers of this material that we consider allies. Are there 

other U.S. suppliers for this material? 

A.1. There are only two countries that regularly export heavy 

water: Canada and India. The United States currently has no capability to produce heavy water. Canada exports heavy water from inventory only. While the substantial U.S. demand for heavy water 

for non-nuclear applications has been reliably met in recent years, 

there is a history of challenges over the past decade. 

Q.2. Can you explain why from your perspective purchasing this 

heavy water from Iran, and not from other suppliers such as Canada and India, made sense? Have any other Nations now started 

to explore purchase agreements to buy this material to ensure it 

isn’t acquired on the international market by others for nefarious 

purposes? 

51 

A.2. The Joint Comprehensive Plan of Action (JCPOA) ensures that 

Iran’s nuclear program is and will remain exclusively peaceful. To 

reach Implementation Day, the JCPOA required Iran to take a 

number of nuclear-related steps that cut off Iran’s pathways to acquire enough fissile material for a nuclear weapon, including the 

plutonium pathway, such as removing the core of the Arak heavy 

water research reactor and filling it with concrete, rendering the 

core permanently inoperable. Moreover, Iran reduced its stockpile 

of nuclear-grade heavy water to less than 130 metric tons (MT), 

which is the current cap under the JCPOA. Specifically, Iran exported its excess heavy water to Oman, where it is under IAEA 

monitoring and verification, in anticipation of a sale on the international market. 

The United States does not produce heavy water, and currently 

has no inventory of heavy water that is suitable for industrial and 

research applications. While the substantial U.S. demand for heavy 

water for non-nuclear applications has been reliably met in recent 

years, there is a history of challenges over the past decade. Most 

international producers of heavy water fill their domestic nuclear 

demand before it making it available for sale. Moreover, the global 

supply of heavy water available to the international market is limited while demand continues to grow. Iran making available its excess heavy water reduces the unpredictability of international supplies and helps address these challenges. 

This purchase provides U.S. industry with a critical product, 

while also providing a final disposition for excess heavy water that 

was exported from Iran prior to Implementation Day as contemplated in the JCPOA. The United States was under no commitment to purchase heavy water from Iran, nor is it committed to do 

so in the future. It is possible that other countries with a need for 

heavy water may choose to purchase excess Iranian heavy water as 

well, and we understand certain countries have already expressed 

interest in doing so. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM STEPHEN D. MULL 

Q.1. In response to questions I asked you during the hearing, you 

noted that you accompanied Secretary Kerry on his recent meetings in Europe and were present when he was meeting with European banks in London on or around May 12th. We have received 

conflicting reports of whether the Secretary was merely clarifying 

the scope of sanctions or was encouraging banks to reengage with 

Iran. 

Please provide me with any notes, minutes, readouts, and/or 

summaries prepared by Secretary Kerry or any State Department 

staff in connection with these meetings. 

A.1. Similar to what was done previously when we were ramping 

up sanctions on Iran, we are engaging with private sector and foreign Government stakeholders to help them understand the contours of the sanctions relief that was effectuated on January 16, 

2016. As Secretary Kerry stated, his meetings in London in particular were an effort to make it clear that permissible business, 

52 

within the scope of the Joint Comprehensive Plan of Action 

(JCPOA), is available to foreign banks. 

Q.2. According to Reuters, British Foreign Secretary Phillip Hammond, said that the strategic objective of the joint meeting between 

U.K. officials, U.S. officials, and European bankers was to draw 

Iran back into the international community, and actively work ‘‘to 

allow these European and global banks to support European businesses in resuming normal trade and investment patterns with 

Iran.’’ 

Does Secretary Kerry disagree with Mr. Hammond’s characterization of the meetings’ objectives, which seem to be at odds with 

merely ‘‘clarifying’’ the scope of U.S. sanctions? 

If you agree with Mr. Hammond, what does Secretary Kerry view 

as ‘‘normal trade and investment patterns with Iran?’’ 

A.2. Commensurate with past practice, we are conducting outreach 

and clarification to Governments and businesses to help them understand the contours of the sanctions relief that was effectuated 

on January 16, 2016, when the IAEA verified that Iran has met 

key nuclear-related commitments specified in the Joint Comprehensive Plan of Action (JCPOA). This meeting was part of that 

effort. 

We took a similar approach of meeting with foreign Governments 

and the private sector to ensure that secondary sanctions to address Iran’s nuclear program were effectively and meaningfully imposed, and it is understandable that similar engagement is now underway to ensure that nuclear-related secondary sanctions are effectively and meaningfully lifted consistent with the JCPOA. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON 

FROM STEPHEN D. MULL 

Q.1. What is the top-line gross amount of Iranian assets that have 

been unblocked as a result of sanctions relief under the JCPOA? 

A.1. The Treasury Department estimates that when our JCPOA 

sanctions relief was effectuated on January 16, 2016 (referred to as 

Implementation Day), the Central Bank of Iran (CBI) about $100 

billion in assets worldwide. However, our assessment is that Iran’s 

usable liquid assets are around $50 billion of that total. 

Q.2. In January of last year—when he was the Treasury Under 

Secretary for Terrorism and Financial Intelligence—CIA Deputy 

Director David Cohen testified that $100 billion in Iranian foreign 

currency reserves were blocked by sanctions. Was his testimony accurate? Have those foreign currency reserves now been unblocked? 

A.2. The Treasury Department estimates that on Implementation 

Day, the Central Bank of Iran (CBI) held about $100 billion in assets worldwide. However, our assessment is that Iran’s usable liquid assets are around $50 billion of that total. 

The other $50–70 billion are either obligated in illiquid projects 

(such as over 50 projects with China) that cannot be monetized 

quickly, if at all, or are composed of outstanding loans to Iranian 

entities that cannot repay them.μμFurthermore, because Iran’s 

freely accessible assets constitute the country’s reserves, not its annual budgetary allowance, Iran will need to retain a portion of that 

53 

$50 billion in available assets to defend its currency and engage in 

international trade. 

Q.3. In May of last year, President Obama told Jeffrey Goldberg 

of The Atlantic that ‘‘Iran has $150 billion parked outside the country,’’ and suggested this would be made available to Iran under 

sanctions relief. Was this statement accurate? What type of assets 

make up the $150 billion to which President Obama referred? 

A.3. The President stated a hypothetical regarding Iran’s use of reserves to Mr. Goldberg. The Treasury Department estimates that 

on Implementation Day, the Central Bank of Iran (CBI) held about 

$100 billion in assets worldwide. 

Q.4. Please explain how and in what currency the United States paid the $1.7 billion settlement to Iran in connection with the freeing of U.S. hostages in January. Please include a description of how 

any U.S. dollars or U.S. financial institutions were involved in facilitating the transaction, whether directly or indirectly. 

A.4. The settlement in January 2016 of a long-standing claim at 

the Iran–U.S. Claims Tribunal was done on its own merits and unquestionably is to the great benefit of the United States. The release by Iran of several U.S. citizens was part of a reciprocal humanitarian gesture in which the United States provided relief to 

certain Iranian nationals. 

The first settlement payment, in the amount of $400 million, 

came out of the Foreign Military Sales Trust Fund, or FMS account. Treasury worked with the Defense Finance and Accounting 

Service (DFAS) and the Federal Reserve Bank of New York 

(FRBNY) so that the funds were converted from dollars to Swiss 

francs and credited to a FRBNY account at a European bank. On 

January 17, the payment was provided to an official from the Central Bank of Iran for transfer to Tehran. 

The second payment, involving settlement of the dispute over interest on the funds in the FMS account, was made from the Judgment Fund. The Judgment Fund is the source of funding Congress 

has provided for use generally in paying judgments and settlements of claims against the United States when there is no other 

source of funding. Treasury disbursed the payment after receiving 

the appropriate approvals from the Department of Justice. The 

payment from the Judgment Fund was initiated through a transfer 

to an account of a European bank. Pursuant to an arrangement between Iran, the home country of that bank, and the United States, 

the European bank converted the $1.3 billion into Euros and disbursed the banknotes to an official from the Central Bank of Iran. 

This process occurred in two installments, one on January 22, and 

one on February 5. 

The sanctions regime we have built with our international partners effectively cut Iran off from the international financial system. 

Iran was very aware of the difficulties it would face in accessing 

and using the funds if they were in any form other than cash, even 

after the lifting of sanctions under the Joint Comprehensive Plan 

of Action. Therefore, effectuating the payment of the funds in the 

FMS account and the subsequent payments in cash for the compromise on interest was the most reliable way to ensure that the 

funds were received in a timely manner. 

54 

For both payments, no direct transfer was made from any U.S. 

account to Iran. These transactions complied with U.S. sanctions 

law and did not require a unique license, waiver, or other form of 

authorization. Treasury regulations explicitly authorize all transactions necessary for payments pursuant to settlement agreements 

entered into by the United States Government in a legal proceeding in which the United States is a party, such as a settlement 

of claims before the Tribunal. 

Q.5. Please explain how and in what currency the United States will pay $8.6 million to Iran in exchange for heavy water. Please 

include a description of how any U.S. dollars or U.S. financial institutions will be involved in facilitating the transaction, whether directly or indirectly. 

A.5. The U.S. Department of Energy’s Isotope Program will pay Iran the Euro equivalent of approximately $8.6 million in exchange 

for 32 metric tons of heavy water. Payment to Iran will be made 

in Euros. The transaction and the payments were all authorized by 

the U.S. Treasury Department’s Office of Foreign Assets Control. 

The routing was through third-country financial institutions and is 

similar to the mechanism that has been used for years to allow 

other authorized transactions—such as for exports of food and medicine—between the United States and Iran. 

Q.6. I understand that after the signing of the initial JPOA, the 

Treasury Department was involved in establishing various ‘‘humanitarian channels’’ to facilitate exports to Iran of humanitarian 

goods. I understand that these channels still operate. 

Please explain how these channels operate, which financial institutions are involved, and whether and how U.S. dollars are involved in the channels, whether directly or indirectly. 

A.6. In furtherance of the JPOA, the P5+1 committed to establish 

a mechanism to further facilitate the purchase of, and payment for, 

the export of food, agricultural commodities, medicine, and medical 

devices to Iran, as well as medical expenses incurred abroad by Iranians. The mechanism, known informally as ‘‘humanitarian channels,’’ remained in place during the JPOA period. Foreign financial 

institutions whose involvement was sought by Iran in hosting this 

new mechanism were provided guidance by the Office of Foreign 

Assets Control (OFAC). Companies interested in using this financial mechanism coordinated with their Iranian counterparties. 

Transactions for the export of U.S.-origin food, agricultural commodities, medicine, and medical devices to Iran were already authorized by general license 31 CFR 560.530, and were not required 

to be processed through this mechanism. 

The institutions that operated humanitarian channels pursuant 

to the JPOA may continue to do so at their discretion even after 

Implementation Day for transactions for the sale of food, agricultural commodities, medicine, and medical devices to Iran. Following Implementation Day, it is no longer sanctionable for nonU.S. entities—including foreign financial institutions—to conduct 

transactions with the Government of Iran or Iranian entities, as 

long as the transactions do not violate the U.S. domestic trade embargo on Iran and do not involve persons that remain on the Specially Designated Nationals (SDN) List or sanctionable conduct deVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00058 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
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scribed in FAQ A.3.ii–iii of the FAQs issued by Treasury in connection with the JCPOA (http://redirect.state.sbu/?url=https:// 

www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoalfaqs.pdf). 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER 

FROM STEPHEN D. MULL 

Q.1. In the past, the Administration has said it would support reauthorization of the Iran Sanctions Act (ISA) only once certain 

events passed, including the JCPOA Implementation Day passed 

and then the Majles elections in February 2016. I hope there are 

not any new reasons for further postponing any movement on this 

matter. Would the Administration support Congressional reauthorization of the Iran Sanctions Act? Would reauthorization violate 

the JCPOA? If there is a timing concern about reauthorizing the 

sanctions, what is that concern, and when will the Administration 

be comfortable with reauthorization? 

A.1. The Administration does not believe that it is necessary to extend the Iran Sanctions Act (ISA) at this time, since it does not expire until December 2016. Right now, we are focused on ensuring 

that Iran continues to fully implement its nuclear-related commitments under the JCPOA. 

The expiration of the ISA in December will not affect our ability 

to continue to issue sanctions designations when warranted, as we 

have ample authorities to target missile-related actors, as well as 

activity related to human rights violations, malicious cyberactivity, 

and other activity of concern. Nor would ISA’s sunset affect our 

ability to snap sanctions back into place, should Iran significantly 

fail to perform its nuclear commitments in the JCPOA. Existing 

authorities give us all the tools we currently need to monitor and 

respond to any destabilizing activity or JCPOA noncompliance from 

Iran. 

My colleagues and I would be happy to engage in further discussions with Congress about how to further foreign policy priorities 

in a manner that does not jeopardize JCPOA implementation. 

Q.2. Why has the Administration not pursued cyberspecific sanctions against Iran, especially given that the Department of Justice 

has already indicted seven Iranian hackers for the dam and bank 

attacks? 

A.2. The Administration is pursuing a comprehensive strategy to 

confront malicious cyberactors, a point the President made clear 

when signing the Executive Order enabling the use of economic 

sanctions against malicious cyberactors. That strategy includes diplomatic engagement, trade policy tools, law enforcement mechanisms, and imposing sanctions on individuals or entities that engage in certain significant, malicious cyberenabled activities. 

The Department of Justice’s March 24 indictment of seven individuals for alleged cyberattacks against the United States is proof 

that we will act when we see evidence of cyberthreats from Iran. 

We take seriously all such malicious activity in cyberspace, and 

we will continue to use all the tools at our disposal, including sancVerDate Nov 24 2008 14:25 Dec 20, 2016 Jkt 046629 PO 00000 Frm 00059 Fmt 6602 Sfmt 6602 L:\HEARINGS 2016\05-25 UNDERSTANDING THE ROLE OF SANCTIONS UNDER THE IRA
56 

tions, to deter, detect, counter, and mitigate such activity in a manner and timeframe appropriate to the incidents themselves. 

Q.3. We continue to see provocative behavior around ballistic missile testing and launch from Iran, even after we have levied sanctions for the behavior. Have ballistic missile sanctions succeeded in 

materially obstructing Iran’s missile component procurement networks or in deterring future Iranian test-launches of ballistic missiles? There have been suggestions that additional sanctions on entities that provide financing for and logistical support, such as 

transportation, in support of Iranian ballistic missiles would be 

useful to apply additional pressure to address this behavior. What 

discussions have you had within Treasury about how to expand 

ballistic missile sanctions, and what Iranian activities would warrant additional sanctions? 

A.3. The United States uses a wide range of multilateral and unilateral tools to address Iran’s ballistic missile programs. While our 

sanctions authorities are an important part of these efforts, we also 

work with foreign Governments to prevent transfers of equipment 

and technology to entities affiliated with Iran’s missile program. 

Such efforts help delay the advancement of these programs and 

make Iran’s procurement efforts more costly, time consuming, and 

difficult. In addition, we continue to call attention to Iran’s missile 

testing activities at the United Nations, for example, reporting 

Iran’s March 2016 missile launches to the Security Council and requesting the Council review this matter to determine an appropriate response. Such efforts help raise awareness among other 

Governments of Iran’s missile development efforts and raise the political costs to Iran for these provocative missile testing activities. 

We bolster these multilateral and bilateral efforts with unilateral 

sanctions authorities to impose penalties on entities connected to 

Iran’s ballistic missile programs, procurement network, or testing 

activities. For example, following Iran’s missile tests in March 

2016, the United States designated two Iran-based entities directly 

involved with Iran’s ballistic missile program under Executive 

Order (E.O.) 13382. Moving forward, we will continue to use our 

current unilateral sanctions authorities as warranted to help address the full spectrum of Iran’s activities related to its missile program. 

Q.4. As you are talking to international firms and financial institutions about what is and is not permissible under our current sanctions regime, are you also reiterating your message that Iran, not 

the United States, is responsible for how much economic relief they 

receive from the JCPOA? If so, what has their reaction been to that 

statement? If not, what are you saying in these meetings to push 

back against the Iranian accusation that the U.S. is to blame for 

their economic woes? 

A.4. Commensurate with our engagement around the world on the 

occasion of any significant change in U.S. sanctions, we are providing guidance necessary to ensure that foreign Governments and 

the private sector understand clearly the extent of U.S. sanctions 

relief provided under the JCPOA. It is in our interest to ensure 

that the JCPOA works for all participants. 

57 

Implicit in your question is the fact that we cannot and do not 

ignore the importance of Iran’s own actions in generating confidence that Iran is a safe place to do business. For our part, we 

will continue to answer questions and address concerns regarding 

U.S. sanctions lifting, but there are also many factors beyond our 

control slowing Iran’s economic recovery that have nothing to do 

with sanctions. And we also recognize that it is going to take time 

for some companies to feel confident in reengaging with Iran due 

to concerns other than sanctions. 

President Obama spoke to this recently, when he pointed out the 

importance of Iran’s own behavior in generating confidence that 

Iran is a safe place to do business. 

As the President said, ‘‘when Iran launches ballistic missiles 

with slogans calling for the destruction of Israel and continues to 

ship missiles to Hezbollah, that makes businesses nervous. When 

Iran continues to ship missiles to Hezbollah, that makes businesses 

nervous. 

Iran has to understand what every country in the world understands, which is businesses want to go where they feel safe, where 

they don’t see massive controversy, where they can be confident 

that transactions are going to operate normally.’’