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S. HRG. 111–780 

IRAN POLICY IN THE AFTERMATH OF 

U.N. SANCTIONS 

HEARING 

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JUNE 22, 2010 

Printed for the use of the Committee on Foreign Relations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

COMMITTEE ON FOREIGN RELATIONS

JOHN F. KERRY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut 

RUSSELL D. FEINGOLD, Wisconsin 

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

JEANNE SHAHEEN, New Hampshire 

EDWARD E. KAUFMAN, Delaware 

KIRSTEN E. GILLIBRAND, New York 

RICHARD G. LUGAR, Indiana 

BOB CORKER, Tennessee 

JOHNNY ISAKSON, Georgia 

JAMES E. RISCH, Idaho 

JIM DEMINT, South Carolina 

JOHN BARRASSO, Wyoming 

ROGER F. WICKER, Mississippi 

JAMES M. INHOFE, Oklahoma 

DAVID MCKean, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

(II)

C O N T E N T S 

Page 

Burns, Hon. William J., Under Secretary for Political Affairs, Department 

of State, Washington, DC .................................................................................... 6 

Prepared statement .......................................................................................... 9 

Responses to questions submitted for the record by Senator John F. 

Kerry .............................................................................................................. 48 

Responses to questions submitted for the record by Senator Richard 

G. Lugar ......................................................................................................... 50 

Kerry, Hon. John F., U.S. Senator from Massachusetts, opening statement ..... 1 

Levey, Hon. Stuart, Under Secretary for Terrorism and Financial Intelligence, 

Department of State, Washington, DC ............................................................... 12 

Prepared statement .......................................................................................... 14 

Responses to questions submitted for the record by Senator John F. 

Kerry .............................................................................................................. 53 

Responses to questions submitted for the record by Senator Richard 

G. Lugar ......................................................................................................... 54 

Lugar, Hon. Richard G., U.S. Senator from Indiana, opening statement ........... 4 

(III)

(1) 

IRAN POLICY IN THE AFTERMATH OF U.N. 

SANCTIONS 

TUESDAY, JUNE 22, 2010 

U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. 

The committee met, pursuant to notice, at 9:33 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. John F. Kerry 

(chairman of the committee) presiding. 

Present: Senators Kerry, Feingold, Boxer, Menendez, Cardin, 

Casey, Webb, Shaheen, Kaufman, Gillibrand, Lugar, Risch, 

Barrasso, and Wicker. 

OPENING STATEMENT OF HON. JOHN KERRY, 

U.S. SENATOR FROM MASSACHUSETTS 

The CHAIRMAN. The hearing will come to order. 

I just wanted to take a minute as we start to respond to remarks 

made by General McChrystal and his staff in a magazine article. 

I had a conversation with General McChrystal about a half hour 

ago and emphasized to him that I think obviously, those are comments that he’s going to have to deal with with respect to the Commander in Chief, his Vice President, and his National Security 

staff. 

I have enormous respect for General McChrystal, I think he’s a 

terrific soldier, and this is a critical moment in Afghanistan. And 

as far as I am concerned, personally, the top priority is our mission 

in Afghanistan and our ability to proceed forward, competently. 

It will be up to the President of the United States, as Commander in Chief to make the decision as to whether or not he and 

his national security staff feel that they can do that. But my impression is that all of us would be best served by just backing off 

and staying cool and calm and, you know, not succumbing to the 

normal Washington twitter about this for the next 24 hours. We 

have troops on the front lines, we have a major mission that we’re 

in the middle of and I think the priorities of that mission are best 

served by letting the President and his top general have their conversation and make a determination as to how we proceed forward. 

I want to thank you for coming this morning to discuss the next 

steps in America’s policy toward Iran. This is as critical an issue 

as we could face. The potential of a nation securing a nuclear 

weapon when it behaves as outside of the norm of international behavior as Iran has chosen to behave, raises serious national security concerns, not just for the United States, but for many other 

countries. 

2 

And I know that regionally, from my meetings with leaders 

throughout the region, they are deeply concerned about it. There 

is not a leader in the Gulf States or the Arab world who hasn’t expressed concern about the potential of a nuclear Iran. 

Today, we are privileged to welcome two of the principal architects of our policy toward Iran: Ambassador William Burns, Under 

Secretary of State for Political Affairs; and Mr. Stuart Levey, 

Under Secretary of the Treasury for Terrorism and Financial 

Intelligence. 

This hearing comes at a crucial moment in our efforts to curtail 

Iran’s nuclear ambitions. All of us understand the stakes: A 

nuclear-armed Iran would pose an intolerable threat to our ally, 

Israel, risk igniting an arms race in what is already the world’s 

most dangerous region, and undermine our global effort, which we 

have just taken significant steps to underscore with the New 

START Treaty, to halt the spread of nuclear weapons. 

That’s why, 2 weeks ago, the U.N. Security Council passed Resolution 1929, widening the scope and scale of international sanctions 

against Iran. It expands sanctions against the Revolutionary Guard 

Corps, subjects Iranian vessels to inspection on the high seas, bans 

most categories of arms sales to Iran, and restricts the kind of 

investments that are allowed in Iran. 

Resolution 1929 also contains a number of nonmandatory measures which give the Treasury and State Departments important 

new leverage to persuade financial institutions, oil companies, and 

other countries to divest from Iran. I want to congratulate all of 

those who have been involved in this impressive diplomatic effort. 

I know it took a lot of personal work, a lot of sitting down and 

working through the possibilities with many countries, and particularly, obviously, with the Perm-5, and among those, China and 

Russia. 

As we gather this morning, Congress is also finalizing legislation 

that contains a number of tough new economic penalties aimed at 

persuading Iran to change its behavior. Among other measures, it 

targets firms that sell refined petroleum to Iran or that deal with 

the Revolutionary Guard. 

These steps to increase pressure are necessary, not because we 

want to target Iran, but because Iran itself has decided to continue 

to defy the international community, the International Atomic 

Energy Agency, and the U.N. Security Council. Iran’s publicly disclosed stocks at its Natanz enrichment facility now include more 

than 2,400 kilograms of reactor-grade low enriched uranium. I 

think I am correct in saying that, at the time that the original deal 

was offered for taking the enrichment out of Iran, there were somewhere around 1,600 or 1,700 kilograms. So, there’s been a growth 

in the amount of available nuclear fuel that they have, and that 

growth narrows the window with respect to their ability to break 

out in terms of nuclearization. 

That is enough feedstock, the 2,400 kilograms, is enough feedstock for two nuclear weapons, though it’s important to note that 

Iran, in order to achieve that, would have to first expel inspectors, 

and then enrich that materiel to the much higher level required for 

weapons purposes, and cross separate weaponization hurdles after 

they’ve done that. So, it is especially troubling that Iran has 

3 

recently begun enriching small quantities of uranium to a concentration of around 20 percent, crossing yet another nuclear 

threshold. 

If Iran continues much further down this path—and there is reason through its prior actions to believe that it intends to—then a 

later move to produce bomb-grade uranium would be significantly 

easier and faster. 

Given Iran’s dangerous progress, some will argue that engagement has been wasted. Well, we all wish Tehran’s response had 

been different. But, frankly, our ability to secure a new resolution 

at the United Nations, and our ability to persuade allies to go still 

further in pressuring Iran came about because we were prepared 

to engage and show our willingness to have engagement over some 

period of time. And it is the exhaustion of patience with that effort 

to engage, that has, in fact, helped to bring a reluctant China and 

Russia to the table. 

In the end, though, the true test of our policy will not be pressure applied, but behavior changed. Recent experience suggests 

that neither sanctions nor engagement alone will convince Iran to 

abandon its nuclear program. Only by combining both pressure and 

diplomacy into a comprehensive and coordinated strategy will we 

have a chance at altering Iran’s behavior. 

Now, there’s no guarantee that Iran will not continue to reject 

our diplomatic overtures. And that will present an opportunity to 

turn the pressure even higher. But given the stakes involved, if 

there is an opening, we must be willing to explore it. When I was 

recently in Syria, President Assad talked to me about the possibilities for that kind of an opening, and for the possibilities of even 

building on Iran’s initial offer. I know the administration will look 

at any opportunity to legitimately try to do so. 

But the current situation brings us to the heart of the questions 

at today’s hearing. Given the failure of the previous three U.N. 

Security Council resolutions to deter Iran, the pregnant question is, 

How will this one be different? How much time do we have and 

how long will it take for these sanctions to have an impact? What 

are the real redlines for the Iranian nuclear program and what 

consequences are we willing to impose if Iran crosses those redlines? 

We need to articulate an end state that is rigorous enough from 

a nonproliferation standpoint, but also has some prospect of being 

acceptable to both parties. America and our allies have put proposals on the table. The June 2008 proposal by the P5+1 to Iran, 

endorsed by both the Bush and Obama administrations, was reiterated this month as an annex to Resolution 1929. Last October’s 

proposal to take 1,200 kilograms out of Iran for further enrichment 

for the Tehran Research Reactor held a lot of promise. But Iran 

failed to provide a concrete response until the eleventh hour, on the 

eve of new U.N. sanctions, even while continuing to enrich uranium to 20 percent, and having already grown the amount that it 

had to that 2,400 kilograms. So, we look forward to hearing from 

our witnesses today on the status of each of these initiatives. 

We also need to understand how our efforts play into Iran’s volatile domestic politics. We need to take care that efforts to deter 

Iran’s nuclear program don’t come at the expense of the Iranian 

4 

people, who may yet emerge as a force for moderation within Iran. 

We recently passed the 1-year anniversary of Iran’s flawed Presidential elections. In the unrest that followed, Iranian security 

forces were responsible for widespread violence and for abuse 

against their own people. Dozens of democracy activists were killed 

and thousands more thrown in jail without due process. 

Three American citizens, Josh Fattal, Sarah Shourd, and Shane 

Bauer, remain in prison 11 months after being jailed for straying 

onto Iranian soil and the whereabouts of Robert Levinson remains 

unknown more than 3 years after he went missing in Iran. So, we 

will continue to speak up for the rights and well-being of the 

Iranian people, but also, of those Americans being held in Iranian 

custody. 

In the interest of time, I’m not going to recite the long and impressive resumes of our witnesses, other than to note that they are 

two of the best public servants that we have in government today. 

And before I introduce them, I want to say one other word about 

Iran. Any history, any reading of the history of Iran has to elicit 

from the United States some statement of responsibility for the 

events that took place in the early 1950s with the CIA’s involvement in a change of government effort there. And that is a 

longlasting and deep memory in the Iranian people, it’s something 

we don’t always think about. 

In addition to that, the Iranian people have an extraordinarily 

accomplished, long, long, history in terms of civilization, a lot 

longer than the United States of America. And their contributions 

to civilization in so many things, in science and art, in discoveries, 

are quite extraordinary. It would be wonderful if we could move 

beyond the repression of this current administration to embrace 

that history and to see Iran take a more legitimate and rightful 

place in the context of that global history. 

I think Ambassador Burns and Mr. Levey both understand that, 

but their task is to hold the process accountable in these days. And 

Ambassador Burns’ sustained diplomacy over the course of many 

months, working closely with Ambassador Susan Rice in New York, 

was absolutely instrumental in securing the passage of the U.N. 

Security Council Resolution 1929. 

And Mr. Levey’s efforts have been very significant. The Treasury 

Department is not as well known in its engagement, here, but it’s 

a very, very significant one. And their ability to be able to dissuade 

international banks and businesses from doing business with Iran 

has had a significant impact, and shown some significant results 

already. 

So, gentlemen, we welcome the both of you, we thank you for 

your work and your appearance here today and look forward to 

your testimony. 

Senator Lugar. 

OPENING STATEMENT OF HON. RICHARD G. LUGAR, 

U.S. SENATOR FROM INDIANA 

Senator LUGAR. I thank you, Mr. Chairman, for holding this important hearing on United States policy toward Iran. Today, our 

examination occurs against the backdrop of several significant 

developments. 

5 

First, the U.N. Security Council adoption of Resolution 1929 on 

June 9 added incrementally to three previous rounds of U.N. sanctions against Iran. This was followed on July 17 by the European 

Union’s announcement of new sanctions, most notably a ban on investment by companies in Iran’s oil and gas industry. 

In addition, June 12 marked the 1-year anniversary of Iran’s disputed Presidential elections and the brutal repression of the protests that ensued. I would just say the anniversary serves as a 

reminder of the values we Americans hold dear and to which Iranian citizens aspire: freedom of expression, freedom of assembly, 

and the freedom to choose our government through transparent, 

fair elections. 

As we debate as to how most effectively to constrain Iran’s 

nuclear ambitions, it is important to keep in mind those who continue to pay a personal cost for expressing their opposition to the 

Iranian regime. 

Iran represents a direct threat to United States national security, as well as to the security of Israel and that of our other 

friends in the region. It has long provided materiel and financial 

support to terrorist organizations, such as Hezbollah in Lebanon 

and Hamas in the Gaza Strip. Concerns about this activity were 

augmented earlier this year by reports of Iran’s transfer of longrange rockets to Hezbollah via Syria. 

The exact status of Iran’s nuclear program and the degree of 

progress it has made toward a potential nuclear weapon continue 

to be debated. But Tehran clearly is not complying with international nonproliferation regime. The latest report of the Director 

General of the International Atomic Energy Agency pointed to 

‘‘Iran’s continued failure to comply with its international obligations,’’ and noted its ‘‘sustained lack of cooperation with the IAEA.’’ 

The revelation last year of Iran’s clandestine enrichment facility 

was but one case in point. 

Restraining Iran’s nuclear program requires significant cooperation with allies and partners, most of whom have commercial interests with Iran and independent views about the Tehran regime. 

The progress this month toward broader international sanctions 

was welcome, but a sanctions strategy is likely to require much 

more work. For example, as additional countries in Europe, Asia, 

and elsewhere expand sanctions, what efforts are being made to 

persuade other nations—particularly China—to forgo the opportunity to substitute their own investment and trade for that which 

is being withdrawn? Greater international unity is vital, not only 

to materially inhibit Iran’s nuclear program ambitions and raise 

the costs of Iran’s noncompliance, but also to demonstrate international resolve that can help deter other states from violating 

NPT commitments and pursuing nuclear weapons. 

While the administration was engaged in negotiations over international sanctions, Congress has deliberated on legislation that 

would expand unilateral U.S. sanctions toward Iran. Although we 

are grateful for the briefings on this matter by administration officials, including Under Secretary Bill Burns, one of our witnesses 

today, it is past time for the administration to weigh in with a concrete response to this legislation. What provisions are supported or 

opposed by the administration, and what changes does it recVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
6 

ommend? How would additional U.S. unilateral sanctions affect the 

ongoing campaign to construct a more comprehensive system of 

international sanctions? 

The administration is conducting a review of existing United 

States sanctions on Iran. What lessons from this review can be 

applied to the new measures? I have my own reservations about 

certain provisions of this legislation, but I look forward to hearing 

from our witnesses today on the administration views. 

Beyond sanctions, I am hopeful that the witnesses will shed light 

on the administration’s broader strategy. At what point will President Obama’s offer of engagement reach the end of its shelf-life? 

What will become of the P5+1 track? Is the administration considering steps to further isolate the regime in Tehran? To what extent 

has the need to isolate Iran been elevated on the bilateral agenda 

with countries that remain friendly with Tehran? 

I look forward to hearing our witnesses’ views. To the extent that 

some of these discussions would be more appropriately held in a 

classified setting, I would also welcome that opportunity at a future 

date. 

We thank you for coming, and I thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Lugar. I think 

that, together hopefully we have framed the questions and the 

backdrop for the hearing today if, indeed, as it could easily be that 

some of questions wind up taking us to a place that is classified. 

We’ll just sort of set those aside, mark them, but we would like to 

go into a classified session, then, because I would like to make sure 

we make that part of the record. 

So, we welcome your testimony, again. Your full testimonies will 

be placed in the record as if read in full. 

We look forward to any summary you would like to make. 

Secretary Burns, why don’t you lead off? 

STATEMENT OF HON. WILLIAM J. BURNS, UNDER SECRETARY 

FOR POLITICAL AFFAIRS, DEPARTMENT OF STATE, WASHINGTON, DC 

Ambassador BURNS. Thank you very much. Chairman Kerry, 

Senator Lugar, and members of the committee, good morning and 

thank you very much for the opportunity to appear before you 

today. 

The passage of United Nations Security Council Resolution 1929, 

2 weeks ago established the most comprehensive international 

sanctions that the Government of the Islamic Republic of Iran has 

ever faced. It reinforces the determination, not only of the United 

States, but of the rest of the international community to hold Iran 

to its international obligations and to prevent it from developing 

nuclear weapons. 

At this critical moment as we vigorously implement Resolution 

1929 and use it as a platform upon which to build further measures by the European Union and other partners, it is important to 

take stock of what’s at stake and where we go from here. Let me 

start with the obvious. A nuclear-armed Iran would severely 

threaten the security and stability of a part of the world crucial to 

our interests, and to the health of the global economy. It would seriously undermine the credibility of the United Nations and other 

7 

international institutions, and seriously undercut the nuclear nonproliferation regime at precisely the moment we are seeking to 

strengthen it. These risks are only reinforced by the wider actions 

of the Iranian leadership, particularly its longstanding support for 

terrorist groups, its opposition to Middle East peace, its repugnant 

rhetoric about Israel, the Holocaust, and so much else, and its brutal repression of its own citizens. 

In the face of those challenges, American policy is straightforward: we must prevent Iran from developing nuclear weapons; 

we must counter its other destabilizing actions in the region and 

beyond; and we must continue to do all we can to advance our 

broader interests in democracy, human rights, and development 

across the Middle East. 

President Obama has made clear repeatedly—including in his 

statement on the adoption of Resolution 1929—that we will stand 

up for those rights that should be universal to all human beings, 

and stand with those brave Iranians who seek only to express 

themselves freely and peacefully. We’ll also continue to call on Iran 

to release immediately Shane Bauer, Sarah Shourd, and Josh 

Fattal, and all other unjustly detained American citizens, and we 

continue to call upon Iran to determine the whereabouts and ensure the safe return of Robert Levinson. 

We’ve pursued out broad policy goals over the past 18 months 

through a combination of tough-minded diplomacy, including both 

engagement and pressure, and active security cooperation with our 

partners in the gulf and elsewhere. We’ve sought to sharpen the 

choices before the Iranian leadership. We’ve sought to demonstrate 

what’s possible if Iran meets its international obligations and adheres to the same responsibilities that apply to other nations and 

we’ve sought to intensify the cost of continued defiance and to show 

Iran that pursuit of a nuclear weapons program will make it less 

secure, not more secure. 

Last year, we embarked on an unprecedented effort at engagement with Iran. We did so without illusions about whom we were 

dealing with or the scope of our differences over the past 30 years. 

Engagement has been both a test of Iranian intentions, and an 

investment in partnership with a growing coalition of countries 

deeply concerned about Iran’s nuclear ambitions. We sought to create early opportunities for Iran to build confidence in its intentions. 

In Geneva, last October, we supported—along with Russia and 

France—a creative proposal by the International Atomic Energy 

Agency to provide fuel for the production of medical isotopes at the 

Tehran research reactor. Unfortunately, what appeared to be a constructive beginning in Geneva was later spurned by the Iranian 

leadership. Instead, Iran pursued a clandestine enrichment facility 

near Qom, announced plans for 10 new enrichment facilities, flatly 

refused to continue discussions with the P5+1 about international 

concerns about its nuclear program, provocatively expanded enrichment to near 20 percent, in further violation of U.N. Security 

Council resolutions, and drew new rebukes for the IAEA in the 

Director General’s most recent report a few weeks ago. 

Iran’s intransigence left us no choice but to employ a second tool 

of diplomacy—economic and political pressure. Passage of Resolution 1929 is the essential first step in that effort. The provisions 

8 

of 1929 go well beyond previous sanctions resolutions. For the first 

time, it bans significant transfers of conventional weapons to Iran. 

For the first time, 1929 bans all Iranian activities related to ballistic missiles that could deliver a nuclear weapon. For the first 

time, it imposes a tough framework of cargo inspections, to detect 

and stop Iran’s smuggling and acquisition of nuclear materiels and 

other elicit items. It prohibits Iran from investing abroad in sensitive nuclear activities such as uranium mining. It creates important new tools to help block Iran’s use of the international financial 

system to fund and facilitate nuclear proliferation. For the first 

time, it highlights, formally, potential links between Iran’s energy 

sector and its nuclear ambitions, and it targets, directly, the role 

of the Islamic Revolutionary Guard Corps in Iran’s proliferation 

efforts, adding 15 specific IRGC entities to the list of designations 

for asset freezes. 

Resolution 1929 provides a valuable new platform, and valuable 

new tools. Now, we need to make maximum use of them. My colleague, Bob Einhorn, will lead this effort for the State Department. 

He’ll work closely with Under Secretary Levey, whose own leadership on these issues for a number of years has been extraordinarily 

effective. Already, the European Union has acted strongly to follow 

up 1929. Its leaders decided last Thursday to take a series of significant steps, including a prohibition of new investment in the energy sector, and bans on the transfer of key technology, as well as 

tough measures against Iranian banks and correspondent banking 

relationships. 

Australia has indicated similar resolve, and other partners will 

follow suit, shortly. Meanwhile, as Stuart will discuss in more detail, we continue to have success in persuading a whole variety of 

foreign companies that the risks of further involvement in Iran far 

outweigh the benefits. 

As all of you know very well, the administration has been working closely with the Congress to help shape pending legislation so 

that it maximizes the impact of the wider international sanctions 

that we are putting in place. 

The net result of this combination of economic pressures is hard 

to predict. It will certainly not change the calculations of the Iranian leadership overnight, nor is it a panacea. But it is a mark of 

their potential effect that Iran has worked so hard in recent 

months to avert action in the Security Council, and tried so hard 

to deflect or divert the steps that are now underway. 

Iran is not 10 feet tall, and its economy is badly mismanaged. 

Beneath all of their bluster and defiant rhetoric, its leaders understand that both the practical impact of Resolution 1929 and its 

broader message of isolation create real problems for them. That is 

particularly true at a moment when the Iranian leadership has 

ruthlessly suppressed—but not eliminated—the simmering discontent bubbled over so dramatically last summer. Millions of Iranians went to the streets last June, and in smaller numbers over 

the course of the ensuing months, with a simple but powerful 

demand of their leaders: That their government respect the rights 

enshrined within its own constitution, rights that are the entitlement of all people; to voice their opinions, to select their leaders, 

to assemble without fear, to live in security and peace. A governVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
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ment that does not respect the rights of its own people will find it 

increasingly difficult to win the respect that it professes to seek in 

the international community. 

Sanctions and pressure are not an end in themselves. They are 

a complement, not a substitute, for the diplomatic solution to which 

we and our partners are still firmly committed. We continue to 

acknowledge Iran’s right to pursue civilian nuclear power, but with 

that right comes a profound responsibility to reassure the rest of 

the international community about the exclusively peaceful nature 

of its intentions. 

Facts are stubborn things, and it is a striking fact that Iran is 

the only NPT signatory in the world today that cannot convince the 

IAEA that its nuclear program is intended for purely peaceful purposes. The Foreign Ministers of the P5+1 countries made clear in 

the statement they issued on passage of Resolution 1929 that we 

remain ready to engage with Iran to address these concerns. E.U. 

High Representative Ashton has written directly to an Iranian 

counterpart to convey this readiness. We’ve joined Russia and 

France in expressing to IAEA Director General Amano a number 

of concerns about Iran’s latest proposal on the Tehran research reactor, and the TRR remains a potential opportunity in the context 

of the broader P5+1 efforts to address Iran’s nuclear program. The 

door is open to serious negotiation, if Iran is prepared to walk 

through it. 

The road ahead will not be easy, and the problems before us 

posed by Iran’s behavior are urgent. But there is growing international pressure on Iran to live up to its obligations and growing 

international isolation for Iran if it does not. Resolution 1929 helps 

significantly to sharpen that choice. We will work very hard to implement and build upon it. We are absolutely determined to ensure 

that Iran adheres to the same responsibilities that apply to other 

nations. Too much is at stake to accept anything less. 

Thank you. 

[The prepared statement of Ambassador Burns follows:] 

PREPARED STATEMENT OF AMBASSADOR WILLIAM J. BURNS, UNDER SECRETARY OF

STATE FOR POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC 

Chairman Kerry, Ranking Member Lugar, distinguished members of the committee, thank you very much for inviting me to be here before you today. 

This hearing comes at a pivotal moment for U.S. policy toward Iran. Only 2 weeks 

ago, we adopted United Nations Security Council Resolution 1929, the sixth such 

resolution on Iran, and the fourth which commits the international community to 

implementing the most comprehensive sanctions that the Iranian Government has 

ever faced. This resolution represents the culmination of months of concerted effort 

and the realization of a truly multilateral partnership focused on pursuing a diplomatic resolution to the threat posed by Iran’s nuclear ambitions. The measures 

contained in this resolution underscore the determination of President Obama to 

prevent Iran from developing nuclear weapons and to reinforce global norms and 

institutions of nonproliferation—a resolve that today is shared by the international 

community. 

Resolution 1929 sends a clear, global message of what is expected from Iran, and 

the consequences for Iran’s decision to shirk its responsibilities to the global nonproliferation regime. It strengthens existing U.N. sanctions by expanding the 

breadth and reach of those measures and breaks new ground with additional categories of sanctions. It provides a platform upon which states can build to advance 

the objectives of the resolution, as our EU and Australian partners did last week. 

Adoption of this resolution is only one milestone in international actions on this 

front. Secretary Clinton announced that senior State Department official Bob 

Einhorn will coordinate our vigorous efforts to work closely with our partners and 

10 

allies to ensure these sanctions are fully enforced and built upon. And all our agencies—State, Treasury, and others—will continue to take action under our existing 

domestic authorities to sharpen Iran’s choices, as Secretary Geithner did last week 

in imposing sanctions on 12 entities and four individuals under proliferation-related 

sanctions authorities. 

This is also an important time for those decisionmakers in Tehran who are in a 

position to shape the future of the Islamic Republic and its relationship with the 

rest of the world. Only a year ago, Iran was convulsed by massive public outrage 

and activism protesting election results. Millions of Iranians came to the streets last 

June and in smaller numbers over the course of the ensuing months with a simple 

but powerful demand of their leaders—that their government respect the rights enshrined within its own constitution, rights that are the entitlement of all people— 

to voice their opinions, to select their leaders, to assemble without fear, to live in 

security and peace. The government has been able to contain the public opposition, 

but only through the use of intense intimidation wielded against individuals and the 

burgeoning civil society that has struggled to survive under a repressive leadership. 

As a result, Iran’s Government today is facing profound pressure on multiple fronts. 

Navigating these realities will require Iranian leaders to decide what kind of future 

they want for their country. 

A nuclear-armed Iran would have grave implications for vital American interests 

in the stability of the gulf region and broader Middle East. The concerns evoked by 

Iran’s determined expansion of its nuclear capabilities are only underscored by the 

destabilizing character of its regional foreign policy—its longstanding financial and 

operational support to terrorist organizations such as Hezbollah, Hamas, and Palestine Islamic Jihad; its cultivation of militancy, instability, and violence in Iraq 

and Afghanistan; and its hate-mongering rhetoric on Israel and the Holocaust. As 

President Obama said on June 9, ‘‘actions do have consequences. And whether it is 

threatening the nuclear nonproliferation regime, the human rights of its own citizens, or the stability of its neighbors by supporting terrorism, the Iranian Government continues to demonstrate that its own unjust actions are a threat to justice 

everywhere.’’ And therefore we will remain active in responding to these Iranian 

policies across the region, and through innovative programs, on advancing human 

rights and democracy and seeking to expand access to information within Iran. We 

will continue our efforts to coordinate with our allies on their own security, to promote more effective regional cooperation, and to buttress those states and political 

forces who are seeking to build a better more peaceful future for the region. 

Our policy seeks to prevent Iran from developing nuclear weapons, counter its 

other destabilizing actions, and advance our broader interests in democracy, human 

rights, and development across the Middle East. Over the course of the past 18 

months, we took unprecedented steps to demonstrate to Tehran the possibilities 

available through cooperation and engagement. Iran failed to take advantage of any 

of these historic opportunities—Iran has left unanswered President Obama’s outreach efforts, rejected a balanced and generous IAEA offer to refuel its Tehran 

Research Reactor (TRR), and has flatly and repeatedly refused to engage in negotiations to address international concerns regarding its nuclear program. Instead, Iran 

continues and expands its enrichment activities to include enriching uranium to 

nearly 20 percent, announces plans for the construction of new enrichment facilities, 

and continues to deny the IAEA full access and information regarding—among other 

places—the previously secret facility at Qom. Iran remains in noncompliance with 

its IAEA Safeguards Agreement; refuses to suspend all its uranium enrichmentrelated, reprocessing, and heavy water-related activities as required by the U.N. 

Security Council; and has yet to cooperate fully with the IAEA’s ongoing investigation, including by answering questions regarding the possible military dimensions 

of its nuclear program. For these repeated acts of noncompliance with Iran’s obligations, and as we had always foreshadowed, we demonstrated our seriousness about 

the second track of our two-track strategy. 

The sanctions imposed under UNSCR 1929 achieve two important priorities—they 

minimize the impact on average Iranians, while imposing real penalties on Iran’s 

nuclear and destabilizing military programs and those who support them. At the 

same time, they also make it harder for Iran to continue its destabilizing activities 

and seek to inhibit its development of nuclear weapons capability and the means 

to deliver them. The scope and strength of 1929 speaks to the depth of international 

concern about Iran’s path and is a testament to the genuinely constructive partnership we have developed with our P5+1 partners. We believe that the resolution, and 

the close coordination among the international community to implement it, will send 

two vital messages to Tehran: that Iran’s nuclear program does not enhance its security and comes at an ever greater cost, and the world is united around an effort 

to change Iran’s calculus. 

11 

Resolution 1929 enhances existing U.N. sanctions by expanding the breadth and 

reach of those measures and at the same time breaks new ground with additional 

categories of sanctions to further pressure Iran to comply with its international 

nuclear obligations. 1929 reinforces the Security Council’s longstanding demand 

that Iran suspend its enrichment program and other proscribed nuclear activities, 

and it imposes measures in several broad categories: 

• It reaffirms the necessity of Iranian compliance with its IAEA obligations and 

its full cooperation with IAEA investigations; 

• It bans Iran’s investment in sensitive, including uranium mining, nuclear and 

ballistic missile-related activities abroad; 

• It imposes new binding restrictions on Iran’s import of eight broad categories 

of heavy weapons, and requires vigilance and restraint in the transfer of all 

arms and related materiel to Iran; 

• It bans all activities related to Iran’s ballistic missiles capable of delivering 

nuclear weapons; 

• In order to deter, detect, and stop Iran’s smuggling and acquisition of sensitive 

nuclear items and prohibited arms and related materiel, the resolution calls 

upon all states to inspect Iranian cargo, and notes that states may request inspections on the high seas consistent with international law and the consent of 

the flag state; 

• It includes provisions to help block Iran’s use of the international financial system—particularly its banks—to fund proliferation; 

• It alerts states to the potential link between Iran’s energy sector revenues and 

energy-related technologies and its nuclear and proliferation activities; 

• It addresses the activities of the Islamic Revolutionary Guard Corps, whose elements have been involved in proliferation by sanctioning the largest and most 

significant enterprise owned by the IRGC, the Khatam al-Anbiya Construction 

Headquarters, and 14 other IRGC-related companies; 

• It establishes a U.N. Panel of Experts to help monitor and enforce sanctions implementation; 

• The resolution also includes three annexes of specific entities and individuals 

subject to targeted sanctions (asset freeze/travel ban). The resolution more than 

doubles the number of designated entities subject to an asset freeze and imposes an asset freeze and travel ban on one individual. Thirty-five additional 

individuals previously subject to ‘‘travel vigilance’’ will now be subject to a travel ban. With the adoption of this resolution, there are now 75 entities subject 

to an asset freeze and 41 individuals subject to an asset freeze and travel ban. 

Let me emphasize that sanctions are not an end in themselves. Our foremost 

objective—one that is shared by our international partners and our allies in the 

region—is a durable diplomatic solution to the world’s concerns about the Iranian 

nuclear program and the broader issues at stake with Iran. U.N. Security Council 

Resolution 1929 offers Iran a clear path toward the suspension of existing sanctions. 

It is an unambiguous one: Iran must fulfill its international obligations, suspend its 

enrichment-related, reprocessing, and heavy water-related activities, and cooperate 

fully with the IAEA. The choice to reconsider its options and adopt a more constructive course is one that Tehran alone can make. As the P5+1 stated upon the adoption of resolution 1929, we remain ready to meet immediately with Iran on its 

nuclear program, and on other issues of mutual concern. EU High Representative 

Cathy Ashton already has reiterated the offer to Iran to meet with the P5+1 for that 

purpose. We hope Iran will take advantage of this standing opportunity. Two weeks 

ago the United States, France, and Russia responded jointly to IAEA Director General Amano regarding Iran’s proposal on the TRR, including our concerns with that 

proposal. The TRR proposal remains a potential opportunity in the context of the 

broader P5+1 efforts to address Iran’s nuclear program. 

As we bear witness to the 1-year anniversary of Iran’s disputed Presidential elections, we reaffirm our commitment to stand up for those who seek to exercise their 

universal rights. One year later, as the detentions and prosecutions proceed 

unabated, we will continue to call on the leaders of the Islamic Republic of Iran to 

meet their responsibilities to their people by respecting the fundamental rights 

afforded them. In fact, just this week, we joined 55 other nations in rebuking Iran 

for its atrocious human rights record at the Human Rights Council. 

In the wake of the Iranian Government’s violent suppression of dissent, closure 

of opposition newspapers, and overwhelming use of intimidation and force to prevent free assembly, the United States has taken steps to facilitate the free expression of Iranian citizens. As part of that effort, the U.S. Government is pursuing 

ways to promote freedom of expression on the Internet and through other connection 

technologies. We are working around the world with over 40 companies to help indiVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
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viduals silenced by oppressive governments, and have made Internet freedom a priority at the United Nations as well. State and Treasury have worked to issue a general license that allows free market downloadable communications software—e-mail, 

chat, blogging—available inside Iran. Our programming is also focusing on allowing 

innovative projects that support free expression and access to information via the 

Internet. 

Let me note here our deep and continuing concern for the safety and well being 

of all American citizens currently detained or missing in Iran. We urge the Iranian 

Government to promptly release Shane Bauer, Sarah Shourd, and Josh Fattal, and 

all other unjustly detained American citizens so that they may return to their families. We also call upon Iran to use all of its facilities to determine the whereabouts 

and ensure the safe return of Robert Levinson. 

The Iranian Government will not change its course overnight. We have no illusions about the obstacles before us. But we and the best of the international community have renewed our determination to sharpen the choice before Iran’s leadership. 

Addressing international concerns about its nuclear program and meeting its international obligations can open up important opportunities for Iran and its remarkable people. Continued failure to do so only makes Iran less secure, less prosperous, 

and more isolated. 

The CHAIRMAN. Thank you, Secretary Burns. 

Secretary Levey. 

STATEMENT OF HON. STUART LEVEY, UNDER SECRETARY 

FOR TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Mr. LEVEY. Chairman Kerry, Ranking Member Lugar, members 

of the committee, thank you for inviting me to be here today. It is 

an honor for me to be here with Under Secretary Burns, with 

whom I’ve worked closely on these issues and many others for the 

last few years, and for whom I have tremendous admiration. 

While he has described the overall strategy to address the threat 

posed by Iran, I will focus on the so-called ‘‘pressure track’’ that he 

mentioned of the administration’s strategy. 

The adoption 2 weeks ago of UNSCR 1929 creates an opportunity 

for us to further sharpen Iran’s choices. Our effort to hold Iran accountable for its failure to meet its international obligations has 

two major fronts. The first is governmental action, encompassing 

actions both by the United Nations, by other concerned governments around the world and our efforts to build upon the four 

Security Council resolutions that have sanctioned Iran. 

We have already begun discussions with other countries about 

the types of measures that should be taken to robustly implement 

U.N. Security Council 1929, and some governments have already 

acted. 

At the same time, we are working with countries to ensure that 

they take actions to fulfill, for example, the Financial Action Task 

Force’s call for countermeasures against Iran. Iran remains the 

only country in the world subject for such a call for countermeasures. 

But perhaps as important as all of the governmental action is the 

second front of our strategy: the role of the private sector. As we 

have targeted Iran’s illicit conduct, we have also taken public action and made an unprecedented effort to share the information 

that forms the basis of our actions with firms all over the world. 

We have made that evidence public, to the extent possible. That information demonstrates that Iran engages in illicit nuclear and ballistic missile transactions, supports terrorist groups, and that in 

13 

order to conduct those activities, it engages in financial deception 

designed to evade the controls of responsible businesses that have 

no desire to participate in illicit activity. 

In response to this information, and to protect their own reputations, virtually all major financial institutions have either completely cut off or dramatically reduced their ties with Iran. We are 

now starting to see other companies, across a range of sectors including insurance, consulting, energy, and manufacturing, making 

similar decisions. The end result is that the voluntary actions of 

the private sector amplify the effectiveness of government-imposed 

measures. 

U.N. Security Council Resolution 1929 represents a new and key 

catalyst in this strategy. The resolution contains a number of significant provisions summarized in our written testimony, and 

which Under Secretary Burns also summarized. There are a few 

key financial provision which I would like to highlight, as well. 

In particular, under paragraphs 21 and 23 of the new resolution, 

states should prevent any financial services, including insurance 

and even including the maintenance of bank accounts for Iranian 

banks, if they have information that these services could—and I 

underscore could—contribute to Iran’s nuclear missile industries. 

And, of course, as this committee knows, there is ample information in the public domain to establish that Iran uses its banks and 

abuses the financial services of other banks for precisely those 

illicit purposes. We have also repeatedly revealed the mechanisms 

by which Iranian banks seek to mask their misconduct. This includes stripping their names from transactions, disguising the ownership of assets on their books, and using nonsanctioned banks to 

stand in the shoes of sanctioned ones. Given this record, it would 

be nearly impossible for financial institutions and governments to 

assure themselves that transactions with Iran are not being used 

to contribute to nuclear missile industries. 

A perfect example of the types of thing I’m talking about is contained in the actions we took last week to begin to implement and 

build upon U.N. Security Council Resolution 1929. Among other 

things, we designated an Iranian bank, Post Bank, for facilitating 

Iran’s proliferation activities. At one time, Post Bank did business 

almost entirely within Iran. But when some of Iran’s largest stateowned banks were sanctioned for financing proliferation, Iran 

began to use Post Bank to facilitate international trade. Indeed, 

Post Bank stepped into the shoes of Bank Sepah, which is under 

U.N. sanctions, to carry out Bank Sepah’s transactions and hide its 

identity. Banks that would have never agreed to deal with Bank 

Sepah have handled these transactions that they believe are really 

for Post Bank. 

In addition, last week we listed five front companies and more 

than 90 ships that Iran’s national maritime carrier, IRISL has 

used to evade international sanctions. We designated, in addition, 

two individuals and four entities that are part of the IRGC, including two that are subsidiaries of Khatam al-Anbiya, a major IRGC 

company. This action complements the designation of the 15 IRGC 

companies, as you’ve mentioned, Mr. Chairman, that are designated in the U.N. Security Council Resolution 1929. We have now 

designated 26 IRGC-related entities, including the IRGC’s Kuds 

14 

force for providing materiel support to the Taliban, Hezbollah, 

Hamas, the Palestinian Islamic Jihad, and others. 

We also identified last week 22 petroleum, energy, and insurance 

companies that are owned and controlled by the Government of 

Iran under our Iranian transaction regulations. Seventeen of those 

companies are located outside of Iran, and many are not easily 

identifiable as being Iranian. These identifications enable United 

States persons—and, importantly, others around the world who are 

choosing not to deal with Iran—to be able to recognize Iranian Government entities and protect themselves against the risk of doing 

business with them. 

As Under Secretary Burns pointed out, we know that officials in 

Iran have been anxious about this new round of sanctions. If the 

Iranian Government holds true to form, it will scramble to identify 

‘‘work-arounds’’—hiding behind front companies, doctoring wire 

transfers, falsifying shipping documents and the like. 

We will continue to expose this deception, and thereby reinforce 

the very reasons why the private sector is increasingly shunning 

Iran. The overall result of these efforts is that Iran’s choice will become increasingly clear: to choose the path offered by President 

Obama and the international community, or to remain on a course 

that leads to further isolation. 

Thank you very much. I look forward to your questions. 

[The prepared statement of Mr. Levey follows:] 

PREPARED STATEMENT OF STUART LEVEY, UNDER SECRETARY FOR TERRORISM AND

FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Chairman Kerry, Ranking Member Lugar and distinguished members of the committee. With the adoption of United Nations Security Council Resolution (UNSCR) 

1929 two weeks ago, the international community made clear that Iran’s continued 

failure to meet its international obligations will have increasingly serious consequences. As President Obama said, the resolution demonstrates the growing costs 

of Iranian intransigence. My colleague, Under Secretary Burns, will describe the 

wide range of challenges posed by Iran, and will provide an overview of the administration’s dual-track approach to addressing the Iranian threat. I will focus my testimony today on the so-called ‘‘pressure track’’ of that strategy. This track is intended 

to hold Iran accountable for its continued refusal to address the international community’s concerns regarding its nuclear program, as well as its support for terrorism, suppression of domestic dissent, and abuse of the financial system. 

The adoption of Resolution 1929 marks an inflection point in this strategy, as it 

broadens and deepens existing sanctions programs on Iran and creates an opportunity for us to further sharpen Iran’s choices. We also intend to not only fulfill the 

letter of the resolution’s mandates, but also to live up to its spirit, by working together with our allies to impose measures that will affect Iranian decisionmaking. 

As you know, we have been working to address Iran’s illicit conduct and to protect 

the international financial system from Iranian abuse for the past several years. 

Last week, the Treasury Department initiated a series of new actions to both implement and build upon UNSCR 1929 and its predecessor resolutions. In addition to 

last week’s actions, we published today a financial advisory providing public guidance on steps that can be taken to protect against the risks of transactions with 

Iran. Before I review the details of UNSCR 1929 and the new obligations it creates, 

I would like to provide an overview of our strategy to hold Iran accountable to its 

obligations and, in particular, the role that the private sector is playing in that 

strategy. 

STRATEGY TO HOLD IRAN ACCOUNTABLE

Our strategy to hold Iran accountable for its failure to meet its international obligations has two major fronts. 

The first front is governmental action, encompassing actions by the United 

Nations and concerned governments around the world. While we are working to encourage full implementation of the four U.N. Security Council sanctions resolutions 

15 

containing binding legal measures, governments around the world are also considering what additional measures might be necessary to address the grave threat 

posed by Iran. We are also looking to international partners to implement the 

Financial Action Task Force’s (FATF) call for countermeasures to address the risks 

that Iran poses to the international financial system. In February, the FATF issued 

its most recent of several statements regarding the risks posed by Iran’s lack of an 

adequate antimoney laundering and counterterrorist financing (AML/CFT) regime. 

The FATF called once again for jurisdictions to impose countermeasures on Iran, 

and urged them to protect against correspondent relationships being used to bypass 

or evade countermeasures and risk mitigation practices. Iran is currently the only 

country in the world subject to a call for such countermeasures. 

Perhaps as important as government action is the second front: private sector action. The steps private sector firms around the world have taken in recent years 

to protect themselves from Iran’s illicit and deceptive activity are extremely important. We have found that when we use reliable financial intelligence to build cases 

against Iranian actors engaged in illicit conduct, many members of the private sector go beyond their legal requirements regarding their interactions with these and 

other Iranian actors because they do not want to risk handling illicit business. This 

behavior is a product of good corporate citizenship and a desire to protect their institutions’ reputations. The end result is that the voluntary actions of the private sector amplify the effectiveness of government-imposed measures. Thus, as we have 

taken action to target illicit Iranian conduct, we have shared some of the information that forms the basis for our actions with our partners in the private sector and, 

in response, virtually all major financial institutions have either completely cut off 

or dramatically reduced their ties with Iran. We are now starting to see companies 

across a range of sectors, including insurance, consulting, energy, and manufacturing, make similar decisions. Once some in the private sector decide to cut off ties 

to Iran, it becomes an even greater reputational risk for others not to follow, and 

so they often do. Such voluntary reductions in ties to Iran, beyond the requirements 

of U.N. and U.S. sanctions programs, in turn makes it even more palatable for foreign governments to impose restrictive measures because their countries’ commercial interests are reduced. In the end, this dynamic can create a mutually reinforcing cycle of public and private action. 

The impact of these actions on Iran has been significant, and is deepening as a 

result of Iran’s own conduct. As international sanctions on Iran have increased, 

Iran’s response has been to attempt to evade those sanctions. For example, sanctioned Iranian banks have, as a standard practice, concealed their identity by stripping their names from transactions so their involvement cannot be detected. In addition, when Iranian assets have been targeted in Europe by international sanctions 

programs, branches of Iranian state-owned banks there have taken steps to disguise 

the ownership of assets on their books to protect those assets from future actions. 

Nonsanctioned banks also have stepped into the shoes of sanctioned banks in order 

to evade international sanctions. We have used this conduct to our advantage by 

exposing it and making it public, reinforcing the private sector’s preexisting fears 

about doing business with Iran. In this way, Iran’s own evasion and deceptive conduct is increasing its isolation. 

UNITED NATIONS SECURITY COUNCIL RESOLUTION 1929

Another key catalyst in this process is the adoption of Resolution 1929, which is 

the fourth resolution in as many years imposing legally binding sanctions on Iran. 

UNSCR 1929 broadens the existing U.N. sanctions framework, and it is important 

to remember that each resolution builds upon earlier resolutions. Resolution 1929 

enhances the international community’s obligation to impose measures on Iran’s 

financial sector, businesses owned or controlled by the Islamic Revolutionary Guard 

Corps (IRGC), and on elements of Iran’s transportation sector that have been used 

to evade sanctions. It also prohibits Iran from acquiring an interest in any commercial activity in another state involving uranium mining, the production or use of 

nuclear materiels and technology, and ballistic missile technology. It also bans 

states from directly or indirectly supplying Iran with a range of heavy weapons, prohibits Iran from undertaking any activity related to ballistic missiles capable of delivering nuclear weapons, and prohibits states from providing bunkering services to 

vessels if they reasonably think these vessels are carrying nuclear or other materiel 

prohibited by Security Council resolutions. The resolution additionally imposes an 

obligation on states to take the necessary measures to prohibit the travel through 

their territories of individuals designated in this and previous Iran-related sanctions 

resolutions. The resolution also highlights the potential connection between Iran’s 

revenues from energy production and funding for the development of its nuclear proVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
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gram. And the resolution designates key entities associated with Iran’s proliferation 

sensitive nuclear activities and ballistic missile programs. 

As I mentioned, the Treasury Department today published a public advisory that 

explains the financial provisions of UNSCR 1929 and provides guidance on steps 

that can be taken to mitigate the tremendous risks underscored by the Security 

Council. Implementation of the financial provisions of the resolution and its predecessors will be consequential, provided that countries implement them robustly and 

faithfully. The implementation of these provisions will also assist financial institutions around the world to avoid the risks associated with business that supports the 

Iranian Government’s proliferation activity and support for terrorism. In the coming 

weeks, the Treasury Department will continue to engage with finance ministries 

around the world and with financial institutions—not only to assure full implementation of the resolution, but also to assist the private sector in avoiding these serious 

risks. As described above, Resolution 1929 contains a number of important provisions; there are a few that we think are important to discuss in greater detail: 

• First, paragraph 21 of the resolution calls upon all Member States to ‘‘prevent 

the provision of financial services, including insurance or reinsurance, or the 

transfer to, through, or from their territory . . . of any financial or other assets 

. . . if they have information that provides reasonable grounds to believe that 

such services, assets, or resources could contribute to Iran’s proliferationsensitive nuclear activities, or the development of nuclear weapon delivery systems.’’ This provision is similar to one in UNSCR 1874 on North Korea, and 

it provides countries with the broadest possible mandate to restrict financial 

ties with Iran. As described above, there is a vast body of public information 

demonstrating that many of Iran’s banks are deeply involved in facilitating its 

proliferation-sensitive activities and other forms of illicit conduct. Over the last 

several years, we have designated 15 Iranian banks under Executive Order 

(E.O.) 13382 for facilitating Iran’s nuclear proliferation activities, and 1 bank 

under E.O. 13224 for providing support to international terrorism. As we have 

done so, we have publicized the types of illicit activities in which these banks 

engage in order to make international financial institutions aware of Iran’s 

illicit conduct, and permit them to take appropriate countermeasures against 

Iranian banks. Specifically, the designated banks have provided a broad range 

of financial services to Iran’s nuclear and missile industries. Banks like Bank 

Melli have also provided financial services to the IRGC, and Bank Saderat has 

facilitated the transfer of millions of dollars to terrorist groups. In the course 

of undertaking these transactions, Bank Melli employed deceptive banking practices, like requesting that its name be removed from financial transactions to 

obscure its involvement from the international banking system. We revealed 

similar information when we revoked Iran’s ‘‘U-turn’’ license in 2008. As a further example, Resolution 1929 highlights that Bank Mellat has facilitated hundreds of millions of dollars in transactions for Iranian nuclear, missile, and defense entities, and that Mellat owns First East Export Bank. This information, 

highlighting the risks associated with providing financial services to Iran, 

makes it nearly impossible for financial institutions and governments to assure 

themselves that transactions with Iran could not contribute to proliferationsensitive activities. • Second, paragraph 23 of the resolution calls upon states to prohibit ‘‘in their 

territories the opening of new branches, subsidiaries, or representative offices 

of Iranian banks, and also [to] prohibit Iranian banks from establishing new 

joint ventures, taking an ownership interest in or establishing or maintaining 

correspondent relationships with banks in their jurisdiction [and] to prevent the 

provision of financial services if they have information that provides reasonable 

grounds to believe that these activities could contribute to Iran’s proliferationsensitive nuclear activities.’’ Consistent with this, governments are to take steps 

to be certain that correspondent relationships with Iran cannot be used for illicit conduct. Given the information described above regarding Iranian banks’ 

involvement in Iran’s proliferation-sensitive activities, coupled with well-known 

information about Iranian banks’ use of a range of deceptive conduct—such as 

concealing their identity by stripping their names from transactions—it is nearly impossible for governments to ensure that correspondent relationships with 

Iran are not abused for illicit purposes. As I just noted, we have revealed this 

deceptive conduct at numerous junctures in the past, and will continue to do 

so as appropriate in the future. We expect the private sector will respond to this 

new provision, and the information we have revealed, by further reducing its 

exposure to Iranian banks worldwide. 

• Third, paragraph 22 of the resolution obliges ‘‘all states [to] require their nationals, persons subject to their jurisdiction and firms incorporated in their terVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
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ritory . . . to exercise vigilance when doing business with entities incorporated 

in Iran or subject to Iran’s jurisdiction, including those of the IRGC and [Iran’s 

national maritime carrier, the Islamic Republic of Iran Shipping Lines] IRISL, 

and any individuals or entities acting on their behalf or at their direction, and 

entities owned or controlled by them, including through illicit means, if they 

have information that provides reasonable grounds to believe that such business 

could contribute to Iran’s proliferation-sensitive nuclear activities’’ or to violations of other Security Council resolutions. To aid countries in this endeavor, 

the resolution identifies three companies owned or controlled, or acting on behalf of IRISL-Irano Hind Shipping Company, IRISL Benelux NV, and South 

Shipping Line Iran. Significantly, the resolution also identifies for sanctions 

Khatam al-Anbiya, an IRGC-owned company involved in major construction and 

engineering projects, as well as several of its subsidiaries. Khatam al-Anbiya 

subsidiaries were involved in the construction of Iran’s uranium enrichment site 

at Qom. 

• UNSCR 1929 also seeks to avoid the violation or evasion of sanctions by IRISL, 

as well as Iran Air’s cargo division. Paragraph 14 of the new resolution therefore expands the call on countries to ‘‘inspect all cargo to and from Iran, in their 

territory, including seaports and airports, if the [s]tate . . . has information 

that provides reasonable grounds to believe the cargo contains items the supply, 

sale, transfer, or export of which is prohibited’’ by U.N. resolutions. Since January 2009, IRISL has been publicly implicated in multiple shipments of armsrelated materiel from Iran to Syria in violation of U.N. Security Council Resolution 1747. 

IMPLEMENTING AND BUILDING UPON THE RESOLUTION

All elements of the administration have been working with our partners around 

the world and will intensify those efforts to ensure not only that the resolution will 

be implemented robustly, but also that it serves as a foundation on which to build 

further measures that will increase the pressure on Iran to comply with its international obligations. 

As part of this undertaking, we announced steps last week intended to reveal 

more of Iran’s deceptive conduct, and to sanction actors engaged in the full spectrum of activity supporting Iran’s nuclear and missile programs. The actions that 

the Treasury Department announced are also intended to reinforce the public sector-private sector mutually reinforcing dynamic that I described earlier. We designated more than a dozen entities and individuals under Executive Order 13382, 

the authority that targets those involved in WMD proliferation and their support 

networks. These include: 

• Post Bank. Treasury designated Post Bank of Iran for providing financial services to, and acting on behalf of, Bank Sepah. Bank Sepah was designated in 

January 2007 pursuant to E.O. 13382 for providing financial services to Iran’s 

missile industry, including two entities linked to Iran’s ballistic missile program. At one time, Post Bank’s business was conducted almost entirely within 

Iran. But when some of Iran’s largest banks were exposed for financing proliferation, Iran began to use Post Bank to facilitate international trade. In fact, 

Post Bank stepped into the shoes of Bank Sepah, which is under United 

Nations sanctions, to carry out Bank Sepah’s transactions and hide its identity. 

International banks that would never deal with Bank Sepah have been handling these transactions that they think are really for Post Bank. 

• IRGC. The IRGC was first designated by the Treasury Department in 2007 for 

its efforts to procure sophisticated and costly equipment that could be used to 

support Iran’s ballistic missile and nuclear programs. We also designated the 

IRGC’s Quds Force, the branch of the Revolutionary Guards that has provided 

materiel support to the Taliban, Lebanese Hezbollah, Hamas, Palestinian 

Islamic Jihad, and others. Last week we supplemented these actions by designating additional branches of the IRGC. We sanctioned its Air Force and Missile Command, both of which have ties to Iran’s ballistic missile program, as 

well as Rah Sahel and Sepanir Oil and Gas Engineering Co, which are owned 

by the IRGC’s Khatam al-Anbiya construction company. In addition, we designated Mohammad Ali Jafari, the Commander in Chief of the IRGC, and Mohammad Reza Naqdi, who has served as head of the IRGC’s Basij Resistance 

Force since October 2009. With these actions, we have now designated 26 entities and individuals connected to the IRGC for sanctions. 

We intend to continue to focus on the IRGC as an important part of our strategy to hold Iran accountable for its actions because of the central role that the 

organization plays in Iran’s most reprehensible and illicit conduct. In addition 

18 

to playing a key part in Iran’s missile and nuclear programs and providing support for terrorism, the IRGC has been involved in the repression of internal dissent in Iran. It has also assumed control over broad areas of the Iranian economy, including through the use of no-bid contracts. The IRGC has gradually increased its influence over the energy, defense, and construction industries, and 

IRGC seeks to monopolize black-market trade of popular items. In so doing, it 

has deprived the Iranian people of valuable economic opportunities. The IRGC 

and its network of companies have no place in the world’s legitimate financial 

system, and we will continue to work to prevent the IRGC and its companies 

from gaining access to it. 

• IRISL. We also took action under 13382 to prevent IRISL from carrying out activities to evade sanctions. We publicly identified several IRISL front companies, including Hafiz Darya Shipping Company, Soroush Sarzamin Asatir Ship 

Management Company, Safiran Payam Darya Shipping Company and others, as 

well as more than 90 names of ships in its fleet. Since we designated IRISL 

for sanctions in 2008, it has desperately attempted to evade those sanctions, 

setting up new front companies and renaming and even repainting ships to hide 

their true ownership. Despite its deceptive maneuvers, IRISL has had to struggle to obtain insurance and other services. Our actions last week further expose 

IRISL’s deception and make it more difficult for IRISL to carry out its illegal 

activities. One way to determine if a ship is an IRISL ship is the International 

Maritime Organization (‘‘IMO’’) registration number, which, like the VIN number on a car, is a unique identifier that cannot be reassigned to another ship, 

and remains with the ship through the life of the vessel. The Treasury Department published these numbers at the time of its original designation of IRISL 

in 2008. 

• Petroleum, Energy and Insurance Firms. We also identified 22 petroleum, energy, and insurance companies that are owned and controlled by the Government of Iran under the Iranian Transactions Regulations (ITR). Seventeen of 

these companies are outside of Iran, and many are not easily identifiable as belonging to the government. Americans have long been forbidden from doing 

business with Iranian entities, but increasingly companies around the world are 

deciding not to do business with the Government of Iran because of its wide 

range of illicit conduct, and because, as President Obama said recently, it is a 

government that has brutally suppressed dissent and murdered the innocent. 

These identifications enable U.S. persons and others to recognize Iranian Government entities and protect themselves against the risks posed by doing business with them. 

We will continue to take action to address the full range of Iran’s illicit conduct, 

and to target the support networks that facilitate Iran’s WMD proliferation activities and to expose Iran’s deceptive conduct and abuse of the international financial 

system. 

As we have taken steps to implement and go beyond the resolution, so too have 

our allies. Last week, Australia announced its designation of Bank Mellat, IRISL, 

and IRGC General Rostam Qasemi. The European Union also announced its intention to impose further restrictions on Iran’s financial sector and insurance industry, 

freeze additional Iranian banks, and impose restrictions on the Iranian transport 

sector, in particular IRISL. Additionally, the EU announced its intention to prohibit 

new investment, technical assistance and transfers of technology, equipment and 

services to key sectors of the gas and oil industry. The EU also announced its intention to impose new visa bans and asset freezes on the IRGC. 

CONCLUSION

The adoption of UNSCR 1929 has enhanced a global effort to hold Iran accountable for its actions. The resolution adds important tools—but it is up to the U.S. 

and its partners around the world to ensure that we use the tools available to us 

comprehensively, effectively, and collectively. We know that officials in Iran have 

been anxious about this new round of sanctions. If the Iranian Government holds 

true to form, it will scramble to identify ‘‘work-arounds’’—hiding behind front companies, doctoring wire transfers, falsifying shipping documents. We will continue to 

expose this deception, thereby reinforcing the very reasons why the private sector 

is increasingly shunning Iran. The overall result of these efforts is that Iran’s choice 

will become increasingly clear—to choose the path offered by President Obama and 

the international community or to remain on a course that leads to further isolation. 

The CHAIRMAN. Thank you, Secretary Levey. 

19 

Let me just follow up quickly with you on that. Are you satisfied, 

I mean, do you have the tools that you need, No. 1, and No. 2, do 

you feel you have confidence that our partners in this effort are 

going to help bring the hammer down sufficiently that all of these 

different cutout cardboards, phony shipping documents, et cetera, 

that will be able to really have an impact? 

Mr. LEVEY. Well, Mr. Chairman, I do think that we have a robust set of tools already that we have used aggressively, and we’ve 

also used just the power of persuasion. That said, as you saw the 

statement from the White House yesterday, we welcome the new 

bill that is making its way through Congress, as well. 

I think all signs are positive, at the moment, that our partners 

will take strong action to implement 1929 and counteract against 

evasion. The statement from the European Union was quite strong, 

of course we now hope to see that turned into action in the coming 

weeks. And the dynamic that I referred to in my statement about 

how the private sector is viewing this sort of evasion—what we’ve 

seen in the public domain in the last couple of years, especially, is 

such an overwhelming body of evidence of Iranian evasion and deceptive practices that the private sector really is getting the point 

that if they do business with Iran that they put themselves at 

enormous risk of being drawn into either illicit transactions or 

dealing with the IRGC. And they realize that that’s both a 

reputational risk to them, but also may draw them into transactions that are actually illicit and that they really don’t want to 

get involved in. 

The CHAIRMAN. Well, probably—I want to come back to some of 

that, but first I want to pursue sort of a larger couple of policy 

issues with you, Secretary Burns. 

First of all, as a threshold predicate to this entire discussion, to 

what degree is the administration convinced, and what is the evidence of it, that if Iran continues, other states in the region are 

going to go down the nuclear road? And is that the conviction of 

the administration? 

Ambassador BURNS. Yes, sir, it is the concern of the administration and the conviction. I think the dangers of stimulating a regional nuclear arms race are quite serious, and it’s one of the concerns that animates all of the efforts that we’re making now to 

prevent Iran from developing nuclear weapons. 

The CHAIRMAN. So, what is the redline, here? What is the administration’s—give us a sense of both timeline and redline, if you will, 

with respect to whatever the timeline is—what action would precipitate, conceivably, what by the allies? I mean, we’ve made these 

very public protestations—no nuclear weapons program. We’ve laid 

out, in some detail, the various threats that it presents to Israel, 

to us, to the region, and so forth, so where’s—is there a clarity to 

that? Because I haven’t sensed it, to date, through the last administration and up until now. 

Ambassador BURNS. Well, Senator, that’s probably the subject of 

a longer, closed conversation. But what I would say is that first, 

you know, this administration is deeply committed to preventing 

Iran from developing nuclear weapons. We want to work very 

closely through a combination of both diplomatic engagement, but 

also pressure, to sharpen the choices for the Iranian leadership. 

20 

Iran claims that it doesn’t seek nuclear weapons. The United 

States and the rest of the international community acknowledge 

the right of Iran and other states to pursue peaceful nuclear programs. It shouldn’t be hard for Iran to demonstrate the exclusively 

peaceful nature of its intentions, but the track record over the last 

couple of decades is a very depressing one in this regard—a failure 

to address the very specific questions that the IEA has raised about 

past weaponization activities. The failure to meet not only the requirements of successive Security Council resolutions with regard 

to suspension of enrichment, but even to address, seriously, the 

creative ideas, the IEA and others have put forward to try to create 

some confidence, as we tried to do last October. 

So, we’re going to keep at it because too much is at stake, otherwise. But, I think our concern is growing, and the concern of the 

rest of the international community is growing, too. 

The CHAIRMAN. Well, I do think that we need to—at the appropriate time, it may not be today—but we need to go into a classified briefing to go through some of the parameters of this. 

Can you share with us a sense of sort of what steps that Iran 

might take that might trigger a next adverse reaction from ourselves and our allies? 

Ambassador BURNS. Well, Senator, I’ll give one example. I mean, 

we’ve already seen a reckless step by Iran in increasing enrichment 

from 3.5-percent levels, to 19.75-percent, near 20-percent levels. 

The pretext for that was that Iran claimed it needed to do that because it wasn’t getting outside help for the Tehran research reactor, which requires fuel enriched to that level. I say pretext, because the Iranians don’t have the capability to produce the finished 

fuel assemblies that you need to work that research reactor. 

But more to the point, we and our partners have made clear our 

willingness to contribute to the provision of that kind of fuel in a 

way that would build confidence for Iran. So, the fact that Iran has 

nevertheless chosen to take enrichment to near 20-percent levels, 

I think, is a reckless sign. And certainly, any effort not only to continue that, but to go beyond 20 percent would be an even more 

dangerous sign. 

The CHAIRMAN. I mentioned in my opening comments the need 

to expel the inspectors and go through a series of steps in terms 

of enrichment, et cetera. Is it possible that they could get so close 

to actual weaponization and/or the adequate level of development 

that there’s a breakout capacity—could they do that without expelling the inspectors, in some clandestine way? 

Ambassador BURNS. Mr. Chairman, at Natanz, which is the central nuclear facility where the IAEA conducts its inspections, you’re 

absolutely right—the facility there would have to be reconfigured, 

as I understand it, to enrich to higher levels and move toward a 

breakout capacity, and that’s something that the IEA could see and 

determine unless they were expelled from that site. 

Of course, the bigger concern—which is reinforced by the revelation of the clandestine facility near Qom in September, is that 

there are other facilities under construction. And that’s why we 

support the IEA so strongly in trying to ensure greater transparency in what’s going on inside Iran. 

The CHAIRMAN. Senator Lugar. 

21 

Senator LUGAR. Thank you, Mr. Chairman. 

Secretary Burns, I would like your comment on a front-page 

story that appeared yesterday in the Washington Times entitled, 

‘‘Military in Iran Seen As Taking Control.’’ The story begins, 

‘‘Defense Secretary Robert N. Gates said Sunday that Iran’s Government is becoming a military dictatorship, with religious leaders 

being sidelined and, as a result, new sanctions could pressure 

Tehran into curbing its illegal nuclear program. ‘What we’ve seen 

is a change in the nature of the regime in Tehran over the past 

18 months or so,’ Mr. Gates said on FOX News Sunday. ‘You have 

a much narrower based government in Tehran now,’ he said. ‘Many 

of the religious figures are being set aside.’ ’’ 

Furthermore, the article later points out that Mr. Gates said, 

‘‘added economic pressures on top of the militarization, ‘has real 

potential’ of pressuring Iran into complying with international 

controls on its nuclear program.’’ I had not seen that sort of analysis before concerning the evolution of Iran’s Government, and furthermore the implication Secretary Gates thought with regard to 

the efficacy of sanctions. Do you have thoughts about that this 

morning? 

Ambassador BURNS. Yes, Senator Lugar. I think it is a fact—as 

Secretary Gates and Secretary Clinton have also pointed out—that 

over recent years, I think, the Iranian leadership has become more 

closed, more dependent on the IRGC, whose role, not only in military affairs, but also in politics and in the economic sphere, has 

expanded over that time. 

What we’ve also seen, as that circle has become more closed, is 

greater fissures within the Iranian political elite, and within the 

clerical establishment, as well, and certainly a large fissure between the elite and much of the rest of the population, as we saw 

so dramatically last summer during and after the election. 

That’s led us to try, in Resolution 1929, to very carefully target— 

and there’s no perfect answer to this—but we’ve tried to target 

many of the measures that Under Secretary Levey and I have described, to focus on the IRGC, to focus on the leadership to try to 

reshape their calculus. And we will continue, as we implement 

1929, as we work with the European Union and others, to focus 

those efforts as sharply as we can. 

Senator LUGAR. These developments would mark quite a change, 

though, as most of us have not been thinking about Iran in terms 

of a military dictatorship in the country. We’ve had conflict between various religious leaders, with the military perceived to be 

more in the background. But it seems to me Secretary Gates was 

suggesting that the military is coming much more into the foreground. Furthermore, I think he suggested the possibility that as 

religious leaders are pushed aside, empowered military personnel 

could take a more pragmatic stance and realize that their security 

is more, rather than less, endangered by going forward with their 

nuclear program. 

Ambassador BURNS. Senator Lugar, one thing I’ve learned is a 

certain amount of humility in making predictions about Iranian decisionmaking. But, I think it is a fact that—particularly the role of 

the Islamic Revolutionary Guard Corps in the Iranian leadership 

has increased. It is a fact, in my view, that the circle has narrowed 

22 

around the leadership, and that has led us to target our efforts as 

precisely as we can. 

As Secretary Gates said, I think there is a reasonable chance 

that those efforts—combined with the continuing possibility of diplomatic engagement—will have an impact on the Iranian calculus. 

Senator LUGAR. Secretary Burns, as you are likely aware, the 

Conference Committee cochairs taked with resolving House and 

Senate differences in Iran sanctions legislation came to an agreement yesterday on draft joint text. The administration has diplomatically asserted that it wishes to work with the Congress on 

this issue. Now, as I understand it, at least according to analysis 

in the press, an ongoing point of contention between the Congress 

and the administration is that the legislation, as it is currently 

crafted, targets foreign companies and even foreign governments 

that do not comply with its provisions. Now, the legislation offers 

exemptions from sanctions on a case-by-case basis if certain criteria 

are met by the foreign party in question, but the administration 

would rather it provide blanket waivers for certain countries. In 

the administration’s view, this would prevent a potential set of diplomatic problems with others who believe they have been working 

even harder at this business of sanctions that we have. Nevertheless, this is an extraterritorial feature of the legislation as some 

have suggested. 

What is your analysis, either one of you, as to the substance of 

this legislation as it currently stands? 

Ambassador BURNS. Maybe I’ll start, and then Under Secretary 

Levey can join me. 

Senator Lugar, first, as the White House made clear yesterday, 

the administration does support the broad aims of the legislation 

that the conference has reported on. We want to work with you to 

help shape that legislation so that it amplifies the impact of the 

international coalition that we built. 

It is no secret that our international partners contain their enthusiasm for extraterritorial applications of U.S. legislation, and 

that’s why we continue to work closely with you and your colleagues to try to ensure that the measures are going to be targeted 

in a way that are going to maximize the impact on the goal, here, 

which is to constrain Iran’s nuclear program, and change its calculus and give the President the flexibility that I think is useful 

to all of us in applying those measures, as well. And those are the 

areas that we’re focused on. And we look forward to continuing to 

work with—— 

Senator LUGAR. Well, how is that advice going to be given? We’re 

coming down to the final stages. Is the President, the Secretary, or 

someone else going to talk to Senator Dodd, Congressman Berman, 

or others who are guiding this along? It’s one thing to talk in an 

advisory capacity, but what are the action steps that need to be 

taken at this point? 

Ambassador BURNS. We certainly will be working very closely 

with the members of the conference as the conference members 

consider their report, to make clear the concerns we have and to 

make clear our interest in producing an outcome that serves the 

broad goals I just mentioned. So, we’ll be working—and we have 

23 

been working—intensively, we’ll continue to do that over the coming days. 

Senator LUGAR. Thank you very much. 

The CHAIRMAN. Thank you, Senator Lugar. 

Senator Feingold. 

Senator FEINGOLD. Thank you, Chairman, for calling this hearing, and I thank our witnesses for joining us today. We face, obviously, significant challenges from Iran which has repeatedly shown 

its unwillingness to play a responsible, constructive role in the 

international community. By working with the U.N. Security Council, with the broader international community, the administration 

has sent a strong message to Iran—that it needs to address the 

very serious and urgent concerns about the nature and extent of 

its nuclear program. These sanctions, of course, must now be enforced and strengthened. At the same time, it’s important to remember that sanctions are meant to be a tool toward the resolution 

of the Iranian nuclear problem, not an end in themselves. And I 

hope that this hearing will provide a, you know, a better picture 

of our broader strategy and the plans going forth. 

Under Secretaries Levey and Burns, I know you’ve touched on 

this, but how effective should we expect international and U.S. 

sanctions to be at limiting Iran’s ability to further advance its 

nuclear program? First, in terms of the ability to enforce existing 

and previous sanctions—do the various sanctions regimes have 

strong enough enforcement tools in this regard and if not, what 

more should we do about those? And additionally, in terms of the 

ability of sanctions to slow down or curb Iran’s ability to continue 

on with enrichment or to pursue weaponize efforts? 

Ambassador BURNS. I’ll start, just very briefly. 

Senator Feingold, U.N. Security Council Resolution 1929 contains, for the first time, an extensive, comprehensive inspection regime modeled, in some ways, on Resolution 1874 as it applied to 

North Korea. I think with vigorous implementation of those measures, I think we’re in a far stronger position as an international 

community to cut down and stop Iranian smuggling and efforts to 

acquire illicit items. 

I think what we’ve already seen, also, Senator, is a very firm 

commitment on the part of our partners to implement some of the 

other notable provisions of 1929, for example, the provision banning significant transfers of conventional weapons to Iran. Russia, 

for example, has confirmed to us that it will not deliver the S–300 

missile system in accordance with the new Security Council resolution. So, I think that’s one concrete example of a firm commitment 

on the part of our partners. 

Senator FEINGOLD. Mr. Levey. 

Mr. LEVEY. The only thing I’d add to what Under Secretary 

Burns said is that the resolution also establishes a panel of experts 

to help with the enforcement. And while that sounds, maybe, like 

just a bureaucratic function, what we did see in the North Korea 

context was a very powerful report from a panel of experts about 

sanctions evasion. And those sorts of reports, then, enable us to do 

what I was referring to earlier, which is to use their evasion 

against them. Which is, to try to get at least the private sector 

around the world to recognize the Iranian evasive conduct and proVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
24 

tect themselves against it by, frankly, not—choosing not to do business with Iran at all, so that we can try to use Iran’s inevitable 

evasion—they will try to evade, if history is any guide—but try to 

use that to our advantage. 

Senator FEINGOLD. Thank you. 

Under Secretary Burns, I want to get a little deeper into something that was already touched on—that our two-track effort appears to be focusing mostly on the sanctions track at the moment. 

But, given the need to prepare for various outcomes, does the 

administration have a plan for what we want to get out of negotiations, including our bottom-line demands, if Iran did come to the 

table? 

Ambassador BURNS. Yes, sir, we do. And at the same time as 

Resolution 1929 was passed, the Foreign Ministers of the P5+1 

countries issued a statement that made clear that the door is still 

open to negotiations. Kathy Ashton, the E.U. High Representative, 

then wrote to her Iranian counterpart to repeat that offer directly. 

And we’ve also made clear that we have a number of concerns 

about the most recent Iranian proposals on the Tehran research reactor confidence-building proposal. But in the context of our wider 

P5+1 efforts, we’re certainly prepared to pursue those, as well. 

So, we believe that it’s only through a combination of pressure 

and engagement that we’re likely to affect the calculus of the 

Tehran leadership. 

Senator FEINGOLD. And, again Under Secretary Burns, can you 

comment on the relationship between Iran and our friends and our 

allies in the developing world? Particularly, to what extent does it 

have openings for influence in Latin America with its Venezuelan 

connection, and Africa, for example, Iran’s been reaching out diplomatically to a number of countries in Africa, including Jabudi, 

Kenya, the Camorros, Senegal, Uganda, the Gambia, and according 

to press reports, stated that Tehran’s growing relations with African countries were, ‘‘A priority for Iran’s foreign policy.’’ What are 

we doing to reach out to our friends and allies in these regions to 

express our concerns about Iran’s nuclear program, and are they 

being receptive to that? 

Ambassador BURNS. Well, certainly in Africa, Senator, I think 

there is an understanding of the reality that Iran’s not living up 

to its international obligations on the nuclear issue. It’s striking 

that all three African members of the Security Council voted in 

favor of Resolution 1929 notwithstanding a very intensive Iranian 

diplomatic effort to produce a different outcome. 

So, we take very seriously the concern you raised and we are 

staying in very close touch with our partners in Africa. 

The same is true in this hemisphere. We’ve designated one Venezuelan bank because of its connection to Iranian banks, and we 

watch very carefully Iran’s relationship with Venezuela and its 

activities elsewhere in the hemisphere. 

Senator FEINGOLD. Under Secretary Burns, the U.S.-Jordan 

Nuclear Cooperation Agreement that’s currently being negotiated 

has brought up the problematic issue that other Middle Eastern 

countries are interested in developing their own enrichment and reprocessing capability, or E&R. How can we minimize the danger 

that Iran will perceive the development of any such capabilities as 

25 

threatening, and insist on maintaining its own E&R as a result, 

given that Jordan does not seem to be interested in our offer providing it with nuclear energy assistance in exchange for any agreement to forgo E&R capabilities, and the nuclear supplier’s group is 

not interested on a meaningful ban on E&R transfers, what is plan 

B for this situation? 

Ambassador BURNS. Well, Senator, as you know, one of the broad 

initiatives we’ve strongly supported—and hopefully once we finalize 

the new 123 Cooperation Agreement with Russia we’ll be in a better position to encourage this—is the idea of international assured 

fuel supply, international fuel banks, that would provide nuclear 

materiel to countries who forgo the pursuit, on their own, of enrichment and reprocessing activities. I think that’s one promising initiative that we can do more to support. 

Senator FEINGOLD. And finally, Under Secretary Burns, the GAO 

recently released a report indicating that Iran continues to successfully divert United States-made military and other controlled 

equipment and transfer—transship this equipment through such 

countries as the U.A.E. What has the United States done to identify and plug the loopholes in the export control regime that allow 

this to happen, and has the United Arab Emirates implemented 

the export control laws it’s committed to implement? 

Ambassador BURNS. I think, Senator, the record of the United 

Arab Emirates has improved considerably in recent years. We’ve 

worked very closely with them in the application of their own export controls and the sharing of information and law enforcement 

cooperation. So, I think their record is an impressive one, now, we 

want to work very closely with them to cut down and eliminate 

those loopholes. 

Senator FEINGOLD. Thanks to both of you. 

Thanks, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Feingold. 

Senator Boxer. 

Senator BOXER. Mr. Chairman, thank you so very much for holding this hearing, very important, timely hearing and welcome to 

both Under Secretaries today. 

It is so important that we focus like a laser beam on Iran’s reckless and dangerous refusal to cease Iranian enrichment in defiance 

of its own treaty obligations. I am so pleased that Congress is moving toward a final vote on the comprehensive Iran Sanctions 

Accountability and Divestment Act. I read that there’s been agreement reached between the House and Senate—Senators Dodd and 

Berman—Congressman Berman—and so we may be voting on that 

this week. 

Countless experts agree that the way to really pressure Iran is 

to target its oil and gas sectors, and that’s exactly what this sanctions bill will do. 

I was pleased that the U.N. Security Council approved a resolution imposing new sanctions on Iran, despite Iran’s frantic attempt 

to derail the effort. And up until the last minute, they were trying 

to derail the effort. And I congratulate the administration for hanging in there and pushing back. I certainly would have liked to see 

a much tougher Security Council resolution. I’m hopeful that more 

countries are finally realizing what many of us have known for far 

26 

too long—that Iran not only poses a grave threat to the security 

of the Middle East, but to the security of the entire globe. Not only 

could Iran use any weapon that it acquires, but it could proliferate 

nuclear materiel and technologies to terror groups and rogue regimes around the world. So, every effort must be made to stop this 

from happening. I know our President feels very strongly about 

this. 

Not only must we pass tough sanctions measures, but we must 

be sure that they’re carried out and they’re enforced to the fullest. 

And I’m going to ask you both about that in a minute. 

But, it means going after American firms who value a quick profit over the national security of the United States of America. This 

means closing loopholes, so that U.S. firms can’t simply acquire foreign subsidiaries that set up shop and do business in Iran. And I 

can tell you that I know this has been done. 

The GAO conducted a narrow study and found that the U.S. Gov- ernment awarded $880 million to seven companies between fiscal 

years 2005 and 2009 that were also doing business in Iran’s energy 

sector, and some of them are working in Iran today. I understand 

that the comprehensive Iran Sanctions Accountability and Divestment Act that we will hopefully pass this week and send to the 

President for signature, includes a provision that requires companies bidding on a U.S. Government procurement contract to certify 

that they are not engaged in sanctionable conduct, and that means 

either directly or through a shell company. 

Can you assure us today, I would ask both Under Secretaries, 

that this provision—this provision which means that we’re going to 

really look at these companies and their shell companies, that it 

will be enforced to the fullest extent possible? So that U.S. taxpayer dollars are not awarded to companies that are skirting 

United States sanctions laws and doing business with Iran? 

Ambassador BURNS. Yes. 

Senator BOXER. Under Secretary Levey. 

Mr. LEVEY. Absolutely. 

Senator BOXER. OK, because we’re going to have to hold you to 

it. 

By almost every account, the June 9 U.N. Security Council resolution is imposing another round of sanctions on Iran. It was not 

as comprehensive as we all had hoped for, the administration, 

those of us in Congress—in the end, concessions had to be made 

to obtain support from China and Russia when the resolution came 

to a vote. It was still—I don’t want to, in any way, take away from 

the achievement, it was a great achievement, not tough enough, 

but we moved in the right direction with these other countries. I 

know that the administration did everything in its power to secure 

a very tough resolution, but I also know that China, in particular, 

didn’t make it easy. 

So, my question is, why does China not see Iran as a grave 

threat to both regional and international security in light of the 

facts—and I’ll just go through a couple of the facts—Iran continues 

to enrich uranium to higher and higher levels, it is continually 

throwing up roadblocks to prevent the IAEA inspectors from gaining access to both known and suspected nuclear facilities; just yesterday Iran banned two nuclear inspectors from working in Iran for 

27 

filing what it has deemed false reports on its nuclear program, and 

earlier this year, the IAEA released a report stating that it had 

found extensive evidence of activities by Iran’s military, ‘‘Related to 

the development of a nuclear payload for a missile.’’ 

So, in your opinion, what additional evidence does China need, 

or is something else going on there? 

Ambassador BURNS. Senator, I think China is increasingly aware 

of its own stake in effective international action against Iran and 

its nuclear ambitions. 

China obviously has a huge economic stake in the gulf and access 

to its energy resources, and I think is increasingly concerned about 

the dangers that Iran’s nuclear ambitions poses to security and stability in the gulf. 

It had voted for the three previous sanctions resolutions; you’re 

absolutely right—this was a very tough negotiation, but in the end 

it voted for a resolution which contains some important measures. 

The issue of China’s continuing or potential investment in Iran’s 

energy sector is going to remain a very important concern for us, 

an important priority in our bilateral dialogue with the Chinese, 

and we’re going to continue to press that hard. 

Senator BOXER. So, let me just cut through what you said. So, 

you think that China does understand the threat, but still, in all, 

they push for weaker sanctions, so why is that? 

Ambassador BURNS. Well, I think they increasingly understand 

the threat, I’m not sure they share the same sense of urgency that 

we and others do, and we’re just going to have to keep pressing 

hard. And I think in many ways, Iran’s failure to live up to its obligations makes the case for us. 

Senator BOXER. So, China’s—I’m just pressing you on this, I 

don’t want to make you feel uncomfortable, I know you can’t speak 

for another nation’s policies, but I’m just—it’s so clear, the threat 

that Iran poses. And you’re basically saying you’re not sure they 

share the view that we do that it’s that much of a threat at this 

time, and that we have to continue to make the case to them? 

Ambassador BURNS. Well, I think, Senator, they increasingly 

share the concern that we, and many others, have, and that was 

reflected in their vote, after a tough negotiation. 

I don’t want to pretend that they have exactly the same view of 

tactics, or the same sense of urgency, but I think that’s why we 

need to continue to press this issue, we made progress. 

Senator BOXER. So, my last point, therefore, is that the administration is pressing China, continuing to tell them the truth about 

this threat and you’re stating that unequivocally? That will not be 

abated? 

Ambassador BURNS. Yes, absolutely. 

Senator BOXER. Thank you. 

The CHAIRMAN. Thank you, Senator Boxer. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

And thank you both for your testimony. 

As a member of the conference committee, I’m looking forward to 

voting for the strongest set of sanctions. I see Ahmadinejad, who’s 

largely dismissive of Resolution 1929, and in part I think it’s beVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
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cause we roar like a lion and bite like a puppy. We need to change 

that dynamic, in my mind. 

No matter what sanctions regime we have, there’s really a real 

question of enforcement. A law is only good if it is enforced. I look 

at the U.N. resolution, and the financial sections in the resolution 

appear to be weak. For example, only one new bank was added to 

the list of sanction entities. Even here, in the United States, the 

sanctions announced last week added only one bank to the list of 

those sanctioned. 

Nineteen twenty-nine specifically notes the need to exercise vigilance over transactions involving the Central Bank of Iran. So, I’d 

like to ask you, was this based on evidence that the Central Bank 

has been involved in facilitating Iran’s illicit nuclear program and 

its support for terrorism? And does the Treasury Department intend to designate the Central Bank of Iran as a supporter of Iran’s 

proliferation activities? 

Mr. LEVEY. Senator Menendez, the current situation with respect 

to the Central Bank of Iran and the United States, as I think you 

know, is that already it is forbidden to do any business if you’re 

a United States person with the Central Bank of Iran. Every financial institution in the United States would be violating our law— 

it would be a crime to do business with the Central Bank of Iran. 

With respect to the banking sanctions—and frankly with respect 

to all sanctions—we have, by far, the toughest sanctions regime of 

any country in the world. 

You’re right, we did designate another bank last week, but that 

brings our list to 16 Iranian banks that we have designated—either 

for facilitating Iran’s proliferation activities, in the case of 15 of 

them—or, terrorism in the case of one of them. So, we think that, 

you know, we will continue to enforce our sanctions regime very, 

very vigorously. 

Those financial institutions who have violated our sanctions laws 

have found themselves on the other end of very, very tough enforcement actions. But Lloyd’s and Credit Suisse found themselves 

on the other side of fines of over $300 million, in the case of Lloyd’s 

and over $500 million in the case of Credit Suisse, for facilitating 

Iranian transactions among other sanctions—— 

Senator MENENDEZ. I understand about the interaction with the 

Central Bank. The question is, Does the Treasury Department 

intend to designate the Central Bank of Iran as a supporter of 

Iran’s proliferation activities? 

Mr. LEVEY. I can’t say right now whether we will do that. 

Senator MENENDEZ. All right. 

Now, let me ask Mr. Burns—enforcement. On July the 9th of 

2008, you testified before the House Foreign Affairs Committee 

that the State Department was investigating Norway’s Statoil for 

a possible violation of Iran’s sanctions act. For the record, that 

company was fined $10 million by the Securities and Exchange 

Commission and the Justice Department for violating the Foreign 

Corrupt Practices Act by bribing Iranian Government officials in 

order to receive a contract. What was the result of that investigation from the State Department? 

Ambassador BURNS. I’d just make two comments, Senator. 

29 

First, it’s important to note that Statoil announced shortly after 

that testimony that they were not going to engage in new investment in Iran and they began to wind down their operations there. 

So, I think that’s an example of where, you know, the use—aggressive diplomatic use of the Iran Sanctions Act—has actually helped 

produce a result. 

On the broader issue of that kind of problematic cases that we 

talked about—we’ve talked about through the course of this administration, the State Department has completed its internal review 

of those cases. Secretary Clinton promised she would do this expeditiously at the start of the administration. 

There are probably—they are a number of cases, less than 10, in 

which it appears that there may have been violations of the ISA. 

Most of those appear to involve activities that have stopped, in 

other words, involving companies that have pulled out of business 

in Iran, but there are a couple that appear to be ongoing. 

The next stage, after the State Department has completed its internal review, is, you know, in accordance with the delegation of 

authority to Secretary Clinton, is to consult with other agencies, 

which we will do expeditiously, about what actions are appropriate, 

here, and then the Secretary will make her determinations. 

So, just as Secretary Clinton promised, we’re moving ahead vigorously in this administration—— 

Senator MENENDEZ. I respect that, except that we haven’t sanctioned anybody. 

You know, we can’t keep doing the review and the review and 

the review. We come to the problematic cases, and then we go 

through the problematic cases, and now you’re telling me that 

there’s a group of problematic cases that are still problematic because they seem to be still engaged in Iran. DOE has information 

about companies doing business in violation of the Iran sanctions. 

I don’t understand how it is that the SEC can make these determinations, that the DOE has these determinations, but we don’t 

seem to come to a conclusion at State Department for sanctions. 

Which makes me wonder whether we really have the desire to implement the law and enforce it. No wonder Ahmadinejad goes, ‘‘Ho 

hum,’’ to the resolutions; they mean nothing. 

Ambassador BURNS. Well, Senator, it’s a fair question. The proof 

will be in our actions. As I said, we’ve completed the internal State 

Department review, which is a significant step, and as the Secretary committed, we’ll move forward quickly on those cases that 

appear to involve ongoing activity. 

Senator MENENDEZ. Well, does the failure of the State Department result from a lack of manpower? Or, simply that you’re not 

choosing to make a final determination for some political or diplomatic reason? 

Ambassador BURNS. No, Senator, we’re going to enforce the law. 

As I said, we have moved through and completed the internal review, it’s not an issue of manpower. It is true, these are complicated issues because you’ve got to sift through a lot of information—some of it inaccurate because the Iranians have their own 

interest, sometimes, in exaggerating and broadcasting in the press 

stories about contracts that turn out, you know, not to be accurate 

in the end. 

30 

So, as I said, the proof will be in our actions, and we’re moving 

ahead expeditiously on this. 

Senator MENENDEZ. Well, I hope we have a cop on the beat, not 

asleep at the switch. 

The CHAIRMAN. Thank you, Senator Menendez. 

Senator Isakson. 

Senator ISAKSON. Thank you, Mr. Chairman. 

And I deeply apologize for missing your testimony and arriving 

late. And if what I ask is redundant, you can just correctly correct 

me or sanction me, and we’ll move forward. [Laughter.] 

Senator ISAKSON. I think all of us really recognize that the 

$64,000 question is the weaponization of nuclear materiel in Iran, 

and that’s what has the clock running. Is there any timetable we’re 

using as a date that we think they will actually have it weaponized? The Iranians? Other than just guesswork? 

Ambassador BURNS. Well, Senator, I mean, I’d be glad to participate in a closed session to talk about this in more detail. I guess 

what I would do is stand by the testimony that the Vice Chairman 

of the Joint Chiefs offered a couple of months ago before a different 

committee, in which case he was asked a similar question. And 

what he said is, it would probably take a year from today, judging 

from the experience of other countries of low enriched uranium 

stockpiles, to produce—for the Iranians—to produce the amount of 

weapons grade materiel, highly enriched uranium that they’d need 

for one nuclear weapon. That’s only the materiel, that’s not the 

weapon. And he estimated, in public testimony, that it would take 

3 to 5 years to produce an actual nuclear weapon. In other words, 

take that enriched materiel over the course of the next 3 to 5 years 

and turn it into a weapon. That was his public estimate, and I’ll 

stand by that. 

Senator ISAKSON. Well, taking that general information, the fuse 

is getting a lot shorter, which is why the sanctions issue is important, to try and get the Iranians to come to the table. 

Do you, in terms of the U.N. sanctions that recently passed the 

Security Council, what is the resolve of the Europeans in terms of 

being an enforcement mechanism, in terms of those sanctions? In 

your opinion—I know that’s all that would be, would be your 

opinion. 

Ambassador BURNS. Yes, sir. I think the best illustration of the 

strength of European resolve is what the European leaders decided 

last Thursday, which was to take Resolution 1929 and not only implement it, vigorously, to the maximum extent possible, but also to 

accompany it with a number of important new measures, for example, a ban on new European investment in the oil and gas sector, 

a ban on the transfer of important technologies to that sector, including those related to LNG where European companies, Western 

companies play an exceptionally important role in terms of provision of that technology to any countries in the world. So, those are 

quite significant steps, and I think it’s a mark of deepened European resolve now. 

Senator ISAKSON. Mr. Levey. 

Mr. LEVEY. I don’t have anything to add to that, it sums it up 

very nicely. 

31 

Senator ISAKSON. There is some movement in Congress on the 

sanctions bill, and one of the sanctions that I—it has always 

seemed to me—would be the one that might hit it the hardest— 

would be the one over the importation of refined petroleum. Is that 

correct, or incorrect? In terms of the gravity of that sanction on the 

Iranians? 

Ambassador BURNS. It is true that Iran is dependent, to a significant degree, on the import of refined petroleum products of gasoline for consumption, although over the last few years, as I understand the statistics, they managed to reduced their exposure. A few 

years ago, they depended for about 40 percent of their consumption 

of gasoline, refined petroleum products on imports. Now, I think 

the figures I’ve seen are closer to 25 percent. So, they’ve anticipated, you know, their vulnerabilities, the kind of pressures that 

could be exercised against them, and tried to act accordingly. But, 

you know, there’s still a significant exposure, there. 

Senator ISAKSON. Do we have any knowledge that they’re—in addition to increasing their capacity—that they’re actually storing it 

so they could ride out a ban? 

Mr. LEVEY. I think that’s one of the measures that they are taking, Senator. 

But, if I might just add on this point that, while this is a vulnerability and that we think it’s one that could be exploited, on the 

other hand, it’s not really—we, it’s our believe that it’s not a silver 

bullet in and of itself, that we need to do all of the other things 

that we’ve talked about in this hearing, in addition to focusing on 

this. But that, one of the things—two of the things that they may 

do in order to anticipate this attempt to constrain their ability to 

import refined petroleum is either to cut rations, or to reduce the 

subsidies on petroleum. And both of those things are, politically, 

very, very difficult for them to implement within Iran at the same 

time as we’ve been discussing that they’re losing the support of 

their people, and for many other reasons. And so, they’re very resistant to taking those sorts of steps. So, it’s for that reason why 

we think it’s quite useful to target this, but not necessarily sufficient in and of itself. 

Senator ISAKSON. Well, we obviously have learned there’s not 

really a silver bullet in this issue, but there may be a critical mass 

of weight that, when it finally all comes to bear, both U.N. sanctions as well as things that Congress does, we get to that critical 

point that they have to react, and that’s where I think we need to 

be—if the window is 3 to 5 years that you were referring to in the 

previous statement, if it is there, we need to be working now to get 

that critical weight sooner rather than later, to get them to the 

table, I think. Do you agree with that? 

Ambassador BURNS. Yes, sir. Absolutely. 

Senator ISAKSON. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Isakson. 

Senator Webb. 

Senator WEBB. Thank you, Mr. Chairman. 

Secretary Burns, I apologize for coming in late. I have followed 

a good bit of this hearing while we were going through meetings 

in my office, so I’ve been very interested to see some of the lines 

of questioning here. 

32 

Let me start by asking if the administration has any position or 

further thoughts of pursuing possible alternative approaches, such 

as the one that was offered by Brazil and Turkey, toward resolving 

this crisis? 

Ambassador BURNS. Senator, I mean, this goes back to the original proposal that the IEA put forth last October, and that we, Russia and France strongly supported and would have participated in. 

When the Iranians announced—just before the Security Council 

resolution was passed, along with the Brazilians and the Turks— 

their version of this proposal, we consulted with Russia and France 

and subsequently provided Mr. Amano, the Director General of the 

IEA a series of concerns about that, reflecting the fact that, you 

know, first the situation has changed, as Senator Kerry mentioned, 

before on the ground, in the sense that, you know, this is meant 

to be an important confidence-building measure, 1,200 kilograms of 

low enriched uranium last October would have been more than 

three-quarters of the then-stockpile that the Iranians had; now it 

would be less than half. The Iranians have since begun to enrich 

to 20 percent. It’s not logical for them to continue to do that if 

they’re getting help from the outside on the TRR. 

It’s a long way of saying that we put our concerns on the table. 

We’re certainly prepared to engage with the IEA and others on 

that issue. 

Senator WEBB. So, procedurally, it’s not off the table—those sorts 

of approaches. 

Ambassador BURNS. It’s not all off the table, no sir. 

Senator WEBB. I was very interested to hear Senator Lugar’s 

question about an article that appeared discussing the possibility 

of the emergence inside of the Iranian Government, more toward 

I think Senator Lugar said, a military dictatorship, but a larger 

direct role, as opposed to the more theocratic approach, as existed 

in the past. Do you have a comment on that? 

Ambassador BURNS. Senator, just to say that I do believe that 

it’s a fact that the role of the Islamic Revolutionary Guard Corps 

in the leadership calculation and its influence as expanded in recent years, I think the circle of leadership has gotten smaller in 

Tehran, and I think that has revealed fissures within the political 

elite, as well as between the elite and much of the rest of the population. 

Senator WEBB. Would you say that has accelerated over the last 

8 or 9 months? That evolution? 

Ambassador BURNS. Yes, sir, I think it has since the elections 

last June. 

Senator WEBB. I have a question about the use of sanctions. We 

spent a lot of time talking about sanctions and existing laws, but 

there have consistently been waiver provisions that seem to have 

overridden sanctions provisions in the past. Would you have a comment on the use of waivers up to now? How broadly they’ve been 

used? 

Ambassador BURNS. Well, Senator, I guess what I’d say is that, 

you know, we share the objective of constraining Iran’s nuclear program; it’s one of the highest national security priorities of the 

United States. What we want to try to do is work with the Congress so that whatever new legislation gets passed in terms of imVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
33 

plementing existing legislation, we’re doing that in a way which 

carries out the law, but also amplifies the effect of the international coalition we put together. And in that sense, the kind of 

waiver authority that I know the conference is discussing now with 

regard to companies from countries that are closely cooperating 

would be a very valuable tool, I think, in all of our interests in 

terms of maximizing the pressure on the Iranian leadership. 

Senator WEBB. And wouldn’t it be fair to say that at least from 

the reading that I’ve been exposed to—the waiver provisions have 

been sort of the rule, rather than the exception, in terms of sanctions that now are in place? 

Ambassador BURNS. Well, Senator, in response to an earlier 

question on the Iran Sanctions Act, I did state that the State 

Department has completed its internal review of a series of problematic cases—that’s a significant step. And now we’re going to be 

working with other agencies to consider appropriate actions, and 

that will lead Secretary Clinton to make determinations. And so, 

we’re going to apply existing law vigorously, and we want to look 

carefully at the kind of flexibility that we think would help the 

President in future legislation to apply maximum pressure on the 

Iranian leadership. 

Senator WEBB. Would you describe the main concern of the 

administration, with respect to the legislation that’s now in conference, with the waiver provisions, or what other major concerns 

are there? 

Ambassador BURNS. I think that’s as significant a concern as I 

can think of. But we’ve been working very closely with the members of the conference, and we look forward to continuing that over 

these next few days. 

Senator WEBB. OK. Thank you very much. Thank you, Mr. 

Chairman. 

The CHAIRMAN. Thank you very much, Senator Webb. 

Senator Risch. 

Senator RISCH. Thank you, Mr. Chairman. 

The reservations that were expressed by Senator Menendez here 

are bipartisan. I thought he was kind and gentle. You know, we’ve 

been at this a year, and nothing’s happened. Ahmadinejad mocks 

the attempts by us, he demeans them, and if the objective—which 

I guess it is—is to stop them from enriching, it has had, seemingly, 

the exact opposite effect because of the ineffective way that we’ve 

gone about this. 

So, I understand, and I’ve heard the arguments, up until recently, about how it was so delicate, what was going on in the 

U.N., and we can’t act too aggressively, et cetera, but that’s behind 

us now. And I’ve said this before, and I’ve said it again—the 

Israelis are not going to allow Iran to continue down this road. And 

they’re going to get to a point where they’re going to do something 

about it, and then everyone’s going to wring their hands and say, 

‘‘Well, why didn’t America do something?’’ So, we’re at that point 

where we really need to do something. 

This is a serious situation, I appreciate hearing you say that it 

is one of the highest priorities for the American Government, but 

I’ll tell you, we’ve got to get better at this because we’re going to 

34 

have a real wreck on our hands and everybody’s going to point back 

to us. 

Your comments, Mr. Burns. 

Ambassador BURNS. Well, Senator, we—as you know, the President, Secretary, other members of the administration share absolutely that sense of urgency. We understand what’s at stake, just 

as you do. I think there’s an increasing number of countries in the 

international community who share that sense of concern. That’s 

reflected, not just in the passage of a new Security Council resolution, but in the steps that the European Union has announced that 

it’s going to take, the steps we expect other governments are going 

to take. We’re going to work at this issue as vigorously as we can 

because, like you, we understand what’s at stake, here. 

Senator RISCH. The only problem with that, Mr. Burns, and I 

agree with you 100 percent, the only problem with that is, we’re 

in the same position we were a year ago. What you just said was 

the position of the administration and the world community and 

everyone else a year ago, but nothing’s happened except Iran has 

continued down the road, in fact, more robust than it ever has before, for the last year. 

Ambassador BURNS. Well, the only thing I’d say, Senator—and 

Stuart may want to add to this—is I think some things have 

changed. You’re right, in terms of our collective frustration with 

Iran’s intransigence. But I think what we tried to do was use an 

intensive period of engagement as an investment in partnership 

with other countries, and it has produced some new tools of pressure that I think—if we implement them effectively and systematically—do have a reasonable chance, as Secretary Gates said on 

Sunday, of having an impact on the Iranian calculus. And that’s 

not just the Security Council resolution, it’s what the European 

Union can do, it’s what other governments can do, it’s what we can 

do, as well. And, you know, to just add to my response to Senator 

Webb’s question earlier about, you know, the implementation of the 

tools that we have, the Treasury Department, State Department 

and others—as Treasury announced last Wednesday—have continued to implement U.S. authorities vigorously. And we’ll continue to 

do that, and take advantage of new legislation, as well. 

Mr. LEVEY. Senator, could I just add one other comment, which 

is, I wouldn’t be too overfocused on the bluster from President 

Ahmadinejad. We do know that the Iranian leadership is quite concerned about these new sanctions, not just from the fact that they 

tried so hard to keep them from being enacted, but from other indications, as well, and that we’ve already seen indications from within Iran from economists and so forth that are quite concerned 

about the effect of these new sanctions. 

And I share your sense of urgency and in some sense, concern, 

about this issue. But now I would say we’re at the beginning of 

pursuing this path of accountability. And we do have new tools. 

So, on the one hand, you say that the one—the only thing that’s 

changed is they’ve increased their stockpile of low enriched uranium. But, we now have new tools, and that’s something that has 

changed, also. This Security Council resolution does give us a good 

platform to build on. 

35 

It targets exactly the right target. We were talking earlier about 

refined petroleum, I’d say that the focus in the Security Council 

resolution and around the world on the IRGC is an excellent target 

for sanctions, for all of the reasons that I think have been discussed. This is a part of the Iranian leadership that’s taking opportunities away from the Iranian people, it’s participating in the repression of Iranians, and it’s the perfect target for sanctions, if I 

might. Because it’s hard to imagine the Iranian leadership rallying 

the people around the IRGC as we target them for sanctions. 

That’s one of the most significant provisions of the new resolution, 

that it’s targeted not only 15 companies—the number’s not what’s 

important, quite frankly—but the largest of these companies is 

significant. 

I’m not saying it’s going to be easy, but I think that we’re at the 

beginning of this process, and we intend to pursue it intensively. 

Senator RISCH. Well, Mr. Levey, I hope you’re right. My problem 

is that when people express this great concern and hand-wringing 

that Iran seems to have, they don’t do anything about it. They keep 

enriching uranium that they don’t need, and all they’ve got to do 

is stop and all of this stuff goes away. So, they can’t be too concerned. 

Anyway, thank you very much. 

Thank you, Mr. Chair. 

The CHAIRMAN. Thank you very much. 

Senator Kaufman. 

Senator KAUFMAN. Mr. Chairman, I want to thank you for holding these hearings. I think that anyone who is interested in Iran 

can look at the series of hearings that you’ve been holding and gain 

a great deal of information about what’s going on and what’s happening over there. It’s been comprehensive, it’s covered all of the 

different areas, and I think it’s a kind of a tour-de-force in how the 

Senate Foreign Relations Committee can do its job. 

And I want to thank the two of you who are, I think, exemplary 

Federal employees. And I think you exemplify all that’s good about 

what’s going on, I think the American people are lucky to have you 

here. 

I also think that, you know, we tried 8 years of yelling at the Iranians. And that, I mean, this is not something that happened in 

the last year. We’ve known about what’s been going on in Iran for 

a long time. And I don’t think yelling at them did a whole lot of 

good. I think that this is very, very frustrating to all of us. It’s obviously frustrating to Senator Risch, it’s frustrating to me, it’s frustrating to everybody. 

But it’s a frustrating world out there. I mean, it isn’t just Iran— 

what about North Korea? I’m frustrated about them, I’m frustrated 

about lots of different things that are going on, and these are just 

very difficult problems. 

And I believe—I’m not going to apologize for the administration, 

but I think we have made progress in terms of the fact that we 

have got Russian more involved. And what we’re doing, we’ve got 

China on these resolutions, I think the stuff that Under Secretary 

Levey’s doing with regard to the financial pressure being brought 

to bear on the Iranians, which he talked about in his opening testiVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
36 

mony is really quite impressive in gathering all of the world and 

going after them financially. This is a tough, tough fight. 

But I do share Senator Risch’s frustration, and I do think that 

we are on a short fuse, but I couldn’t think of two better people 

to have working on this. 

Now, that out of the way, Secretary Levey, could you talk a little 

bit about cooperation you’re getting from the Gulf States in terms 

of what we’re trying to do? 

Mr. LEVEY. Well, thank you, Senator, and thank you for the kind 

words. 

I’d say that, as others have commented here and as the chairman 

commented in his opening statement, the concern about a potentially nuclear-capable Iran—nuclear weapons-capable Iran—is felt 

just as deeply in the gulf as it is anywhere. 

I do think that we certainly have the indications that we’ll get 

strong cooperation. We’re in much, much better shape now that we 

have a U.N. Security Council resolution. To be candid about it, I 

think that was something which our gulf allies wanted very much 

to see. They feel much more comfortable cooperating under the umbrella of a U.N. Security Council resolution. And so, we’re going to 

pursue that right now. I think there are indications that we’ll get 

good cooperation. 

Senator KAUFMAN. Secretary Burns, you mentioned in your testimony about the U.N., the Russian decision not to transfer S–300 

surface-to-air missiles to Iran. How significant is that? 

Ambassador BURNS. I think it’s a significant illustration of Russia’s commitment to the full implementation of the new resolution. 

I think it’s significant that Russia had shown restraint in the 

period of years before the new resolution. And I think it’s a good 

example for other countries as they look at implementing all of the 

provisions of 1929. 

Senator KAUFMAN. Secretary Levey, Senator Boxer went through 

a good series of questions about China, and China’s involvement. 

Clearly, China signing on the sanctions is significant for us, but 

what are the chances that China is going to use this as an opportunity to do business in Iran, now that other Europeans are starting to cooperating with us, and other nations are cooperating with 

us, that China can move into this vacuum and pick up some of this 

business? 

Mr. LEVEY. I’d also invite Secretary Burns on this, but I’d say 

that this is a significant challenge that we face and that we intend 

to make this a very, very high priority to use the U.N. Security 

Council resolution in the first instance to—which we have every 

reason to expect that China will faithfully execute, and they have 

historically executed U.N. Security Council resolutions that they— 

that have been passed. But, the key point is to try to make sure 

that they don’t backfill from business opportunities that others are 

forgoing, and that’s going to be a very high priority that we really 

push and urge them on. 

Senator KAUFMAN. Under Secretary Burns. 

Ambassador BURNS. No, I’d just echo the same thought. 

It’s going to remain a high priority for us in our dialogue with 

China. 

37 

Senator KAUFMAN. Secretary Burns, I noticed in your statement 

you talked about the Justice Week, 55 other nations joined and rebuked Iran for its atrocious human rights record in the Human 

Rights Council. Can you talk a little bit about how this and the 

1929 Resolution indicates some change in the U.N.’s approach to 

Iran? 

Ambassador BURNS. Well, I think since last June you have seen, 

as you know very well, Senator, a rising concern of the international community about the repression of Iranian citizens about 

the denial of rights that really ought to be universal for Iranians. 

And I think the administration, President Obama, has spoken out 

clearly about that, will continue to do it. And I think it is notable 

that 55 other countries joined us in this joint statement at the 

Human Rights Council. They came from a variety of regions of the 

world, and I think they do reflect growing concern. And that’s 

something we’re—I think the United States is certainly not alone 

in highlighting, and we will continue to work with others to amplify that. 

Senator KAUFMAN. Under Secretary Levey, can you just kind of 

go through—kind of from Iran’s view—what’s happening to them 

financially around the world? 

Mr. LEVEY. I’d be happy to, Senator. 

If you were to rewind the clock to 2005, say, Iran was doing business openly like a quote-unquote ‘‘normal’’ country all over the 

world, and had access to the financial system, including all of the 

leading financial institutions in the world, and they were doing an 

enormous amount of business everywhere except in the United 

States, where we already had sanctions on Iran. 

But, when we started to expose the way Iran was using the 

financial system for its proliferation activities and for terrorism, 

the financial institutions around the world looked at the information that we were providing and the actions that we were taking, 

and the deceptive conduct that Iran was engaging in, and they decided almost unanimously to dramatically cut off their business 

with Iran, or dramatically cut it back. That has left Iran isolated 

financially, and that has had real impact; it makes it harder for 

them to do trade, they have a very difficult time obtaining letters 

of credit from financial institutions around the world. They find it 

very difficult to obtain financing for the major infrastructure 

projects. One of the things that you asked earlier was about the 

risk of backfill as others pull out of projects in Iran. The truth is 

that already the major European companies are avoiding that business, in part because they don’t want to do the business with Iran, 

partly because of urging from the United States, but in part because there’s no financing available, because big financial institutions just will not finance deals in Iran. 

This has real impact. It’s also part of the reason why, I think, 

they are concerned about this new set of sanctions, and the potential implementation by governments around the world. 

Senator KAUFMAN. Thank you. Thank you, both, for your service. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Senator Shaheen. Senator Wicker, excuse me. 

38 

Senator WICKER. Thank you very much, I appreciate your testimony, gentlemen. 

What do you say to the charge that the U.N. sanctions have been 

so watered down and so weakened that they’re relatively meaningless? What do we have to give up in order to get Russia and China 

on board with this U.N. resolution? 

Ambassador BURNS. Well, Senator Wicker, I think first, two 

points. Security Council Resolution 1929 does go well beyond previous sanctions resolutions, and I think the provisions in it are significant. I’d just cite a couple of examples: the ban on significant 

transfers of conventional arms; Russia’s subsequent decision that it 

will not deliver S–300 missiles to Iran in accordance with that resolution; the ban in the new resolution on all ballistic missile activity 

connected with missiles that could carry nuclear weapons; the 

range of provisions in the financial sector that Under Secretary 

Levey has already talked about. I think all of those provisions 

provide a stronger platform than we’ve ever had before internationally. 

And that’s my second point. I think we can build on that platform, as the European Union announced it was going to do last 

Thursday, in ways which further strengthen the impact on Iran of 

those kind of measures. And I think that’s a significant advance on 

where we’ve been before. 

Senator WICKER. Then the second part of my question—what do 

we have to give up, as compared to what we wanted—in order to 

get the Russians and the Chinese on board at the Security Council? 

Ambassador BURNS. Well, it’s like, Senator, any negotiation anyplace. I mean, we didn’t get everything that we wanted in that resolution, but nor did the other parties get everything that they 

wanted. And I think what we produced in the end, collectively, 

especially amongst the permanent members of the Council, was a 

significant step forward—— 

Senator WICKER. Was there a draft proposal that we submitted 

that specifically listed some proposals that were taken out in the 

final version? I guess that’s my question. 

Ambassador BURNS. Well, sure. As I said, Senator, we didn’t get 

everything that we, the United States, would have liked, if we were 

just writing the resolution ourselves, but—— 

Senator WICKER. And, what might those have been? 

Ambassador BURNS. Sir, I don’t want to go into all of the backing 

and forthing of a negotiation, but, you know, there were certainly 

provisions that if we were just doing this ourselves, you know, we 

would have preferred. But, I think at the end of the day, we were 

able to produce, collectively, a very significant set of sanctions. 

Which puts us on a very good position to build on them, with the 

E.U., with steps the United States can take, steps Australia and 

other countries can take. 

Senator WICKER. Does it surprise you, Secretary Burns, that 

Russia has criticized the announced United States sanctions and 

the E.U. sanctions? 

Ambassador BURNS. No, Senator, it didn’t surprise me. Russia 

has been quite consistent and quite clear in its concern about 

measures that go beyond those in the U.N. Security Council resolution. 

39 

Senator WICKER. And so, would you say it’s fair to characterize 

their opposition as being more to the forum of the sanctions, rather 

than to the specifics—the specific effects of those sanctions? 

Ambassador BURNS. Well, you know, the Russians can speak for 

themselves on this—I think there is concern about measures that 

go beyond the forum of the U.N. Security Council. I think there’s 

also concern that’s shared—it’s not only a Russian concern, it’s 

shared by our European partners, too, about extraterritorial application of other countries’ national measures. So, it’s a variety of 

concerns that produced that. 

Senator WICKER. OK. With regard to Turkey and Brazil voting 

no. Again, I’m asking you to characterize someone else’s point of 

view. But, is it their contention that—that we sort of pulled the rug 

out from under them, that we had asked them to go forward with 

these negotiations with President Lula and President Ertigan, 

and—and they felt that they didn’t get enough communication from 

the State Department. Is that a fair characterization of their viewpoint? 

Ambassador BURNS. I don’t think, Senator, there was any lack of 

communication on this issue. I think the Turks and Brazilians, 

while they share the same goals strategically, they’re firmly opposed, both of them, to a nuclear armed Iran. We had differences 

over timing and tactics, and, you know, we expressed our disappointment in the votes that they chose to take, but we’ve also 

taken note of the fact that both Turkey and Brazil have made clear 

that they intend, as members of the United Nations, to implement 

fully the Security Council resolution that was passed. 

Senator WICKER. Do you think this is a flap between the United 

States and Turkey and the United States and Brazil, that we’re 

going to get past fairly quickly? Are there going to be any longterm ramifications of this decision on their part? 

Ambassador BURNS. Well, as I said, Senator, you know, we’ve 

made clear our disappointment over those votes. We also recognize 

the number of areas, for example, with Turkey, where we have 

common concerns. One recent example has to do with the PKK, a 

terrorist group, where the United States has cooperated closely 

with Turkey in support of its efforts to protect its own security. 

And that’s an area in which we’re going to continue to work 

together. 

So, you know, these are complicated relationships with countries 

that matter in lots of important ways, and we’ll have to try to work 

through our differences. But they were real enough over the Security Council resolution. 

Senator WICKER. Thank you very much. 

The CHAIRMAN. Thank you, Senator Wicker. 

Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. 

Let me thank both of our witnesses for the work their doing. 

Clearly getting the next U.N. sanction resolution passed was a 

major step forward, and we really do applaud your efforts in that 

regard. 

But I must tell you, I think that the United States sanction legislation is critically important. Just by way of analogy, historically 

what happened with South Africa—there was a lot of angst about 

40 

the United States moving forward with sanctions against the 

apartheid Government of South Africa. They said we can depend 

upon the international community, and quite frankly, it was 

United States leadership that provided the impetus for the economic pressure on South Africa to changes its apartheid government. 

And I do remember the arguments at the time, people saying, 

gee, it’s going to hurt the people of South Africa and result-wise, 

it was part of the strategy that brought about the transition of that 

country in a less bloody way that otherwise it would have 

happened. And, you look at economic sanctions working, of the 

Jackson-Vanik law, which was instrumental in freeing a lot of 

immigrants from the Soviet Union. And Iran may give its own 

assessments of this, but clearly the economic sanctions need to be 

strengthened. And the work that you did within the United 

Nations is a very positive step. 

The legislation, which I hope we will approve this week, is 

strong, putting the United States in the forefront dealing with refined oil products. And, I understand the historic relationship between the executive and legislative branch. On foreign policy, we’re 

usually together. But I think it’s important that we speak with a 

very strong voice, and you can always point to the independence of 

Congress as you try to negotiate with our friends around the globe. 

I want to get to the enforcement issues of the U.N. resolutions. 

I know you’ve talked about that, but, you know, I am concerned as 

to how we will be monitoring the work within the United Nations 

on enforcement of its own resolution, and how the United States 

will provide the international support that’s going to be needed to 

provide the intelligence information as to whether the sanctions, in 

fact, are being complied with. 

Can you just go into a little bit more detail as to how this will 

be handled as a priority within our government to make sure these 

sanctions are enforced at the highest levels? 

Ambassador BURNS. Yes, Senator, I’d be glad to start. I mean, 

first, Secretary Clinton has appointed Bob Einhorn, one of her senior advisors, to be the full time coordinator in the State Department of implementation, exactly the kind of challenges that you 

talked about, working with Under Secretary Levey, our colleagues 

throughout the administration, and the intelligence community, 

and importantly, working with foreign governments to make sure 

that there’s vigorous implementation of these measures. Because as 

significant as the new measures are, they’re only as good as the 

implementation. 

Second, as Stuart mentioned before, we do have in Resolution 

1929, the creation of a so-called panel of experts. The Iran sanctions regime has, up until this point, been the only U.N. sanctions 

regime without such a panel, which is aimed at enforcing accountability. It will consist of eight members, including one from the 

United States, and that gives us another tool in the U.N. system 

to try to hold people accountable for implementing the new resolution. 

Senator CARDIN. But as I understand it, a lot depends upon having reliable information as to whether there’s reasonable cause to 

believe that a vessel contains elicit products. That information 

41 

most likely will be coming from sources that the United States has 

interest in. How is that coordinated with the United Nations effort? 

Ambassador BURNS. Well, sir, the comprehensive inspection regime set up in Resolution 1874 in North Korea, is in some ways 

a good model from this, and we’ve learned a lot from that experience and had some successes. And, we will work, you know, very 

closely with our friends and allies with this new panel of experts 

at the U.N. to ensure that information is passed quickly, and that 

we can use it to identify suspect cargos and then take advantage 

of the new provisions of the resolution. 

Senator CARDIN. Are there any additional resources that the 

United Nations needs in order to carry this out, or do you think 

they have adequate resources devoted to this? 

Ambassador BURNS. Well, it’s certainly something, Senator, we’ll 

keep a careful eye on and stay in close consultation with the U.N. 

Secretariat on, but I think this new panel of experts is an important new tool. 

And then—what Bob Einhorn’s efforts and his coordination of, 

you know, the efforts of not only the State Department but others 

in the administration, I think is also an important new tool. We 

just need to plug the two together and I think that can produce 

real results. 

Senator CARDIN. Once the United States has completed its bilateral sanction improvement, the one we sign when the conference 

board is completed—which we hope will be this week—can you just 

tell whether other countries are looking at the United States to 

perhaps follow our lead and enhance the sanctions in addition to 

the United Nations? 

Ambassador BURNS. Yes, sir, the European Union, last Thursday 

when its leaders met, took a very significant step in announcing a 

series of measures that not only implement to its fullest, Resolution 1929, but accompany it with steps such a flat ban on new investment in the oil and gas sector, a flat ban on the transfer of certain important technology to the energy sector in Iran, a range of 

other measures which build on the new Security Council resolution. 

Australia has announced similar kinds measures. We know Canada 

is considering a similar set of provisions, and we’re in touch with 

a range of other governments about steps that they could take as 

well. 

Senator CARDIN. Well, I think that’s important. I think it’s important to show that this, again, beyond just the United Nations. 

That sets the framework, but it really does depend upon those who 

are concerned what Iran is doing, coming together with creative 

ways to make these economic sanctions really work. And then we 

can learn from each other, get the best practices, which will 

strengthen the U.N. effectiveness of its resolutions, but also help 

us figure out ways that we can close any gaps in the intended economic pressure. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Senator CASEY. Thank you, Mr. Chairman. 

I want to thank both of you for being here and for your testimony 

and for your service at a tough time in our Nation’s history. I do 

want to thank Ambassador Burns for mentioning, and Chairman 

42 

Kerry for mentioning, the three hikers, one of whom, Josh, is a 

Pennsylvanian, and Sarah and Shane. And I know that our government has taken a lot steps to try to secure the release that has not 

happened yet. We’re coming up on a year, but we’re grateful for the 

work and we look forward to continuing to work with you on that. 

And in that vein, with regard to freedom and human rights and 

Internet freedom and freedom of expression, I want to—I was noting from Under Secretary Burns, the reference on page eight, page 

seven onto page eight, where you state, ‘‘State and Treasury have 

worked to issue a general license that allows free market, downloadable communication software available inside Iran.’’ And I 

know you may have already addressed this, but two things. One is, 

what you can you tell us, in terms of an update—and again, this 

may be redundant from what you’ve testified to earlier—an update 

on how that effort is proceeding. And second, what if anything the 

Congress can do to help the administration in this area. I know 

we’ve passed the Voice Act, we’ve done a number of things, but is 

there a gap or a hole or a strategy that we haven’t acted that we 

can be helpful to the administration with? 

Ambassador BURNS. Thanks, Senator Casey. No, we admire very 

much the efforts that you and your colleagues in Congress have 

made to highlight the importance of free access to information on 

the part of Iranians, which is a universal right. You highlighted, 

sir, one of the specific steps we’ve taken, along with Treasury, in 

issuing a general license to make more accessible kinds of software, 

whether it’s for e-mail or blogs that we think are very useful. The 

truth is that there are at least 25 percent of the Iranian population 

that is online regularly, and it’s an extremely important way of 

people communicating with one another. 

We’ve taken another step, which is to issue a specific waiver for 

a kind of technology that helps avoid jamming, which is a—certainly a tool that the Iranian Government has used to cut down on 

the free flow of information. We applauded the Voice Act, we’ll try 

to take full advantage of the kind of provisions that are in that act, 

and look for other creative ways in which we can help Iranians 

have access to information, just like any other society ought to 

have. 

Senator CASEY. When you say the waiver, explain how that 

works. When you said the providing waiver, tell me how that 

works. 

Ambassador BURNS. Well, it’s just under the—I’ll probably get 

some of the details wrong, but under the current strictures, you 

know, that the U.S. Government applies to any kind of commercial 

interchange with Iran, there were proscriptions on, you know, certain kinds of equipment, and this would actually make an exception in that case. 

Senator CASEY. Thank you. I know that Under Secretary Levey 

has been part of the effort to keep the heat on the regime as it relates to sanctions. I know we’re—we meet here principally to focus 

on what the United Nations has done. And in that vein, I want to 

ask as well about some of the congressional action on this, but I 

was looking at your testimony as well. On page six where you 

talked about the—the Islamic Revolutionary Guard Corps being 

designated by Treasury in 2007, and you want to—you go on from 

43 

there, and I guess it’s second or—I think it’s the third sentence, 

about what happened last week, the actions taken to supplement 

those actions. And in the end of the paragraph, you talk about the 

26 entities now that have been so designated. 

What if—let me ask you first, what if anything is left there, in 

terms of work to be done on putting pressure, particularly on the 

Revolutionary Guard Corps, is there anything more that you would 

hope the Congress would do or do you think the sanctions that are 

being worked on now, by way of a conference committee, whether 

or not that’s going to be sufficient to provide the kind of pressure, 

in particular, on the Guard Corps. 

Ambassador BURNS. I’d make two points, Senator. One is that, 

as I understand the bill that is being considered, it does have IRGC 

provisions that would expand our authorities in this respect and 

that would provide the authority to restrict U.S. business with 

entities that are doing business with IRGC. But, perhaps most 

important, is the implementation—I mean, it comes back to the 

implementation of the U.N. Security Council resolution, because 

the designation in the Security Council resolution of Khatam alAnbiya, which is the umbrella company that does all the—that 

does a lot of this business, and then a lot of it’s subsidiaries and 

affiliate companies, that it’s—it’s frankly hidden behind, since we 

designated it ourselves in 2007. To have that be a global implementation of those restrictions will be very powerful, even in their most 

important industry, which is of course their energy industry. 

Because they can’t attract investment, they are turning over 

projects to IRGC affiliated companies. One knows that if those companies were capable of doing those—handling those projects, that’s 

how they would have handled it in the first place. They need to 

contract out, outside of Iran, and those companies have a history 

of contracting out with companies around the world, including in 

Europe, to do the projects that they’re given as sole-source contracts from the government. 

So, we think that implementing that provision of the resolution, 

the designation of the IRGC companies, is a very, very powerful— 

a very, very powerful step. 

Senator CASEY. And I know we don’t have—we have not completed the conference work that will lead to final passage of the 

legislation. But, let me conclude with this. There are a lot of people 

who will say to me, ‘‘Well, it’s great you guys are going to pass 

something in Congress to provide more authority for the President 

for administration.’’ Some authority, of course, will relate, as Senator Brownback and I worked on the divestment, so we have other 

levels of government, pension funds, and local government and 

State governments helping us, but in terms of the new authority 

for this President, this administration and succeeding administrations, I would urge both of you to be a very strong voice, to use the 

power that’s granted. I know it’s I know it’s unilateral, I know 

it’s—there’s discretion involved to a substantial extent, but we need 

to keep the heat on this regime and we don’t want to pass legislation where it just sits on the shelf. So, I know you have strong feelings as well about this, but I urge you to be a strong voice for the 

use of those enhanced authorities. 

Thanks very much. 

44 

The CHAIRMAN. Thank you very much, Senator Casey. 

Senator Shaheen. 

Senator SHAHEEN. Thank you, Mr. Chairman. 

And thank you both for being here. I had a meeting recently with 

a representative from a large corporation who was expressing some 

concern about how they might be affected by the further Iran sanctions resolution at the U.N. and the action that we’re taking here 

in Congress. And, they were expressing concern in a way that indicated some question about whether they thought this was really 

necessary. 

And, I wonder if you can tell me how we’re dealing with American corporations who we hope and expect to comply with the sanctions resolution and the action that we’re taking, and are we educating them, are we—I mean, what surprised me, frankly, was that 

he didn’t view this as his patriotic duty and that he didn’t seem 

to recognize the very real threat that Iran poses. 

Mr. LEVEY. obviously I don’t know which company you’re referring to, but, Senator, I, and I know Secretary Burns and others at 

the State Department do a lot of the sorts of discussions like this, 

to the extent that I’m talking to a company that’s not American 

company, I make the point that our companies have been voting 

with their, you know, putting their money where their mouth is for 

a generation. 

We have largely forsworn the economic opportunities of doing 

business with Iran through our unilateral sanctions for a long time, 

and so when I get push back from other governments I’m quick to 

point that out. 

When it comes to U.S. companies, this is a very, very small and 

frankly, you know, it gets a lot of attention, but it’s a very small 

amount of business in absolute terms, but we are very—very vigilant with respect to making sure that we enforce our law as it 

stands, which is that if you’re a U.S. company and you have a subsidiary abroad, you can not use that subsidiary to evade the sanctions, and if you do, we’ll take enforcement action against you. 

What frankly happens a lot of times is when we start to investigate 

the business of the foreign subsidiary, we get a public announcement that they’re going to stop doing the business, and then we say 

that’s great. And that’s maybe a good outcome. 

But we take this very seriously, and as I indicated to other Senators, when people violate our sanctions, we’re very tough, as we 

were with the two major financial institutions that violated our 

sanctions in the last couple of years, and imposed multiple hundred 

million dollar fines on both of them. 

Senator SHAHEEN. Thank you. Can you also talk about the reaction to the Financial Actions Task Force’s recommendations and— 

I guess they’re more than recommendations, they’re countermeasures—and how responsive the international community has been 

to that. 

Mr. LEVEY. Well, thank you for asking that, because this is something which—which the Financial Action Task Force, which is the 

standard setting body on money laundering and terrorist financing 

issues, and it has the buy-in of almost every country, major country 

in the world has—only one country that they have called out for 

countermeasures, and this is not done for political reasons, this is 

45 

a technical assessment of the risks posed by elicit finance within 

each country. And Iran is the only one that opposes such a risk, 

that they’ve asked countries to impose countermeasures. 

We frankly intend to use that call for countermeasures and the 

combination of the financial provisions of the U.N. Security Council 

resolution to seek very robust countermeasures on Iran, and the indications, at least initially from the Europeans, as Under Secretary 

Burns said, their statement is at least a political statement in the 

right direction, we’ve now got to turn it into action. 

Senator SHAHEEN. And you mentioned the Europeans, the Australians, is there anybody that we’ve been talking to who we are 

concerned will not go along with those countermeasures? Either 

one of you. 

Mr. LEVEY. The issue about the countermeasures is that’s there 

no prescribed—there’s no prescription about exactly what countries 

have to do, and so we have to work with them to make sure that 

the countermeasures that are imposed are robust enough. And so, 

the direct answer to your question, is no one will say, no, we’re not 

taking it seriously. My concern and what I intend to work on very 

hard to make sure that what they do impose is strong enough and 

isn’t just a statement of concern, but rather some real teeth in 

these countermeasures. 

Senator SHAHEEN. Under Secretary Burns, you talked about Turkey and—Turkey and Brazil having—supporting the underlying 

goals of the resolution, but thinking there were other ways to get 

there is that were more effective. Should I assume from that that 

they share our very real concern about the threat that Iran poses? 

Ambassador BURNS. I think they do, Senator. I certainly—I think 

they share the strategic goal here, which is to ensure that Iran 

doesn’t develop nuclear weapons, Turkey in particular, is a close 

neighbor and has as big a stake as anyone in the security and stability of that part of the world. 

Senator SHAHEEN. And, can you also elaborate a little bit on how 

that action at the U.N. has affected Turkey’s relationship with 

Israel? 

Ambassador BURNS. Well, the relationship between Turkey and 

Israel, as you know, has been a complicated one for, you know, for 

reasons that go beyond simply the issue of the resolution in New 

York, and certainly the incident effecting the recent Gaza flotilla 

was a source of real friction between them. 

In the past, Turkish-Israeli relationship I think had been one of 

the, you know, more encouraging developments in the region. Turkey played a very significant role, as Senator Kerry knows, in 2008 

in facilitating an indirect exchange between Syria and Israel, and 

I think that was reflection of the kind of role that Turkey can play 

on a range of important Middle East issues. 

Senator SHAHEEN. And finally, what impact on Iran’s position 

within the Middle East have these sanctions had, or is it too soon 

to tell? So, have they increased some of the other countries within 

the Middle East who might—like Syria—who might have been 

more supportive of Iran, or have they decreased their commitment 

to Iran? 

Ambassador BURNS. Well, I think the passage of the resolution— 

it’s, you know, it’s not a magic cure, but it does reinforce the isolaVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
46 

tion of Iran in the international community. I think it reinforces in 

the region, I think, the concerns of, you know, our partners not 

only in gulf but elsewhere. There are concerns about Iran’s nuclear 

ambitions and about its behavior in lots of other areas, its support 

for terrorist groups, its efforts to undermine efforts of Middle East 

peace. 

So, I think in that sense the Security Council resolution has a 

constructive impact in highlighting what the real problem is here 

today, and the real problem is Iran’s unwillingness to live up to its 

international obligations. 

Senator SHAHEEN. Thank you. 

The CHAIRMAN. Thank you, Senator Shaheen. 

Mr. Secretary, I know you want to try to get out of here around 

11:30, we’ll try to get you right out of here momentarily, just a couple of quick questions, if I may. 

How much international cooperation, Secretary Levy, do you anticipate for the nonbinding measures? 

Mr. LEVEY. I have very high hopes and I think that our indications so far are quite positive. And these nonbinding measures, I 

think, I have two reasons for optimism. One is that we have had 

prior consultation with a lot of our allies about exactly what they 

needed to do the things that we want them to do. And my second 

reason for optimism is that the overwhelming information that is 

already in the public domain about—that the resolution calls for 

countries to meet before they can take action. 

So, as I mentioned earlier, governments are asked to cut off all 

financial services and corresponding banking if they have reason— 

if they have enough information to believe that this could be used 

for Iran’s nuclear missile enterprises. Well, the information that is 

in the public domain already is overwhelming, and in fact, even in 

the resolution itself, one of the criticisms of the resolution that I 

heard was that there’s only one bank listed. And it is a bank that’s 

a small bank that is owned by Bank Mellat, which is a large Iranian bank. 

But the description in the resolution of what bank—of Bank 

Mellat, is that it moves hundreds of millions of dollars for Iran’s 

nuclear and missile and other military enterprises. So there you 

have, even in the resolution itself, already the information that is 

necessary for governments to take strong action against Bank 

Mellat. And so, we can use that, I think, to get some strong 

response. 

The CHAIRMAN. And what are the most significant provisions in 

1929 that you think are going to bring real economic and financial 

pressure on Iran? 

Mr. LEVEY. Perhaps the most important one is the simplest one, 

it’s the IRGC designations, because that is a very significant and 

it’s a larger part of the economy, as we’ve discussed. But I would 

again point to the restrictions—in terms of economic issues, I 

would point to the restrictions on any kinds of financial services, 

including banking, insurance, et cetera, that governments are 

called upon to cut off if there’s any basis for believing that it could 

help Iran’s nuclear missile enterprises. 

The combination of all that, plus just the vigilance and the encouragement to stop doing business with IRISL, their shipping line, 

47 

and the IRGC. I think you put all of that together, it can have a 

strong impact, but the three provisions that are most important, I 

think, would be the IRGC provision, as well as its paragraphs 21 

and 23 about financial services. 

The CHAIRMAN. And once we’ve got the rules in place et cetera, 

what do you—what is the key to ensuring that these new sanctions 

are going to be as effective as possible? What do you, both of you, 

most—— 

Mr. LEVEY. You know, I think that there’s—— 

The CHAIRMAN [continuing]. Just track and push. 

Mr. LEVEY. There—well, what we’ve learned over time, I think, 

is that you’ve—this is in some ways a labor intensive process. You 

know, there is no, in my view, there is no substitute from, you 

know, showing up over and over again to talk about these issues. 

We have made a lot of progress by doing that, discussing, you 

know, sharing this information, showing up with the information, 

discussing it again. We have made that our priority to do over the 

last few years. Now with the appointment of Bob Einhorn to coordinate these efforts of the State Department, we’ll be able to follow 

through and do that in a very concerted way. I think the more people understand that this is a high priority for the United States, 

the more likely they are to cooperate and—— 

The CHAIRMAN. You talked earlier about one bank shifting off to 

another bank once that bank gets, sort of, the hammer come down 

on it. Can they simply do that again, just shift off to yet another 

bank or create a bank to shift off to? Don’t they have significant 

amount of flexibility in that? 

Mr. LEVEY. Well, we’ve now designated 16 of their banks. 

The CHAIRMAN. How many do they have? 

Mr. LEVEY. They’ve got more, but the point is that—we’re trying 

to use this evasion—you know, you could go the other way, but our 

view is that you use the evasion by pointing it out and getting people to see exactly how they’re behaving so that they can take action 

themselves to not do business with Iran’s banks. If we just issued 

an edict that said, you know, all of Iran’s banks, you know, are in 

this category, it wouldn’t have the effect because we wouldn’t have 

the publicly available information to substantiate our concerns. 

So, it’s our view that the most effective way to do this is the way 

we have been doing it, to sort of—you point out exactly the elicit 

conduct, make it public, confront people with it so that they can 

take steps on their own. 

The CHAIRMAN. Now I understand we pay Iran $100 million a 

day for oil. Is that accurate? 

Mr. LEVEY. I’m not sure what you’re referring to, Mr. Chairman. 

The CHAIRMAN. I’m trying to figure it out. I have seen the ads 

on television and recent reports in news media referring to $100 

million that goes to Iran, in terms of America’s dependence on foreign oil. Can you speak to that? 

Mr. LEVEY. I think I’d have to sit down with whoever is making 

those calculations and see what they’re referring to. There’s no— 

it’s impermissible to directly purchase from Iran by any United 

States person, but—— 

The CHAIRMAN. Do you have any sense of how indirectly that 

money is getting to Iran? Obviously it’s indirect, I understand that. 

48 

Mr. LEVEY. I don’t want to speculate. I mean, it’s possible that 

people are saying this is fungible product, and so the amount that 

we buy raises the prices to a certain extent, but I—that’s a pure 

speculation. I don’t know. 

The CHAIRMAN. Have you not looked at that tracking, I mean, 

aren’t there some joint oils fields shared? Don’t the Qataris have 

a joint oil field in the gulf? 

Mr. LEVEY. I believe that’s a gas field, but you’re correct. 

The CHAIRMAN. And do we buy from them? Does some of that 

proceed go to Iran? 

Mr. LEVEY. I don’t know, but I do know that it’s impermissible 

to buy directly from Iran by any United States person. 

The CHAIRMAN. To what degree will our sanctions have the ability to deal with the indirect support structure, which if it is true, 

results in $100 million a day, is kind of counterproductive? 

Mr. LEVEY. You know, I don’t want to say—I feel like we have 

a premise that we haven’t really—— 

The CHAIRMAN. All right. 

Mr. LEVEY [continuing]. Established yet. 

The CHAIRMAN. We’ll get the premise to you more directly. I was 

wondering whether you had any—if you could shed any light on 

that, because I’ve just seen that in these last days, and I wanted 

to try to—— 

Mr. LEVEY. Let me look into further and see if can get back to 

you. 

The CHAIRMAN [continuing]. Focus in on it. Fair enough. 

Let me thank both of you very much. 

Senator Lugar, do you have any additional questions? 

Senator LUGAR. Well, thank you, Mr. Chairman, I do, but I will 

submit them to the witnesses for the record, and if you would respond swiftly, we’d appreciate it. 

The CHAIRMAN. Senator Lugar, we’ll leave the record open until 

the end of the week, for colleagues, and in addition, there are questions we do need to ask in classified session. And if we could get 

you back, I could—I think you could sense from the participation 

of the committee here, the level of interest that obviously exists. 

We could try to do that, I hope in the near-term, we’ll try to work 

that out with your staffs. 

Thank you very much for being here today, very interesting and 

very helpful. We appreciate it. 

We stand adjourned. 

[Whereupon, at 11:48 a.m. the hearing was adjourned.] 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

RESPONSES OF UNDER SECRETARY WILLIAM BURNS TO QUESTIONS SUBMITTED FOR

THE RECORD BY SENATOR JOHN F. KERRY

Question. In your testimony you mentioned the three American hikers detained 

by Iran, Shane Bauer, Josh Fattal, and Sarah Shourd. 

a. What steps are being taken to help bring about their release? 

b. Do we have knowledge of their well-being? 

c. Recent reports suggested they may have been arrested by Iranian border 

guards on Iraqi soil. Is that your assessment as well? 

d. Another American who went missing in Iran is Robert Levinson. What do we 

know about his whereabouts? 

49 

e. What steps are being taken to find him and bring him home? 

Answer. (A) The three hikers have been detained for nearly a year without official 

charges or access to their attorney. The Department is committed to ensuring fair 

and humane treatment for all U.S. citizens detained overseas, and we stand ready 

to assist detained citizens and their families within the limits of our authority in 

accordance with international law. In the case of the hikers, we are using a variety 

of diplomatic tools to ensure that Iran understands the U.S. Government’s concern 

for the welfare of these three Americans. We are raising our concerns bilaterally, 

through the Swiss protecting power, and through third parties. 

(B) We understand the three have not been physically harmed, although their 

psychological well-being is a major concern. The Swiss have been granted consular 

access on three occasions: September 29, 2009; October 29, 2009; and April 22, 2010. 

The hikers’ mothers were able to visit them on May 20 and May 21, 2010. Although 

the Iranian Government has not permitted Sarah, Shane, and Josh to sign a Privacy 

Act Waiver, the families have released information on their welfare and well-being 

to the press. Through these reports we understand that Sarah Shourd has been in 

a cell by herself since her detention on July 31, 2009, and has serious preexisting 

medical conditions. We have asked the Iranian Government to share her medical 

records with us. The Iranian Government has yet to provide the results of medical 

tests she has undergone while in detention. 

(C) The Department is unable to corroborate reports that the hikers were arrested 

by Iranian border guards on Iraqi soil. 

(D) We continue to seek information regarding Mr. Robert Levinson, who disappeared on March 9, 2007, while on a business trip to Kish Island, Iran. In December 2007, Mr. Levinson’s family traveled to Iran and met with Iranian officials. The 

officials expressed a willingness to share information about their investigation into 

Mr. Levinson’s disappearance; however, the Iranians have yet to provide this information. 

(E) The Department uses every opportunity to raise its concerns over Mr. 

Levinson’s disappearance—both bilaterally, through the Swiss protecting power, and 

through third parties. The United States continues to call on the Government of the 

Islamic Republic of Iran to assist in providing any information on Mr. Levinson’s 

whereabouts and following through on its promise to share the results of its investigation with the Levinson family or the Swiss Embassy in Tehran. 

Question. In the wake of U.N. Resolution 1929, countries are taking ‘‘national 

measures’’ to increase the pressure on Iran. What do you expect will be the impact 

of the ‘‘national measures’’ taken by U.S. allies in the wake of U.N. Resolution 

1929—both on Iran’s economy and on its decisionmaking? 

Answer. Already, the European Union has acted strongly to follow up UNSCR 

1929, announcing in its June 17 European Union Council Declaration the plan to 

adopt EU-wide regulations, which we expect to occur at the July 26 Foreign Affairs 

Council meeting. Its leaders have decided to take a series of significant steps, including bans on the transfer of key technology, and tough measures against Iranian 

banks and correspondent banking relationships, and additional designations to include banks. Canada and Australia have indicated similar resolve, and other partners will follow suit shortly. Meanwhile, we continue to have success in persuading 

a variety of foreign companies that the risks of further involvement in Iran far outweigh the benefits. 

The net result of this combination of economic pressures is hard to predict. It will 

certainly not change the calculations of the Iranian leadership overnight, nor is it 

a panacea. But it is a mark of their potential effect that Iran has worked so hard 

in recent months to avert action in the Security Council, and tried so hard to deflect 

or divert the steps that are now underway. Iran’s leaders understand that both the 

practical impact of Resolution 1929 and its broader message of isolation create real 

problems for them and their pursuit of nuclear weapons. 

Question. Europe’s supply of refined petroleum to Iran is declining. Where is Iran 

getting its refined petroleum? 

Answer. Major gasoline suppliers to Iran have included companies from India, 

China, Turkmenistan, the Netherlands, France, Singapore, Kuwait, Russia, and the 

United Arab Emirates. Exports from European companies have been in decline, due 

in large part to U.S. pressure; however, exports from Asian companies and wholesalers have increased to meet Iranian gasoline demand. 

50 

RESPONSES OF UNDER SECRETARY WILLIAM BURNS TO QUESTIONS SUBMITTED FOR

THE RECORD BY SENATOR RICHARD G. LUGAR

Question. Please describe, in a classified format if necessary, the administration’s 

diplomatic efforts with gulf allies to counter the threat of a nuclear Iran. 

Answer. As allies in the region potentially affected greatly by Iran’s nuclear program, the United States works closely with members of the Gulf Coordination Council (GCC) both bilaterally and in the context of the GCC, to counter this threat to 

regional stability. Most recently, we have been working with the gulf states on the 

implementation of United Nations Security Council Resolution 1929. We continue 

to work with our GCC partners to enhance counterproliferation authorities and 

interdiction capabilities through activities such as the Proliferation Security Initiative (PSI). All GCC members have endorsed the PSI, and the United States engages 

our gulf allies with an active PSI program that includes the biannual PSI Exercise 

LEADING EDGE, issue-specific workshops, and bilateral training opportunities. 

Furthermore, the United States works closely with the United Arab Emirates—the 

largest transshipment hub in the region—through a bilateral Counterproliferation 

Task Force. Through this dialogue, we work together on a full range of counterproliferation issues including export controls. 

We have worked closely in bilateral discussions with GCC countries on the need 

to fully and robustly implement obligations under existing UNSCRs and to consider 

imposing supplemental measures, in particular targeting Iran’s ability to finance 

procurement of prohibited equipment through entities in gulf states. 

Question. Please lay out, in a classified format if necessary, administration concerns about the potential for a nuclear arms race in the region, were Iran to obtain 

nuclear weapons. Likewise, how does the administration view the status of conventional arms races since the Gulf Security Dialogue began? 

Answer. Our security strategy toward the Persian Gulf vis-a-vis Iran is to enhance bilateral and multilateral security relationships while deterring a conventional arms race. We believe our strategy has been successful. The Gulf Security 

Dialogue (GSD) is the State Department’s primary security coordination mechanism 

with the Gulf Cooperation Council (GCC) countries. The GSD includes regular bilateral, interagency (State, NSC, OSD, JS, CENTCOM) consultations with the GCC 

states on the breadth of security issues affecting the gulf. For a number of years, 

through the construct of the GSD, we have worked with the countries of the Arabian 

Peninsula as well as other partners in the region to develop a common architecture 

that includes bilateral and multilateral security defenses, shared early warning systems, counterterrorism and counterpiracy programs, programs to build partner capacity and efforts to harden and protect our partners’ critical infrastructure. In fact, 

we currently have missile defense assets in a number of gulf partner nations. 

CENTCOM maintains a robust exercise schedule in the region and a sizeable force 

presence which reaffirms our commitment to our partners. 

We also maintain a full schedule of bilateral and multilateral engagement going 

up to the highest levels. In the last 2 months alone, Secretary of Defense Gates and 

Chairman of the Joint Chiefs Admiral Mullen have both traveled to the region. 

Strengthening the capacities of vulnerable states in the region is a vital avenue for 

countering destabilizing Iranian activities, and we believe we are seeing some 

results. 

Question. The Conference Report on H.R. 2194 contains language authorizing appropriations necessary to implement provisions of the act. What additional resources 

will the State Department require? 

Answer. Implementation of the act will require additional personnel having a variety of specializations in several State Department bureaus. Requirements for open 

source and classified data collection, technical and legal analyses and reporting will 

be considerably in excess of needs under the 1996 act. We expect that a portion of 

our personnel needs will be met, in the short term, through the hiring of contractors 

with specific skill sets not previously required. U.S. Embassies will be tasked with 

the responsibility to engage local governments and businesses on issues raised by 

the 2010 act and to investigate potentially sanctionable activities. Nevertheless, 

travel by U.S.-based personnel also will be substantially expanded. We are currently 

working up approximate cost figures for the expanded effort needed to implement 

the 2010 act. We will provide those to you as soon as possible. 

Question. Please explain in greater detail the responsibilities that Ambassador 

Einhorn will have with respect to Iran sanctions. 

51 

Answer. Secretary of State Clinton has asked Bob Einhorn, Special Advisor for 

Nonproliferation and Arms Control, to take on the added role of our government’s 

coordinator for the implementation of sanctions related to Iran and North Korea. 

He will lead U.S. efforts with partners and allies around the world—including foreign governments, private industry and the United Nations—to strengthen multilateral and national measures to address Iranian proliferation activities. He will direct 

U.S. efforts to ensure full and effective implementation of all U.N. Security Council 

resolutions related to Iran, including most recently UNSCR 1929. 

As part of these efforts, Bob Einhorn will work closely with the National Security 

Council, Treasury Department, Department of Defense, intelligence community and 

other agencies to ensure full and effective coordination of U.S. efforts for implementation of sanctions related to Iran and North Korea. Bob Einhorn’s new responsibilities will further strengthen State Department’s already close cooperation with other 

agencies on addressing Iran’s compliance with its international obligations. 

Question. How does the Department plan to implement the provisions relating to 

sanctions to be imposed on certain persons who are responsible for or complicit in 

human rights abuses committed against citizens of Iran or their family members 

after the June 12, 2009, elections in Iran? 

Answer. The State Department’s Bureau of Human Rights, Democracy, and Labor 

closely monitors human rights violations in Iran as reported and documented by 

human rights defenders and watch groups. As we do with our annual Country 

Report on Human Rights Practices in Iran, we will engage in consultations with and 

seek input from a range of sources that document human rights abuses in Iran in 

order to identify the appropriate persons to place on this list. Upon identifying these 

individuals, the Department will promptly notify Congress and, in accordance with 

the legislation, will publish the list of designees on the State Department Web site. 

We will then work with our colleagues in the Treasury Department to implement 

applicable sanctions under the International Emergency Powers Act, while our Consular Affairs Bureau implements visa restrictions on the designated human rights 

violators. 

Question. Please share the results of the internal review of existing sanctions you 

mentioned during the hearing. What lessons has the administration learned from 

this process that can be applied going forward? 

Answer. As I mentioned in my testimony, we have identified a few firms, less 

than 10, which may have violated the 1996 act. We have been in contact with these 

firms and relevant governments, often repeatedly, in order to establish the precise 

nature of their economic activity in Iran—both past and present. In most cases, we 

have good reason to believe that the firms of concern have wound down their activities in Iran. However, a few appear to be continuing their work there. According 

to the President’s delegation of the 1996 act, the State Department is now required 

to consult with other agencies about appropriate next actions. Upon the completion 

of that set of consultations, the Secretary will make a determination about possible 

sanctions and/or waivers of the subject firms. 

Looking forward, we are satisfied that we have put in place a robust system to 

review instances of possible violation of the 1996 act. An important part of our effort 

has been to make use of our embassies in the field, as well as our intelligence resources, to differentiate between actual activity in violation of the act and claims 

of activity made by the Iranian Government or its proxies. Those analyses are sometimes complicated by the reluctance of firms to publicly contradict statements by the 

Iranian Government, particularly if a company has a financial exposure in Iran. 

However, we have gone to pains to build credibility among energy firms, and many 

have shown sufficient confidence in our discretion so as to share commercial information with us. Finally, our work with many governments over recent months has 

permitted us to develop our understanding about which local institutions and individuals are helpful for the implementation of the act. 

Question. How does/will the administration measure the success of its Iran policy, 

not only with respect to sanctions, but also to other aspects of its broader policy? 

Answer. U.S. policy toward Iran is straightforward. We have sought to engage the 

Islamic Republic in dialogue in order to: (1) Prevent Iran from developing nuclear 

weapons; (2) counter its other destabilizing actions in the region and beyond; and 

(3) advance our broader interests in democracy, human rights, and development 

across the Middle East. 

President Obama has made clear repeatedly, including in his statement on the 

adoption of Resolution 1929, that we will stand up for those rights that should be 

universal to all human beings, and stand with those brave Iranians who seek only 

to express themselves freely and peacefully. 

52 

We have pursued our broad policy goals over the past 18 months through a combination of tough-minded diplomacy—including both engagement and pressure—and 

active security cooperation with our partners in the Persian Gulf and elsewhere. We 

have sought to clarify the choices before the Iranian leadership, which has so far 

been unable to respond to President Obama’s offers of outreach. Those offers have 

unsettled the leaders of the Islamic Republic, who now find their empty anti-American slogans completely discredited. 

We have sought to demonstrate what’s possible if Iran meets its international obligations and adheres to the same responsibilities that apply to other nations. And 

we have sought to intensify the costs of continued defiance, and to show Iran that 

pursuit of a nuclear weapons program will make it less secure, not more secure. The 

choice is Iran’s: whether it will choose to comply with its obligations, or be further 

isolated from the international community. 

Question. The House version of the Iran sanctions legislation contained language 

regarding Agreements on Civil Nuclear Cooperation (or ‘‘123 Agreements’’) which 

has since been dropped. Let me pose several questions regarding the 123 Agreement 

with Moscow, which Senator Kerry and I introduced legislation approving on June 

21: 

a. How will the administration use entry into force of an agreement for civilian 

nuclear cooperation with Russia to influence Russian behavior on Iran? 

b. Has the Russian Federation executed a facility-specific safeguards agreement 

with the IAEA for the Bushehr nuclear power reactor? 

c. Last week, Secretary Gates stated in testimony before the Armed Services Committee that Russia has a schizophrenic pattern of behavior on Iran. Do you share 

this assessment, and what is the status of the joint Iranian missile threat assessment the United States proposed to conduct with Russia last year? 

d. This year the intelligence community concluded in an open assessment that ‘‘at 

least in the past’’ Russian entities had assisted Iran’s ballistic missile program. If 

this is the case, then why did the assessment change from that given in previous 

years, which was that such assistance has continued? 

Answer. (A) Russia has been a strong partner within the P5+1 and in international efforts to prevent Iran from acquiring a nuclear weapons capability. The 

administration has determined that the level and scope of Russia’s cooperation with 

us were sufficient to justify resubmitting the 123 Agreement to Congress for review. 

We continue to work closely with the Russian Government to further our shared 

nonproliferation goals and to prevent Iran and other countries of concern from developing WMD and their means of delivery. The decision to move forward with the 

Agreement—a legal framework for enabling bilateral civil nuclear commerce—was 

made on its own merits: There are clear benefits with entry into force of the Agreement to promote our broader nonproliferation goals, such as joint research and development of international nuclear fuel cycle services as well as civil nuclear energy 

technologies that would limit proliferation and security risks. 

(B) It is incumbent on the country where a safeguardable facility is located, not 

the country providing assistance to that facility, to have a safeguards agreement 

with the IAEA, and Iran has such an agreement with the IAEA that covers 

Bushehr. Russia has, in addition, engaged in a lengthy negotiation with Iran to 

secure very important nonproliferation measures in the Russia-Iran agreement, 

namely ‘‘just in time’’ fuel delivery and spent fuel take-back. These measures have 

gone a long way toward satisfying the immediate nonproliferation concerns we had 

with the Bushehr project. Russia has made clear to Iran that IAEA safeguards are 

a requisite part of reactor operation. 

(C) Russia shares the United States concerns regarding Iran’s nuclear and missile 

programs. To that end, it has supported all four United Nations Security Council 

resolutions imposing sanctions on Iran. With respect to the Joint Threat Assessment 

(JTA), we have met with Russia three times to exchange our views on the Iranian 

and North Korean missile programs. We have proposed another meeting in the near 

term to continue our discussions and hope to complete a written report to our respective leaderships by the end of this year that will describe the results of our 

discussions. 

(D) We defer to the intelligence community, as it is better suited to substantively 

respond to this assessment. 

53 

RESPONSES OF UNDER SECRETARY STUART LEVEY TO QUESTIONS SUBMITTED BY

SENATOR JOHN F. KERRY

Question. During the hearing, I raised the question of the strategic impact of 

America’s dependence on foreign oil on Iran and its behavior. The Center for American Progress Action Fund and the Massachusetts Institute of Technology, have 

found that capping carbon emissions would cost Iran up to $100 million a day in 

oil profits. 

• a. Is there a connection between America’s dependence on imported oil and 

Iran’s ability to pursue its nuclear program despite international pressure? 

Answer. There is a limited potential connection between U.S. demand for imported oil and Iran’s ability to pursue its nuclear program. The United States does 

not import Iranian oil, but U.S. demand has a large impact on international oil 

prices. Up to two-thirds of Iranian Government revenue comes from oil exports, 

according to data from the International Monetary Fund. Iran views its nuclear program as a strategic priority, and while a decline in revenue from lower oil prices 

would hurt the Iranian Government’s fiscal position, it is unclear whether that 

effect would cause a cut in spending on its nuclear program. 

• b. Is there a connection between America’s dependence on imported oil and 

Iran’s ability to sponsor terrorist groups abroad? 

Answer. See response to (c) below. 

• c. Can you comment on the nature of these linkages? 

Answer. This is a complicated issue, but what is clear is that American demand 

for imported oil has an impact on its overall market price, and thus an indirect impact on Iran’s oil revenues. 

Question. In the wake of U.N. Resolution 1929, countries are taking national 

measures to increase the pressure on Iran. 

• What do you expect will be the impact of the national measures taken by U.S. 

allies in the wake of U.N. Resolution 1929—both on Iran’s economy and on its 

decisionmaking? 

Answer. Following the adoption of Resolution 1929, the United States, the European Union, Norway, Canada, Australia, Japan, and South Korea, among others, 

have implemented national sanctions programs to implement the requirements of 

the resolution. These measures impose, inter alia, sanctions on Iranian financial institutions, other entities, and individuals that facilitate Iran’s proliferation program, 

and impose broad systemic sanctions, such as prohibitions on the provision of insurance or export credits for business with Iran and prohibitions on certain activities 

in the energy sector. We expect that the growing coalition of countries that are imposing national sanctions as a means of implementing UNSCR 1929 will continue 

to put pressure on Iran, sharpening its choice between the path of engagement and 

the path of further isolation. 

Question. Europe’s supply of refined petroleum to Iran is declining. 

• Where is Iran getting its refined petroleum? 

Answer. In the past, major refined petroleum suppliers to Iran have included companies from India, China, Turkmenistan, the Netherlands, France, Singapore, 

Kuwait, Russia, and the United Arab Emirates. Passage of CISADA and the State 

Department’s efforts to engage with these companies has had a strong effect on refined petroleum sales to Iran, as many of Iran’s prior suppliers have decided not 

to sell refined petroleum products to Iran. As Under Secretary William Burns recently testified, open sources indicate that prior to last July, Iran imported roughly 

130,000 barrels per day of refined petroleum products, and that in October, that figure had dropped by approximately 85 percent to 19,000 barrels per day. Although 

Iran continues to import some refined petroleum products from countries in Asia 

and the Middle East, diminished imports have forced Iran to increase its domestic 

production of refined petroleum. The rapid conversion of petrochemical facilities to 

petroleum refining is not without costs, as it decreases petrochemical output. 

Question. Thanks in part to your work Iran is having an increasingly difficult 

time gaining access to international capital markets. 

• a. Can you tell us more about where these efforts stand? 

Answer. U.S. sanctions with respect to Iran generally prohibit U.S. financial institutions and their foreign branches from engaging in transactions with Iran and with 

Iranian Government entities. In addition, U.S. sanctions generally prohibit U.S. financial institutions and their foreign branches from dealing with numerous Iranian 

54 

entities, Iran-linked banks, and individuals that have been designated for their involvement in terrorism or WMD proliferation. Treasury regulations that implement 

section 104(d) of CISADA further prohibit the owned or controlled subsidiaries of 

U.S. financial institutions from knowingly engaging in transactions with or benefiting Iran’s Islamic Revolutionary Guard Corps or its designated agents or affiliates. Iran and its designated persons are therefore unable to access U.S. and international financial markets and find it difficult to engage in transactions involving 

U.S. dollars and euros. Last, section 104(c) of CISADA gives Treasury authority to 

prohibit or severely restrict the U.S. correspondent accounts of foreign financial institutions that knowingly engage in certain transactions related to Iran. We have 

undertaken considerable outreach to financial market participants, both here and 

abroad, to educate them about Iranian sanctions and to inform foreign financial institutions about the risk that if they engage in sanctionable transactions, their own 

access to U.S. financial markets could be closed off. 

• b. Can you provide details about Iran’s ability to access international markets? 

Answer. As a result of recent sanctions, the majority of Iran’s state-owned banks 

are no longer able to conduct transactions with banks in most of the major financial 

centers in Europe, Asia, and the Western Hemisphere. Most of the world’s most significant financial institutions refuse to do business with Iran because of ever-increasing reputational risk, international pressure, and concern that they themselves 

could lose access to U.S. financial markets. As a result, Iran is facing great difficulty 

gaining access to financial services, finding partners with which to engage in 

projects, and conducting financial transactions. Insurance companies are increasingly unwilling to insure Iranian cargo and shipping companies do not want to risk 

traveling to or from Iranian ports. This is especially manifesting itself in Iran’s energy sector. Almost daily we receive reports of the world’s major oil companies cancelling projects and drawing down their business with Iran. We also have seen governments around the world impose severe restrictions on government-backed export 

credits for projects in Iran, further reducing the incentive for the private sector to 

proceed with projects. 

RESPONSES OF UNDER SECRETARY STUART LEVEY TO QUESTIONS SUBMITTED BY

SENATOR RICHARD G. LUGAR

Question. The Conference Report on H.R. 2194 contains language authorizing 

appropriations necessary to implement the provisions of the act. What resources will 

the Treasury Department require? 

Answer. At this time, we are not certain what resources will be required to carry 

out the provisions of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. On August 16, we issued regulations implementing subsections 

104(c) and 104(d) of CISADA and will work with the Office of Management and 

Budget to ensure that Treasury receives sufficient resources. 

Question. You referred in your testimony to voluntary actions by private sector 

companies to curtail their activities in Iran. 

• a. Is the administration satisfied with the extent of such voluntary curtailments? 

Answer. As I described in my testimony, the reaction of the private sector to 

Iran’s illicit conduct and deceptive financial practices has played an important role 

in increasing the pressure on Iran to comply with its international obligations. To 

date, the private sector has responded to the inherent reputational risk of doing 

business with Iran by withdrawing from projects, financial relationships, and investments. However, as would be expected in the global market economy, there are 

always some actors that are willing to accept higher risk in exchange for profit. We 

will continue to engage the private sector around the world to underscore the obligations inherent in the existing sanctions framework, explain the potential consequences of CISADA, and encourage responsible corporate behavior from all those 

who might be otherwise inclined to continue doing business with Iran. 

• b. What efforts are being made to persuade other countries, particularly China, 

to forgo the opportunity to substitute their own investment and trade for that 

which is being withdrawn, and with what level of success? 

Answer. Treasury and State Department officials are engaged in an ongoing effort 

to persuade our counterparts around the world to robustly implement the requirements of UNSCR 1929. 

55 

Since the adoption of UNSCR 1929, Treasury and State officials have traveled to 

Europe, the Middle East, Asia, and Latin America to discuss Iran sanctions implementation. We believe these engagement opportunities have been and will continue 

to be useful in underscoring the importance that the United States places on robust 

enforcement of the existing international sanctions framework and encouraging our 

partners all over the world to view the actions taken by the United States, the EU, 

Norway, Australia, Canada, Japan, and South Korea, among others, as examples of 

responsible implementation of this framework. 

Question. How does the Treasury Department measure the success of its efforts 

with respect to Iran sanctions enforcement? 

Answer. Some indicators are classified, but even public information shows that 

international sanctions programs have been having a pronounced impact on Iran in 

a number of different areas. First, many of the world’s largest and most prestigious 

financial institutions are eliminating or dramatically reducing the business they do 

with Iran. This trend is in response to Iran’s established history of using deceptive 

financial practices to mask the real nature of, or the true parties involved in, their 

transactions. The result is that Iran has been relegated to the margins of the international financial system, and is finding it increasingly difficult to access the largescale, sophisticated financial services necessary to run a modern economy efficiently. 

Second, beyond the financial services sector, companies from many industries, including manufacturing, automotive, insurance, engineering, and accounting, have 

similarly announced the withdrawal of business from Iran. Many foreign energy 

companies have also withdrawn their investments in Iranian petroleum projects, 

and have pulled out of joint ventures with Iranian energy companies. Some European and Middle Eastern companies have even stopped providing jet fuel to Iran’s 

national air carrier in Europe. Iran also is increasingly unable to secure the foreign 

investment, financing, and technology it needs to modernize its aging energy infrastructure, threatening its oil and gas production and export capacity over the long 

term. The Iranian economy depends on energy revenues, and the continued stagnation or decline of energy outputs could adversely affect Iran’s economic stability. 

We believe that the speed, scope, and impact of sanctions have caught the regime 

by surprise. There are clear signs that the Iranian leadership is worried about the 

impact of these measures and is taking sanctions seriously. By sharpening the 

choice for Iran’s leaders between integration with the international community and, 

alternatively, increasing isolation, sanctions are creating the leverage needed for 

effective diplomacy. 

Question. What are the annual quantifiable costs for U.S. business interests of existing Iranian sanctions? Please list the top five industry sectors that are affected. 

Answer. The Treasury Department has not undertaken such an analysis, which 

would require additional data and expertise from other U.S. Government agencies. 

Treasury and other appropriate agencies could potentially work with congressional 

staff to evaluate whether this would be feasible to undertake. 

Question. What is the estimated effect that current and proposed sanctions have 

on Iranian GDP? 

Answer. Because of many years of the Iranian Government’s mismanagement of 

the economy, it is difficult to discern the causal relationships that exist between the 

state of Iran’s economy and specific actions taken by the international community. 

We do know, however, that Iran is struggling to obtain investment in its oil and 

gas industry, which could ultimately affect Iranian oil production and therefore government revenues. Indeed, the head of Iran’s oil ministry, Masoud Mir-Kazemi, has 

said that Iran aimed to attract at least $25 billion per year in local and foreign investment in its oil/gas sectors over the next 5 years (2010–15). However, Iran had 

attracted only a few billion dollars in foreign investment each year in the previous 

4 years. 

Iran is poorly positioned to respond to the impact of sanctions and, as the leadership tries to formulate a response, it is faced with unappealing choices. As an example, in part because it is encountering difficulties in acquiring refined petroleum because of sanctions, the government is seeking ways to reduce domestic demand for 

gasoline. One obvious step would be to reduce the heavy subsidies on gasoline that 

now make the price at the pump about 37 cents per gallon. Iran recently announced 

that it would reduce subsidies on gasoline and other household and energy products 

by $20 billion. The government, however, appears to have hesitated in going forward 

with these subsidy cuts, potentially because of concern about popular backlash. 

They have even deployed security forces to try to enforce order, and President 

Ahmadinejad has threatened to severely punish businesses that raise prices of consumer goods in reaction to subsidy cuts. Additionally, fears that inflation could acVerDate Nov 24 2008 15:45 Jan 04, 2011 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6621 S:\HEARING FILES\111TH CONGRESS\2010 ISSUE HEARINGS TO PREPARE FOR PRINT
56 

celerate surrounding government implementation of subsidy reform, combined with 

increased barriers to Iranian banks and currency exchanges accessing dollars as a 

result of the implementation of recent sanctions, were likely the cause of the sudden 

near 20 percent depreciation of the Iranian rial on market exchanges in late September. The Central Bank of Iran was slow to respond to these pressures, and it 

took weeks of intervention to stabilize volatility in the rial market exchange rate. 

Question. My office has interacted with branch campuses of some U.S. universities 

located in the Middle East who would like to recruit Iranian faculty and students 

to their campuses. As you interpret existing law, are they restricted from such activity? Could they offer a recruiting trip to visit their campuses, for example? Could 

they offer financial assistance? How could such educational opportunities be encouraged without involving the U.S. Government in each step of such a process? What 

recommendations should I give these institutions? 

The application of Treasury’s regulations to these activities is highly fact dependent, but it appears that certain activities identified in the question—e.g., recruitment of Iranian faculty and students to campuses of U.S. universities located in the 

Middle East and the provision of financial assistance, presumably to Iranian students—may be prohibited by USG sanctions on Iran unless authorized by OFAC. 

As a general matter, Treasury does not seek to discourage educational or cultural 

exchange programs designed to directly benefit the Iranian people and, in 2006, 

Treasury’s OFAC issued a statement of favorable licensing policy to encourage applicants to seek authorization in the form of specific licenses for these types of programs, which are akin to academic exchange programs. 

If institutions seek your recommendations on these matters, please encourage 

them to approach OFAC for guidance on the applicability of OFAC’s regulations 

to the activities and, if necessary, seek formal authorization to engage in these 

activities. 

Æ