U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

56–167 PDF 2010

S. HRG. 111–410 

MINIMIZING POTENTIAL THREATS FROM IRAN: 

ADMINISTRATION PERSPECTIVES ON ECONOMIC 

SANCTIONS AND OTHER U.S. POLICY OPTIONS 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON 

ADMINISTRATION PERSPECTIVES ON RECENT DEVELOPMENTS IN IRAN 

AND FUTURE U.S. POLICY OPTIONS 

OCTOBER 6, 2009 

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

( 

Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

CHRISTOPHER J. DODD, Connecticut, Chairman 

TIM JOHNSON, South Dakota 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

EVAN BAYH, Indiana 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

HERB KOHL, Wisconsin 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

MICHAEL F. BENNET, Colorado 

RICHARD C. SHELBY, Alabama 

ROBERT F. BENNETT, Utah 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

MEL MARTINEZ, Florida 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

KAY BAILEY HUTCHISON, Texas 

EDWARD SILVERMAN, Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director and Counsel 

COLIN MCGINNIS, Professional Staff Member 

NEAL ORRINGER, Professional Staff Member 

MISHA MINTZ-ROTH, Legislative Assistant 

JOHN O’HARA, Republican Senior Investigative Counsel 

MARK OESTERLE, Republican Chief Counsel 

DAWN RATLIFF, Chief Clerk 

DEVIN HARTLEY, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)
C O N T E N T S 

TUESDAY, OCTOBER 6, 2009 

Page 

Opening statement of Chairman Dodd .................................................................. 1 

Prepared statement .......................................................................................... 47 

Opening statements, comments, or prepared statement of: 

Senator Shelby .................................................................................................. 3 

Prepared statement ................................................................................... 48 

Senator Menendez ............................................................................................ 5 

Senator Schumer .............................................................................................. 9 

Prepared statement ................................................................................... 48 

WITNESSES 

Sam Brownback, a U.S. Senator from the State of Kansas ................................. 6 

Prepared statement .......................................................................................... 49 

Robert P. Casey, Jr., a U.S. Senator from the State of Pennsylvania ................ 7 

Prepared statement .......................................................................................... 51 

James B. Steinberg, Deputy Secretary of State, Department of State ............... 13 

Prepared statement .......................................................................................... 53 

Responses to written questions of: 

Senator Vitter ............................................................................................ 63 

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

Department of The Treasury ............................................................................... 15 

Prepared statement .......................................................................................... 57 

Responses to written questions of: 

Senator Vitter ............................................................................................ 65 

Daniel O. Hill, Acting Under Secretary for Industry and Security, Department 

of Commerce ......................................................................................................... 17 

Prepared statement .......................................................................................... 60 

(III)

(1) 

MINIMIZING POTENTIAL THREATS FROM 

IRAN: ADMINISTRATION PERSPECTIVES ON 

ECONOMIC SANCTIONS AND OTHER U.S. 

POLICY OPTIONS 

TUESDAY, OCTOBER 6, 2009 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 9:32 a.m. in room SD–106, Dirksen Senate Office Building, Senator Christopher J. Dodd, Chairman of the 

Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD 

Chairman DODD. The Committee will come to order. 

Let me welcome all of our guests who are here in the hearing 

room this morning and welcome our witnesses to this hearing, as 

well as my colleagues who are here today. Our hearing is ‘‘Minimizing Potential Threats from Iran: Administration Perspectives on 

Economic Sanctions and Other U.S. Policy Options.’’ I am going to 

make some brief opening comments. I will then turn to my colleague from Alabama. Normally we move right into our witnesses, 

but this is a subject matter, I know, in which many members have 

interest. So I will ask if anyone has any very brief opening comments they would like to make, and then we will turn to our two 

colleagues who are here—Senator Brownback and Senator Casey. 

I should let you know I extended the invitation to others as well 

who have an interest in the subject matter. My colleague from Connecticut, Senator Lieberman, and my wife this morning are attending a funeral. We lost a wonderful young captain who was killed 

in Afghanistan, and the funeral services are for him this morning. 

And Joe, properly, and my wife are there at the funeral services 

in New Haven this morning. So I apologize for his absence. He has 

a strong interest in the subject matter, as many of you know, along 

with Senator Kyl and Senator Bayh, who have also offered a proposal dealing with sanctions. 

So we will move along here and get to our witnesses from the 

administration as quickly as we can. But I thank everyone for their 

tremendous interest, appropriate interest in this subject matter. 

Today we confront, of course, a serious threat to our Nation’s security and global stability: the prospect of a nuclear-armed Iran. If 

Iran were to acquire a nuclear weapons capability, it would pose, 

I think all of us agree, a serious threat to peace and security in 
2 

the Middle East, especially to our closest friend in the region— 

Israel—not to mention to ourselves and others as well. 

At our last Iran hearing in July, Senator Shelby and I agreed to 

hear from the Obama administration before moving forward on any 

sanctions legislation. Much, of course, has happened in that time. 

Last week, in Geneva, after revealing another covert uranium 

enrichment facility in Iran, the administration held its first diplomatic meetings with Iran and other permanent members of the 

U.N. Security Council and Germany. Under Secretary of State William Burns met one-on-one with Iran’s chief nuclear negotiator. 

This dialogue demonstrated the United States’ commitment, in my 

view, to pursuing every avenue to push Iran to come clean on its 

nuclear program and abide by international nonproliferation commitments. 

President Obama described the talks, and I quote, as ‘‘a constructive beginning.’’ Participants agreed to follow-up talks later this 

month. The International Atomic Energy Agency is to be granted 

access to Iran’s uranium enrichment site in Qom, and Iran has indicated a willingness in principle to export low-enriched uranium 

to Russia and France for processing for medical uses. 

Whether Tehran will keep these commitments, or if it will prove 

yet to be another stall tactic to avoid tougher sanctions, obviously 

remains to be seen. And the situation is increasingly urgent, as I 

think many would agree. Over the weekend, the New York Times 

reported that the IAEA scientists believe Iran has enough sensitive 

data to assemble a nuclear weapon. Ultimately, we will only succeed if Iran’s leaders are persuaded to cooperate or face sustained, 

progressively intensifying multilateral economic and diplomatic 

pressure on their government, including tougher sanctions. They 

must make a clear choice: come clean on their nuclear program, 

suspend enrichment, and stop supporting terrorists around the 

world, or continue to deepen their international isolation. 

Increased international pressure and the specter of biting sanctions are clearly what have brought Iran to the table for substantive talks, in my view. Worldwide condemnation of Tehran’s secret enrichment activities, its human rights abuses, and post-election crackdown have unified the international community to intensify the pressure on Iran’s leaders. We must not let up now. 

I intend to move forward in this Committee this month on comprehensive sanctions legislation. I am committed, as I think colleagues are as well, to ensuring that this Congress equips this 

President with all of the tools that he needs to confront the threats 

posed by Iran. Just as last year, we will incorporate the best of our 

Senate colleagues’ contributions into one original Committee bill, 

including penalties on companies that support Iran’s import of refined petroleum products or bolstering its domestic capacity, advanced by Senators Bayh, Lieberman, and Kyl, the authorization 

for State and local governments to divest from companies involved 

in critical businesses with Iran sponsored by our colleagues who 

are here today, Senators Brownback and Casey. 

In addition, our legislation will further tighten our trade embargo on Iran, enhance Treasury’s mandate to freeze assets tied to 

Iran’s terrorist and proliferation activities, and help to cutoff Iran’s 

access to the most sensitive and advanced technology available 
3 

through tougher export controls on these products sent to Iran 

through its black market trading partners. 

I would hope our legislation will complement, as I believe it will, 

and reinforce ongoing diplomatic efforts and send a very, very clear 

signal to Iran’s leaders of what is in store if they continue to defy 

the will of the international community. 

We are very fortunate to be joined today by some of the administration’s chief architects of Iran policy: 

Deputy Secretary of State James Steinberg will elaborate on ongoing diplomatic efforts to curb Iran’s nuclear ambitions, assess our 

chances for success, and survey the policy options. 

Under Secretary of the Treasury Stuart Levey joins us once 

again. A welcome holdover from the Bush administration, he will 

discuss the tough targeted financial measures already deployed 

against Iran and explore with us other pressure points in the global financial system that could be employed against Iran’s Government. 

And, finally, we will hear from the Acting Under Secretary of 

Commerce Dan Hill. It has been over 2 years since the Bush administration proposed restricting export licenses to countries where 

sensitive technology flows to rogue nations, such as Iran, via third 

nations, combating black market proliferation networks which 

flourish throughout Asia and the Middle East. 

But first we are going to hear from two of our colleagues after 

we hear from Senator Shelby and others this morning who may be 

here. Senator Casey and Senator Brownback will describe their legislation currently under review by our Committee on the role of divestment from firms doing business in Iran’s energy sector. 

We welcome to the hearing those members who are here and our 

guests who are in the audience, but let me turn first to Senator 

Shelby. 

STATEMENT OF SENATOR RICHARD C. SHELBY 

Senator SHELBY. Thank you, Mr. Chairman. 

Recent developments in Iran underscore the importance of this 

morning’s hearing. Last month, we learned that Iran has a secret 

uranium enrichment facility. Last week, the Iranians announced 

that they had reached a last-minute deal to send their supplies of 

low-enriched uranium to France and Russia for further enrichment. 

Just yesterday, news reports revealed that senior staff at the International Atomic Energy Agency have concluded that Iran has acquired ‘‘sufficient information to be able to design and produce a 

workable nuclear weapon.’’ 

Although Iran denies that it is trying to develop nuclear weapons, it has taken no credible steps to prove otherwise. Iran’s troubling conduct is not limited to its pursuit of nuclear weapons. Iran 

has the dubious distinction of being the most active state sponsor 

of terrorism for 10 years running, according to our State Department. Because of Iran’s extensive financing of terrorism around the 

globe, the Treasury Department has referred to Iran as ‘‘the central 

banker of international terrorism.’’ 

There should be no doubt that Iran remains a serious and growing threat to the entire Middle East region, to our European allies, 

and to the interests of the United States. The issue is not whether 
4 

we must take action to check Iran’s hostile ambitions but, rather, 

I believe, how to maximize the effectiveness of the actions that we 

take. 

There is a long history of failed policy designed to rein in Iran. 

As Secretary of Defense Gates noted last October, and I quote, 

‘‘Every administration since 1979 has reached out to the Iranians 

in one way or another, and all have failed.’’ 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you very much, Senator. 

Any opening comments? I know Senator Corker—it is a modified 

Corker rule we are applying here this morning, but several members—— 

Senator SHELBY. Corker II. 

Chairman DODD. That is right. Any comments, Jack? No? Jim? 

Go ahead, Jim. 

Senator BUNNING. Thank you, Mr. Chairman. 

I believe this is probably the most important hearing that I have 

been with you since I have been on the Banking Committee. The 

danger of a nuclear Iran poses one of if not the greatest threat to 

our national security. Now more than ever, we need to use every 

economic and diplomatic tool at the disposal of the United States 

and the rest of the free world to prevent this from happening. 

We have had sanctions against Iran on our books since 1987, the 

first year I was in Congress. They, along with other multilateral 

efforts, have served to put a financial choke on Iran’s rogue behavior. Now is the time to expand these sanctions even further and 

close several loopholes in existing laws. 

In the past, I have authored legislation to enforce a mandatory 

ruling of investigations of potential violations of existing Iran sanctions under the Iran Sanctions Act of 1996. I was pleased last year 

to see this Committee incorporate my amendment into the Chairman’s mark of S. 3445, the Comprehensive Iran Sanctions Accountability and Divestiture Act. I am looking forward to working with 

the Chairman and Senator Shelby to ensure that this language and 

its stated purpose are incorporated in any new Iran sanction legislation that this Committee will take up. 

As it stands, the State Department is encouraged but not required to provide a determination on whether or not a company is 

in violation of our sanctions, thus giving these sanctions little or 

no enforceability. Time and time again, I have asked the State Department for transparency on this issue as well as guidance on how 

to develop workable guidelines on enforcement that will give our 

sanctions real teeth. Now is the time to enforce these sanctions and 

deny Iran the financial capital needed to fully fund their nuclear 

proliferation and support for international terrorism. 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you very much, Senator. 

Anyone else wish to be heard? Bob, do you want to be heard on 

this at all quickly? Senator Menendez. 
5 

STATEMENT OF SENATOR ROBERT MENENDEZ 

Senator MENENDEZ. Thank you, Mr. Chairman. I appreciate the 

opportunity. 

Mr. Chairman, I just want to say that I appreciate you holding 

this hearing, incredibly important, incredibly timely, in the midst 

of all the Committee’s other work, and to state my strong support 

for strong actions on Iran’s financial and energy sector should efforts to engage with the regime fail to produce desired results. 

You know, although the administration’s meetings with Iran officials in Geneva last week have been called ‘‘a constructive beginning’’—and I look forward to hearing how that definition was defined through our witnesses-what we need now is meaningful action by the Iranian Government to live up to its obligations under 

multiple U.N. Security Council resolutions. 

Current engagement efforts must not be an open-ended process. 

We cannot weather endless rounds of fruitless negotiations while 

the Iranian regime surreptitiously advances its nuclear ambitions. 

The Iranians have a history of using talks to stall for time in developing their nuclear program. This fact and the troubling disclosure 

of a covert enrichment facility at Qom underscore the urgency with 

which we must be prepared to resort to severe sanctions to arrest 

Iran’s nuclear ambitions. 

I continue to ask, How long are we to pursue what up to now 

have been fruitless negotiations while the Iranian Government continues to pursue a clandestine nuclear program with the clock running out? 

And so I hope that the negotiations can provide a resolution, but 

I also believe that there are many areas of Iran’s financial and energy sector where sanctions can have a profound effect. Sanctioning 

Iran’s central bank or, for that matter, banks that continue to do 

business with Iranian banks could cause the Iranian banking system to collapse. Sanctioning suppliers of refined petroleum products to Iran and thereby curtailing Iran’s ability to import such 

products could be devastating to Iran’s economy. Those are but two 

examples. 

I firmly believe, however, that use economic pressure is far superior to the other alternatives which we might have to consider in 

the future if we do not act now. And so I believe that the opportunity for those sanctions, if the talks soon do not really produce 

meaningful results, is a far better alternative than the options that 

would be left to us on the table. 

Thank you, Mr. Chairman, and I would ask that my full statement be included in the record. 

Chairman DODD. That will be the case. Thank you, Senator. 

Chairman DODD. By the way, for the record purposes, any statements that members want to put in the record will be included, 

along with any supporting documentation. That will be true of all 

of our witnesses as well. I will make that point. 

Senator Brownback and Senator Casey, we welcome both of you 

to our Committee, and we are glad you are able to be here this 

morning to present your thoughts and ideas. Senator Brownback, 

we will begin with you. 
6 

STATEMENT OF SAM BROWNBACK, A U.S. SENATOR 

FROM THE STATE OF KANSAS 

Senator BROWNBACK. Thank you very much, Mr. Chairman. I appreciate that. Ranking Member Shelby, members of the Committee, 

thank you very much for attending and for letting us speak here 

today. I have worked for a number of years on Iranian policy 

issues. It has been a difficult task and one I cannot say we have 

got a whole lot to show for over a number of years. 

In spite of all the efforts and the diplomatic efforts, the Iranian 

regime has continued to choose a collision course with the free 

world. The Iranian Government is the leading state sponsor of terrorism worldwide, as Senator Shelby noted, the foremost exporter 

of extremist ideology, the primary source of instability in the Middle East. The regime’s leaders have brutally oppressed their own 

citizens. They have threatened to commit genocide against the 

state of Israel, the region’s only full-fledged democracy. And the regime’s radicalism and brutality not only harms our interest and 

threatens our national security, but also challenges our moral obligations. 

It simply, in my estimation, would be unconscionable to allow the 

mullahs to acquire nuclear weapons. Were they to achieve this 

goal, they would possess a trump card to ensure the continuation 

and augmentation of all these dangerous and destabilizing actions. 

Mr. Chairman, you have been willing to hear us on our simple 

piece of legislation. It is a piece of the puzzle, I believe. It certainly 

is not the whole thing. It is an effort, like Senator Menendez is saying, that you try to get out in front with some things to try to head 

off a much bigger collision, and that is what we are after with this. 

There is a very simple divestiture piece. It is modeled after something that was done 2 years ago on the Sudan divestiture effort, 

which was modeled after the South African divestiture effort. This 

allows State and local units of government to divest from investments associated with Iranian companies or companies doing business in Iran in such a way to bring an economic pressure on them. 

A number of States have already done this, and yet they are in this 

legal limbo whether or not they can actually legally do it. This 

makes it clear that they can do it. 

Iran’s Sanctions Enabling Act, S. 1065, currently has 33 bipartisan cosponsors of it. The administration I believe would support 

it. Then-Senator Obama in the last Congress was the cosponsor 

along with me of this same bill. So I think the President—I know 

he is well aware of it and is supportive of it. 

I would say, though, that this is only one piece of it. We have 

got to do, I think—and this Committee is a key one in doing this— 

a broad set of sanctions proposal. I have pushed in the past that 

we should look at human rights as being our first concern and the 

last of our concessions, not the other way around. I think we need 

to showcase that in this overall piece because that gets the people 

of Iran, which are natural allies, on our side if we emphasize the 

Iranian people and their need for human rights. Along this line, I 

think appointment of a special envoy for human rights in Iran to 

elevate and lift up the issues would be good. 

Another issue that is working its way through the foreign operations budget now is the Global Interest Freedom Consortium. It 
7 

is a small amount of money, $30 million, to allow people to be able 

to communicate over blogs, Facebook, and Twitter from the Iranian 

revolution. We saw this during the election. It has been very effective as the regime tries to block people getting onto the Internet, 

and yet some of these fairly simple mechanisms can allow them to 

communicate over the Internet. I think that would be a key thing 

as well for this Committee to support and add its voice to. 

And, finally, Radio Farda I think has been a good key piece of 

the overall communications effort with the Iranian people, and I 

would urge its continuation and support. 

That is hitting a round of issues, but, Chairman, I think we have 

got to go at this strong, because the collision course is what has 

been set by the Iranian regime, and anything we can do to stop 

that prior to them developing nuclear weapons are things I think 

we have to engage, and we have to engage them now. We have got 

to push this forward at this point in time and not wait and not 

dither, saying, well, we are waiting on something else or we are 

waiting diplomatically for things to move, because I think diplomatically the Iranians are just using that to stall for time while 

the collision course gathers steam. 

Thank you, Chairman. 

Chairman DODD. Thank you very much, Senator. 

Senator Casey. 

STATEMENT OF ROBERT P. CASEY, JR., A U.S. SENATOR 

FROM THE STATE OF PENNSYLVANIA 

Senator CASEY. Mr. Chairman, thank you very much, and I am 

honored to be back before this Committee as a former member. 

Chairman DODD. Good to have you back. Anytime you want to 

come back. 

Senator CASEY. We meet here at a time of grave challenge with 

regard to what Iran has been up to, and I want to commend the 

work of this Committee, Mr. Chairman and Ranking Member Shelby and the entire Committee, for focusing, appropriately so, on this 

grave challenge. I do want to commend the work of Senator 

Brownback not just on his work on our particular piece of legislation but generally over many years on these issues. 

We have, as I said, a challenge before us, and I know that many 

saw some hope in some of the discussions last week in Geneva. But 

I do not think we should be under any illusions with regard to 

what this regime has been doing. 

This is a regime which has refused to recognize the will of the 

Iranian people and last June’s election. This is a regime that has 

repeatedly disregarded U.N. resolutions on its nuclear program. 

And this is a regime that previously agreed to send uranium 

abroad for enrichment, only to later renege on the deal. And, finally, this is a regime which continues to threaten our ally Israel 

and, of course, is a direct threat to our national security interests. 

Iran, the regime in Iran, has repeatedly claimed that its nuclear 

program is only for peaceful purposes. But the facts, especially in 

recent weeks, do not add up. The United Nations says Iran violated 

international law by not notifying the IAEA when construction on 

the Fordu site started more than 3 years ago. Why are inter-
8 

national inspectors invited only after the regime is caught misleading the world again? 

So I believe we have several strategies here that have to be employed, and they are on concurrent or parallel tracks. 

First, the negotiations conducted by the administration are important and should continue. At a minimum, this international effort will help restore America’s long-held reputation of being an 

honest broker, of a country that values diplomacy, of a country that 

values relationships with allies and welcomes new ones. Internationally, the U.S. is on better footing on this ground than it has 

been in years. Ties with traditional allies in Europe have been 

strengthened, and those on the fence, like Russia and China, are 

showing signs of cooperation on issues that are critical to our national interests. 

But, second, I believe the Senate must act, and in summary, 

what we are trying to do is to give not only the Federal Government all the tools it needs, the administration as well, but in particular to give other levels of Government—in this case, pension 

funds—give them the tools they need to participate in this strategy. 

I believe the Senate should do its part by providing the administration all the tools it needs to put pressure on the Iranian regime. 

Iran’s leaders need to know that if they decide to renege on their 

commitments, as has been done in the past, the United States is 

prepared to impose a series of tough sanctions—tough sanctions including measures that will allow State pension funds to divest from 

Iran and restrict petroleum imports. 

The Iran Sanctions Enabling Act, which Senator Brownback and 

I introduced last May, would allow State and local government 

pension funds to divest from companies that do more than $20 million in business with the Iranian energy sector. As Senator 

Brownback noted, this measure is similar to legislation used with 

regard to Sudan in the past. Eighteen State legislatures have 

passed individual Iran sanction measures, and we need to do the 

same thing at the Federal level to give these pension funds the authority that they need to help us out on this grave challenge. 

Finally, in terms of a third strategy, we need to be prepared— 

and I would add to the second part of that the Kyl-Bayh-Lieberman 

legislation as well that I and many others are cosponsors of. 

Third, I would think we need to be prepared to support democratic voices and human rights activists in Iran. This is not about 

regime change, but a genuine commitment to democratic values. In 

a speech before the U.N. General Assembly, President Obama said, 

and I quote: 

There are basic principles that are universal. There are certain truths that 

are self-evident. And the United States will never waver in our efforts to 

stand up for the right of people everywhere to determine their own destiny. 

Our long-held commitment to human rights should not fall off 

the table during these important deliberations on Iran’s nuclear 

program. In fact, these should be fully addressed, and our diplomats should raise specific concerns with regard to human rights 

in Iran. 

Ultimately, the political fate of Iran is up to its people to decide, 

and we should take the lead from them. We should remain open 

to their calls for assistance. 
9 

In closing, Mr. Chairman, if history is any indication, Congress 

should be prepared to hand the President the leverage he needs to 

send a message to the Iranian regime that America cannot and will 

not accept an Iran with nuclear weapons. The administration needs 

all the tools at its disposal to increase pressure on the regime diplomatically, politically, and through more stringent economic sanctions. 

I call on my colleagues in the Senate to listen to legislatures in 

so many States across the country who have passed divestment legislation. The American people do not want to do anything with investing in Iran’s energy sector. We need to send a strong message 

to the regime and the international community that a nucleararmed Iran is unacceptable. 

Mr. Chairman, thank you very much. 

Chairman DODD. Thank you very much, Senator, and I appreciate that very much. 

We have been joined by a couple of our other colleagues here, 

and I want to turn to Senator Schumer. I see Senator Bayh, who 

is also one of the authors of one of the proposals that we hope to 

incorporate in this bill. 

Just to notify my colleagues, I want to thank people like Senator 

Casey, Senator Brownback, Senator Lieberman, and others. We 

had planned on this hearing actually prior to the announcement of 

these talks that opened up on October 1, but I think it is very timely that we do so. I think the point is providing the tools necessary 

to go forward are essential. 

So let me turn to Senator Schumer briefly. If I could ask my colleagues to be relatively brief with opening statements, we are going 

to have full statements in the record. 

STATEMENT OF SENATOR CHARLES E. SCHUMER 

Senator SCHUMER. I would ask unanimous consent that my entire statement—— 

Chairman DODD. You are excused, by the way. If you want to sit 

for a minute, we will have these opening statements, and then any 

questions we will ask you to hold up a minute. 

Senator SCHUMER. I ask unanimous consent that my entire statement be read in the record, and thank you, Mr. Chairman, first, 

for holding these hearings. They could not come at a better and 

more important time, and I want to thank all of my colleagues, 

Senator Brownback, Senator Casey, Senator Bayh, Senator 

Lieberman, Senator Kyl, who worked so hard on this. 

Look, we have to do something. This has been an issue important 

to me for about 10 years. I believe when it comes to Iran, we 

should never take the military option off the table, but I have long 

argued that economic sanctions are the preferred and probably the 

most effective way to choke Iran’s nuclear ambitions. 

The Obama administration has recently begun direct diplomatic 

negotiations with Iran, and the first round of these talks did yield 

some important concessions from the Iranians last week. These negotiations certainly continue, but they do not supplant the need for 

action by this Congress now. 

Iran, when it is caught red-handed, has a habit of promising just 

enough to avoid a strong response from the international commu-
10 

nity. Not this time. We should continue talks with the Iranians, 

but we should not trust them. The threat of new sanctions will only 

serve to strengthen the President’s hand as we pursue a diplomatic 

solution. And as I mentioned, economic sanctions are the right way 

to go. I am going to try to summarize here in the interest of time. 

The bill sponsored by Senators Bayh, Kyl, and Lieberman I think 

is exactly the right way to go. Gasoline is one of the few pressure 

points where, if we act unilaterally, we will have real effect on the 

Iranian economy. Most of the other things we have to do multilaterally. But that is one thing that we can do, and I am glad it is 

in the legislation. 

Two other things that we can do unilaterally: First, Senator 

Graham and I introduced something called RICA, the Reduce Iranian Cyber-Suppression Act, and what it would do, it would bar 

companies that export sensitive communication technology equipment to Iran from applying or renewing procurement contracts 

with the U.S. Government. Many of the large ones, particularly in 

Europe, do this. It allows the Iranian secret police and others to 

spy and do other things against their citizens. We should stop them 

from selling it by using tough sanctions. 

And another point in the bill, 27 of us last year called for the Iranian central bank—we blocked off the bank, the correspondent reactions of banks with one another, and that really hurt Iran. So 

what they did is they had their central bank move in, and now it 

does what commercial banks do. We should block, and I hope we 

will put it in this legislation, the Iranian central bank, called the 

Bank Markazi, from playing a role in helping other banks circumvent U.S. financial sanctions. We should treat them as a commercial bank and block them off. 

Finally, one other point, Mr. Chairman, and that is that we need 

to enforce as well as put new tools to use sanctions. Our existing 

sanctions are riddled with leaks in the form of trading partners 

who funnel our exports through a back door to Iran. We send them 

exports, and then they send them to Iran. We can plug these leaks 

by increasing the amount of inspector we have stationed in the 

United Arab Emirates and other countries where black markets 

are serving to circumvent our sanctions. 

A GAO report, for instance, found that enforcement is lacking 

particularly in the UAE, and so today at least I am asking the administration to deploy more inspectors to the UAE and other areas 

of vulnerability of sanctions. 

It is a very good bill, Mr. Chairman. I hope we move it quickly. 

I ask that my entire statement be read into the record, and I thank 

my colleagues. 

Chairman DODD. Thank you, Senator. It will be included. 

Chairman DODD. Senator Bayh, any opening comments? 

Senator BAYH. Just very briefly, Mr. Chairman. First, I would 

like to thank you for your leadership. With all the other issues you 

have on your plate, this is a clear signal of how seriously you take 

this matter, and so I want to thank you for that. 

Also, for your willingness to incorporate the legislation I have 

worked on with Senators Lieberman and Kyl. We have 76 cosponsors of that legislation spanning both sides of the political aisle and 

running, frankly, the length of the ideological spectrum, from left 
11 

to right. So there is real consensus about the need to bring urgency 

to this issue because time is not our friend. Iran is moving aggressively down a nuclear path. If we don’t take aggressive steps, 1 

day, we will wake up to the unpleasant surprise of them having become a nuclear power, and at that point, it will be a much more 

difficult problem to deal with. 

Also, on the issue that I focused on here, vulnerability to restricting imports of refined petroleum products. They recognize that vulnerability. They are moving aggressively to deal with it by increasing their refining capacity. So we have a window of opportunity 

here in the next year or two to act, to really raise the price that 

they have to pay for their nuclear ambitions and hopefully get 

them to change their minds. 

The last thing I will just say, Mr. Chairman, is this legislation 

offers our best chance to avoid the very painful dilemma of having 

to choose between either a nuclear Iran, which is unacceptable, or 

military action to avoid that eventuality, which would be very difficult in and of itself. 

So I thank you for your leadership, for including our approach. 

I want to thank our colleagues for focusing on this, as well. Frankly, we need to use the entire spectrum of sanctions to try and deter 

the Nation of Iran from pursuing these weapons. 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you, Senator, very much. 

Do any of our colleagues have questions for our two friends, Senator Brownback and Senator Casey? If not, you are both—I am 

sorry, Bob. Did you have—— 

Senator CORKER. I would just—first of all, I couldn’t agree more 

with the opening statements and things that have been said about 

this. I absolutely believe that Iran obviously is pursuing a nuclear 

weapon and that is absolutely unacceptable. 

I guess the question I would have for all of the sponsors, which 

it sounds like we have many of in the Senate, is are we looking at 

something that is enabling, that gives the administration tools that 

they can use should they decide it is appropriate to use them, or 

are we prescribing? I mean, to me, that is something that is of concern, especially with what has just occurred. I mean, we do have 

an opportunity, hopefully, to actually have sanctions in place that 

mean something for the first time in decades, and I wonder whether the Senate and House, acting in a prescriptive way, is actually 

helpful or harmful. I guess the question is, are we talking about 

enabling legislation or are we talking about directing, prescriptive 

type of legislation? 

Chairman DODD. Do either one of you want to respond to that 

very briefly? 

Senator BROWNBACK. Just briefly on ours, it is clearly enabling, 

because what we are doing is allowing State and local pension 

funds to divest, and right now, they have a questionable legal authority whether they can do that. So this is then their choice, but 

it is something a number of them will take advantage of. 

Chairman DODD. Senator Casey, any quick comments? 

Senator CASEY. No. I would agree with that assessment in terms 

of our legislation. But at the same time, if the other major piece, 

the Bayh-Kyl-Lieberman, were to pass, it does give the President 
12 

authority. It is not—in my understanding, it is not prescriptive, but 

I think it sends a very powerful message to the Iranian regime and 

to the world that the U.S. Congress is united on this. So I think 

it could be a combination of both empowerment in terms of the 

pension funds, but also giving the President authority that is unilateral. 

Chairman DODD. Thank you very much. We thank both of you 

very much for your participation this morning. We look forward to 

working with you. 

That was a very good question, Bob, and it is an important one, 

obviously. I think the enabling point is one, because we do need to 

modify some laws that would allow the administration to act, and 

thereby giving them those tools ahead of time—and I suspect that 

there are other ideas they have which probably will not be included 

necessarily in our legislation, as well. So it is an excellent question 

and one that we are sensitive to here, as well. I appreciate it very 

much. 

Let me turn to our witnesses. Again, I thank you for being with 

us. Jim Steinberg is well known to many of us here. He is Deputy 

Secretary of State, the second highest official at the Department. 

He works closely with Secretary of State Clinton, our former colleague, and Under Secretary William Burns. By the way, I want 

to thank Secretary Burns. I talked to him over the weekend. He 

called and gave me a good briefing on the events as they unfolded 

on October 1 and was constructive and somewhat optimistic, although cautious, obviously, about progress. But I appreciate very 

much his doing so. 

During the Clinton administration, Jim Steinberg served as Deputy National Security Advisor and Director of Policy and Planning 

at the State Department. And while I don’t mention it here, he formerly sat behind these daises up here as a Senate staffer, so he 

knows our job as well as the job of the executive branch. Jim, welcome back to the Senate. 

Stuart Levey is the Under Secretary for Terrorism and Financial 

Intelligence at the Department of Treasury, the first ever to hold 

this position. Appointed by President Bush, Mr. Levey has earned 

renown for honing U.S. sanctions policy and employing targeted financial measures against financiers of terrorism and weapons proliferation. You have a wonderful reputation. You have done a great 

job and we are delighted you are staying on to continue this effort, 

so thank you for being with us this morning. 

I have already introduced Dan Hill, but let me just briefly give 

you a little background. Dan Hill is the Acting Under Secretary for 

Industry and Security at the Department of Commerce. In this capacity, he oversees policies for licensing exports of dual-use products, that is, goods and services that have both military and commercial applications. A senior career commercial official, Mr. Hill 

is playing a key role in the administration’s review of U.S. export 

control systems. We thank you very much, Mr. Hill, for being with 

us. 

I am going to ask you to try and keep your comments relatively 

brief, if you could. And again, your full statements and supporting 

documents will be a part of the record. 

We will begin with you, Jim. 
13 

STATEMENT OF JAMES B. STEINBERG, DEPUTY SECRETARY 

OF STATE, DEPARTMENT OF STATE 

Mr. STEINBERG. Well, thank you, Mr. Chairman, Ranking Member Shelby, and all the Members of the Committee. It is always 

good to be back in the Senate. 

I want to express appreciation on behalf of the whole administration for the interest you, this Committee, and the entire Congress 

has expressed in this subject. It is an important issue for all of us 

and I am confident that we will have a very useful discussion this 

morning about how we can best achieve our common objective, 

which is how to address the challenge posed by Iran’s nuclear programs. Strong Congressional interest in this issue is extremely valuable to us in our efforts and I am appreciative of all the work that 

you have already done on this. 

I ask, obviously, that my full statement be part of the record, but 

I will just make a few points in summary. 

I want to begin by being clear about our objective. Our goal is 

to prevent Iran from achieving a nuclear weapons capability, and 

we will work with our allies and partners toward that goal, as well 

as to counter Iranian actions that threaten to destabilize the greater Middle East and the rest of the world. 

To that end, as you have observed, we pursued a dual-track 

strategy of economic sanctions and engagement. We think that only 

by using them together and coordinating them closely can we 

achieve this important objective. 

Let me just take a minute to explain how we are implementing 

the strategy, including last week’s meeting in Geneva, and I would 

be happy to take your questions when I am finished. 

We understand Congress’s concerns and sense of urgency that 

you have all expressed this morning and look forward to working 

with you and consulting with you on any legislative effort with the 

aim of maximizing our ability to pursue this two-track strategy to 

convince Iran to meet its obligations while preserving the President’s flexibility to carry out the strategy successfully. This Committee and others have already provided crucial leadership and important work and we appreciate the importance of working with 

you in this shared objective. 

I want to emphasize that we are pursuing engagement not because we believe in talking for talking’s sake, but because we believe it will advance our goals. In the past, as we have attempted 

isolation without engagement, Iran has developed a growing mastery of the nuclear fuel cycle while flagrantly flouting its international obligations. Its leaders have neglected the rights of its citizens. Its government has continued to pursue a wide range of destabilizing activities abroad. 

Now, we are realistic about the prospects of engagement. We are 

and we have forcefully presented our concerns to Iran’s leaders and 

made clear the choices they have before them. But engagement not 

only increases the chances of achieving our goals through negotiations. As so many of you have observed, it also forges a strong consensus with others if negotiations do not produce the results that 

we seek. 

Our objective is a positive outcome that successfully addresses 

the security concerns posed by Iran’s nuclear program to the 
14 

United States, to Iran’s neighbors, and to the international community. We are making clear the steps that Iran can take to help resolve our concerns and those of the international community and 

the benefits that that would bring in turn. 

Iran must demonstrate through its actions the exclusively peaceful intentions of its nuclear program. That means allowing unfettered access to international inspectors, cooperating fully with the 

IAEA’s investigation, and taking up the longstanding proposals of 

the P5+1, including a halt to uranium enrichment. 

In response to the clear and unified message of the P5+1 in Geneva last week, Iran pledged to take several concrete steps along 

these lines, including IAEA inspections of the previously undisclosed facility at Qom, now scheduled for October 25, and an agreement in principle regarding a supply of low enriched uranium for 

the Tehran research reactor. 

If implemented—and I stress, if implemented—this agreement 

would limit Iran’s potential to achieve a short-term breakout in developing weapons grade highly enriched uranium, and in so doing 

would help demonstrate whether Iran is serious about proving its 

peaceful—exclusively peaceful intentions. But as Chairman Dodd 

noted in quoting President Obama earlier last week, he said this 

is a constructive beginning, but it must be followed by constructive 

action by the Iranian government. We will look for and judge by 

the constructive actions ahead of another meeting of the P5+1 with 

Iran, which we anticipate to take place later this month. 

While we are beginning this diplomatic process, our patience is 

not limitless. We are sensitive to the security concerns of many 

countries in the region, and these concerns have heightened our 

sense of urgency. In the event that Iran passes up this opportunity, 

our engagement will make it possible to mobilize international action more effectively. By our openness to a negotiated resolution, 

we can clearly increase our ability to persuade others to stand by 

with us if more forceful action is needed. Our efforts to convince 

Iran to change course will be more effective if we act in concert 

with others. 

Our efforts have already shown some signs of paying off. Three 

years ago, the United States was virtually alone in applying pressure on Iran. Now, a growing number of countries share our concern about Iran’s negative policies and have signaled willingness to 

join our dual-track strategy. We have pursued a progressive tightening of U.N. sanctions on Iran with Resolutions 1737, 1747, and 

1803. We have worked with our colleagues at Treasury and with 

the international financial community through the Financial Action 

Task Force. The European Union has adopted measures to delimit 

the granting of export credits. And as a result of sanctions and 

international efforts, the cost of doing business with Iran is going 

up. 

I also want to note, as so many of you have done, that our concerns with Iran go beyond the nuclear issue. The Iran government’s 

terrible repression of peaceful protesters, opposition politicians, and 

journalists following the elections reveal to the world much about 

the character of that government and has increased its isolation. 

We are also deeply concerned about the American citizens held 

in Iran and urge the Iranian government to promptly return them 
15 

to their families. We have expressed those concerns directly to the 

Iranian government. 

Tehran’s aggressive foreign policy presents another threat. In recent years, Iran has benefited from and exploited instability in 

Iraq, Afghanistan, Lebanon, and the Palestinian Territories. Our 

strategy in the greater Middle East is aimed at bolstering security 

for our partners while reducing Iran’s ability to exploit these challenges for its own gain. 

We have been working with our regional partners, including 

Egypt, Jordan, Iraq, Israel, Lebanon, and the Gulf States, to develop cooperation that will enable us to manage the political, diplomatic, and security challenges that Iran poses. These efforts are beginning to show signs of success, including the GCC+3 Forum, 

inter-Arab cooperation to help address the political crisis in Lebanon, security and military talks with the Gulf States, and Arab 

governments’ increasing support for Iraq. We are also working actively on a comprehensive Middle East peace process. 

And some regional governments have chosen to conclude modeled 

nuclear cooperation agreements in partnership with the United 

States, thus disproving Iran’s claims that the West seeks to block 

the pursuit of peaceful nuclear energy by countries. 

Well aware of the regional and global consequences of a nuclear 

Iran, we will continue with our dual-track strategy. We in the 

international community very much hope that Iran will make the 

correct choices for itself, the region, and the world. Yet we will be 

prepared to move ahead swiftly and effectively with additional 

measures with the confidence that our engagement today will make 

such measures unified and effective. 

So in conclusion, again, Mr. Chairman, thank you for your interest in this, for all the Members of the Committee, and we look forward to working with you in the days and weeks ahead. 

Chairman DODD. Thank you very much, Mr. Secretary. We appreciate very much your approach. We will have some questions for 

you in a minute. 

Secretary Levey, thank you again for joining us, and thank you 

again for your service. 

STATEMENT OF STUART A. LEVEY, UNDER SECRETARY FOR 

TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT 

OF THE TREASURY 

Mr. LEVEY. Thank you, Mr. Chairman, Members of the Committee. It is good to be back here again to discuss this critical 

issue. We appreciate your focus on this issue and the support you 

have given us at Treasury over the years. 

Deputy Secretary Steinberg has already given an overview of our 

two-track strategy toward Iran, focused both on engagement and 

on being ready to impose clear consequences on Iran if that engagement does not yield the outcomes we seek. For that reason, we 

have been working with our colleagues across the U.S. Government 

to develop a strategy for imposing substantial costs on the government of Iran if the President determines that that is what is needed. 

The plan we are developing is necessarily comprehensive. As 

many of you noted in your statements, no single sanction alone is 
16 

a silver bullet. We will need to impose measures simultaneously in 

many different forms in order to be effective. the plan we are developing also takes into account Iran’s potential vulnerabilities and 

those activities that are likely to have the greatest influence on 

Iran’s decisionmakers. We should be realistic about the ability of 

sanctions to achieve our political and security objectives with Iran. 

If, however, we accurately target the key vulnerabilities and fissures within Iran and then act together with a broad coalition of 

governments and key private sector actors, we can, at the very 

least, demonstrate to the Iranian government that there are serious costs to any continued refusal to cooperate with the international community. 

Although we cannot describe the particulars of our planning in 

an open hearing, I would like to explain some of our thinking. 

First, we will build to some extent on what we have done before 

and the efforts that you mention, Mr. Chairman. As this Committee knows well, beginning in 2006, we developed and implemented a strategy to target Iran’s illicit activities. We used our authorities to designate more than 100 entities and individuals supporting Iran’s nuclear missile enterprises, including the key organizations within Iran, scores of their front companies, Iran’s major 

banks that finance their conduct, and Iran’s major shipping line 

that handles illicit shipments for these dangerous enterprises. We 

also acted against the IRGC and several of its companies, as well 

as the Qods Force for its role in supporting terrorist organizations. 

Many of our actions have been implemented internationally by 

the U.N. Security Council, and still others by the European Union 

and Australia. We combined those government actions with outreach to scores of banks and other private sector leaders around 

the world. We discussed the risks of doing business with Iran and 

shared information with them about Iran’s illicit and deceptive 

practices. 

As a result, the international private sector amplified the effect 

of our government actions as banks and companies around the 

world came to understand that if they are dealing with Iran, it is 

nearly impossible to protect themselves from being entangled in 

that country’s illicit conduct. At this point, most of the world’s 

major banks have cutoff or significantly scaled back their business 

with Iran, and Iran is increasingly dependent on an ever-shrinking 

number of trade and finance facilitators. 

The second point I would make is that if we must increase sanctions, we will need to adjust our strategy to the current situation 

in Iran. Due to economic mismanagement, some experts estimate 

Iran’s unemployment rate to be well over 20 percent, with the lack 

of jobs disproportionately affecting the young. Three out of four unemployed Iranians are under 30. Foreign investment in Iran has 

declined substantially. 

The Iranian government’s reliance on corruption and nepotism in 

business limits opportunities for all Iranians. The government 

awards no-bid contracts to companies associated with the IRGC. 

These companies operate under names that obscure their IRGC affiliation so that many unwitting non-Iranians are, in fact, doing 

business with the IRGC. 
17 

In the name of privatization, the IRGC has taken over broad 

swaths of the Iranian economy. The IRGC seeks to monopolize 

black market trade of popular items, funneling the proceeds from 

these transactions through a patronage system and then using 

them to help subsidize the government’s support for terrorist 

groups. 

There is now a broad acknowledgment that the Iranian government engages in deceptive financial and commercial conduct in 

order to obscure its development of nuclear missile programs and 

to facilitate its support for terrorism. International understanding 

of those practices have been underscored by the U.S. Security 

Council resolutions on Iran and by six warnings issued by the Financial Action Task Force about the risks Iran poses to the financial system. Secretary Geithner reinforced all of these concerns this 

week, meeting with his counterparts at the IMF in Istanbul. 

Across the board, transactions with Iran are already handled differently than transactions with any other country, except perhaps 

for North Korea, engendering either heightened suspicion or outright refusal to engage in them. 

The vulnerabilities in Iran could be compounded by the internal 

fractures resulting from the elections. As Secretary Gates recently 

stated, it is clear in the aftermath of the election that there are 

some fairly deep fissures in Iranian society and politics, and probably even in the leadership. 

Finally, and I think most important, as the Deputy Secretary 

pointed out, we will need a united coalition. We are intensifying 

work with our allies and other partners to ensure that if we must 

strengthen sanctions, we will do so with as much international support as possible. I think that will be critical to our success. 

Thank you, and I would be happy to answer your questions. 

Chairman DODD. Thank you very much, Mr. Secretary. 

Mr. Hill, we appreciate you being here, Mr. Secretary, as well. 

STATEMENT OF DANIEL O. HILL, ACTING UNDER SECRETARY 

FOR INDUSTRY AND SECURITY, DEPARTMENT OF COMMERCE 

Mr. HILL. Thank you, Mr. Chairman. Mr. Chairman, Senator 

Shelby, Members of the Committee, I welcome the opportunity to 

appear before the Committee today to discuss the Department of 

Commerce’s role in administering and enforcing U.S. dual-use export control policies toward Iran. We work closely with our colleagues at the Department of State and the Department of Treasury as well as other agencies to implement the longstanding U.S. 

embargo on Iran. 

All exports to Iran are subject to both the Export Administration 

Regulations and the Department of Treasury’s Iranian Transaction 

Regulations. The Treasury is the lead agency for administering the 

embargo, including licensing activities, which features not only a 

prohibition on exports and reexports of items under our jurisdiction 

at the Department of Commerce, but also comprehensive restrictions on financial transactions and investments. 

Commerce, however, is responsible for several aspects of the embargo of Iran. First, we provide critical technical assistance to 

Treasury on the proper classification of items proposed for export 

or reexport to Iran under a license. 
18 

Second, we play a vital role in enforcing the embargo by investigating transactions that may constitute violations of our regulations. An export or reexport of an item subject to our regulations 

without Treasury authorization would generally constitute a violation of law. The Bureau of Industry and Security at the U.S. Department of Commerce has approximately 100 Federal law enforcement agents in ten field offices around the United States. We have 

agents stationed at Main Commerce, as well. 

We have had a number of significant cases involving Iran which 

have, in turn, led to successful enforcement actions. Currently, we 

have 235 open investigations involving Iran, which constitutes a 

little less than one-third of all the investigations we have of possible violations of our regulations. I have attached to my written 

testimony lists of recent enforcement cases for Iran that sheds light 

on our activities. 

We also have Export Control Officers in five foreign locations: 

Abu Dhabi in the United Arab Emirates, one in Beijing, one in 

Hong Kong, New Delhi, and Moscow. We hope to add more to 

Singapore and a second one in Beijing in the coming year. These 

Export Control Officers conduct pre-license checks and post-shipment verification visits to verify that items will be and are being 

lawfully used and have not been diverted to prohibited users or 

uses within the country or illegally transshipped to another country, such as Iran. 

We coordinate closely with the Department of State and other 

agencies as we work with other countries, including states that we 

have concerns that may be involved in transshipments to Iran, to 

establish and strengthen these states’ export and transshipment 

control systems. This enables those countries to cooperate with us, 

build their export control system based on our best practices, and 

to cooperate with us on specific transactions, as well as take actions against parties in their own countries who are illegally exporting items. 

We have a set of unique tools at the Department of Commerce 

to enforce the export controls. The first tool that I would like to 

talk about is our Temporary Denial Orders. A Temporary Denial 

Order is a legal order that can be issued quickly for 180 days at 

a time to prevent an imminent violation of the Commerce regulations. 

For example, in 2008, we issued a Temporary Denial Order denying the export privileges of Balli Group PLC and related countries 

and individuals known as the Balli Group, Blue Airways, and 

Mahan Airways for 180 days. Evidence obtained by our agents 

showed that the parties knowingly reexported three U.S.-origin aircraft to Iran in violation of our regulations and they were preparing to reexport three additional aircraft to Iran in further violation of our regulations. Our Temporary Denial Order effectively 

precluded the United States or foreign parties from engaging in 

that activity, and ultimately, the Temporary Denial Order prevented the illegal reexport of the three commercial aircraft to Iran. 

A second tool we have is what we call the Entity List. This is 

a list that can be used to prohibit the export or reexport of any 

item subject to our regulation to any listed entity. In 2008, for example, we added 75 foreign parties to the Entity List because of 
19 

their involvement in a global procurement network that sought to 

illegally acquire U.S.-origin electronic components and devices capable of being used to construct improvised explosive devices. 

These commodities have been used in IEDs and other explosive devices against our Coalition forces in Iran and Afghanistan. This 

network acquired the U.S.-origin commodities and illegally exported them to Iran. 

As a consequence of the addition of these entities to our Entity 

List, no United States or foreign party may export or reexport any 

items subject to our regulations to these entities without a license. 

Exporting or reexporting of any items to the entities without the 

required license is a violation of law. 

We maintain a robust outreach program to educate the private 

sector on our embargo on Iran and we have detailed guidance on 

our website. We focus on key companies, such as freight forwarders, integrators, air cargo carriers, and shipping lines with regard to the embargo of Iran. Our efforts are targeted toward educating exporters on vigilance in partnering with firms based in 

major transshipment hubs, not only in the Persian Gulf region, but 

also in Southeast Asia. 

In conclusion, I have detailed the role the Department of Commerce plays in the administration’s enforcement of the embargo on 

Iran and I would be happy to answer any questions at this time. 

Chairman DODD. Thank you very much, Mr. Secretary. I appreciate very much your testimony. We will have some questions 

about that. 

Let me just say to my colleagues, I will try and keep around that 

5 to 6, 7 minutes if we can. There are ten of us—roughly ten of 

us here, so we don’t want to keep our witnesses any longer than 

necessary. 

Let me begin, if I can, Secretary Steinberg. Critics of the administration deride the government’s current approach as rewarding 

Iran’s misbehavior with just talks, in a sense. You get a flavor of 

that with some of the comments that are made. However, as you 

outlined, our strategy is more nuanced than that and it has a dualtrack approach, as you pointed out, engagement backed by the 

threat of severe sanctions. How has that open-hand diplomacy disarmed our international critics and provided the United States 

with the cooperation that I think all of you in one way or another 

have mentioned here? 

Obviously, you can go it alone, and then we have seen in the 

past—I recall the South African sanctions. We were almost alone 

in that process and had the positive impact, even though it would 

have been better had we had more cooperation. But certainly, I 

think, ultimately, we had an effect on what was occurring. But 

ideally, you get cooperation. If you are seeking success here, you 

need to achieve that. So I am curious as to whether or not this approach has helped in building that additional support that is necessary. 

And then I would second like to know whether Iran is using the 

talks to make sincere commitments on nonproliferation or to stall 

severe multilateral sanctions. Again, we have a history here that 

raises concerns. You have raised them yourselves. We don’t know 

the answer to that yet. Obviously, there is a history here which 
20 

would cause one to have deep concerns about how serious Iran is 

about complying here or just buying the time, as many of my colleagues have indicated in their statements. 

So I would like to know what benchmarks that you are using to 

correctly judge Iran’s commitments down the road. What are you 

looking at here specifically that will give you a stronger sense of 

whether or not we are on the right track with all of this. Why don’t 

you begin with that, if you can. 

Mr. STEINBERG. Well, thank you, Mr. Chairman. As you said, I 

think one of the keys and one of the important elements of our decision to deepen our engagement here is because it does strengthen 

our ability to get the international community to support our dualtrack approach. When there is a recognition that we are going the 

last mile to seek a diplomatic resolution, there is greater understanding if we have to take other measures. 

And I think you saw this coming out of the meetings that both 

the President and the Secretary had in New York and Pittsburgh 

over the last several weeks, the comments by President Medvedev, 

for example, a clear indication that they Russians understand in 

light of Iran’s behavior and the fact that we have made a good effort to try to solve this that the Russians seem to be more open to 

additional sanctions. You are seeing a coming together of countries 

around the world to recognize that this is Iran’s last opportunity, 

and if they fail to take it, there is a greater openness to this. 

I don’t want to underestimate the difficulty. It is very critical 

that we get the support of the Security Council, if we can, because 

that really strengthens the effectiveness. I, myself, was in Beijing 

last week to discuss this with very senior Chinese leadership to 

make clear that we view this as critical and a core interest of ours 

that is important to our relationship with China, that they work 

with us as we engage, that they be supportive of our efforts if we 

need to take stronger measures. 

So I think that there is a strong sense that these efforts will pay 

off, and frankly, the spotlight now is on Iran. We have come to the 

table. Everyone is looking for their response. And I think by being 

able to focus that international spotlight now on these discussions, 

people will judge Iran by its actions, which leads nicely into your 

second question, which is I think we now actually do have some 

very concrete benchmarks that we can judge whether Iran is now 

beginning to get serious in light of this additional pressure and the 

global attention or whether this is a stalling tactic. 

In particular, we have two very specific commitments that we are 

going to be following up on in just the coming weeks, the commitment to ship out the low enriched uranium for fabrication into fuel 

for their research reactor, and the commitment to provide the 

IAEA access to this previously undisclosed facility. We have meetings with the Iranians scheduled on October 19 to review the details of how to carry out this shipment out of the LEU and the inspections of the Qom site, the Fordu site are scheduled for October 

25. So by the end of the month, we will have some very clear indications about what their intentions are. 

Going beyond that, we have on the table, as you know well, Mr. 

Chairman, a proposal for a freeze for freeze that would begin us 

down the path of stopping their enrichment program, and so we 
21 

will expect a quick response by then, as well. So I think we do have 

a number of concrete benchmarks. 

I think it is very important that by giving the Iranians the sense 

that the patience is not limitless that we have had some success. 

At the July G8 meetings in Italy, the G8 leaders made clear that 

they anticipated review where we were in September, and I think 

that giving them that sense of a time horizon had an impact on 

getting the Iranians to come forward. 

The President has also made clear that his patience is not limitless on this. He sent a very strong message, both publicly and privately, that we expect a firm and clear response from Iran in the 

near future. 

Chairman DODD. Let me ask both of you, quickly, a question that 

has been raised and that is certainly in the minds of many—I saw 

a small piece the other day—those who are objecting to this stronger set of sanctions, particularly when it comes to gasoline and petroleum issues, that this may have a counter effect within the population of Iran, that it could trigger a domestic backlash in Iran 

against the West. It has been pointed out that, obviously, the protests have been devastating, what has happened to people there, 

and yet highlighted for the world the repressive actions of the Iranian Government. But it has been a critical element—I think all 

of us in talking about additional pressures—that we not lose the 

support of the average Iranian in this process here who will obviously be affected by these policies we are talking about. 

How do you address that question? It seems to me I recall other 

examples, having been here on the sanctions issues in South Africa 

and elsewhere, that those same criticisms were raised at the time, 

that this was going to have the reverse effect. It did not, of course, 

and we have now learned since how important those sanctions 

were to emboldening and encouraging the population that were living under a regime that was so repressive. 

What is the answer here, in effect? Do you believe those criticisms are legitimate? And if so, how do we address them? Or do 

you believe the Iranian population themselves, those who are putting so much on the line, would welcome this approach that we are 

engaging in today? 

Mr. STEINBERG. Mr. Chairman, how to impose sanctions and 

have them be effective is a matter of judgment and not science. We 

have had a lot of experience, as you said, over the years with sanctions. We know that sometimes they have an impact on the population, and the government is able to insulate itself from those 

sanctions. Other times they can provide leverage by putting additional pressure on the government. 

So I think that is something that we are going to have to finetune as we go forward. I think it is important that we have a broad 

range of tools available to us, but I think we do need to have a 

more refined judgment about precisely how to exploit the kind of 

vulnerabilities that Under Secretary Levey talked about to see 

which are the smart sanctions that have the biggest impact. 

So, for example, Under Secretary Levey talked about the role of 

the IRGC. That may be a place where we could be particularly effective. And I think we will want to work with you, working with 

the experts in this area, as we develop this toolkit to think about 
22 

how the targeting is most effective in both supporting those we 

want to support in Iran and putting the pressure on those who 

need to make the decisions to desist from the program that they 

are currently involved in. 

Chairman DODD. Secretary Levey, do you want to quickly comment on that as well? 

Mr. LEVEY. Well, I agree with what the Deputy Secretary just 

said. We have learned over the last few years how to do this better, 

and some of the lessons that we have learned are that, to the extent we can focus on illicit conduct of the government in Iran, we 

will have a better chance of not only getting better support within 

Iran, but getting a better multilateral coalition to impose the measures with us, which is my second point, that, you know, if we can 

do this with other countries, we are much, much better off than if 

we do it unilaterally. So as we go forward, as the Deputy Secretary 

said, we need to be very careful and craft this plan in as careful 

a way as possible to make sure we have the desired effect. 

Chairman DODD. Are you concerned at all about the population— 

not that that should be the sole determining factor, but it is a critical element, it seems to me. You have had great courage being 

shown by huge populations that have responded to the elections, 

particularly in Iran. We have heard over and over again the continued support among large populations for what we are trying to do 

here and how we maneuver and handle that situation so it does not 

become a liability but a continuing asset for us in this effort. 

Do you have any concerns about that? 

Mr. STEINBERG. Mr. Chairman, as I said, I do think we always 

have to worry about the humanitarian impact and the political impact, because we want to take advantage of the dynamic there and 

not to undercut the opposition, not to hurt those who are being courageous, as you said. 

And I think part of it will be a judgment call, as Under Secretary 

Levey has said, about whether there is a broad international consensus, whether this is seen as the international community taking 

an action so that it is not the United States alone singling them 

out, that I think will have an impact on the political dynamic within Iran. It may also depend on what other measures are taken and 

how obvious it is that Iran is refusing to take any kind of positive 

action. 

So I think it is a delicate judgment. There may be other steps 

that we want to take first. We need to look at the full suite of tools 

that are available to us, both in terms of the sequence and how it 

applies in the circumstances. 

Chairman DODD. I went way over the time, and I apologize. Senator Shelby. 

Senator SHELBY. Thank you, Mr. Chairman. 

Secretary Steinberg, why have we allowed the Iranians a month 

from the time the secret nuclear site was discovered to the time 

that the International Atomic Energy Agency inspectors will visit 

the site? There is a lag time there. It seems like a pretty good sized 

one. 

Mr. STEINBERG. Thank you, Mr. Shelby. As you will recall, these 

meetings took place on October 1st, and the inspections are now 

scheduled on October 25th. We obviously need to do—we want the 
23 

IAEA to do the kind of work it needs to do to make sure that these 

inspections are effective. It is the kind of thing where it is not just 

a question of walking into the site, but actually doing the preparatory work, assembling the right equipment, materials, the 

background. They need to get briefings from those who may have 

some insight to make their inspections worthwhile. 

There is a little bit of a danger than an unprepared inspection 

will not be a very effective inspection. We had asked for 2 weeks. 

It is going to take place in 3 weeks. Obviously, we would have preferred 2 weeks. But I think it is a short notice here. This is not 

an indefinite delay. It is within a matter of weeks of the disclosure. 

And I think the IAEA will be in a good position to determine what 

is going on there. It is our judgment that this is within the period 

of time that we will still get a good insight into what is going on. 

Senator SHELBY. Mr. Secretary, did Iran enter into and then 

abandon a similar pledge to have Russia enhance its low-enrichment uranium in 2007? 

Mr. STEINBERG. To my knowledge, Mr. Shelby—— 

Senator SHELBY. I know you were not doing that then. 

Mr. STEINBERG. I do not believe that the discussions were similar 

to this particular understanding, which is to have the fuel fabricated for this research reactor. I would have to check, and I will 

give you the answer for the record. But I think the specifics of this 

arrangement are somewhat different than the past discussions, and 

I think this is a more concrete set of proposals as to how this would 

be handled, including the involvement of the French as fabricators 

of the fuel. 

Senator SHELBY. The State Department—you are the Deputy 

Secretary there—continues to identify Iran as ‘‘the most active 

state sponsor of terrorism.’’ Do you think that this raises the possibility that any nuclear weapon that Iran builds could find its way 

into the hands of terrorists? 

Mr. STEINBERG. Mr. Shelby, I think these are all grave concerns. 

I think that there are so many different reasons why the potential 

possession of a nuclear weapon from Iran would pose a danger to 

us and to the region. We have the danger that it would be either 

deliberately or inadvertently transferred to a terrorist or a nonstate actor. There is a very serious concern that it would be used 

to threaten its neighbors. There would be a concern that it would 

be used as a cover for it to engage in more aggressive behavior in 

the region. 

We can think of so many reasons why this is such a grave danger 

that that is why we put such a high priority on preventing them 

getting it. 

Senator SHELBY. Mr. Steinberg, Secretary Steinberg, in the past 

10 days we have learned of both the secret enrichment facility and 

the International Atomic Energy Agency report that concludes that 

Iran has acquired ‘‘sufficient information to be able to design and 

produce a workable nuclear weapon.’’ 

Should these two revelations lead to a reevaluation of the 2007 

U.S. National Intelligence Estimate on Iran, which stated then that 

Iran had a weapons program prior to 2003 but stopped it—in other 

words, update the estimate. 
24 

Mr. STEINBERG. Mr. Shelby, as you know well from your past 

service here in the Senate, there are aspects of this that I can only 

go into in closed session, and we obviously are prepared to do that. 

This is something we constantly take a look at. It is constantly 

under review because of the urgency that it takes. 

Senator SHELBY. In other words, you are saying you would not 

ignore the new revelations. 

Mr. STEINBERG. Right. And the only thing I would say on that 

is that we have seen the reports, obviously; we have not seen the 

formal IAEA conclusions, so we will look forward to that. But we 

take this all very seriously. This is something that is not—you do 

not just kind of do the assessment once and then look again. This 

is something that we put a high priority on to keep under permanent review. 

Senator SHELBY. Secretary Levey, you have been involved in this 

a long time, that is, dealing with terrorist financing. The United 

Nations blacklists three of the five Iranian banks explicitly sanctioned by the United States, and European Union only sanctions 

two of them that you are aware of. What would the effect be if the 

United Nations and the European Union worked with the United 

States in sanctioning all the Iranian banks? And because of the existing U.S. sanctions, banking within Iran is quickly, I understand, 

moving from government-run banks to private banks and unofficial 

banks. What are the difficulties there? First with the U.N. and 

with the European Union. 

Mr. LEVEY. Well, Senator Shelby, as you indicate, even the unilateral designation of the Iranian banks by the United States has 

had a broad effect, not only because other governments take it seriously, but most importantly because banks around the world take 

it seriously. That effect is, no doubt about it, multiplied and is 

made much more effective to the extent it is done multilaterally. 

So, to the extent we have had designations at the EU of Bank 

Melli, that has been greatly enhancing of the effect of our designation of Bank Melli; to the extent that the U.N. designated Bank 

Sepah, that was devastating to Bank Sepah. 

So there is no doubt that the premise of your question is correct 

that the U.N. designation of these financial institutions that we 

have already designated would be extremely powerful. 

Senator SHELBY. Secretary Hill, last week, Secretary Locke proposed to eliminate license requirements for dual-use exports to a 

large number of countries which are our allies and partner nations, 

so to speak. If original export license requirements are removed for 

items exported, for example, to the European Union, how will the 

United States be able to enforce its re-export license requirements? 

In other words, once it goes into the Union, what tentacles do we 

have there? 

Mr. HILL. Thank you, Senator. As Secretary Locke clearly said 

in his address last week, any export control reform must be accompanied by a robust enforcement and compliance effort and ramping 

up our efforts there. I have met with the Secretary since his announcement, and he is very committed to that and has asked us 

to carefully consider the very question that you just raised as we 

craft our regulations to move that process forward. 
25 

We currently have for Iran a total embargo on exports and reexports that would stay in effect, would not have any—there would 

be no impact from our export control reform. For other items that 

might be included in the export control reform, we are looking at 

ways to control those, including requiring re-export requirements 

out of those allied nations, including monitoring and notification. 

We are looking at a broad range of issues. We think it is a very 

important issue that you have raised, and we intend to get it right. 

Senator SHELBY. How is the administration ensuring that any 

proposal to decrease controls, which comes under the State Department—I mean, the Commerce Department, on sensitive U.S. equipment will not find its hands—ultimately, the equipment will not 

find it being in the hands of Iranians? 

Mr. HILL. Thank you, Senator. Again, the answer remains the 

same. We need to be very diligent as we craft that regulation because we do not want that to happen, and a very robust enforcement and compliance effort to guarantee that going forward. We 

work today with allies. For example, we have had a team with the 

State Department that has visited the UAE once to twice a year 

over the past few years where we have helped them develop an export control system, and we are starting to see progress there. So 

we have that going on as well. 

But, again, we are going to be very careful as we move forward 

on export control reform to ensure that the bad guys do not get the 

stuff. And, frankly, sir, some of the stuff they get is not all that 

sensitive stuff. The electronics that go into IEDs that end up on the 

battlefield hurting our young men and women are not the highesttech items. But we are very conscious of that. Our enforcement efforts have been on that. We were able to disrupt the international 

Mayrow ring and put 75 entities on our Entity List. 

Senator SHELBY. Mr. Chairman, I have one quick question, if I 

could, of Secretary Levey. In our July hearing, Mr. Secretary, reference was made to the notion that if one is doing business in Iran 

today, then they are probably doing business with the Islamic Revolutionary Guard Corps. In October of 2007, the Office of Foreign 

Assets Control that you are very familiar with listed the leading 

Iranian financial institutions, the IRGC, and other entities as specially designated global terrorist organizations. 

At that time, or anytime thereafter, was there ever a list with 

a complete financial footprint of who is trading with Iran? And if 

there is no such list, then why do you suppose one was never created? 

Mr. LEVEY. Well, as you indicate, Senator Shelby, we did do the 

very broad set of designations in 2007—— 

Senator SHELBY. But not specific, was it? 

Mr. LEVEY. Well, it was a little bit more specific than you have 

laid out because we also subsequently have designated a number 

of companies that are owned or controlled by the IRGC. 

As you indicate, that has an effect in the United States, of 

course. It freezes their assets and makes it a crime for anyone to 

do business with them. But it is a good signal to the rest of the 

world who really do not want to necessarily do business with the 

IRGC. If we can identify the companies for them that are IRGC 
26 

owned and controlled, then they can take steps themselves to avoid 

doing business with them. 

So we have made an effort to continue to provide that guidance 

to the international business community and continue to take action ourselves to make sure that we are applying the appropriate 

sanctions. 

Senator SHELBY. That is important, is it not? 

Mr. LEVEY. I think this is a very, very important matter, yes. 

Chairman DODD. Thank you very much. 

Again, these are open hearings, and we invite people to come. 

The signs are blocking the view of some other people in the room 

from watching the witnesses, so I would ask them to lower them 

a bit if they would. Thank you very much. 

Senator Reed. 

Senator REED. Thank you, Mr. Chairman, and thank you, gentlemen. 

Secretary Steinberg, you have just returned from China. We 

heard that the Russians were ready to stand with President 

Obama on the stage in Pittsburgh along with President Sarkozy 

and Prime Minister Brown, but the Chinese were reluctant. So it 

seems to me that they are the most critical element of pulling all 

the major powers together. 

Can you comment on their position or what we are doing to get 

them to pull together with the rest of the major countries? 

Mr. STEINBERG. Well, thank you, Senator Reed. It obviously is 

critical because of the value that we get from having the Security 

Council act in these cases. It gives a much more powerful international message as well as legal tools. 

I think it is important to recognize that China did not stand in 

the way of the earlier Security Council resolution, so they have accepted in the past that these measures are necessary. And as you 

know, we have had some considerable success with China in connection with North Korea recently. And I think that is a very important step because the measures that we took most recently with 

North Korea are very powerful tools that are available to us and 

could be replicated in this context with Iran. 

I think it is very clear to me from my discussions with them that 

the fact of our engagement strengthens our hands with them. They 

obviously see this as the preferable course, and to the extent that 

they see us seriously working in an attempt to solve this diplomatically, it increases the chance that they are going to do it. 

They obviously have a number of economic interests there. That 

makes it more challenging to get their support. But the President 

has raised this at the very highest levels, and in his meeting just 

a few weeks ago with President Hu, he made clear that this is at 

the very top of our agenda in terms of our concerns. And I believe 

that that strong connection that the President has made will help 

us, should it become necessary, to seek additional measures 

through the Security Council. 

Senator REED. One of the issues that concerns the Chinese is 

they have about 20 percent of their oil, I believe, comes from Iran. 

But do they understand that if this situation gets out of hand, one 

of the likely consequences is that oil prices boom up and that they 
27 

would suffer probably more than anyone else—or as much as anyone else? 

Mr. STEINBERG. Well, Senator, I certainly made that point to 

them when I met with them, and I also made clear that, more 

broadly, as they become increasingly dependent on imported oil, 

imported energy, they have a huge stake in stability in the Middle 

East. And an Iran with nuclear weapons or nuclear capability 

would create deep instabilities in that region. 

So I think in some ways, although their energy needs create ties 

with Iran and others, it also creates a recognition that they have 

a stake in this in ways that they may not have seen before. And 

I think this is one of the great challenges in our broader engagement with China, is to make clear that they now have a global 

stake in dealing with questions like this. They cannot simply stay 

on the side and say, ‘‘This is not our problem.’’ 

Whether that has successfully made it into their thinking, we 

will only see in the event. But we have certainly been making that 

explicit with them. 

Senator REED. Let me switch gears to the domestic situation in 

Iran: unprecedented turmoil after their election, seems to be continually below the surface, and occasionally breaking through. 

What effect does this have on their deliberations, their negotiations, their view of how they should proceed with their nuclear program? 

Mr. STEINBERG. Senator, it is in some ways the $64,000 question, 

and I think it really is ultimately somewhat a matter of speculation. 

There is no question that this is a major factor, but whether this 

is leading the Government of Iran to be more open to a solution 

because it faces internal pressures or whether it is making it more 

defensive I think is really hard to judge at this point. And I think 

the only way we are going to be able to tell is by testing the proposition by making clear, including very clearly to the Iranian public, 

where the opportunities are and how either the government can 

deepen its isolation further—which is one of the arguments that 

the opposition made during the campaigns, is pointing to the behavior the government, which deepened its isolation and the costs 

it imposed on the Iranian people. So I think we have to keep focused on that aspect. 

Senator REED. Secretary Levey, you mentioned in response to 

Senator Shelby that the IRGC has a significant economic role. I 

heard that they have just bought a major position in the telecom 

company in Iran. Is that correct? 

Mr. LEVEY. Senator Reed, I have seen that report, and at this 

point we are trying to confirm it. But there are some indications 

to that effect, yes. 

Senator REED. And I would presume it is not just that they have 

a good idea for a situation comedy, but they are looking to control 

actually access to the Internet, Twitter, and everything else. 

Mr. LEVEY. That is certainly a possibility, and one is seeing the 

IRGC injecting itself into so many different areas, as I laid out in 

my testimony and as you pointed out. And as Secretary Steinberg 

said, this may well be an area where we can focus some attention 
28 

and have the ability to bring others along with us and make it 

more effective. 

Senator REED. Is the IRGC becoming so powerful that they are 

a force unto themselves, that Ahmadinejad and the mullahs have 

less and less control of them? Or have they allied with 

Ahmadinejad as a front so that they can maintain their presence, 

their growing presence? 

Mr. LEVEY. I think that there are different indications that we 

have in both directions on that. But at this point, it looks like the 

IRGC is certainly well connected to the Supreme Leader, and that 

is the assumption that we are going forward on. 

Senator REED. Just a final question. How does the nuclear program get their money? Do they go get bank loans? Or how directly 

can we affect the funding of these specific programs through sanctions? 

Mr. LEVEY. Well, Senator Reed, the issue here is this is a government-funded enterprise, obviously, so this is a regime—this is, you 

know, a country that has a lot of income from its natural resources. 

So we have to deal with that situation as we find it. 

Just because they have the money, though, does not necessarily 

mean that they can easily engage in international business transactions. So by trying to raise the costs and make it more difficult 

and identify illicit transactions and get partners around the world 

to scrutinize it and be suspicious, we can slow them down and 

make it more difficult for them and that way even if it is a situation where we cannot stop Iran from having money that it gets 

from selling its oil. 

Senator REED. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman DODD. Thank you very much, Senator. 

Senator Corker. 

Senator CORKER. Mr. Chairman, thank you, and I thank each of 

you for your service and testimony, and we appreciate what you 

have said today. 

Secretary Steinberg, is there any question in anybody’s mind 

that during this period of time between now and October 25th that 

much of the facility that we are getting ready to inspect is being 

dismantled? 

Mr. STEINBERG. Senator, as you can probably guess, what I could 

tell you about that I cannot tell you in open session. But I think 

that my broader point is that we are pretty confident that the period of time, the delay, is not going to have an impact, a significant 

impact on our ability to understand what was going on there. So 

I guess to get to what I think is underlying your question, which 

is, is this—they have acknowledged that this is an enrichment facility. This is not a case where we are accusing them of having a 

facility, they have denied it, and they are going to then go hide all 

the stuff to prove it was not. They have acknowledged that it is an 

enrichment facility, and so I think we believe that the period of 

time here is not likely to have an impact on our understanding. 

More important, in addition to inspecting what is there, what we 

will achieve from this is making sure that this is put under safeguard so that if they want to continue to go forward with this facil-
29 

ity, it will be fully safeguarded with monitors and all the equipment that the IAEA has. 

So given the state of this—and it is at a very preliminary state— 

I think we feel confident that this delay is not one in which significant deception or activities will take place that would significantly 

impede our understanding of what was taking place. 

Senator CORKER. And I have seen much of the classified—probably not as much as you have on a daily basis, and I do not think 

there is any question about that. I guess sometimes one might wonder, you know, would it make sense to have somebody on the 

ground immediately there and then let the inspectors come in once 

they are prepared. But I guess that is too rational of a thing to 

occur and just does not make sense in international diplomacy. 

Mr. STEINBERG. Again, Senator, we obviously would have liked to 

have had a somewhat earlier engagement, but given what our understanding of the state of play is there, the slight delay beyond 

the 2 weeks that we had suggested in our judgment is not going 

to make a significant impact on that. 

Senator CORKER. And I appreciate the answer. 

Senator Dodd asked a good question about what might happen 

with the sanctions on refined product as far as the people go. As 

just a tool itself, do you think the keeping of refined product from 

actually coming in from other places to Iran is an effective sanction, period? I mean, is it an effective sanction? And the reason I 

ask, there have been a lot of people that say that they can easily 

get around it and they have subsidies in place that they could remove and that would contain, you know, the amount that would actually be utilized. There is a lot of smuggling that goes on to other 

countries which they could stop. 

I mean, is it or is it not an effective sanction? 

Mr. STEINBERG. Senator, I think we still have not reached a firm 

judgment on whether that would be the best way to go, in part because we need a better understanding of what the efficacy would 

be, in part because it would depend on the degree to which others 

participated in this. Obviously, this is a hard thing to do unilaterally. 

Senator CORKER. Sure. But if everybody participated—I know 

right now China is the major assistor, if you will. But if everybody 

participated and the companies that have just recently stopped continue to stop, would it be an effective sanction or not? 

Mr. STEINBERG. Again, I think we have not reached a firm conclusion about whether the net benefits and the net cost would have 

the efficacy. The challenge is always to try to translate the economic impact into what the political impact would be, and our goal, 

as we think about what we might want to do going forward, is to 

think, as Secretary Levey said, about how does the government 

make its calculation. What would have the biggest impact on them, 

whether it is transmitting through its impact on the people or 

whether it is directly affecting their own activities? 

We found in many cases, for example, that the reason I think a 

lot of us are focused on the IRGC is if you can focus on kind of the 

cost/benefit calculation of the individuals who are making these decisions, sometimes that has a more targeted impact—sometimes 
30 

called ‘‘smart sanctions’’—that things that have to work as a transmission belt through the pain they impose on the public. 

But I do not think we want to take it off the table. I think it is 

one of the things that we need to—— 

Senator CORKER. Let me ask you this: Have you asked for Congress to act? And the reason I ask that, my guess is with all the 

testosterone, if you will, that shows itself as it relates to Iran and 

other kinds of things, if you asked for sanctions, they would be 

passed out of here in about 24 hours, maybe more quickly. So the 

question is: Have you asked for us to take any actions in Congress 

as it relates to sanctions? 

Mr. STEINBERG. I think, Senator, the key for us will in part be 

timing, which is—— 

Senator CORKER. No, no. But have you asked yet? Just yes or no. 

Mr. STEINBERG. We have not asked for additional measures. 

Senator CORKER. Would you like for Congress to prescribe what 

needs to be done? Or would you like for Congress to enable you if 

you make decisions as it relates to sanctions? 

Mr. STEINBERG. Certainly, Senator, the President would like to 

have the maximum flexibility in part because of his ability to—— 

Senator CORKER. He would like to be enabled. 

Mr. STEINBERG. He would like to be enabled. 

Senator CORKER. Then, in essence, just to get to the legislation 

we have before us, you would oppose then the Lieberman-Kyl bill 

that says you shall—you shall keep refined product from coming 

into Iran? 

Mr. STEINBERG. Again, Senator, I think what we would like to 

do is work with the Committee to give the President the appropriate flexibility, and I know the Chairman and others have indicated some willingness to look at actually how—— 

Senator CORKER. So the answer—I am just going to say it for you 

since you are being diplomatic, as a diplomat—is that you oppose 

this legislation. And I guess, you know, it does worry me that we 

might get in the middle of your work right now. 

But the counter to that—and this is my last question—some of 

my colleagues up here on the dais, you know, we whispered back 

and forth a little bit about, OK, what is different now? I mean, 

there have been talks that have been going on for some time. And, 

by the way, I am on the side of feeling that you guys do need some 

flexibility, that we do not need to be telling you guys what to do 

yet. OK? I mean, I think there is an opportunity for actions to take. 

I think, though, the world community is watching. I know many of 

us are watching. There has been a lot of talk going on by many administrations, and nothing has happened. 

My final question is: What is different, in your opinion, this time 

that would enable you, if you had the freedom and you were not 

prescribed by others, what is different this time that will allow you 

to be effective as it relates to Iran? 

Mr. STEINBERG. I think the most important thing is I think we 

have a better chance of getting broad-based sanctions, broad-based 

economic and political pressure because we demonstrated that we 

have made every effort to solve this through diplomacy and that 

the burden is clearly on Iran, that they have clearly rejected any 

attempt to solve this peacefully. 
31 

I think that is an enormous tool for us to get others to act, and 

at the end of the day—because not only are sanctions more effective when they are broad-based, but it also takes away the political 

argument that the Iranian government may try to make, which is 

that this is American hostility. This is clearly an international rejection of their unwillingness to be straightforward and open about 

their program, their unwillingness to prove that it is peaceful. 

And so I think that affects not only our ability to get others to 

join us, but the dynamic that we have all been discussing today 

about how this plays within Iran itself. It becomes harder for them 

to try to use that line with their own people about why these painful measures are now being employed. 

Senator CORKER. I thank you for your service and your answers, 

and Mr. Chairman, for the hearing. 

Chairman DODD. Thank you very much, Senator. 

Let me just point out, as I understand the legislation, by the 

way, there is waiver authority in the legislation for the administration. So it is not quite as prescriptive as my friend from Tennessee 

has suggested. 

And second, and I say this respectfully over the years, that as 

a coequal branch of government, and obviously we delegate to the 

administration and the executive branch to conduct foreign policy, 

and you can’t have 535 Members of Congress conducting foreign 

policy, I understand that point, but also, I think it is important on 

issues like this that the world understand, particularly the Iranian 

government understand, that our patience has run out, that this 

has gone on too long and that we are running a great risk if they 

acquire these weapons and pose a great threat to us and to our allies. 

And so while we don’t relish this choice, they are giving us no 

other choice at this point except for the one that we would all like 

to avoid, and that is the one that we are trying to avoid by what 

we are suggesting here. And so while it is painful and it may impose some difficulties, in the absence of doing so, there is the fear 

here collectively that the Iranian government is taking us to the 

cleaners on the issue and the end result would put us at great risk. 

So I just think it is important to note that. This is not something 

that we enjoy doing, and obviously working with you—and I appreciate your response, Mr. Secretary—is exactly the mood that we intend to engage with you on. 

Let me turn to Senator Bayh. 

Senator BAYH. Thank you, Mr. Chairman. 

Just following up on that, to my friend from Tennessee and the 

Chairman and our guests here today, the legislation does use the 

word ‘‘shall,’’ but it also includes waiver authority, that the President on a finding that it is not in the national interest to impose 

the sanctions can waive the sanctions. So we are trying to strike 

the balance between creating a sense of urgency, clearly getting 

Congress on record as saying that this is something that we are interested in doing—I personally think it is the right thing to do— 

but maintaining the appropriate balance of powers between the 

legislative and the executive branch. We ultimately give discretion 

to the executive branch to exercise its judgment as it sees fit. So 

that is the balance that we were attempting to strike, between 
32 

being advisory and prescriptive, maybe a little of both. So that is 

just for the record. 

Thank you all for being here today, and my first question, I 

guess, Mr. Steinberg—it is good to see you again—would be for 

you. We are now engaged in this accelerated diplomacy, but the 

clock is also running. And so my question for you would be, what 

should the deadlines for the diplomacy be and what should the consequences for failing to meet them be if the Iranians just are dragging this process out in an attempt to achieve a nuclear capability 

before the world can do anything about it? 

Mr. STEINBERG. Well, thank you, Senator. I think there are some 

real opportunities here to test Iran’s intentions and to get a sense 

of the accelerated time line. One of the reasons why we put such 

emphasis on this arrangement for shipping out most of the low enriched uranium to be reprocessed into fuel for the Tehran research 

reactor is that it has a real needed impact, which is it takes away 

from Iran LEU which could be fabricated into high enriched uranium, highly enriched uranium, and potentially into material for a 

nuclear weapon. 

So a prompt action by Iran on that would be a very significant 

step. That is why we have put a lot of emphasis on it. We will have 

an opportunity in a matter of days—— 

Senator BAYH. How would you define prompt? 

Mr. STEINBERG. We have a meeting on October 19 to discuss the 

details of this, and as I indicated earlier, we anticipate a meeting 

of the P5+1 with Iran by the end of the month. So we are really 

talking about a matter of days and weeks for the first two commitments that Iran made in the Geneva talks, as the inspection of the 

Qom facility and trying to reach an agreement on the shipping out 

of the LEU—— 

Senator BAYH. Is there any way for us to verify whether they 

have actually shipped out all the enriched uranium that they have? 

Mr. STEINBERG. Well, I think we have a fairly good idea—not to 

the gram, but a fairly good idea—because the facility is under 

IAEA inspection, that within a reasonable tolerance, we have a 

pretty good idea of what their current LEU stockpile is—— 

Senator BAYH. So you are for prompt deadlines—— 

Mr. STEINBERG. Yes. 

Senator BAYH. You are talking in terms of by the end of the 

month or—— 

Mr. STEINBERG. By the end of the month, I think we will have 

a clear indication of whether on the first two specific things that 

they apparently agreed to in Geneva, whether they are taking action to show they are serious. 

Senator BAYH. It was, I guess, typical that they apparently 

agreed to things and then pretty quickly denied having agreed to 

those very things. They don’t seem to be speaking with a unified 

voice. So the second part of my question is, if they appear to be dissembling or delaying, what should the consequences for that be? 

Mr. STEINBERG. I think the President and the Secretary and others have made clear that if we see that they are unwilling to take 

action on the things that they have said they are going to do, that 

we are prepared to move to stronger actions, ideally through the 

Security Council and multilaterally, but we reserve the right to 
33 

take actions by ourselves. I think we have given them a good time 

horizon within which they have to do it, which is not years but has 

to be quite promptly. 

Senator BAYH. I think you are quite right in judging them not 

by what they say, but by what they do, and my observation is that 

the Iranians tend to respect the strength and that seriousness of 

purpose or credibility is important here and a willingness to actually take steps forward. Interestingly, it maximizes the chance that 

you don’t have to take those steps, so—— 

Mr. STEINBERG. I strongly agree with that, Senator. 

Senator BAYH. My second question—and my clock must be on 

fast-forward, I am only going to have time for two here— I would 

be interested in all three of you, it seems to me at the bottom of 

all this is an assessment of the character of the Iranian regime, 

and it may be—it is obviously opaque and it may be somewhat internally divided. I think two of you have indicated that. But ultimately, will they act as a nation state, assessing their interests 

and acting in pursuant thereof, or will they be motivated by religious fervor or hatred toward Israel or the United States or the 

West, making decisions that we would consider to be irrational? 

If it is the former, we can ratchet up economic, financial, diplomatic, cultural, all sorts of pressure, hopefully ultimately attaining 

a level that they determine it is just not in their interests to pursue nuclear weapons anymore. If, in fact, the ultimate arbiters are 

motivated by other factors, then perhaps not and that takes you 

down another line of analysis. 

So my question to all of you gentlemen is, ultimately, if this regime as currently constituted were to obtain a nuclear weapon, 

what are the chances that they would misuse that weapon in a way 

that we would consider to be irrational? 

Mr. STEINBERG. Senator, it is obviously—it is hard to know the 

answer to that question, but I think that is why we are—the dangers that it potentially poses is why we place such an urgency on 

preventing them from developing that capability in the first place. 

We have a variety of tools available to us. Nothing is off the table. 

We believe that there is a chance through diplomacy, but we recognize that that may not succeed and we may have to turn to other 

options. But we have made clear that we have a very clear goal, 

to prevent them to develop the capability to do that so that we can 

avoid the risk that you have identified. 

Senator BAYH. Mr. Levey? By the way, thank you for our previous meetings over the years. You have done great work in this 

area, one of the few things that actually has ratcheted up the cost 

to the Iranian regime for their misbehavior, so I am grateful to you 

for continuing on. 

Mr. LEVEY. Well, thank you, Senator, and I appreciate your interest in this and all the discussions that we have had about it over 

the years. 

I think the answer to your question about what is the nature of 

this leadership in Iran is that while we don’t know for sure, what 

we are trying to do now is probe that. The process that Deputy Secretary Steinberg laid out will give us—will put before the leadership in Iran a rational choice, either to engage and take the steps 

that they are being asked of, or face the consequences of not doing 
34 

so. And so we put before them the rational choice and we will be 

able to learn by what happens rather than by a prediction. 

Senator BAYH. Mr. Hill, do you have an opinion about this? 

Mr. HILL. Sure, but I think I will defer to my distinguished colleagues. I would just say, at Commerce, we are focused on preventing bad guys from sending things to Iran that will hurt us on 

the battlefield. 

Senator BAYH. Well, if I could just make two final points, Mr. 

Chairman, my time has expired. It is possible that they are operating as if they were in a bazaar and there are ultimately rational 

decisionmakers at the end of the day, but we may not be able to 

raise the cost so high as to ultimately affect their decision about 

this, because even the reformers, as I understand it, are under 

agreement about the nuclear aspirations of the country. At least, 

they have been until recently. So there seems to be a broad consensus within Iran about this. That is number one. 

Number two, even if you think there is a 95-percent chance that 

they are rational decisionmakers and will behave like a normal nation state, if there is only a 5-percent chance that they will not, is 

that a risk that you are willing to run, and that is a very hard 

question to answer. 

So I encourage you in these efforts. We should ratchet up the 

cost as high as we can. Mr. Levey, as you say, perhaps we will then 

find out how they behave. Of course, then you always have the 

question of will they comply with that, but that is perhaps the subject for another hearing on another day. Thank you, gentlemen. 

Thank you. 

Senator REED. [Presiding.] Thank you, Senator Bayh. 

Senator Merkley? 

Senator MERKLEY. Thank you very much, Mr. Chair, and I appreciate your testimony today. 

The question I want to ask you all to help us have insights on, 

to the degree you can do so in unclassified fashion, is certainly 

there is no long-term benefit to China and Russia to having a nuclear-armed Iran, and yet they have been somewhat reluctant to 

come to the table and join in the international effort, multilateral 

sanctions. Can you give us a little insight into how Russia and 

China have thought about this issue, weighing their short-term 

trade deals against the long-term risk, and how their perspectives 

are changing and how we are working to continue to help them see 

the importance of this effort? 

Mr. STEINBERG. Thank you, Senator. It is always a little bit perilous to try to peer into the internal decisionmaking of other countries, and particularly in these cases where it is not so transparent, 

perhaps, as in our own, where you can read about it in the newspapers. 

It seems to me that the biggest challenge that we have is that 

both Russia and especially China have a firm conviction that the 

best results are achieved through diplomacy and they are, frankly, 

more skeptical than we tend to be about the efficacy of economic 

sanctions and the like. They aren’t opposed to them. As I said earlier, we have had the support of Russia and China on three Security Council resolutions that affect Iran, so they have recognized 

that at the end of the day, you may have to take these measures, 
35 

and again, most recently with North Korea, we have opted to take 

some very strong measures. 

So I think they are slower to come to the conclusion. They are 

more likely to conclude that the threat is counterproductive than 

we often feel where the threat actually is incentivizing to a country 

to negotiate. But as I say, I think that it is not because there is 

a fundamental disagreement about the objective, nor, I think, increasingly, is there as much of a difference about how dangerous 

a nuclear Iran would be. I think there is a growing acceptance 

among all of the five that this is something that is of paramount 

importance. 

So that is why the engagement strategy has been so important, 

because it helps us convince countries like Russia and China, 

which are more inclined to put stock in diplomacy and negotiation, 

that we have seriously pursued that and we are not just kind of 

rushing over it to get to other kinds of actions. 

They obviously have economic interest there. Europeans have 

economic interest there. And those must have an impact on their 

overall calculation. But I think at the end of the day on these 

issues, they understand of what paramount importance this is. 

Again, you can never know for sure, but in my earlier service 

during the Clinton administration, we worked with China to end 

their direct support for Iran’s nuclear program in the mid-1990s, 

and again, they had an involvement with the zero power reactor in 

Iran and the like, and they were reluctant to do it, but over time, 

they did end that involvement. So I think the record would suggest 

that if you work this hard enough, there is no guarantee, but there 

is at least some prospect that they will come around to the view 

that we share. 

Senator MERKLEY. Let me ask this question. When Iran’s government looks around the world, they see Pakistan now as a nuclear 

power, despite sanctions that were applied at one point. They see 

certainly North Korea as a nuclear power and they see how reluctant foreign nations are to mess with nations that are nuclear powers. Is there a certain logic to their pursuit, especially if you throw 

in national prestige? Are these things so deeply rooted, their vision 

of kind of the protection that a nuclear weapon provides them, and 

their national prestige? Can sanctions be reasonably expected, even 

in a multilateral, serious format, be expected to counteract those 

two powerful forces? 

Mr. STEINBERG. Senator, I think we have to disrupt that logic, 

if you take each of the elements. I think you have raised some good 

questions there. 

With respect to prestige, I think it is possible, and I think this 

gathering of international consensus is how we do it, is to actually 

reverse the calculation, that it isolates it, that it makes it more of 

a pariah state. That rather than gaining prestige and influence, it 

becomes less welcome in the international community, less able to 

achieve its objectives. So I think we have the ability to break that 

logic. 

In terms of security, I think we can also show that they are less 

secure, that they are uniting all of the countries in the region to 

be concerned about them, to strengthen their military ties with 

each other and cooperation with us. 
36 

So each of these potential logics are what we have to work on 

and to demonstrate to them that if they think that is what they 

are achieving, they are actually not going to achieve it. They will 

achieve the opposite. They will be less secure, less prestigious, less 

able to achieve their objectives by going down this road. And here, 

the strong international consensus, I think, is a critical part of that 

effort. 

Senator MERKLEY. And to change that international environment, we really have to have full cooperation of major powers 

around the world, and I understand that that is the foundation of 

your efforts and we all hope that those are successful. 

Mr. STEINBERG. I agree. 

Senator MERKLEY. Thank you. 

Senator REED. Senator Bunning? 

Senator BUNNING. Thank you, Mr. Chairman. 

Mr. Steinberg, since the enactment of the Iran Sanctions Act of 

1996, approximately how much have foreign countries invested in 

Iran’s energy sector? 

Mr. STEINBERG. I would have to provide that for the record, Senator. I don’t have that. 

Senator BUNNING. I would appreciate that very much. Since you 

do not know that answer, I happen to be aware that the figure that 

you would give us does not include $70 billion in pending transactions that are known about, most of which are long-term contracts to purchase Iranian gas and oil, is that correct? Do you know 

about those? 

Mr. STEINBERG. Senator, obviously, there are some long-term 

contracts and there are—I mean, there are legal issues with respect to investment and the coverage of the Iran Sanctions Act as 

opposed to purchases and long-term contracts. 

Let me just say, because I know of your interest in the Iran 

Sanctions Act, that you have to look at this not only from transactions that have taken place, but transactions that have not taken 

place. And one of the powerful tools and one of the ways that we 

work with the Iran Sanctions Act is to use this as leverage to discourage people from investing in Iran. Again, from my previous 

service, I know how powerful that can be, and I know that the previous administration also used it as a way to discourage actors, 

particularly Europeans, but others, as well, from making these investments. And I think there is no question—— 

Senator BUNNING. Well, in that regard, then, under the Iran 

Sanctions Act, how many of these countries that are in violation of 

our sanctions, how many more countries—in other words, does the 

State Department actually consider these countries in violation of 

our sanctions? 

Mr. STEINBERG. We obviously look at each transaction that comes 

to our attention, Senator, and if we find a violation, we would obviously impose measures on this—— 

Senator BUNNING. Do you rule on it? Does the State Department 

then impose the ruling that is in the Iran Sanctions Act? 

Mr. STEINBERG. We would impose sanctions if we found there 

was a violation of the Sanctions Act. 

Senator BUNNING. You would? This is for the same gentleman. 

Recent excerpts from the International Atomic Energy Agency 
37 

Annex confirms foreign intelligence reports that Iran has restarted 

work on a nuclear warhead design. Does it remain the position of 

the administration that Iran has not restarted this design? 

Mr. STEINBERG. Senator, you are citing press reports. To my 

knowledge, that IAEA report has not been completed or sent to us, 

so I can’t comment on the specifics of the IAEA report. 

With respect to Iran’s nuclear program, that is something that 

we continue to keep under advisement and review. The details, obviously, we would be happy to review in a classified session. 

Senator BUNNING. Thank you. Mr. Levey, are you aware of foreign banks that continue to conduct business with sanctioned Iranian entities? If so, why have these banks not been sanctioned? 

Mr. LEVEY. Well, Senator Bunning, the question is, whose sanctions are they violating? 

Senator BUNNING. Yes. 

Mr. LEVEY. If they are violating—— 

Senator BUNNING. I am speaking about ours. 

Mr. LEVEY. Right. So we have acted against the Iranian banks 

that—— 

Senator BUNNING. What about the other foreign banks? 

Mr. LEVEY. They are not permitted to use our financial system—— 

Senator BUNNING. That is correct. 

Mr. LEVEY.——to do the business with any Iranian bank. 

Senator BUNNING. So if you find them in violation of that, then 

you do sanction? 

Mr. LEVEY. There would be consequences for any foreign bank 

that was using our financial system to do business with an Iranian 

bank. 

Senator BUNNING. Thank you. What role do large financial clearinghouses, such as Euroclear, EBA, and the Asian Clearing Union, 

play in allowing Iran to circumvent sanctions? 

Mr. LEVEY. Well, Senator, as you know, those are all major institutions that have to abide by not only U.N. Security Council resolutions that apply to Iran, but also kind of the financial rules of the 

road in terms of legitimate financial activity. That said, there is— 

and we have engaged with the institutions that you have mentioned to make sure that they are aware of the risks of doing business with Iran, as I laid out in my testimony—some of the institutions that you mention, we do engage with very closely to make 

sure that they are not being used as a way for Iran to obscure the 

underlying parties to a transaction, and that is a concern that we 

continue to have and engage on actively. 

Senator BUNNING. Mr. Steinberg, outside of the Qom facility, 

how confident is the administration that there are no other secret 

Iranian facilities? 

Mr. STEINBERG. Senator, this is obviously something that the 

very fact of the Qom facility has to raise questions about whether 

there are things that we don’t know about. This is something we 

obviously put as among our highest priorities in terms of the intelligence community. I think this is something that, while we have 

no specific evidence of other facilities, it is not something that we 

take for granted, the fact that we don’t—— 

Senator BUNNING. In other words, there could possibly be? 
38 

Mr. STEINBERG. By definition, there could be, and I think we 

have to take very seriously the possibility that there might be. 

Senator BUNNING. OK. This will be my last question, since my 

time is running out. For Mr. Steinberg, the P5+1 talks have been 

described as slow and a constructive beginning. Will Russia and 

China agree to the next steps if the negotiations fail to show 

progress? 

Mr. STEINBERG. Senator, I obviously will have to see in the 

event, but I think that certainly with respect to Russia, the comments of President Medvedev are encouraging in terms of his recognition, of explicitly recognizing the role of sanctions in this case, 

and I am hopeful that with the Chinese, as well, given their past 

practice, which is ultimately coming along with supporting Security 

Council resolutions, that we can persuade them, as well. But I can’t 

obviously guarantee it at this point. 

Senator BUNNING. Do you know if Russia will commit to stopping 

anti-aircraft system sales to Iran? 

Mr. STEINBERG. It is certainly something we have raised repeatedly with them. They have indicated that they understand the concerns that we have, but we are not resting our laurels on this one. 

Senator BUNNING. Thank you very much, gentlemen, for being 

here. 

Senator REED. Thank you, Senator Bunning. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Secretary Steinberg, in your opening statement, you basically 

said the Iranians can either negotiate in good faith or they can face 

increasing international isolation and pressure. And my question 

is, up to now, do you think the Iranians have negotiated in good 

faith? 

Mr. STEINBERG. Senator, I think this is, frankly, the first concrete evidence that we have had during this administration of serious negotiation. I am an outsider with respect to the earlier negotiations and whether those who are involved felt that there was 

any progress made at that point. But I certainly think that during 

the first months we were in office, we were not seeing the signs of 

responsiveness at all from them, and I think it has been both a 

growing focus of the two tracks of our strategy that has brought 

the intense scrutiny on them and the possibility of additional pressure, so—— 

Senator MENENDEZ. Let me ask you this. Their first day of talks 

seemed to produce a potentially positive first step that Iran’s agreement supposedly to ship most of its low enriched uranium out of 

the country. Now, I have read press reports that they are denying 

they made that commitment. Which one is it? 

Mr. STEINBERG. Senator, as I mentioned before, we have a meeting with them on October 19 and I think we will see. I think 

that—— 

Senator MENENDEZ. But did they or did they not make that commitment on the first—— 

Mr. STEINBERG. They made a commitment to proceed with this 

program. 

Senator MENENDEZ. All right. So they made a commitment. Now 

they said they don’t, which is an example to me of what they have 
39 

traditionally done as they have moved along in these negotiations, 

you know, give you one step forward and then two steps backward. 

Let me ask you this. We can only sustain a process with measurable, practical results, is your testimony. Well, my question is, 

then, what is that? That is rather amorphous to me. The President 

said by the end of the year, we should be able to assess whether 

the talks hold real promise. What is the time line you all have in 

mind? How will we know if the Iranians are serious? How will we 

be able to palpably have a sense of benchmarks in which we measure real progress versus illusory progress? 

Mr. STEINBERG. I think the issue that we have just been talking 

about is an important first step. The agreement, if they implement 

it—and I agree we have to make sure they implement it, although 

I don’t think we should draw a lot of conclusions from the press 

statements they make about it. I think we put a lot more emphasis 

on what they actually agree to when we come back together again. 

But if they, in fact, move forward, not just agreeing, but actually 

move forward, actually shipping out the LEU, that would be a tangible sign of progress. It doesn’t end the problem. It is just the beginning of the process. But it would be a very tangible step because 

it would reduce dramatically in the near term their ability to move 

forward with enriching the LEU to a high enriched uranium. That 

is significant. It is a tangible, substantive step. 

Similarly, putting the Qom facility under full IAEA safeguards is 

important. We have a number of steps they need to take. They 

need to implement the additional protocol to the NPT. That is an 

important step that will give us significantly greater confidence 

about what is going on in the rest of the country. They need to suspend enrichment. That has been the requirement of the Security 

Council and remains the requirement of the Security Council. 

So we have a number of steps beyond these preliminary steps 

that they have to take and we have a very, I think, forced march 

to this process to make sure that they are doing it. 

Senator MENENDEZ. You have listed about four significant items 

that need to be pursued. What is the timeframe that we need to 

see that happening? 

Mr. STEINBERG. Again, I think the President has made clear that 

we need to continue to see tangible steps as we move forward 

through the fall. 

Senator MENENDEZ. If, in fact, we come to December and those 

four items have not been achieved, is that satisfactory? 

Mr. STEINBERG. I think we have to look at the state of play at 

that point to see what has been accomplished, what has not, and 

what the prospects are for moving it forward. 

Senator MENENDEZ. How long do we continue with these talks 

before we see a verifiable suspension of Iran’s enrichment program? 

Mr. STEINBERG. That is the requirement of the Security Council 

and it is the priority in our negotiations. 

Senator MENENDEZ. I know, but—I understand it is a priority, 

but it has been our priority for how long now? 

Mr. STEINBERG. Again, Senator, what we are—— 

Senator MENENDEZ. Would you quantify for me, how long has it 

been the priority for? 
40 

Mr. STEINBERG. It has been a priority since the Security Council 

imposed these provisions, and I—— 

Senator MENENDEZ. And how long has that been? 

Mr. STEINBERG. Again, I think we need to make sure—— 

Senator MENENDEZ. Mr. Secretary, how long has that been? 

Mr. STEINBERG. When was—— 

Senator MENENDEZ. Roughly? 

Mr. STEINBERG. Two-thousand-six. 

Senator MENENDEZ. Two-thousand-and-six. We are near the end 

of 2009 and the clock is ticking. And so I am trying to get from this 

administration what is a sense of time. Is this open-ended in our 

pursuit? I mean, I hope you are successful, believe me. I think we 

all hope you are successful. But, you know, we have to have some 

quantifiable timeframe. You don’t want the Congress to pursue the 

legislation, but at the same time, you don’t give us a timeframe. 

That makes many of us very uneasy. 

Mr. STEINBERG. Senator, I share your concern about this not 

being either a cover for continuing the program or an unlimited 

process, and the President has been very clear publicly about the 

fact that he will not tolerate that. We set a timeframe of September 

for a comprehensive review at the G8 and what we got was the 

agreement to the October 1 meeting and some in principal commitments to some steps. So it shows that, at least in theory, we may 

be making some progress. 

We don’t want to interrupt that progress because we don’t know 

for a fact that sanctions will necessarily be effective if we can make 

progress through negotiations. But we also don’t want to drag this 

out indefinitely. We will have some very clear indications that either the decision to send out the LEU or to not do it is a very powerful indication of what their intentions are. It is an important step 

because it has an impact on the ticking clock. That is to say, if they 

don’t have these stores of LEU, then their ability to move quickly 

to break out to a nuclear capability is delayed. 

So we understand very strongly, and I think the countries in the 

region, as you know, understand as strongly as we do about the 

danger of the ticking clock. The clock needs to stop ticking. We 

have made it clear to the Iranians that that is what we are looking 

for right now, because we recognize that it may take some time to 

get a comprehensive settlement, but they need to stop the clock 

ticking so that the danger doesn’t grow, and that is what we are 

focused on in the near term. 

Senator MENENDEZ. Well, I certainly hope that you succeed, but 

I want you to know that I and I am sure others feel very passionately that this is not a chess game where each get to, after you 

make your move, you stop the clock. The clock is continuously ticking, and regardless of what is said, what we need is real action. 

Thank you, Mr. Chairman. 

Senator REED. Thank you, Senator Menendez. 

Senator Schumer? 

Senator SCHUMER. Thank you, Mr. Chairman. Thank you to the 

witnesses. 

My first question is for Mr. Hill. Mr. Hill, as I mentioned in my 

opening statement, black markets around the world have been 

serving to circumvent our sanctions against Iran, and until we ad-
41 

dress the illegal funneling of goods, any new sanctions could be 

easily skirted, as well, at least some of them. The UAE in particular has been a major hub for illegal transshipments of goods to 

and from Iran. We have seen reports that Dubai has now been 

working to prevent these transshipments from going through, but 

those activities have merely shifted to other countries. Malaysia 

and Oman continue to be key intermediaries for Iran to illegally acquire U.S. technology. 

A 2007 GAO report found fault with our enforcement of illegal 

transshipments of goods to and from Iran. It cited that only one inspector from each Treasury and Commerce were stationed in the 

UAE. Would more inspectors on the ground in this region make a 

difference in our ability to enforce existing sanctions? 

Mr. HILL. Thank you for the question, Senator, and of course, 

more resources are always welcome as we work with the Congress 

and with the administration—— 

Senator SCHUMER. That wasn’t quite my question. They are always welcome, but would more inspectors make a difference here? 

Mr. HILL. I would have to say, yes, probably. We have—— 

Senator SCHUMER. Thank you. 

Mr. HILL.——a focus on Iran and around the world we are trying 

to enhance our bootprint, our footprint for enforcement, and the 

Secretary is very focused—Secretary Locke is very focused on that. 

Senator SCHUMER. How many U.S. officials are currently working on the ground in these countries to investigate the diversion of 

U.S. goods? 

Mr. HILL. We have five agents stationed—we have five posts 

overseas. In my testimony, I reference those—— 

Senator SCHUMER. How many agents? 

Mr. HILL. We have 100 agents here in the United States focused 

on this issue. 

Senator SCHUMER. How many overseas? 

Mr. HILL. There are five. 

Senator SCHUMER. Just five, one in each place? 

Mr. HILL. One in each. 

Senator SCHUMER. OK. Well, I certainly think you need more, 

and certainly, I guess, you agree we need more and we should try 

to get you those, OK. I hope we will. 

Could you describe the cooperation between Commerce, Customs, 

FBI, OFAC, the State Department, in stopping and prosecuting illegal export schemes? 

Mr. HILL. Thank you, Senator. It truly is a good story to tell. It 

has been a remarkable collaborative effort on the case that I described in my oral comments where we added 75 names to the Entity List, which interrupted an international smuggling chain that 

was eventually ending up in components being shipped to Iran to 

put in IEDs and ended up in Afghanistan. It was an effort led by 

Commerce, but we were strongly supported and worked closely 

with Justice, Customs, ICE, and all those. 

I think—you know, I remember back in the 1980s—I have been 

around for a while—where relations weren’t so good. Relations are 

good today and we work well with our sister agencies. 

Senator SCHUMER. OK. Next, I think I will ask this to Mr. Levey, 

Mr. Steinberg, but any of you could answer it. I am always looking 
42 

for places where the United States, we can act unilaterally and 

have some real economic effect on Iran, and it seems to me that 

the legislation that had been introduced by Senators Bayh and Kyl 

and Lieberman would do that, because gasoline was a weak pressure point. What is your view as to the effectiveness of that legislation, without commenting specifically? I don’t know if in your testimony you support it or not. Does the administration support the 

legislation? 

Mr. STEINBERG. Senator, as I said to the Chairman, I think we 

want to work with the Committee in terms of how we would craft 

an overall package coming out of the Congress—— 

Senator SCHUMER. But the concept. I am not asking you for language. I am asking, would the administration support the concept 

of putting pressure on oil companies that sell gasoline to Iran and 

making it virtually untenable for them to do that by not selling 

here? 

Mr. STEINBERG. Again, Senator, I think we have to—in terms of 

which of the potential measures of sanctions, whether they are 

more targeted on individual entities in Iran as opposed to a broadbased thing that would affect the Iranian economy like that, I 

think we have not reached a judgment as to which of those might 

be the most effective, in part because not only do we want to have 

the impact on the economy, we want to make sure that that is 

going to affect the decisionmaking in Iran and not target the wrong 

people in Iran, and similarly to make sure that we maximize the 

chance of getting international support for these things because 

there is obviously a risk in these things, that if we do not have 

international support, that there will be diversions, there will be 

work-arounds, and the efficacy of the sanctions will not nearly be 

as effective. 

Senator SCHUMER. But it seems to me with gasoline, where there 

are not that many large refiners and sellers, and most of the large 

ones need a U.S. market, as well, that that is a place that has real 

possibilities. 

Let me ask you about Central Bank. I was very active in preventing Iranian banks from being co-respondents—this is to Mr. 

Levey and now their Central Bank has taken over some of those 

roles. I do believe the one effective thing we have done economically unilaterally was when we put pressure on their banking industry. Would the administration support a move, which I have already urged the Chair to put in this legislation, to extend that in 

whatever way we could to the Central Bank of Iran, who is now, 

as I said, assuming the same functions that the commercial banks 

did? 

Mr. LEVEY. Well, Senator, without commenting on what action 

we might take in the future, let me just tell you what we have done 

already with respect to the Central Bank because we have publicly 

expressed some concerns about just what you have mentioned, 

which is that they have engaged in certain deceptive conduct and 

have assisted banks that are under unilateral sanctions by the 

United States. 

But what we did do is we cut off all Iranian financial institutions, their commercial banks, their state-owned banks, their private banks, and the Central Bank of Iran from all access to the 
43 

United States financial system. And at this point, that is the state 

of affairs with respect to the Central Bank of Iran, as well as with 

all other Iranian financial institutions. 

So the question now is getting—trying to broaden that to what 

other countries can do—— 

Senator SCHUMER. Correct. 

Mr. LEVEY.——and having the desired impact within Iran. 

Senator SCHUMER. I guess I share the frustration expressed by 

my colleague, Senator Menendez. I don’t trust the Iranians one bit. 

If you look at past history, whenever they are squeezed a little bit, 

they feint, and then they back off. I am not saying we shouldn’t 

pursue these negotiations, but I find it troubling that the administration is not looking at the same time to be supportive of the 

toughest sanctions possible. It is great that the Russians have finally said something, but again, seeing will be believing there. 

As you know, Mr. Steinberg, I worked really hard to try and persuade the previous administration to look at the Russians and the 

interconnection of the missiles in Eastern Europe and sanctions in 

Iran, got nowhere, and I am glad that this administration—I know 

the two are not related officially, but I am glad you are pursuing 

both separately. 

Tell us if you think there is a real chance that the Russians 

will—I mean, to me, Putin sees Iran as leverage over us and he 

doesn’t want to give up that card very easily. Tell me, is there any 

reason that you have some optimism that this time it will be different? 

Mr. STEINBERG. Senator, as I think you have said, I mean, I 

think we will see in the event—I mean, I think whether we are optimistic or not, we will see in the event. We are encouraged by the 

words of the public and the private words, but especially the public 

words, because I think President Medvedev has put himself out 

there in ways that I think creates some credibility issues there. 

But I also think that—I mean, for reasons that you understand, 

the specifics of some of the things we are looking at, we don’t particularly want to bring up, but there is a very intensive internal 

effort to examine precisely the questions you are asking here. 

Would refined products be the right thing to do? Are there other 

measures? 

We are working very hard on this, because we recognize, as Senator Menendez and you have said, that we may have to move very 

promptly if we don’t get a response in the next couple of weeks on 

these things to take measures. We will be ready and we will be 

coming back to you to tell you what we want to do, but I think at 

this stage, for us to sort of kind of go through publicly and precisely what we are doing—— 

So you are raising the right questions. We are very, very focused 

and we welcome your thoughts about which of this whole suite— 

because we have a lot of tools and a lot of things that we might 

take as the next step as to what is going to be the most effective, 

because there is no science in this. It is a judgment call as to which 

of these various tools, what is the sequence, do you do them all at 

once, do you do them in a series, how do you sequence this with 

the international action, unilateral, Security Council, otherwise. 
44 

But we recognize we need to be ready quickly, and the President 

has asked us to be in a position to take measures, strong measures, 

quickly if we don’t see very prompt response to the kinds of things 

that the Iranians have said that they are prepared to do. 

Senator SCHUMER. Well, I would recommend, just in conclusion— 

and I thank the Chair—as tough of measures as possible that are 

efficacious. You don’t want to do what the Bush administration 

did—this is my judgment, not yours—sounded tough and did very 

little. You want to really be tough, but I wouldn’t back off any 

longer. 

Thank you, Mr. Chairman. 

Senator REED. Do any of my colleagues have additional questions? Senator Merkley? 

Senator MERKLEY. Thank you, Mr. Chair. 

I want to address this to Mr. Hill. In your testimony, you lay out 

the export controls on U.S.-origin devices and the efforts you go to 

enforce that. Have you done any sort of evaluation of the impact 

that this has in terms of the Iranian economy? 

Mr. HILL. I am not aware of any internal evaluation we have 

done. Again, our focus is to prevent the bad guys from getting stuff 

to Iran and we haven’t evaluated what that means to the Iranian 

economy that I am aware of. 

Senator MERKLEY. OK. It strikes me as very strange that you 

wouldn’t have such an evaluation. Could you get back to us on 

whether you think this has had any impact? 

Mr. HILL. I certainly would be happy to do that, sir. 

Senator MERKLEY. One of the things that has limited its impact 

is U.S. corporations have been allowed to set up foreign subsidiaries to do business with Iran. Doesn’t that just create a huge loophole that almost makes the export controls irrelevant? 

Mr. HILL. Thank you, Senator. Under our regulations, any U.S. 

item that is exported or reexported by any entity in the world is 

under our regulations and has no effect if it is a foreign sub or not. 

Senator MERKLEY. No, but it does mean a U.S. company can set 

up a foreign subsidiary to engage in trade with Iran, and while the 

items can’t be U.S. origin, isn’t that basically the only limitation? 

Mr. HILL. Our regulations go to U.S.-origin items that contain 

U.S. parts, made with U.S. technology, or they are in their entirety 

U.S. origin. 

Senator MERKLEY. So getting back to us in terms of evaluating 

the effectiveness of the sanctions, if you could address this issue of 

whether the ability of U.S. corporations to set up foreign subsidiaries to do business with Iran has undermined the effectiveness of 

trade factors, that would be helpful. 

I noticed in your testimony, for example, you talked about three 

plans that—and you don’t list what type of plane, or if you did, I 

missed it, but three planes that were not reshipped to Iran due to 

the efforts, and I think this was involving the Balli Group, three 

U.S.-origin aircraft to Iran in violation of the EAR, and I wondered, 

well, so Iran turns around and can buy them from a U.S. company 

that has a foreign subsidiary, not U.S.-origin planes but planes produced in some other nation. 

Mr. HILL. Well, again, just be clear, they cannot export or reexport any U.S.-manufactured planes. They cannot export or reexport 
45 

any foreign-made planes that incorporate U.S. parts and components, and most of the major airlines and aircraft today incorporate 

significant U.S. parts. And so they would be prohibited from export 

or reexport to Iran under our current regulations. 

Senator MERKLEY. With anything with U.S. parts. 

I wanted to turn to the effort to address the actions of foreign 

companies, and particularly under the Iran Sanctions Act. How 

many companies have been assessed penalties under the Iran 

Sanctions Act? 

Mr. STEINBERG. Senator, there has only been one finding under 

the Iran Sanctions Act. That was in 1998, but the sanctions were 

waived at that time. 

Senator MERKLEY. Is the answer zero? 

Mr. STEINBERG. That is correct. 

Senator MERKLEY. OK. I believe that that Act, if you think of the 

three components, investment, trade, and sales of equipment, that 

of those three, the Act only addresses investments. It doesn’t address trade purchases, if you will, or sales of equipment to Iran. 

And then, indeed, the investment portion, we have had reason to 

not implement sanctions when we found them, and so the kind of— 

or penalties, so is essentially the ISA toothless and perceived as 

such around the world? 

Mr. STEINBERG. Senator, I think, as I mentioned earlier in talking to Senator Bunning, I think one of the things that is hard to 

judge, although I think we can give some impressions about it, is 

the amount of investment that has been deterred as a result of the 

Iran Sanctions Act. There have been a number of companies which 

have indicated an intention, a number of European countries and 

East Asian countries that have made very explicit initial plans to 

make investments, and those investments did not go forward because of the result of our investigations. 

I recall some explicitly when I was last in office where we had 

conversations with the foreign governments, made clear that we 

were prepared to impose what was then the Iran-Libya Sanctions 

Act, and they desisted from those investments. So it is one of those 

things that it is not always the case that you can judge the efficacy 

of the legislation by the number of times the sanctions have been 

imposed. It has been a deterrent. It has been a substantial deterrent, and I will try to get the Committee more details about what 

we think may have been the impact in terms of other investments 

which at least were mooted about and didn’t take place. But I am 

aware of several. 

And so I think that just the fact that it hasn’t been imposed 

doesn’t mean that it was toothless in terms of its impact. And as 

the sponsor said at the time, the goal was not to impose the sanctions. The goal was to get other countries to join with us in doing 

this, and what we tried to do was to try to develop an international 

consensus around trying to discourage investment. 

And, in fact, one of the biggest problems Iran has had is the difficulty that it has had in attracting investment. It is way behind 

in its technology. Its output is much less. Its technology is much 

less forward leaning and effective because of our concerted diplomacy backed by the ISA to stop those investments. So I think—I 

just don’t want you to be drawing the conclusion—the fact that 
46 

sanctions were not imposed doesn’t mean that the Act in its deterrent value didn’t have an effect. 

Senator MERKLEY. Can I follow up for a moment here, Mr. 

Chair? Am I correct in thinking that Total SA, the French company 

that was found in violation, proceeded with investments and is still 

proceeding with investments today? 

Mr. STEINBERG. I would have to get back with you on the specifics on that, Senator. But clearly, we keep these all under review, 

and so in our judgment, there are no investments that we are 

aware of that are in violation of the Act. 

Senator MERKLEY. I will conclude with just this notion, and that 

is that the loopholes limited the impact of U.S. sanctions, but the 

biggest hole is the lack of multilateral action. I know the administration is pursuing that aggressively, because no matter what the 

United States does on their own, if the rest of the world isn’t with 

us, as my colleague—my assistant said earlier today, it is like 

building a dam halfway across the river. You don’t stop the water 

from flowing. And so we have to build that dam all the way across 

the river, and thank you for your efforts in that regard. 

Thank you, Senator. 

Senator REED. If there are no further questions, thank you very 

much, gentlemen, for your testimony and your service. 

The hearing is adjourned. 

[Whereupon, at 11:50 a.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions follow:] 
47 

PREPARED STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD 

Welcome. 

Today we confront a serious threat to our nation’s security and global stability: 

the prospect of a nuclear-armed Iran. 

If Iran were to acquire a nuclear weapons capability, it would pose a serious 

threat to peace and security in the Middle East, especially to our close ally Israel. 

At our last Iran hearing in July, Senator Shelby and I agreed to hear from the 

Obama administration before moving forward on sanctions legislation. Much has 

happened in that time. 

Last week in Geneva, after revealing another covert uranium enrichment facility 

in Iran, the Administration held its first diplomatic meetings with Iran and the 

other permanent members of the U.N. Security Council and Germany. 

Under Secretary of State William Burns met one-on-one with Iran’s chief nuclear 

negotiator. 

This dialogue demonstrated the United States’ commitment to pursuing every avenue to push Iran to come clean on its nuclear program and abide by international 

non-proliferation commitments. 

President Obama described the talks as a ‘‘constructive beginning’’: participants 

agreed to follow-up talks later this month, the International Atomic Energy Agency 

is to be granted access to Iran’s uranium enrichment site at Qom, and Iran has indicated a willingness, in principle, to export low-enriched uranium to Russia and 

France for processing for medical uses. 

Whether Tehran will keep these commitments—or if they will prove to be yet another stall tactic to avoid tougher sanctions—remains to be seen. 

And, the situation is increasingly urgent—over the weekend, the New York Times 

reported that IAEA scientists believe Iran has enough sensitive data to assemble 

a nuclear weapon. 

Ultimately, we will only succeed if Iran’s leaders are persuaded to cooperate or 

face sustained, progressively intensifying multilateral economic and diplomatic pressure on their government—including tougher sanctions. 

They must make a clear choice: come clean on their nuclear program, suspend enrichment, and stop supporting terrorists around the world—or continue to deepen 

their international isolation. 

Increased international pressure and the specter of biting sanctions are clearly 

what have brought Iran to the table for substantive talks. 

Worldwide condemnation of Tehran’s secret enrichment activities, its human 

rights abuses and post-election crackdown have unified the international community 

to intensify the pressure on Iran’s leaders. 

We must not let up now. 

I intend to bring move forward in this Committee this month on comprehensive 

sanctions legislation. I am committed to ensuring that this Congress equips President Obama with all the tools he needs to confront the threats posed by Iran. 

Just as last year, we will incorporate the best of our Senate colleagues’ contributions into one original Committee bill, including: penalties on companies that support Iran’s import of refined petroleum products or bolstering its domestic capacity, 

advanced by Senators Bayh, Lieberman, and Kyl; and authorization for state and 

local governments to divest from companies involved in critical business with Iran, 

sponsored by Senators Brownback and Casey. In addition, our legislation will further tighten our trade embargo on Iran; enhance Treasury’s mandate to freeze assets tied to Iran’s terrorist and proliferation activities; and help cutoff Iran’s access 

to the most sensitive and advanced technology available, through tougher export 

controls on these products sent to Iran through its blackmarket trading partners. 

I hope our legislation will complement and reinforce ongoing diplomatic efforts, 

and send a clear signal to Iran’s leaders of what’s in store if they continue to defy 

the will of the international community. 

We are fortunate to be joined today by some of the Administration’s chief architects of Iran policy. Deputy Secretary of State James Steinberg will elaborate on ongoing diplomatic efforts to curb Iran’s nuclear ambitions, assess our chances for success, and survey policy options. 

Under Secretary of the Treasury Stuart Levey joins us once again. A welcome 

hold-over from the Bush Administration, he will discuss the tough targeted financial 

measures employed against Iran and explore with us other pressure points in the 

global financial system that could be employed against Iran’s government. 

And finally, we will hear from Acting Under Secretary of Commerce Dan Hill. It 

has been over 2 years since the Bush Administration proposed restricting export licenses to countries where sensitive technology flows to rogue nations such as Iran 
48 

via third countries, combating blackmarket proliferation networks which flourish 

throughout Asia and the Middle East. 

But first, we will hear from two of our colleagues, Senator Casey and Senator 

Brownback, who will describe their legislation currently under review by the Committee on the role of divestment from firms doing business in Iran’s energy sector. 

We welcome them to the hearing. 

PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY 

Thank you, Mr. Chairman. 

Recent developments in Iran underscore the importance of this morning’s hearing. 

Last month, we learned that Iran has a secret uranium enrichment facility. Last 

week, the Iranians announced that they had reached a last minute deal to send 

their supplies of low-enriched uranium to France and Russia for further enrichment. 

Just yesterday, news reports revealed that senior staff at the International Atomic Energy Agency or IAEA have concluded that Iran has acquired ‘‘sufficient information to be able to design and produce a workable’’ nuclear weapon. 

Although Iran denies that it is trying to develop nuclear weapons, they have 

taken no credible steps to prove otherwise. 

Iran’s troubling conduct is not limited to its pursuit of nuclear weapons. 

Iran has the dubious distinction of being ‘‘the most active state sponsor of terrorism’’ for ten years running according to our State Department. 

Because of its extensive financing of terrorism around the globe, the Treasury Department has referred to it as the ‘‘Central Banker’’ of international terrorism. 

There should be no doubt that Iran remains a serious and growing threat to the 

entire Middle East region, our European allies, and the interests of the United 

States. 

The issue is not whether we must take action to check Iran’s hostile ambitions, 

but rather, how to maximize the effectiveness of the actions we take. 

Unfortunately, there is a long history of failed policies designed to reign in Iran. 

As Secretary Gates noted last October: ‘‘Every administration since 1979 has 

reached out to the Iranians in one way or another and all have failed.’’ 

I hope this hearing will provide greater insight into the most effective way forward. 

PREPARED STATEMENT OF SENATOR CHARLES E. SCHUMER 

Thank you, Mr. Chairman and Ranking Member Shelby. 

And welcome to our esteemed witnesses who have agreed to testify at this important and timely hearing, including my colleagues Senator Bob Casey and Senator 

Sam Brownback. Mr. Chairman, I would like to thank you for calling this hearing, 

and I commend you for putting forth a comprehensive plan to arm the administration with the tools they need to put a stop to Iran’s rogue nuclear program. 

I believe that when it comes to Iran, we should never take the military option 

off the table. 

But I have long argued that economic sanctions are the preferred and probably 

most effective way to choke Iran’s nuclear ambitions. 

The Obama administration has recently begun direct diplomatic negotiations with 

Iran, and the first round of these talks did yield some important concessions from 

the Iranians last week. These negotiations should continue, but they do not supplant the need for action by this Congress. Iran, when it is caught red-handed, has 

a habit of promising just enough to avoid a strong response from the international 

community. Not this time. 

We should continue to talk to the Iranians, but we should not trust them. The 

threat of new sanctions will only serve to strengthen the President’s hand as we 

pursue a diplomatic solution. 

By giving the administration the capability to impose crippling sanctions on Iran 

should they continue to pursue a nuclear weapons program, this Committee today 

is exploring a tough and smart plan to address the real threat Iran poses to the 

United States and our allies, particularly Israel. 

First, Mr. Chairman, I want to commend you for including in that plan key provisions of the Iran Sanctions Enhancement Act of 2009, a bill introduced by Senator 

Evan Bayh of which I am an original cosponsor. 

This bill sanctions companies that export gasoline to Iran. This is one of the few 

pressure points where we can act unilaterally and have a real effect. The world 

knows that Iran does not currently have the refining capacity to meets its domestic 

gasoline needs and is dependent on imported gasoline. So now is the time to reduce 
49 

Iran’s energy supply if they fail to suspend their nuclear enrichment program as 

called for in several U.N. Security Council resolutions. 

I am also glad that we will be strengthening export controls to stop the illegal 

export of sensitive technology to Iran. During the recent Iranian elections we witnessed the Iranian regime go as far as to block the Internet and mobile phone communications of their own citizens. 

That is why I and Senator Lindsey Graham introduced ‘‘The Reduce Iranian 

Cyber Suppression Act’’ or ‘‘RICA’’, a bipartisan bill that would bar companies that 

export sensitive communication technology to Iran from applying for or renewing 

procurement contracts with the U.S. Government. I look forward to working with 

you to make sure that the key provisions of this bill are also included in our plan. 

Our comprehensive plan will also address the role that global financial institutions play in enabling Iran to develop a nuclear program. Mr. Chairman, I have long 

argued that financial sanctions are one of the most effective way to crack down on 

the dangerous Iranian regime. But we have to make sure that they are designed 

effectively. 

Last year, 27 Democrats joined me and called for the Iranian central bank, known 

as Bank Markazi, to also be included in our economic sanctions, as they have been 

heavily involved in terrorism and helping finance acquisitions of nuclear and conventional weapons technology. The central bank has also played a role in helping 

other Iranian banks circumvent U.S. financial sanctions. We should also include the 

central bank in the sanctions plan we are developing in this Committee. 

All of these actions will go a long way to strengthen global security and reverse 

Iran’s dangerous course. Yet unless we have a fool-proof enforcement regime in 

place, any new tools we deploy will be less than effective. 

Our existing sanctions are riddled with leaks in the form of trading partners who 

funnel our exports through a backdoor to Iran. 

We can help plug these leaks by increasing the amount of inspectors we have stationed in the United Arab Emirates and in other countries where black markets are 

serving to circumvent our sanctions. 

A 2007 GAO report found that enforcement is lacking, particularly for products 

that are sold to the UAE. At the time of that report, Treasury and Commerce Departments each only had one inspector stationed in the UAE. 

To increase the effectiveness of any new sanctions, we must authorize the Commerce and Treasury Departments to enhance their manpower on the ground in UAE 

and other black market areas to ensure that Iran is not skirting our sanctions. That 

is why today I am calling on the administration to deploy more inspectors to the 

UAE and other areas of vulnerability in our enforcement of sanctions. 

I hope these proposals are given serious consideration and I look forward to working with the Chairman to passing this important. 

PREPARED STATEMENT OF SENATOR SAM BROWNBACK 

A U.S. SENATOR FROM THE STATE OF KANSAS

OCTOBER 6, 2009 

Thank you, Senator Dodd, and Senator Shelby. I am grateful for the opportunity 

to testify today before this distinguished Committee regarding the grave threats we 

face from the regime in Tehran, and how Congress can, and must, confront these 

threats. 

This Committee plays a critical role in shaping our nation’s Iran policy, and I 

thank the Chairman and Ranking Member for holding this hearing and for being 

willing to move forward with legislation that would impose meaningful sanctions on 

the Iranian regime. 

Iran is the leading state sponsor of terrorism worldwide, the foremost exporter of 

extremist ideology, and the primary source of instability in the Middle East. The 

regime’s leaders have brutally oppressed their own citizens, and have threatened to 

commit genocide against the State of Israel, the region’s only full-fledged liberal democracy. The regime’s radicalism and brutality not only harms our interests and 

threatens our national security, but also challenges our moral obligations. 

It simply would be unconscionable to allow the mullahs to acquire nuclear weapons. Were they to achieve this goal, they would possess a trump card to ensure the 

continuation, and augmentation, of all of these dangerous and destabilizing actions. 

We must do everything in our legislative power to prevent this from occurring. 

This means crafting robust and effective sanctions that pull the plug on the regime’s ability to pursue nuclear enrichment, support international terrorism, and 
50 

oppress the Iranian people. Our goal must be to make it so that pursuing these hostile actions would be existentially threatening to the regime itself. 

To that end, divestment can play a key role in any sanctions proposal that this 

Committee will consider. Divestment is part of a broad political and economic strategy to force the Iranian regime to reevaluate its dangerous and oppressive policies. 

But the benefits of divestment extend beyond its effect on the targeted regime. 

Divestment also is a wise financial decision. As a major study last year indicated, 

companies with links to regimes that violate human rights make poor investments. 

Not only that, but divestment serves as a way of fulfilling our minimum moral obligation toward the victims of oppression from brutal regimes, like that in Tehran. 

Divestment is not the sharpest diplomatic tool, but nor is it ineffective. Indeed, 

as we know from the successful movement against apartheid in South Africa, divestment can play a key role in a government’s decisionmaking, especially if that government depends on large amounts of foreign investment for economic stability. 

Less than 2 years ago, this Committee passed Sudan divestment legislation that 

was ultimately signed into law by President Bush. In that divestment model, the 

Federal Government authorized states and local governments to divest their pension 

funds from companies that were effectively subsidizing the genocide in Darfur. 

Following that lead, several states have already passed divestment laws targeting 

Iran. But in doing so without explicit Federal authority, these legislatures have 

opened up their divestment laws to potential constitutional challenges under the 

doctrine of Federal preemption on matters of foreign affairs. Moreover, the fund 

managers that seek to carry out divestment could be subject to legal action, reducing the incentive and efficacy of the measure. 

It is for these reasons that earlier this year Senator Casey and I introduced the 

Iran Sanctions Enabling Act, S. 1065, which authorizes states and local governments to divest from companies that invest in Iran’s energy sector, and provides 

safe harbor for fund managers that divest according to the bill’s guidelines. At this 

time, S. 1065 has 32 bipartisan cosponsors, and a companion bill has already passed 

through committee in the House. And lest any of my colleagues worry about where 

our President stands on this, you can rest easy. In the last Congress, then-Senator 

Obama and I introduced almost this very same bill. At that time, Senator Obama 

said this: 

The Iranian government uses the billions of dollars it earns from its oil and 

gas industry to build its nuclear program and to fund terrorist groups that 

export its militaristic and radical ideology to Iraq and throughout the Middle East. Pressuring companies to cut their financial ties with Iran is critical to ensuring that sanctions have their intended result. All Americans 

can play a role in pressuring companies to cut their ties with the Iranian 

regime, a state sponsor of terror that is a threat to our allies in the region 

and international security, as a means of convincing Iran to fundamentally 

change its policies. 

—Senator Barack Obama, May 15, 2007 

I could not have said it better than the President. In that spirit, and in the context of the Chairman and Ranking Member’s intention to markup comprehensive 

Iran sanctions legislation, I urge this Committee to include the Brownback-Casey 

divestment bill in the final package. 

One final word on sanctions: enforcing sanctions is as important as legislating 

them. American products often end up in Iran in spite of our sanctions, often because we are not able to deter third parties from re-exporting U.S. origin items to 

Iranian companies. 

I hope that we can provide a small increase to the budget for export enforcement 

during this week’s floor consideration of the FY10 Commerce Justice Science appropriations bill. And, I look forward to working with the administration and my Senate colleagues to ensure that we have the means to enforce both existing sanctions 

and any additional sanctions that may emerge from this panel and ultimately be 

signed into law. 

I wish to make one other point today about our duty and ability to confront the 

threats from Iran, and that is that we must not view sanctions as the only tool at 

our disposal. We cannot ignore the power of promoting liberty and confronting the 

violation of human rights, wherever it occurs. 

When it comes to foreign policy in general, I believe that human rights should 

be the first of our concerns and the last of our concessions, not the other way 

around. My belief stems from a recognition of the inextricable link between a regime’s domestic repression and its aggression abroad. 

We must make human rights the cornerstone of our Iran policy. For too many 

years, the suffering of the Iranian people—the executions, the arbitrary 
51 

imprisonments, the religious repression, and the suffocating censorship—has taken 

a backseat to everything else. The Iranian people are our natural ally, and we have 

let them get crushed under the weight of the mullahs’ theocracy. 

Instead of perpetuating this shortsighted policy, we should broaden our scope and 

raise the profile of Iranian human rights in every statement, every diplomatic meeting, and at every international forum, both public and private. 

The message should be simple and clear: We cannot continue to look the other 

way as the Iranian people are starved of their basic human rights and freedoms. 

This approach makes good policy sense. Leaders of oppressive regimes disdain 

criticism because it pushes back against the fiction of success they peddle to the 

masses. As the fiction crumbles, their grip on power dissolves. Like in the Polish 

Solidarity movement, the defiance of the people eventually cracked the defiance of 

the government. 

In previous sessions of Congress, I have introduced legislation requiring the President to appoint a special envoy for human rights in Iran, and I would hope that 

the members of this distinguished Committee would join me in introducing a similar 

measure in the near future. 

We must also focus our efforts on promoting the freedom of information, specifically Internet freedom. 

In the past few months, one of the key battles inside Iran has taken place on the 

Internet—on blogs, on Facebook, and on Twitter—as Iranians struggle to tell their 

story while the regime fights back with the instruments of censorship. 

One thing is clear: while physical brutality will always be the tool of oppressors, 

twenty-first century authoritarianism has already been defined by the lengths to 

which autocrats will go to limit online access to information. 

The Iranian dictatorship, like the Chinese Communist Party, the Burmese junta, 

and the Castro regime, derives a large share of its power through media suppression 

and rigorous Internet censorship. 

These dictators not only shield their populations from their own brutality, but 

also block information about the basic freedoms enjoyed by millions worldwide. 

As individual information exchanges become effortless through wireless communication, authoritarian regimes must devote ever more resources to maintain their 

electronic wall. 

We must ensure that Iranians, and all closed society residents for that matter, 

have free and open access to the Internet. This is the surest, and most costeffective, 

way to jumpstart liberty. To that end, I would urge the members of this panel to 

support funding in the State and Foreign Operations Appropriations bill that would 

go toward technology that allows residents of closed societies to break through the 

stifling firewalls and access open information. 

We must also ensure that Radio Farda remains a key source of information for 

the Iranian people by supporting additional reporters and transmission capacity, 

and providing Farda with the technical means to overcome the regime’s jamming 

efforts. The surrogate broadcasts provided through Radio Farda worked very well 

even when the regime tried to block the free flow of information during the street 

demonstrations earlier this year. 

Indeed, the more Iranians understand the nature of their regime, the more effective will be the sanctions this Committee prepares, and the more power Iranians 

will have to determine their own future. 

And this, in turn, will transform Iran from one of the lead sources of global instability to a prosperous nation once more, in the great Persian tradition of innovation, 

justice and magnanimity. 

I thank you again for giving me the opportunity to testify at this important hearing. 

PREPARED STATEMENT OF SENATOR ROBERT P. CASEY JR. 

A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA

OCTOBER 6, 2009 

Chairman Dodd, Senator Shelby, thank you for inviting me to speak on U.S. policy options toward Iran. This is a timely and important hearing and I appreciate 

your efforts to explore the options before us. 

As we all now know, Iran has agreed to inspections of its uranium enrichment 

facility in Fordu starting October 25th. The Iranians have agreed to talks on October 19th regarding the shipment of uranium abroad for enrichment and use for 

medical research purposes. The international community has responded with guarded optimism. I support the Administration’s continued call for a freeze in Iran’s nu-
52 

clear enrichment and encourage my colleagues to back up these diplomatic efforts 

with sanctions. 

While the prospects for progress grew with last Thursday’s meeting in Geneva, 

we should not be under any illusions about this regime. Let me be clear. This is 

a regime which refused to recognize the will of the Iranian people in last June’s 

election. This is a regime that repeatedly disregarded U.N. resolutions on its nuclear program. And this is a regime that previously agreed to send uranium abroad 

for enrichment only to later renege on the deal. This regime continues to threaten 

our ally Israel. And finally, Mr. Chairman, this regime continues to directly threaten the national security interests of the United States. 

Iran has repeatedly claimed that its nuclear program is only for peaceful purposes, but the facts, especially in recent weeks, simply don’t add up. The U.N. says 

Iran violated international law by not notifying the IAEA when construction on the 

Fordu site started more than 3 years ago. Why are international inspectors invited 

only after the regime is caught misleading the world again? 

So what are our concurrent/parallel tracks moving forward? I believe that we have 

three. 

First, the negotiations conducted by the Administration are important and should 

continue. At a minimum, this international effort will help to restore America’s long 

held reputation of an honest broker, of a country that values diplomacy, and of a 

country that values relationships with allies and welcomes new ones. Internationally, the United States is on better footing than it has been in years. Ties with traditional allies in Europe have been strengthened. Those on the fence, like Russia 

and China, are showing signs of cooperation on issues that are critical to our national interests. 

It is clearly in Russia’s security interests to prevent Iran from acquiring a nuclear 

weapon capability, but that has not stopped Russian leadership in the past from engaging in commercial and military trade with the regime. As we work to build confidence with the Russian government, however, I believe that cooperation on issues 

like Iran can continue to improve. President Medvedev’s comments at the University 

of Pittsburgh during the G20 meeting indicated a willingness to consider sanctions 

and were an encouraging first step. 

While China relies on Iran for a substantial fuel imports, I trust that they are 

carefully weighing their need for energy against Iran’s increasingly erratic and irresponsible behavior. The political and actual cost of doing business with Iran has 

risen considerably and may now be too high a price to pay. I hope that the Chinese 

will support international efforts to pressure this regime at this critical time with 

the understanding that these efforts could ultimately result in a more stable business and diplomatic partner in Tehran. 

In short, the Administration’s diplomatic efforts have put us into a position where 

we have a strong coalition throughout these important negotiations. 

The onus will now be on the Administration to maintain and strengthen this coalition as we move forward. In the past, Iran has sought to drag out negotiations 

with the goal of weakening the resolve of the international community. The dynamics have changed somewhat as our French, German and British allies have been increasingly vigilant in their efforts to expose threats from Iran. The question now 

comes down to the Russians and Chinese, whom we hope will play an enhanced role 

in pressuring the regime in Iran. 

Second, I believe that the Senate should do its part in providing the Administration all the tools it needs to put pressure on the Iranian regime. Iran’s leaders need 

to know that if they decide to renege on their commitments, as has been done in 

the past, the United States is prepared to impose a series of tough sanctions, including measures that would allow state pension funds to divest from Iran and restrict 

petroleum imports. 

The Iran Sanctions Enabling Act, which Senator Brownback and I introduced last 

May would allow state and local government pension funds to divest from companies 

that do more than $20 million in business with the Iranian energy sector. The measure is modeled on similar legislation passed in response to the genocide in Sudan. 

Eighteen state legislatures have passed individual Iran sanction measures and our 

legislation would bring these state efforts into line with Federal law. When President Obama was in the Senate, he introduced an earlier version of this legislation. 

It was right in 2007, and it is right now. 

Analysts have estimated that Iran requires $20 billion annually in investments 

for its oil and natural gas sector. That sector directly provides funding for Iran’s nuclear program as well as its support for international terrorism. Iran will only cease 

its illicit nuclear program, end its support for Hamas and Hezbollah and stop arming militant groups in Iraq when it is compelled to pay an economic price. 
53 

Third and finally, I believe that we need to be prepared to support democratic 

voices and human rights activists in Iran. This is not about regime change, but a 

genuine commitment to democratic values. In his speech before the U.N. General 

Assembly, President Obama said that: 

There are basic principles that are universal; there are certain truths that 

are self-evident—and the United States will never waver in our efforts to 

stand up for the right of people everywhere to determine their own destiny. 

Our long held commitment to human rights should not fall off the table during 

these important deliberations on Iran’s nuclear program. In fact, these should be 

fully addressed and our diplomats should raise specific concerns with regard to the 

human rights situation in the country. Ultimately, the political fate of Iran is up 

to its people to decide and we should take the lead from them. We should remain 

open to their calls for assistance. 

In closing Mr. Chairman, if history is any indication, Congress should be prepared 

to hand the President the leverage he needs to send a message to the Iranian regime 

that America cannot and will not accept an Iran with nuclear weapons. The Administration needs all the tools at its disposal to increase pressure on the regime, diplomatically, politically and through more stringent economic sanctions. I call on my 

colleagues to listen to legislatures in so many states across the country who have 

passed divestment measures. The American people do not want anything to do with 

investing in this regime. Let’s send a strong message to this regime and the international community that a nuclear-armed Iran is unacceptable. 

PREPARED STATEMENT OF JAMES B. STEINBERG 

DEPUTY SECRETARY OF STATE, DEPARTMENT OF STATE

OCTOBER 6, 2009 

Mr. Chairman, Ranking Member Shelby, and Distinguished Members of the Committee: 

Thank you for the opportunity to appear before this Committee today. The challenge posed by Iran to U.S. interests, to our friends and allies in the greater Middle 

East, and to the wider international community is one of the Obama administration’s central foreign policy concerns. 

First, let me be clear about our objective: our goal is to prevent Iran from achieving a nuclear weapons capability and we will work with our allies and partners toward that goal as well as to counter Iranian actions that threaten to destabilize the 

greater Middle East and the rest of the world. 

To that end, the Obama Administration has embarked on a dual-track strategy 

that presents a clear choice to Iran’s leaders: they can negotiate in good faith, prove 

their willingness to address the concerns of the international community, and in 

turn improve Iran’s standing in that community, or they can face increasing international isolation and pressure. We see these two tracks as complementary rather 

than contradictory, with the understanding that engagement and pressure used in 

coordination offer the best and most likely path to our objective. We also understand 

the Congress’s interest in taking action, and look forward to consulting fully on any 

legislative effort, with the aim of maximizing our ability to pursue this two track 

strategy. 

The goals of engagement 

Upon taking office, President Obama made clear that the United States was prepared to join our P5+1 partners as a full participant in future talks with the Islamic 

Republic of Iran. This marks a significant departure from previous approaches. We 

are engaging not because we believe in talking for talking’s sake, but because the 

strategy of refusing to engage failed to achieve our vital goals. During the time 

when we refused direct engagement, Iran developed a growing mastery of the nuclear fuel cycle while flagrantly avoiding complying with its international obligations and responsibilities. The Iranian government failed to respect the rights of its 

citizens, and its support for terrorist organizations continued. 

We are realistic about the prospects from diplomacy, particularly given Iran’s repeated intransigence and deception, most recently demonstrated by the previously 

undisclosed uranium-enrichment facility at Qom. We will state our concerns unequivocally and make clear to Iran’s leaders the choice they have before them. Engagement not only opens up the prospect of better outcomes, but also strengthens 

our position in negotiations—or in forging a strong consensus with others if engagement does not produce the results we seek. 

More concretely, engagement serves three purposes: 
54 

1. By leading with diplomacy and communicating directly, Iran will know precisely what we expect and what we are prepared to do if they take the necessary acts: they cannot hide behind false or misleading accusations about our 

positions or point to the lack of engagement as an excuse for inaction on their 

part. We in turn will be better placed to judge whether Iran is willing to seriously address our concerns. 

2. As Secretary Clinton has said, engagement also opens up the possibility that 

dialogue will persuade Iran to alter its policies. Given the gravity and urgency 

of the situation, it is important that we employ all the tools available to us. 

3. Engagement also allows us to mobilize international action if Iran refuses to 

respond positively to our efforts. By demonstrating our openness to a negotiated resolution of differences, the United States is significantly bolstering the 

willingness of other nations to stand with us if additional pressure should be 

necessary. 

Early returns 

Our dual-track strategy has led to some important steps in recent months. 

In last week’s talks in Geneva, intensive multilateral and bilateral engagement 

with our partners in the P5+1 and others laid the groundwork for potential 

progress. After the talks, President Obama explained that the meeting allowed the 

international community to convey a clear and unified message to the Iranian government: ‘‘Iran must demonstrate through concrete steps that it will live up to its 

responsibilities with regard to its nuclear program.’’ He stated that the day’s meeting ‘‘was a constructive beginning, but it must be followed by constructive action by 

the Iranian government.’’ As Secretary Clinton emphasized, ‘‘We are not involved 

in a process just to say that we can check a box on process. We want to see concrete 

actions and positive results.’’ 

The test of Iran’s seriousness in the coming weeks will be the practical steps it 

takes. Iran agreed in principle in Geneva last week to an international approach 

for supplying fuel for the Tehran Research Reactor by shipping out Iran’s low enriched uranium (LEU) to other countries for further enrichment and fabrication. If 

implemented this would significantly reduce Iran’s current LEU stockpile, a major 

source of anxiety in the region and beyond and demonstrate support for an exclusively peaceful nuclear program. This step, if implemented, would be a useful interim confidence building measure, allowing more time and diplomatic space for negotiations on a resolution of the more fundamental problems of Iran’s nuclear program. Additional discussions regarding the technical details are needed and are 

scheduled to take place under IAEA leadership in Vienna on October 19. Iran also 

agreed to allow the IAEA access to the previously undisclosed enrichment facility 

near Qom on October 25, which must be the first step toward full cooperation with 

the IAEA’s investigation. 

As we have always said, Iran’s compliance with its international obligations will 

lead to more constructive relations with the international community and improved 

cooperation on security, economic, and other matters, as outlined in previous offers 

made by the P5+1. We anticipate another meeting between the P5+1 and Iranian 

officials before the end of October. This is bound to be a very difficult and uncertain 

process, and we will continue to build unity among our international partners consistent with our dual track strategy, which the P5+1 Ministers strongly reaffirmed 

in New York on September 23. We are prepared to give this process a chance, but 

we are not interested in engaging in talks for the sake of talking or an open-ended 

process. We can only sustain a process with measurable, practical results. 

A united front 

In this regard, the importance of a broad and united international coalition cannot 

be understated. With wide international support, sanctions regimes can be enforced, 

pressure can be sustained, and Iran’s leaders are less able to shift the blame from 

themselves to the United States for the pain caused by their behavior. 

Three years ago, the United States was virtually alone in imposing pressure on 

Iran. Now, a growing coalition shares our concerns about Iran’s negative policies, 

and has made clear the necessity for Iran to change course. As the United States 

has shown its commitment to engaging in serious, good-faith talks, we are also 

working together to lay the groundwork for concerted and effective international action to pressure Iran to change its policies if negotiations do not produce the necessary results. 

Multilaterally, we have pursued a progressive tightening of United Nations Security Council sanctions on Iran through the adoption of resolutions 1737, 1747, and 

1803. These resolutions have sent a powerful message to Iran that the international 

community will not allow Iran to break the rules that everyone else must live by. 
55 

We have also worked with our colleagues at Treasury and with the international 

financial community through the Financial Action Task Force. As a result of sanctions and international efforts, the cost of doing business with Iran is going up. 

Consistent with the U.N. Security Council’s call on member states, the European 

Union has also adopted measures to limit granting of export credits. As a result, 

a number of European countries have worked successfully to reduce their export 

credit exposure to Iran, making it more difficult for Iran to finance its international 

trade. 

Iran’s nuclear program 

The disturbing revelation of the previously undisclosed enrichment facility at Qom 

provides yet another example of why Iran’s credibility is so low in the international 

community. For years, in contravention of its international obligations and responsibilities, Iran has frustrated IAEA efforts to address the international community’s 

serious concerns with Iran’s nuclear program, including Iranian efforts to develop 

a nuclear warhead. Tehran has defied U.N. Security Council resolutions and continued to enrich uranium. 

While the United States, along with the international community, has acknowledged Iran’s right to pursue a peaceful nuclear program, with those rights comes 

a crucial responsibility to prove ‘‘convincingly,’’ as President Medvedev put it last 

month, the exclusively peaceful purposes of Iran’s program. 

President Obama stated this clearly last month at the United Nations: if the government of Iran chooses to 

ignore international standards; if they put the pursuit of nuclear weapons 

ahead of regional stability and the security and opportunity of their own 

people; if they are oblivious to the dangers of escalating nuclear arms races 

in. the Middle East—then they must be held accountable. The world must 

stand together to demonstrate that international law is not an empty promise, and that treaties will be enforced. 

Beyond the nuclear issue 

There are other important areas of significant concern to the United States and 

the rest of the international community. 

The United States and the broader international community remain gravely concerned about the Iranian government’s repression of its own people. The internal 

turmoil and terrible repression of peaceful protestors, opposition politicians, and 

journalists that followed the June 12 elections in Iran revealed much about the 

character of the government. Its use of unwarranted arrests, prolonged detentions, 

and violence against ordinary citizens was condemned by our government at the 

highest levels, including by the President, as well as by counterparts in the international community. As President Obama affirmed, 

The Iranian people have a universal right to assembly and free speech. If 

the Iranian government seeks the respect of the international community, 

it must respect those rights, and heed the will of its own people. It must 

govern through consent, and not coercion. 

It is still too early to tell what lasting impact the government’s focus on stamping 

out internal debate will have on Iran’s internal dynamics, or on Iran’s destabilizing 

international and regional behavior, but prospects for reform remain uncertain. 

The post-election repression is part of a broader international concern with 

Tehran’s record of human-rights abuses, which has grown significantly worse in the 

past year. As documented in our annual human rights report on Iran, the government regularly uses torture and other forms of inhumane treatment against its own 

people. The government also severely restricts basic freedoms of expression, press, 

religion, and assembly to discourage political opposition, and manipulates Iran’s 

electoral process, particularly through the mass disqualification of candidates. 

We are also deeply concerned for the fate of American citizens currently detained 

or missing in Iran. Following on the recent consular visit by the Swiss, we urge the 

Iranian government to promptly return Shane Bauer, Sarah Shourd, and Josh 

Fattal to their families. We also call on the Iranian authorities to release immediately American citizens Kian Tajbakhsh and Reza Taghavi, and we ask Iran to 

use all of its facilities to determine the whereabouts and ensure the safe return of 

Robert Levinson. 

Regional stability 

Tehran’s aggressive foreign policy also constitutes a threat to both regional stability and broader U.S. interests. Iran’s claim to have its voice respected in the region depends on Iran’s willingness to play a positive and constructive role. Today, 
56 

Iran is the leading state sponsor of terrorism, providing financial and other support 

to Hizballah, Hamas, Palestinian Islamic Jihad, certain Iraqi militant groups, and 

the Taliban. The role of the Islamic Revolutionary Guard Corps-Qods Force in supporting foreign militants continues to pose a threat to regional stability. 

As the international community is engaged in efforts to promote dialogue between 

Israel and the Palestinian Authority, Iran is supporting those who deny Israel’s 

right to exist, refuse to renounce violence, and work to sabotage efforts to re-launch 

negotiations that would establish an independent Palestinian state. President 

Ahmadinejad’s inflammatory statements against Israel tarnish Iran’s international 

standing and undermine the interests and aspirations of the Palestinian people. 

Many governments in the region have grave and legitimate fears about Iran’s 

policies and aggressive posture. These concerns contribute to our sense of urgency 

in making clear to Iran the need to resolve tensions and reassure Iran’s neighbors 

and the wider international community. 

In recent years, Iran has contributed to instability in Iraq, Afghanistan, Lebanon, 

and the Palestinian territories. The Obama administration’s strategy in the greater 

Middle East has begun to significantly reduce Iran’s ability to exploit conflict for its 

own gain. 

Our broad engagement with regional partners has strengthened our position relative to Iran. The President’s June 4 speech in Cairo conveyed a clear message to 

Muslim communities in the Middle East and around the world: the United States 

is committed to a ‘‘new beginning’’ to our relations, based on the principles of mutual respect and mutual interest. We are also working actively and intensively to 

bring a comprehensive resolution to the conflict between Israel and its Arab neighbors. 

Regional governments threatened by Iran’s activities are working more energetically to counter and diminish Iran’s negative influence. As the Iraqi government 

continues to establish more capable and effective institutions, Iran’s destabilizing 

activities have encountered new obstacles. Iraq and Iran share deep historic ties, 

but as the Iraqi government’s capacity and confidence grows, it has chosen to assert 

its own sovereignty and speak out against Iranian influence. Iraq’s increasing reintegration into the region and the greater international community reduces Iran’s 

ability to manipulate and exacerbate differences among its neighbors. 

We are working with the Gulf nations to increase cooperation to address security 

issues of mutual concern. These states support the responsible and transparent development of civilian nuclear energy but have publicly declared their opposition to 

the pursuit of nuclear weapons and emphasized their grave concerns about Iran’s 

nuclear intentions. They also protest Iran’s meddling in the affairs of others. Some 

regional governments have signed arrangements with the United States on nuclearenergy cooperation that provide strong guarantees of peaceful intention by relying 

on the international market for nuclear fuel services without the development of an 

indigenous fuel cycle. The UAE–U.S. nuclear cooperation agreement, signed by both 

governments and currently in the congressional review process, contains a commitment on the part of the UAE not to pursue domestic enrichment or reprocessing activities. These efforts by other countries disprove Iran’s assertions that the West 

seeks to block the pursuit of nuclear energy for peaceful purposes. 

We have been working with our regional partners to help them develop the kind 

of cooperation that will enable them to better manage the political, diplomatic, and 

security challenges Iran poses. Examples include the GCC+3 forum to address Iran; 

inter-Arab cooperation to help address the political crisis in Lebanon; security and 

military talks with the Gulf states; and the increasing efforts on the part of Arab 

governments in working with and supporting the Government of Iraq. We are also 

supporting Lebanon’s legitimate state institutions, in part so that the Lebanese do 

not turn to Hizballah for the provision of services or for security. 

We continue to support military, law enforcement, and regulatory mechanisms 

and promote robust anti-terrorism cooperation with our Gulf partners to stem extremism and deny safe haven for terrorists throughout the broader region. With our 

important allies Egypt and Jordan, the only two Arab countries that currently have 

peace treaties with Israel, we are working on a broad range of shared initiatives, 

including promoting a comprehensive Middle East peace, countering terrorism, and 

promoting good governance, human rights, and economic prosperity. All these efforts 

work to constrain Iran’s destabilizing policies in the region and build support for 

the United States in confronting and attempting to change those policies. 

Conclusion 

With our international partners, the United States will continue with our dualtrack strategy with Iran. We are sincere in our desire to see Iran live up to its international obligations and responsibilities and play a positive and constructive role in 
57 

the international community. We and the international community very much hope 

that Iran will make the needed choices for itself, the region, and the world at large. 

Yet we will remain vigilant and judge whether Iran is willing to negotiate in good 

faith. If it is not, we will be prepared to move ahead swiftly and effectively with 

additional pressure and sanctions—with the confidence that our engagement will 

make such measures broad-based and effective. We appreciate Congress’ interest in 

making sure that we have the tools we need to meet the challenge posed by Iran’s 

nuclear program. 

We believe that we have the authorities necessary to take strong action—alone 

and together with our international partners, should that prove necessary. We look 

forward to consulting with Congress on how best to use these as events develop. 

Thank you. I look forward to answering any questions you have. 

PREPARED STATEMENT OF STUART LEVEY 

UNDER SECRETARY, OFFICE OF TERRORISM AND FINANCIAL INTELLIGENCE

U.S. DEPARTMENT OF THE TREASURY

OCTOBER 6, 2009 

Chairman Dodd, Ranking Member Shelby and other distinguished members of the 

Committee, thank you for this opportunity to update you on our efforts involving 

Iran. I welcome the Committee’s ongoing focus on this important issue, and, more 

broadly, your continued support for our efforts to protect the integrity of the international financial system. 

Less than a week ago, the five permanent members of the U.N. Security Council 

and Germany—the P5+1—met with Iran in Geneva. As the President said, that 

meeting was a constructive beginning to our dialogue, but much work remains to 

be done. He was clear that, 

[i]f Iran does not take steps in the near future to live up to its obligations, 

then the United States will not continue to negotiate indefinitely, and we 

are prepared to move toward increased pressure. 

Deputy Secretary of State James Steinberg has outlined to the Committee our overall two-track strategy toward Iran, focused on both engagement and clear consequences if Iran declines to take concrete steps. 

Even as the Administration focuses on diplomacy, we have also been working with 

our colleagues across the U.S. Government to develop a strategy for imposing substantial costs on the government of Iran if the President determines that is what 

is needed to affect Iranian policies. 

The plan we are developing is comprehensive. It takes into account that no single 

sanction is a ‘‘silver bullet’’—we will need to impose measures simultaneously in 

many different forms in order to be effective. It also takes into account Iran’s potential vulnerabilities and those activities that have the greatest influence on Iran’s decisionmakers. As we consider various measures, we are particularly mindful of potential unintended consequences on the people of Iran, and the internal dynamic 

now playing out in that country. 

Because financial measures are most effective when imposed as part of a broadbased effort with the support of the largest possible international coalition, we are 

working closely with our allies as we put together this strategy. We believe that by 

consulting with them closely and pursuing engagement genuinely we have a better 

chance to generate the coalition we will need if dialogue does not lead to demonstrated progress. 

We should be realistic about the ability of sanctions to achieve our political and 

security objectives with Iran. If, however, we accurately target the key 

vulnerabilities and fissures in Iran and then implement our plan with a broad coalition of governments and key private sector actors, we can at least demonstrate to 

the Iranian government that there are serious costs to any continued refusal to cooperate with the international community. Although we cannot describe the particulars of our planning in an open hearing, I would like to explain some of our thinking. 

Financial Measures 

Beginning in 2006, we developed and implemented a strategy to target Iran’s illicit conduct. We took formal action against many of the specific banks, government 

entities, companies, and people involved in Iran’s support for terrorism and its proliferation activities. We did so using two powerful Executive Orders, E.O. 13382 and 

E.O. 13224, that allow us to designate proliferators of weapons of mass destruction, 
58 

terrorists, and their supporters, freezing any assets they have under U.S. jurisdiction and preventing U.S. persons, wherever located, from doing business with them. 

We have designated more than 100 entities and individuals supporting Iran’s nuclear and missile enterprises, including the key organizations within Iran, scores of 

their front companies, Iran’s major banks that finance their conduct, and Iran’s 

major shipping line, the Islamic Republic of Iran Shipping Lines, that handles illicit 

shipments for these dangerous enterprises. We have also acted against the Islamic 

Revolutionary Guard Corps, or the IRGC, and several of its companies for proliferation, as well as the IRGC’s Qods Force for its role in supporting terrorist organizations. 

As a result of the State Department’s intensive diplomatic efforts, the U.N. Security Council resolutions on Iran contain many of the same designations we have implemented here in the United States. The European Union and Australia have gone 

beyond implementing the Security Council’s list, joining us in other designations, 

such as that of Iran’s Bank Melli. These actions are particularly powerful in that 

they give us an opportunity to explain publicly our reasons for acting, thereby exposing the illicit conduct of those we have designated. 

Importantly, we combined these government actions with unprecedented, highlevel outreach to scores of banks, banking associations, and other private sector 

leaders around the world. We discussed the risks of doing business with Iran and 

shared information about Iran’s illicit and deceptive practices. As a result, the international private sector has amplified the impact of government actions, as banks 

and companies around the world have come to understand that, if they are dealing 

with Iran, it is nearly impossible to protect themselves against becoming entangled 

in that country’s illicit conduct. 

We have seen firsthand that the financial measures applied by the United States 

and the international community on Iran since 2006 have had an impact. At this 

point, most of the world’s major banks have cutoff or significantly scaled back their 

business with Iran because of the reputational risks involved. Iran is increasingly 

dependent on an ever-shrinking number of trade and finance facilitators. Many foreign companies have pulled back from business deals with Iran, including investment in Iran’s energy sector. Iranian businessmen face greater inefficiencies, higher 

operating costs, and increased difficulty finding business partners and banks to provide them with financing. 

Iran’s foreign borrowing has sharply declined since 2006, a significant change 

from 2002 to 2005, when foreign credit growth to Iran outpaced that of the wider 

Middle East. External credit to Iran fell 18 percent between September 2006 and 

September 2008, in stark contrast to the 86 percent rise in external credit to the 

Middle East region during the same period. And, to the extent that Iranian firms 

have been able to replace lost credit with domestic credit, they are likely doing so 

at a much higher cost. 

Iran’s Economic Vulnerabilities 

The Iranian government’s mismanagement of the Iranian economy, its increasingly corrupt business practices, its ongoing threatening and deceptive conduct, and 

its handling of the recent elections have fostered dissatisfaction, divisions, and discord within Iran and have made Iran an even less attractive business partner. 

Some experts estimate Iran’s unemployment rate to be well over 20 percent, with 

a lack of jobs disproportionately affecting the young—three out of four unemployed 

Iranians are under 30. Inflation remains high at about 13 percent. The banking sector is unhealthy and reliant on government support. Iran is ranked 137th out of 183 

countries on the World Bank’s Doing Business report, in terms of ease of doing business, and 165th in terms of protecting investors. And, as a result of the Iranian government’s economic mismanagement and its self-isolating conduct, foreign investment in Iran has declined. All of this results in decreased opportunities for the people of Iran. 

The Iranian government’s reliance on corruption and nepotism in business further 

limits opportunities for all Iranians. The Transparency International Corruption 

Perceptions Index of 2008 ranked Iran 141st out of the 180 countries. The Iranian 

government has increasingly awarded no-bid government contracts to companies associated with the IRGC—a group that counts Iranian President Ahmadinejad and 

many senior government officials as former members. These companies, some of 

which have been designated by the United States and the U.N. Security Council for 

their role in Iran’s illicit missile program, operate under names that obscure their 

IRGC affiliation, so many unwitting non-Iranians are in fact doing business with 

the IRGC. 

In the name of ‘‘privatization,’’ the IRGC has taken over broad swaths of the Iranian economy. Former IRGC members in Iranian ministries have directed millions 
59 

of dollars in government contracts to the IRGC for myriad projects, including developing the South Pars gas field, managing the Imam Khomeini International Airport 

in Tehran, and expanding Tehran’s metro system. Furthermore, the IRGC seeks to 

monopolize black-market trade of popular items, funneling the proceeds from these 

transactions through a patronage system and using them to help subsidize the government’s support for terrorist groups. 

There is broad acknowledgment that the Iranian government engages in a range 

of deceptive financial and commercial conduct in order to obscure its development 

of nuclear and missile programs and facilitate its support for terrorism. International understanding of these practices—underscored by the U.N. Security Council resolutions on Iran and six warnings issued by the Financial Action Task Force 

about the risks Iran poses to the financial system—has been brought about in part 

by our efforts to share information about Iran’s deception with governments and the 

private sector around the world. 

These deceptive practices taint all Iranian business because they make it difficult 

to determine whether any Iranian transaction is licit. Iranian banks request that 

their names be removed from transactions so that their involvement cannot be detected; the government uses front companies and intermediaries to engage in ostensibly innocent commercial business to obtain prohibited dual-use goods; and Iran’s 

shipping line, the Islamic Republic of Iran Shipping Lines, or IRISL, repeatedly manipulates bills of lading to shield prohibited cargo from scrutiny. 

To a greater extent than ever, private companies across industries are now alert 

to these kinds of risks. Banks worldwide have been repeatedly warned by regulatory 

and standard-setting bodies to regard Iranian transactions with caution. Traders 

and shippers know that transactions with innocent-sounding Iranian counterparts 

can expose them to risk—both reputational and legal. Energy companies have put 

Iranian investments on indefinite hold, cautious of the political risk of investing too 

heavily in Iran. And exporters of sensitive and dual-use technologies know that supplying Iran can lead to severe sanctions and even prosecution. Across the board, 

then, transactions with Iran are already handled differently than transactions with 

any other country—except perhaps for North Korea—engendering either heightened 

suspicion or outright refusal to engage in them. 

Finally, the vulnerabilities in Iran could be compounded by the internal fractures 

resulting from Iran’s elections of 2009. As Secretary of Defense Gates recently stated: 

It’s clear in the aftermath of the election that there are some fairly deep 

fissures in Iranian society and politics and—and probably even in the leadership . . . [T]his is one of the reasons why I think additional and especially severe economic sanctions could have some real impact . . . [W]e 

know that the sanctions that have already been placed on the country have 

had an impact. 

United Coalition Necessary To Exploit Iran’s Economic Vulnerabilities 

This Administration has demonstrated that it is committed to a diplomatic resolution of the international community’s issues with Iran. The world is now united in 

looking to Iran for a response. If Iran does not live up to its obligations in this process, it alone will bear the responsibility for that outcome. 

Under these circumstances, the United States would be obliged to turn to 

strengthened sanctions. We are intensifying work with our allies and other partners 

to ensure that, if we must go down this path, we will do so with as much international support as possible. For the less united we are in applying pressure, the 

greater the risk our measures will not have the impact we seek. This challenge will 

be difficult, but not impossible. Over the past 3 years, the U.N. Security Council 

has adopted three unanimous Chapter VII resolutions against Iran. Those resolutions now represent the baseline. If Iran chooses to defy the international community yet again, and not live up to its obligations, these resolutions as well as other 

steps taken to date have laid the groundwork for a concerted and meaningful international response. 

Conclusion 

The Administration remains committed to the dual-track strategy and views last 

week’s developments as a step forward. We will now wait to see whether Iran follows its constructive words with concrete action. If it does not, and if the President 

determines that additional measures are necessary, we will be ready to take action, 

ideally with our international partners. 

I would be happy to answer your questions. 
60 

PREPARED STATEMENT OF DANIEL O. HILL 

ACTING UNDER SECRETARY OF COMMERCE FOR INDUSTRY AND SECURITY

DEPARTMENT OF COMMERCE

OCTOBER 6, 2009 

Mr. Chairman, Senator Shelby, Members of the Committee: 

I welcome the opportunity to appear before the Committee today to discuss the 

Department of Commerce’s role in administering and enforcing U.S. dual-use export 

control policies toward Iran. We work closely with our colleagues at the Departments of State and the Treasury, as well as other agencies, to implement the longstanding U.S. embargo on Iran effectively. The United States has had a trade embargo on Iran since May 1995. The United States took these steps because of Iran’s 

continued active support for terrorism and concerns that it is pursuing weapons of 

mass destruction. 

All exports to Iran are subject to both the Export Administration Regulations 

(EAR) and the Department of the Treasury’s Iranian Transactions Regulations. 

Treasury is the lead agency for administering the embargo, which features not only 

a prohibition on exports and reexports of items under the Commerce Department’s 

jurisdiction, but also comprehensive restrictions on financial transactions and investments under the jurisdiction of the Treasury Department. 

Commerce, however, is responsible for several aspects of the embargo of Iran. 

First, Commerce provides technical assistance to Treasury on the proper classification of items proposed for export or reexport to Iran under a Treasury license. The 

Iran Iraq Arms Non-Proliferation Act of 1992 (Note to 50 U.S.C. 1701) generally requires BIS to deny licenses, absent a Presidential waiver, for the export or reexport 

of items on the Commerce Control List (CCL) to Iran. In considering an application 

to export an item to Iran, Treasury must know whether the item is on the CCL and 

thus prohibited for export to Iran without a waiver. Commerce determines whether 

the item is on the CCL and informs Treasury. 

Second, Commerce plays a vital role in enforcing the embargo by investigating 

transactions that may constitute exports or reexports to Iran in violation of the 

EAR. An export or reexport of an item subject to the EAR without Treasury authorization will generally constitute a violation of the EAR. The Bureau of Industry and 

Security (BIS) has approximately 100 Federal law enforcement agents in ten field 

offices throughout the United States. The field offices are located in Boston, New 

York, Washington, Miami, Chicago, Dallas, Los Angeles, San Jose, Houston; and the 

Washington, DC area. Additional BIS agents are based in main Commerce here in 

Washington. These agents are on the frontlines of the effort to prevent illicit transfers of items which would do us harm if they fell into the wrong hands. 

In addition, Commerce has export control officers (ECO) in five foreign locations— 

Abu Dhabi, United Arab Emirates; Beijing and Hong Kong; New Delhi; and Moscow. 

In Fiscal Year (FY) 2010, BIS has authorization to post an ECO in Singapore and 

a second ECO in Beijing. These ECOs are Bureau of Industry and Security enforcement agents temporarily assigned to the U.S. & Foreign Commercial Service. The 

ECOs conduct pre-license checks and post-shipment verification visits to verify that 

items will be, or are being, lawfully used and have not been diverted to prohibited 

users or uses within the country or illegally transshipped to another country such 

as Iran. 

The Commerce Department closely coordinates with the Department of State and 

other agencies to work with other countries, including states that may be involved 

in transshipments to Iran, to establish and strengthen those states’ export and 

transshipment control systems. This enables those countries to cooperate with us on 

specific transactions as well as take actions against parties in their own territory 

who are illegally exporting items to countries such as Iran. 

Commerce also can bring to bear unique tools to enforce U.S. export controls on 

Iran. These tools include Temporary Denial Orders (TDO) and the Entity List. A 

TDO is a legal order that can be issued quickly, for 180 days at a time, to prevent 

imminent violations of the EAR. For example, in 2008, we issued a TDO denying 

the export privileges of Balli Group PLC and related companies and individuals 

(‘‘Balli Group’’), Blue Airways, and Mahan Airways for 180 days. Evidence obtained 

by our agents showed that the parties knowingly reexported three U.S.-origin aircraft to Iran in violation of the EAR and were preparing to reexport three additional 

U.S.-origin aircraft to Iran in further violation of the EAR. The TDO effectively precluded United States or foreign parties from engaging in any activity related to the 

aircraft. Ultimately, the TDO prevented the illegal reexport of three commercial aircraft to Iran. 
61 

The Entity List is a regulatory tool that can be used to prohibit the export, or 

reexport, of any item subject to the EAR, including items not on the CCL, to any 

listed entity. In 2008, the Bureau of Industry and Security added 75 foreign parties 

to the Entity List because of their involvement in a global procurement network 

that sought to illegally acquire U.S.-origin electronic components and devices capable of being used to construct Improvised Explosive Devices (IEDs). These commodities had been used in IEDs or other explosive devices against Coalition Forces in 

Iraq and Afghanistan. This network acquired U.S. origin commodities and illegally 

exported them to Iran. As a consequence of the addition of these entities to the Entity List, no United States or foreign party may export or reexport items subject to 

the EAR to them without a license. Exporting or reexporting an item to any of these 

entities without the required license would constitute a violation of the EAR. 

In addition, Commerce has led investigations of a number of significant cases involving Iran which have in turn led to successful enforcement actions. Commerce 

currently has 235 open investigations involving Iran which constitute about 29 percent of all open investigations of potential violations of the EAR. I have attached 

a summary of prosecutions concluded in 2008 for illegal exports to Iran. 

The Commerce Department’s authority to enforce our dual-use export controls is 

based on the Export Administration Act of 1979 (EAA). This statute, however, has 

been in lapse since 2001. While the EAA is in lapse, the U.S. dual-use export control 

system has been maintained under the authority of the International Emergency 

Economic Powers Act (IEEPA). Most recently, the president renewed Commerce authority under IEEPA in August 2009. 

Cooperation with our sister law enforcement agencies has been paramount to the 

success of our efforts to prevent unauthorized exports to Iran and obtain sanctions 

against those making such exports. We work in concert with the Federal Bureau 

of Investigation, U.S. Immigration and Customs Enforcement, and several other 

agencies, including by participating in several FBI-led Joint Terrorism Task Forces, 

which focus on export control violations, including those involving Iran’s support of 

international terrorism and violations of the Iran sanctions. 

Finally, the Commerce Department maintains a robust outreach program to educate the private sector on the embargo on Iran. We have detailed guidance on our 

website for exporters to follow. We also focus on key companies such as freight forwarders, integrators, air cargo carriers, and shipping lines with regard to the embargo of Iran. Our efforts are targeted toward educating exporters on vigilance in 

partnering with firms based in major transshipment hubs, not only in the Persian 

Gulf region but also in Southeast Asia, which might result in illegal transshipments 

of U.S.-origin goods to Iran. 

In conclusion, the Department of Commerce plays a key role in the administration 

and enforcement of the embargo on Iran. At this time I would be happy to answer 

any questions you may have. 

Summaries of Recent Commerce Enforcement Cases involving Exports or 

Reexports to Iran 

• On January 30, 2009, James Gribbin, former sales manager for Oyster Bay 

Pump Works, was sentenced to 3 years of probation and a $100 special assessment in connection with an attempted export of laboratory equipment, valued 

at approximately $300,000, to Iran via the United Arab Emirates. On May 1, 

2008, Patrick Gaillard, President of Oyster Bay Pump Works, was sentenced to 

30 days in prison, a $25,000 criminal fine, 3 years of probation, and a $300 special assessment for his part in the attempted export. 

• On June 11, 2009, Traian Bujduveanu, the owner and operator of Orion Aviation, was sentenced to 35 months in prison followed by 3 years of supervised 

release for his role in the illegal export of civilian and military aircraft parts 

to Iran Defense Industries Organizations. 

• On December 10, 2008, Nicholas Groos was sentenced to 60 days in prison, 1 

year supervised release, a $249,000 criminal fine, and a $400 special assessment for his part in a scheme to transship U.S.-origin fire fighting equipment 

to Iran using his position as Director of the Viking Corporation subsidiary located in Luxembourg. 

• On August 28, 2008, Desmond Frank was sentenced to 23 months in prison, a 

$500 criminal fine, and a $600 special assessment for his part in the export of 

defense articles to Iran and China. 

• On August 7, 2008, James Angehr and John Fowler, owners of Engineering Dynamics Inc., were sentenced to 5 years of probation for their part in an attempt 

to export software to Iran via Brazil. Angehr was additionally sentenced to 6 

months of confinement in a halfway house, and Fowler was sentenced to 4 
62 

months of confinement in a halfway house. Each defendant was fined $250,000, 

and ordered to forfeit $218,583. On May 22, 2008, Nelson Galgoul was sentenced to 13 months in prison, 3 years of supervised release, a $100,000 criminal fine, and a $109,291 forfeiture for his part in the conspiracy. 

• On February 8, 2008, Mojtada Maleki-Gomi was sentenced to 18 months in 

prison and a $200,000 criminal fine for exporting textile goods to Iran without 

the required export licenses, and Babek Maleki was sentenced to 12 months 

probation for making false statements related to the same export. 
63 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM JAMES B. STEINBERG 

Q.1. Are you confident that Iran is not buying time for continued 

enrichment of weapons-grade nuclear material by merely pretending to engage in serious negotiations on this issue? If so, why 

are you confident of this? 

A.1. President Obama came into office willing to test whether dialogue would yield more positive results with Iran, with full awareness that dialogue might not achieve the results we seek. This is 

exactly why we are employing a range of tools for dealing with Iran 

including implementing existing UNSCR and U.S. sanctions, together at the same time we seek to achieve our goals through the 

engagement approach. 

The results of engaging in this dialogue are clear: the P5-plusl is united, and we have an international community that has reaffirmed its commitment to non-proliferation and disarmament. 

The Iranian government heard a clear and unified message from 

the international community in Geneva: Iran must demonstrate 

through concrete steps that it will live up to its responsibilities 

with regard to its nuclear program. This message was reinforced by 

the IAEA Board of Governors’ adoption of a resolution on 27 November 2009 condemning Iran’s construction of the Qom enrichment facility as inconsistent with Iran’s safeguards agreement and 

demanding Iran’s full compliance with its international obligations 

without further delay. 

Going forward, we’ve made clear the necessity for Iran to take 

swift action. If Iran does not take steps in the near future to live 

up to its obligations, then we are prepared to move toward increased pressure. If Iran takes concrete steps and lives up to its obligations, there is a path toward a better relationship with the 

United States, increased integration with the international community, and a better future for all Iranians. 

The burden of meeting these responsibilities lies with the Iranian 

government, and they are now the ones that need to make that 

choice. 

Q.2. In your opinion, how likely is it that Iran’s nuclear enrichment 

activities will result in weapons-grade material? If this comes to 

pass, when do you think it will happen? 

A.2. Our goal is to prevent Iran from acquiring a nuclear weapons 

capability. The same technology that is used in centrifuge-based 

enrichment for reactor fuel is used for producing HEU and Iran 

has made significant advances in its enrichment program. Iran’s 

refusal to comply with its international obligations over the past 

twenty years adds to the concern that Iran’s intent is to—at a minimum—preserve the option to acquire nuclear weapons. Iran needs 

to take steps to address the questions raised by the international 

community, and suspend its proliferation-sensitive nuclear activities as required by the United Nations Security Council. 

We defer to the intelligence community for an update on Iran’s 

nuclear program, a timeline of possible HEU-production scenarios, 

and any indication of a weapons program. 

Q.3. Are the upcoming talks with Iran being conducted with a 

sense of urgency appropriate to the situation, given the wide evi-
64 

dence of Iran’s enrichment activities in violation of UN Security 

Council resolutions, along with the very real possibility that Iran 

is ‘‘running out the clock’’ while it pursues its nuclear ambitions? 

A.3. Our whole approach is predicated on an urgent need to prevent Iran from obtaining a nuclear weapons capacity. That is why 

a united P5+1 has presented Iran with a very plain choice: prove 

to our satisfaction that its program is, as they claim, for peaceful 

purposes and open up its facilities to inspections, freeze its uranium enrichment program, and follow through on the agreement to 

provide fuel for enrichment outside of the country or face real pressure and consequences. 

This message was reinforced by the IAEA Board of Governors’ 

adoption of a resolution on 27 November 2009 condemning Iran’s 

construction of the Qom enrichment facility as inconsistent with 

Iran’s safeguards agreement and demanding Iran’s full compliance 

with its international obligations without further delay. We—in coordination with our partners—will be taking stock of where things 

stand in the coming weeks, and we will make appropriate judgments about the next steps, including the option of imposing additional pressure. 

Q.4. Can you provide some concrete examples of potential steps the 

Iranian regime could take that you would consider ‘‘progress’’ as a 

result of the current negotiations? 

A.4. The October 1 meeting in Geneva, as well as Iran’s acceptance 

of an initial inspection in Qom, offered a cumulative set of options. 

We regret that Iran has not followed through. As a result, the 

IAEA Board of Governors’ adopted a resolution on 27 November 

2009 condemning Iran’s construction of the Qom enrichment facility as inconsistent with Iran’s safeguards agreement and demanding Iran’s full compliance with its international obligations without 

further delay. 

The P5+1 has made clear that Tehran must agree to another 

P5+1 political director level meeting, focused on the nuclear issue. 

We have stressed the need for continued cooperation regarding the 

Qom enrichment facility, including access to personnel and documents. And we have called upon Iran to implement the IAEA’s 

Tehran Research Reactor proposal to which it agreed in Geneva on 

October 1. Iran must demonstrate through these concrete steps 

that it will live up to its responsibilities with regard to its nuclear 

program. 

We have conveyed to Iran that, if it expects the world to believe 

in the exclusively peaceful nature of its nuclear program, then Iran 

must engage fully and immediately with the IAEA to address all 

outstanding issues surrounding its nuclear program. As set forth in 

numerous resolutions of the IAEA and the U.N. Security Council, 

Iran must fully implement its IAEA Safeguards Agreement and 

bring into force its Additional Protocol. 

Additional confidence building measures would include Iran’s full 

implementation of its UN Security Council obligations as well as 

answering the IAEA’s outstanding questions, particularly with regard to the possible military dimensions to Iran’s nuclear program. 

These steps are clearly outlined in U.N. Security Council resolutions 1737, 1747 and 1803 as well as in the plethora of IAEA Direc-
65 

tor General’s reports from the past 7 years. Iran knows what it 

needs to do to restore international confidence in the exclusively 

peaceful nature of its nuclear program. Now is the time to take advantage of an historic opportunity to constructively engage and find 

a diplomatic resolution to the nuclear issue. 

Q.5. How confident are you that United States intelligence-gathering operations are providing an accurate picture of Iran’s nuclear 

capabilities, given the recent failure to detect the scope of operations at the Qom facility? 

A.5. Due to the sensitive nature of our intelligence programs, we 

will address this question in a separate, classified submission to 

the Committee. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM STUART A. LEVEY 

Q.1. What is your assessment of the current set of sanctions 

against Iran? In what ways are these sanctions succeeding and in 

what ways do they fall short of achieving our objectives in this situation? 

A.1. In addition to the broad country sanctions the United States 

has in place against Iran, the Treasury and State Departments 

launched an effort in 2006 to target Iranian illicit conduct and, specifically, Iranian entities’ and individuals’ use of the international 

financial system to support proliferation and terrorism. This effort 

combined formal government measures against the specific Iranian 

banks, companies, and people involved in this conduct with unprecedented high-level outreach to scores of banks, banking associations, and companies around the world. 

Our strategy of targeting illicit conduct has resulted in broad 

international support. In terms of formal government actions, the 

U.N. Security Council resolutions on Iran contain many of the 

same designations we have implemented here in the United States. 

The European Union and Australia have gone beyond implementing the Security Council’s list, joining us in other designations, such as that of Iran’s Bank Melli. On the private sector side, 

banks and companies around the world have come to understand 

that, if they are dealing with Iran, it is nearly impossible to protect 

themselves against becoming entangled in that country’s illicit conduct. 

Government and private sector actions have increased pressure 

on Iran. These mutually reinforcing actions have not only had an 

impact on Iran’s ability to use the international financial system to 

support its illicit activities, but have also put Iran at a competitive 

disadvantage in the world marketplace due to its increasing financial and commercial isolation. Iran is increasingly dependent on an 

ever-shrinking number of trade and finance facilitators. Many foreign companies have pulled back from business deals with Iran, including investment in Iran’s energy sector. Iranian businesses face 

greater inefficiencies, higher operating costs, and increased difficulty in finding business partners and banks to provide them with 

financing. 
66 

We are working to build on this effort by developing a comprehensive plan aimed at imposing additional substantial costs on 

the government of Iran, and we are coordinating this plan with our 

international partners. As the President recently stated: 

[T]he dual-track approach requires Iran to get a clear message that when 

it fails to take advantage of these opportunities [offered by the P5+1], that 

in fact it is not making itself more secure, it’s making itself less secure. 

Q.2. What steps are being taken to target the efforts of foreign financial institutions and foreign governments, such as Venezuela, 

which have assisted Iran in evading the full impact of the sanctions? 

A.2. The United States takes very seriously its obligation to protect 

the international financial system from abuse. The Treasury and 

State Departments have taken domestic action against specific 

banks, entities and individuals complicit in Iranian illicit activity. 

We have also acted against the subsidiaries of the banks we have 

targeted. For example, on October 22, 2008, we designated Banco 

Internacional de Desarollo, a subsidiary of the Export Development 

Bank of Iran (EDBI) located in Venezuela, under Executive Order 

(E.O.) 13382 for being owned or controlled by, or acting for or on 

behalf of, EDBI. More recently, on November 5, 2009, we designated First East Export Bank (FEEB), a Bank Mellat subsidiary 

located in Malaysia, under E.O. 13382 for being owned or controlled by Bank Mellat. Through the designation of over 100 entities and individuals supporting Iran’s nuclear and missile enterprises, the United States has not only cutoff illicit actors from the 

U.S. financial and commercial systems, but has also highlighted 

publicly the risks of doing business with Iran and Iran’s efforts to 

evade sanctions. 

In addition to the formal actions we have taken, the Treasury 

Department has also engaged bilaterally with its foreign government partners and the private sector around the world to share information about Iran’s illicit and deceptive conduct. Where releasable information has been available on specific foreign financial institutions or entities supporting Iranian proliferation efforts, the 

United States has actively worked to inform the host government 

and request assistance in disrupting the activity. Finally, we have worked through the Financial Action Task 

Force (FATF) to build awareness of the risks stemming from Iran’s 

deceptive practices and lack of an adequate anti-money laundering 

and counterterrorist financing (AML/CFT) regime. In October 2009, 

the FATF issued its seventh statement on Iran, reiterating its call 

for jurisdictions to apply effective countermeasures to protect their 

financial sectors from these risks. 

Q.3. In what ways would sanctions targeting companies that assist 

Iran in importing refined petroleum help to discourage those companies from continuing those activities? Would these sanctions, in 

your estimation, succeed in increasing economic pressure on Iran? 

A.3. Sanctions by their very nature create a disincentive to engage 

in the activities against which they are targeted. However, the effectiveness of any specific measure needs to be considered in the 

context of our overall package of sanctions and our broader policy 

and objectives. If desired, I would be pleased to provide a more detailed briefing in a closed setting.