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S. Hrg. 111–1081 

IRAN SANCTIONS: WHY DOES 

THE U.S. GOVERNMENT DO BUSINESS WITH 

COMPANIES DOING BUSINESS IN IRAN? 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MAY 12, 2010 

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

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

EDWARD E. KAUFMAN, Delaware 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

TROY H. CRIBB, Counsel 

VANCE F. SERCHUK, Foreign Policy Advisor, Office of Senator Lieberman 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

MOLLY A. WILKINSON, Minority General Counsel 

LUKE P. BELLOCCHI, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

LAURA W. KILBRIDE, Hearing Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Lieberman ........................................................................................... 1 

Senator Collins ................................................................................................. 3 

Senator Brown .................................................................................................. 17 

Senator McCaskill ............................................................................................ 18 

Senator Ensign ................................................................................................. 21 

Senator Gillibrand ............................................................................................ 23 

Prepared statements: 

Senator Lieberman ........................................................................................... 27 

Senator Collins ................................................................................................. 29 

Senator Burris .................................................................................................. 31 

WITNESSES 

WEDNESDAY, MAY 12, 2010 

Hon. Theodore E. Deutch, a Representative in Congress from the State of 

Florida ................................................................................................................... 5 

Joseph A. Christoff, Director, International Affairs and Trade, U.S. Government Accountability Office .................................................................................. 8 

Danielle Pletka, Vice President, Foreign and Defense Policy Studies, American Enterprise Institute for Public Policy Research ........................................ 10 

ALPHABETICAL LIST OF WITNESSES

Christoff, Joseph A.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 63 

Deutch, Hon. Theodore E.: 

Testimony .......................................................................................................... 5 

Prepared statement with an attachment ....................................................... 32 

Pletka, Danielle: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 79 

APPENDIX 

GAO report sent to Senators Lieberman, Collins, and Kyl, dated May 4, 

2010 ....................................................................................................................... 71 

(1) 

IRAN SANCTIONS: WHY DOES 

THE U.S. GOVERNMENT DO BUSINESS WITH 

COMPANIES DOING BUSINESS IN IRAN? 

WEDNESDAY, MAY 12, 2010 

U.S. SENATE,

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 11:02 a.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding. 

Present: Senators Lieberman, McCaskill, Collins, Brown, 

McCain, and Ensign. 

Also Present: Senator Gillibrand. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. The hearing will come to order. We will 

begin with an apology to our witnesses for starting late, but, as my 

kids always say, ‘‘It wasn’t my fault.’’ And it certainly was not Senator Collins’. Sorry, the Senate staged these votes at this time. This 

is an important hearing. We appreciate the witnesses being here. 

Congressman, I thank you for your patience. 

The title of our hearing today really says it all: ‘‘Iran Sanctions: 

Why Does the U.S. Government Do Business with Companies 

Doing Business in Iran?’’ 

A prohibition on awarding Federal contracts to companies that 

violate the Iran Sanctions Act of 1996 is one of the actions authorized in that law. It was intended by Congress to be a tool, a powerful tool, and it could be if it was ever used. But it has not been 

up until this time, and that is now 14 years. In the last fiscal year, the Federal Government spent $520 billion 

to buy goods and services, everything from basic office supplies to 

parts for weapons systems to an extraordinary range of services 

that are acquired. 

Here is another example of the scope of Federal purchasing: The 

Federal Government is the single largest purchaser of energy in 

the world. 

The U.S. Government’s market power gives us the capacity, I 

think, to influence the behavior of companies doing business with 

Iran and to give them a choice between doing business with us or 

doing business with Iran. We no longer should allow businesses to 

do both. 

2 

1The GAO report referenced by Chairman Lieberman appears appears in the Appendix on 

page 71. 

But Presidents of both parties have failed to enforce the existing 

law. As a result, many companies that make money from the U.S. 

Government continue to do business with Iran and in Iran, helping 

to sustain—directly or indirectly—the fanatical, anti-American regime in Tehran that regularly promises to bring ‘‘Death to America.’’ 

Today the Government Accountability Office (GAO) is releasing 

a report which illustrates America’s failure to use the 1996 law as 

authorized. 

Based on publicly available information, GAO has identified 41 

foreign companies that have conducted commercial activity in support of Iran’s energy sector. While GAO reaches no conclusion 

about whether these companies are in violation of the Iran Sanctions Act—because that is not its responsibility—the report does 

suggest strongly that many companies see no downside to doing 

business with Iran in violation of the law. 

At the request of Senators Kyl, Collins, and myself, GAO is releasing a follow-up report today on seven companies doing energy 

business with Iran that also held Federal contracts between fiscal 

years 2005 and 2009.1 These companies have received combined 

payments of nearly $880 million from the Department of Defense— 

including $319 million to Repsol of Spain and $312 million to Total 

of France for the purchase of fuel, and $111 million to Daelim Industrial Company of South Korea for the construction of military 

family housing in Korea. 

The New York Times recently published its own analysis showing 

that the Federal Government has awarded more than $107 billion 

in contracts, grants, and other benefits over the last decade to foreign companies, as well as to foreign subsidiaries of U.S. companies, that have engaged in commercial activity in Iran. This includes $15 billion to companies that certainly appear to me to have 

violated the Iran Sanctions Act. 

Companies identified in the New York Times report include 

Royal Dutch Shell, which has helped develop oil fields in Iran and 

has received over $11 billion from the U.S. Government, mostly 

through contracts for the purchase of fuel for the Department of 

Defense. 

I hope that this hearing this morning, the GAO report, and the 

testimony of the witnesses send a clear message to those companies: Either do business with Iran’s $250 billion a year economy, 

or do business with America’s $13 trillion economy, including our 

government, but you cannot do business with both. And it is simply 

unacceptable for the Federal Government to enrich foreign firms 

that are enriching the extremist, repressive, terrorist Government 

of Iran. 

Those companies should be put on notice—I hope they will be 

today—that Congress is on the verge of passing tough new sanctions legislation. The conference committee on which I am privileged to serve just held a meeting this morning. What cannot be 

sanctioned today can and will, I am confident, be sanctioned tomorrow. 

3 

I note that both chambers have adopted provisions intended to 

tighten the prohibition on American Government contracts to companies that violate sanctions, which is based on legislation originally introduced in both chambers by Senator Chuck Schumer and 

in the House by Congressman Ron Klein. 

I really want to thank our panel today, which I know will help 

us better understand the scope of foreign commercial activity in 

Iran, with a focus on its energy sectors, and the nexus between 

these companies and U.S. Government contracting. 

I look forward to the testimony and our discussion afterwards. 

Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. 

We are at a critical juncture in our efforts to prevent Iran from 

obtaining nuclear weapons, a capability that threatens the stability 

of the region and, indeed, the world. The conference committee on 

the comprehensive Iran Sanctions Act is now underway, and I commend the Chairman for his leadership on that legislation and for 

holding this oversight hearing. 

Like the Chairman, I am deeply troubled by recent reports in the 

New York Times and by the GAO that the U.S. Government continues to do business with companies that are, at least indirectly, 

aiding and abetting Iran’s nuclear program by investing in the Iranian economy. GAO’s report that the U.S. Government entered into 

almost $880 million worth of contracts with seven foreign firms 

that had investments in Iran’s energy sector is extremely troubling. 

Obviously, this practice goes against our own national security interests. 

The GAO report exposes evidence of potentially serious violations 

of our current sanctions regime. In light of this alarming information, we not only need to pursue rigorous enforcement of our current laws but also to strengthen our sanctions against Iran. Congress can assist by completing conference negotiations on the Iran 

Sanctions Act. But the State Department can take immediate action to improve our efforts simply by enforcing current law. 

Unfortunately, this lack of enforcement is not a new problem. As 

far back as 1996, when the Iran Sanctions Act first became law, 

Congress has attempted to extinguish investment in the energy 

sector. Yet, despite clear evidence of violations of that law, not a 

single company has ever been sanctioned. In fact, many of the corporations that have reportedly done business with Iran have continued to receive Federal contracts or other benefits from our government. 

This failure to enforce the law has sent a signal to the Iranian 

leadership that we may be less than determined to bring their nuclear program to a halt. Continuing lack of enforcement may undermine our credibility as we seek tougher international sanctions. 

And, most important, Iran has seized on our leniency by continuing 

to enhance its nuclear weapons capability. 

While the Federal Government continues to send mixed messages, many States have taken much more forceful action. In 2007, 

Florida became the first State to divest its pension funds from companies doing business in Iran and the Sudan. Many other States 

4 

have adopted similar divestment measures or have imposed procurement restrictions on companies doing business in Iran. For example, the State of Illinois requires State contractors to disclose in 

each bid whether or not they are engaged in operations in Iran’s 

energy sector. 

The Federal Government requires contractors to certify that they 

do not conduct prohibited business operations with Sudan. Unfortunately, no similar requirement is in place for contractors doing 

business with Iran. At a minimum, it seems to me the Federal Government should impose this requirement on its contractors. 

I have repeatedly expressed my concern about the Federal Government’s inconsistent actions to enforce and strengthen our sanctions against Iran. And as the Chairman has pointed out, this 

problem has gone across Administrations and involved both Democratic and Republican Presidents. Along with our allies, our Nation 

must be prepared to impose strong sanctions against Iran if the 

U.N. Security Council fails to implement tough and effective measures. But the fact is that the sanctions will lack teeth if they are 

not enforced. Mere threats will not prevent companies, including 

government contractors, from doing business with the Iranian regime. 

In light of the danger posed by the Iranian nuclear threat, we 

must take every possible economic, political, and diplomatic measure to demonstrate to Iran’s leaders that the price for its nuclear 

program has simply become too high. 

As we consider broader sanctions to deter the nuclear threat 

posed by Iran, I am reminded of the suffering endured by the 66 

American hostages seized by the Iranian Revolutionary Guard and 

other militants in November 1979. These Americans were held 

against their will for 444 days. To date, they have received absolutely no compensation from the Iranian Government for the brutality that they experienced. One of those hostages, Moorhead Kennedy, lives in Maine and is here today. I am very pleased that he 

is present for this hearing. His presence reminds us that these 

Americans continue to be denied justice from the Iranian regime, 

despite the intent of Congress. 

Mr. Chairman, again, thank you for holding this hearing, and I 

look forward to discussing these issues with our witnesses. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. I 

thank Senator McCain and Senator Brown for being here. We will 

go to the witnesses now who have been so patient in waiting. 

First, Congressman Ted Deutch was elected to Congress to fill an 

open seat last month by the voters of the 19th District of Florida 

in quite an impressive victory, all the more impressive to those who 

know because of the fact that he had earlier in his career supported various of my campaigns, and notwithstanding that, he 

went on to win a great victory. 

Congressman Deutch is seated as a member of the House Foreign Affairs Committee and the House Judiciary Committee, I 

think showing the confidence that the leadership has in him. But 

this morning we asked him to be here particularly to share with 

us lessons from the State Senate in Florida where he has served 

and where he led a successful effort to pass legislation requiring 

the State pension fund to divest from companies doing business in 

5 

1The prepared statement of Mr. Deutch with an attachment appears in the Appendix on page 

32. 

Iran. And I think the process followed there is instructive and encouraging for us at the Federal level. 

Congressman Deutch, congratulations again and welcome to our 

Committee this morning. 

TESTIMONY OF HON. THEODORE E. DEUTCH,1 A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. DEUTCH. Thank you, Chairman Lieberman, Ranking Member 

Collins, and Members of the Committee. I appreciate the invitation 

to join you here today. 

The Iranian nuclear weapons program poses a grave and growing 

national security threat to our Nation, risks a nuclear arms race 

in the Middle East, threatens our allies in Europe and beyond, and 

poses an existential threat to our critical ally Israel. 

I am grateful that the House and Senate have now both passed 

new Iran sanctions legislation, and I firmly expect strong language 

to emerge from the conference committee before the end of this 

month. 

It is important to note that States and local governments have 

been at the forefront of the Iran sanctions movement for years, 

highlighted by dramatic successes such as those in my own State 

of Florida. I was elected to the Florida State Senate in 2006, and 

recognizing the threat of the Iranian nuclear program, I was determined to use every tool at my disposal to put pressure on the regime. I crafted legislation that would prevent the pension funds of 

Florida’s workers from investing in companies that conduct business within the energy sector of Iran, consistent with the framework established by the Iran Sanctions Act. 

As the author of the Protecting Florida’s Investments Act, I laid 

out a procedure for identifying and engaging those ‘‘violating’’ companies who currently invest in the energy sector of Iran above the 

thresholds in both the State and Federal statutes. The Florida 

State Board of Administration (SBA), subsequently worked with 

experts from across the country to develop an effective course of action for divesting the Nation’s fourth largest pension fund. 

Three years later, it is clear that this effort has been a dramatic 

success. The State of Florida has divested nearly $1.5 billion from 

24 companies that do or did business in the Iranian energy sector, 

including Royal Dutch Shell, Total, Eni, and others. This is $1.5 

billion from Florida alone. But no public worker, no retiree from 

any State or local government or from any police force, fire department, or school district should see his or her retirement savings invested in Iran’s nuclear program. Divestment must be expanded, 

and most significantly for our collective efforts here today, the companies must be identified. 

While 19 other States and the District of Columbia have passed 

similar divestment policies, Florida is the only State to have successfully identified, named, and published on a quarterly basis a 

list of violating companies, followed by a full and successful divestment from them. Therefore, I would urge Congress to look to Florida as one model for how to identify those companies who are presVerDate Nov 24 2008 08:45 Oct 18, 2011 Jkt 057936 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 P:\DOCS\57936.TXT SAFFAIRS PsN: PAT
6 

ently doing business in Iran in contravention of international security. Once those companies are identified, immediate economic 

pressure can be brought to bear at the Federal level. 

Now, SBA identifies potentially violating companies through a 

thorough and multi-source research effort which relies on their own 

analysis along with independent external research providers. The 

SBA then sends written notification to any company found to have 

active business operations with Iran informing the company that it 

is now subject to divestment and that it has 90 days to cease such 

activity. 

In only a matter of months, Florida published a verifiable and 

comprehensive list of companies and did so with a small budget 

and minimal staffing levels. The Federal Government can easily 

match and replicate the actions of Florida to create and maintain 

its own list of violating companies that are presently doing business in Iran. 

The legislation that emerges from the House-Senate conference 

must include a requirement that the Administration provide a list 

of all companies that are in current violation of the Iran Sanctions 

Act. 

But in advance of these new legislative requirements, the Administration should waste no time in creating its own definitive list so 

that the American people can know immediately which companies 

are choosing to risk international security by investing in Iran. It 

would be highly imprudent to waste time by waiting until after the 

new sanctions law takes effect to compile this important list when, 

in fact, it can be created quickly and easily today. In Florida, this 

research is done by the pension fund administrators and their outside consultants. I am aware that the State Department currently 

has jurisdiction over this area, but it is worth noting that the Energy Department is well positioned to publish such a list, as these 

are ultimately factual findings, and the Department of Energy has 

a long track record of publishing similar data within their detailed 

reports that document energy activity in specified countries, including Iran. 

If the United States is serious about shining a light on the companies that continually defy U.S. law, we must do everything that 

we can to simplify this process. The easiest way to gather information is to mandate that companies divulge their business activities 

in Iran. I would like to commend the Securities and Exchange 

Commission (SEC) Chairman Mary Schapiro for her recent comments in support of strengthening the disclosure requirements for 

companies engaged in such dealings with Iran. It is apparent to a 

growing number of observers that, under U.S. securities law, doing 

business in Iran should properly be considered a material event 

that triggers mandated disclosure on SEC filings. Stricter SEC disclosure requirements have also been promoted by Florida’s SBA 

and the not-for-profit group United Against Nuclear Iran—whose 

president, Ambassador Mark Wallace—circulated a letter recently 

favoring this new understanding of materiality in the securities 

law context. I would respectfully ask the Members of this Committee to join in the call for more complete disclosure requirements. 

A company’s decision to do business in Iran at a time when the 

United Nations, the European Union, and this Congress are all deVerDate Nov 24 2008 08:45 Oct 18, 2011 Jkt 057936 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 P:\DOCS\57936.TXT SAFFAIRS PsN: PAT
7 

bating various forms of economic sanctions certainly makes any 

such Iranian investment material and worthy of full notice to the 

company’s shareholders and to the public. 

The list of violating companies serves another role. We must 

cease awarding any government contracts to companies that invest 

in Iran. My colleague, Congressman Klein, has written tough and 

important legislation in the House that is included in this comprehensive Iran sanctions package currently in conference committee. 

As the Chairman referred to earlier, the New York Times article 

confirmed over $107 billion of Federal Government money has been 

awarded to companies appearing to be in violation of the Iran 

Sanctions Act since its enactment. Further, as the most recent 

GAO report states, the Federal Government spent almost $880 million just in the last 5 years contracting with companies currently 

doing business in the Iranian energy sector. 

This is unacceptable, and I am gratified that we are on the verge 

of passing legislation to ban this practice going forward. 

Through both Democratic and Republican Administrations, the 

sanctions regime under the Iran Sanctions Act has essentially lay 

dormant. I am certain that Congress did not repeatedly enact 

thoughtful and complex Iran sanctions for them never to be used. 

This practice must end, and it is long past time for these sanctions 

to be utilized as designed. 

I am aware that in the world of international diplomacy it is not 

polite to name names. I understand that foreign nations do not 

want us telling their companies when and where to invest, but the 

stakes are now too high for diplomatic niceties to trump international security. It is time for our government to name and publish the companies that are investing in Iran. I am aware that 

many of those companies are based in countries that are our allies. 

Nevertheless, there is no greater threat to global security than the 

Iranian regime’s quest for nuclear weapons, and it is time we put 

proper pressure on our friends, allies, and international competitors alike to end their investments in Iran. 

The government should be using every power at our disposal to 

encourage, badger, demand, entice, and sanction companies to remove their business interests from Iran. 

We are at a crucial moment in history, and time is not on our 

side. For many years, we waited for diplomacy to take hold and for 

Iran to forgo its nuclear weapons program. Instead, Iran is spinning more centrifuges and announcing the opening of new nuclear 

facilities, while their president declares his intent to wipe Israel off 

the map and publicly envisions a world without America. We will 

have failed if our discussion shifts toward containment and how to 

deter Iran from using nuclear weapons. Our mission is clear: We 

must prevent Iran from acquiring nuclear weapons. We must act 

now before it is too late for economic sanctions to deliver genuine 

results. Florida has shown that it is possible to identify violating 

companies and to exert real economic pressure. Congress and the 

Administration must now do the same. We can prepare that list 

today and immediately move ahead with sanctions. We need not 

and we cannot wait a moment longer. 

8 

1The prepared statement of Mr. Christoff appears in the Appendix on page 63. 

Thank you, Mr. Chairman, for your dedication and commitment 

to this vital national security interest, and thank you for giving me 

this opportunity. 

Chairman LIEBERMAN. Congressman Deutch, thank you for a 

very thoughtful, very strong, and ultimately very hopeful statement 

about what the Federal Government can and should do. Obviously 

we would love for you to stay for questions, but we will understand 

if in light of the delay you have to return to the House. 

Mr. DEUTCH. Thank you. 

Chairman LIEBERMAN. Mr. Christoff of GAO, thanks for being 

here. Thanks for the work that you have overseen. We now look 

forward to a presentation on the findings of GAO on this subject, 

and particularly the list of foreign firms engaged in Iran’s energy 

sector who also hold U.S. Government contracts. Thank you. 

TESTIMONY OF JOSEPH A. CHRISTOFF,1 DIRECTOR, INTERNATIONAL AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. CHRISTOFF. Thank you, Mr. Chairman, Members of the Committee. Thanks for inviting GAO to this important hearing. I am 

here today to discuss our work on foreign firms that have commercial interests in Iran’s energy sector. The issue is important because Iran needs foreign investments to develop its energy sector, 

and the United States seeks to deter these investments through additional sanctions. 

Iran seeks investments from foreign firms to increase oil and 

natural gas production and meet domestic energy needs. According 

to the International Monetary Fund (IMF), Iran’s oil production 

has remained virtually flat in recent years and will likely stagnate 

without more investment. In addition, Iran must import about 

130,000 barrels of gasoline each day to meet domestic demand. 

Currently, oil revenues account for as much as three-quarters of 

the Iranian government’s revenues and one-quarter of the country’s 

gross domestic product (GDP). 

The Iran Sanctions Act seeks to limit Iran’s ability to produce 

more oil and thereby deny it the financial resources it needs to 

fund international terrorism and develop its nuclear sector. Under 

the Act, foreign firms may lose U.S. Government contracts if they 

invest more than $20 million in Iran’s energy sector within a 12- 

month period. 

The only time the United States invoked the Iran Sanctions Act 

was in 1998 when it determined that the investments of three foreign energy firms were sanctionable. However, at that time the 

Secretary of State waived the sanctions citing U.S. national interests. 

My statement today is based on two reports that we completed 

for this Committee, one in March and one that is being released 

today. In the March report, we found that 41 foreign firms had 

commercial activity in Iran’s energy sector between 2005 and 2009. 

These firms are located in 22 countries throughout Europe, Asia, 

and South America. We defined commercial activity as having either signed an agreement to conduct business, invested capital, or 

9 

received payment for providing goods or services in Iran’s energy 

sector. 

To identify these 41 firms, we examined over 200 industry publications, U.S. Government and trade associations reports, and corporate statements. We also interviewed officials from the Departments of Energy and State, and U.S. intelligence agencies. We excluded sources that we deemed insufficiently reliable because 

GAO’s evidentiary standards require accurate and credible information. Therefore, we excluded newspaper reports and statements 

from the Iranian Government. 

We included a firm only if its activities in Iran were documented 

in at least three reputable industry publications or in at least one 

industry publication plus a corporate statement. Accordingly, the 

41 firms represent a minimum number of firms with commercial 

activity in Iran’s energy sector. 

We provided the firms an opportunity to comment on our report. 

Thirteen of the 41 firms responded and confirmed our findings. 

Since the report was released, four more firms have responded, including one firm that stated that it had not yet made an investment decision. 

Mr. Chairman, it is important to note that we did not determine 

whether the activities of these 41 firms meet the legal criteria for 

an investment under the Iran Sanctions Act. The Secretary of State 

is responsible for making such determinations. 

In the report released today, we found that seven of the 41 firms 

had contracts with U.S. Government agencies, and over the past 5 

years, U.S. agencies have obligated almost $880 million to fund 

these contracts. About 90 percent of these funds purchased fuel and 

petroleum products for U.S. military operations overseas. Two 

firms—Repsol of Spain and Total of France—accounted for nearly 

three-quarters of the $880 million. 

To identify which of the 41 firms had U.S. Government contracts, 

we took three steps. First, we obtained each firm’s unique registration number. Second, we used the registration numbers to search 

the General Services Administration’s Federal Procurement Data 

System and identified the seven firms with U.S. Government contracts. And, third, we searched a second database, the Department 

of Defense’s Electronic Document Access System, to obtain copies 

of the documents and thereby corroborate our findings. 

In closing, let me note that our work for this Committee continues. At your request we are developing a third report where we 

identify firms selling gasoline, diesel, and other refined petroleum 

products to Iran. 

Mr. Chairman, Ranking Member Collins, that concludes my 

statement. I look forward to your questions. 

Chairman LIEBERMAN. Thanks, Mr. Christoff. That is very important, revealing work, and I look forward to the question period. 

Finally, we are delighted to have with us Danielle Pletka, who 

is Vice President for Foreign and Defense Studies at the American 

Enterprise Institute (AEI). I think Ms. Pletka will offer some opinions about why the Iran Sanctions Act (ISA) has not been enforced 

and hopefully suggest ways to strengthen our sanctions policy. It 

is a pleasure to have you here this morning. 

10 

1The prepared statement of Ms. Pletka appears in the Appendix on page 79. 

TESTIMONY OF DANIELLE PLETKA,1 VICE PRESIDENT, FOREIGN AND DEFENSE POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH 

Ms. PLETKA. Thank you, Mr. Chairman and Senator Collins, Senator Brown, Senator McCaskill. I have to apologize in advance, I 

am sick and so—— 

Chairman LIEBERMAN. You are making me feel right at home because whatever the ailment is, my wife has had it for the past few 

days. 

Ms. PLETKA. Well, stay away from her, is all I can tell you. 

[Laughter.] 

Chairman LIEBERMAN. You are asking a lot, really. 

Ms. PLETKA. I know her and I agree, but, boy, this is horrible. 

In any case, thank you very much for including me in this most 

important hearing. 

The question that you posed in the title of the hearing, ‘‘Why 

does the U.S. Government do business with companies doing business in Iran?’’—has a pretty simple answer: Because it can. 

As the Department of Defense (DOD) rightly noted in its commentary on the GAO report released today, the companies in question are qualified to bid on Federal contracts and are not excluded 

by any U.S. law or by any regulations. 

The New York Times, as we have mentioned repeatedly, reported 

earlier this year that 74 companies have done business with both 

the Islamic Republic of Iran and with the U.S. Government over 

the past decade. Of those, 49 continue to do business there, according to the New York Times, and have no reported plans whatsoever 

to stop their business with Iran. The GAO report does make clear 

that some of this business seems necessary for either logistical or 

financial reasons; fuel supplies, base building and similar endeavors can, though may not necessarily, limit the choices available to 

DOD. But among the benefits that some of these companies receive 

have also been $4.5 billion in loan guarantees and loans from the 

Export-Import Bank—loans which the bank leadership insisted 

were fully vetted with the Department of State and other Administration players. 

The larger problem, as I think all of the witnesses and you, the 

Members, have suggested, is that the U.S. Government is for the 

most part indifferent as to whether beneficiaries of U.S. taxpayer 

dollars are indeed doing business in Iran. And that is entirely in 

keeping with the underlying trouble: For the last decade and a 

half, the U.S. Government has not taken the Iran sanctions legislation passed by the Congress seriously. 

Under the Iran Sanctions Act, there is a full menu of measures 

available to sanction entities found to be doing business with Iran, 

which range from a slap on the wrist to punitive or crippling sanctions for a designated company. Section 6 of the act targets two of 

the focuses of recent articles and some of the things that we have 

actually been talking about here today: The sanction in paragraph 

(1) offers ‘‘denial of Export-Import Bank loans, credits, or credit 

guarantees,’’ and paragraph (5) offers a ‘‘prohibition on U.S. Government procurement from the entity.’’ Had there been designaVerDate Nov 24 2008 08:45 Oct 18, 2011 Jkt 057936 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 P:\DOCS\57936.TXT SAFFAIRS PsN: PAT
11 

tions in accordance with the Act by the Department of State, it 

would not have been necessary for the taxpayer to subsidize any 

of these Iranian business partners. 

But since the passage of the Iran Libya Sanctions Act (ILSA) 

back in 1996, as we have said, only three companies taking part 

in one particular project have actually been sanctioned. Those sanctions were immediately waived. And no project bar that example 

has merited more than an inconclusive and half-hearted investigation by the Department of State. 

Several years ago, an amendment to the underlying law would 

have required the President to make a determination within a time 

certain about a particular case, but that was opposed by the White 

House and was ultimately excluded from revisions to ILSA. Indeed, 

this is the history of what we now call the Iran Sanctions Act. Congress acts to force the Executive Branch to seriously pursue a stringent sanctions regime against Iran, and the Executive Branch— 

whether led by Democrat or Republican Administrations—resists. 

Congress’ previous efforts to encourage Administration implementation of the Iran Sanctions Act were really for naught. And 

the Bush Administration was no more aggressive against firms investing in Iran than was the Clinton Administration—the intervention of September 11, 2001, Iran’s own progress toward a nuclear 

weapon, the election of Mahmoud Ahmadinejad, and Iran’s complicity in attacks on our troops in Iraq notwithstanding. 

By 2006, it had become clear to many in Congress that the loopholes in the Iran sanctions legislation sufficed to accommodate a 

State Department convoy driving through. And the Iran Freedom 

and Support Act tried to close those loopholes, also funding democracy activities in Iran and sanctioning companies transferring 

weapons of mass destruction (WMD) and conventional weaponry. 

In other words, it expanded beyond the energy focus. It also set a 

90-day time limit on a sanctions determination—a clear congressional response to State’s failure to comply in good faith with the 

Iran Libya Sanctions Act. The House version of the bill was even 

tougher still, with a ban on foreign aid to countries whose nationals 

violated the terms of the bill and an amendment closing the loophole which allowed subsidiaries of U.S. companies to operate in 

Iran. 

But the Bush Administration opposed the stronger language with 

the stock claim that the bill failed to afford the President sufficient 

flexibility. And as a result, a watered-down version was ultimately 

passed—one that did not require a determination about violators, 

but notably did provide support for promotion of democracy in Iran, 

an activity largely discontinued by the Obama Administration. The 

bill also suggested that the Administration not conclude nuclear 

agreements with countries known to have provided nuclear technology to Iran. This last was a swipe at Russia, and yet another 

ignored signal from the Congress. The Bush Administration transmitted a so-called 123 Agreement for nuclear cooperation with Russia to the Congress in May 2008, rescinding it in the wake of the 

Russian attack on Georgia 3 months later. The Obama Administration reportedly retransmitted that 123 Agreement to Congress yesterday. 

12 

As Members of this Committee are aware, Congress is once again 

considering legislation intended to strengthen and expand the Iran 

Sanctions Act. And once again, the administration in power is seeking to weaken the provisions of the legislation. 

I understand that the State Department is playing an active role 

behind the scenes in conference seeking to weaken key provisions 

of the legislation, including demands to create an exemption for socalled cooperating countries. This, by the way, has been something 

that they have been trying to get in there throughout all of these 

years. 

There is no question that there is no silver bullet to address 

Iran’s nuclear program. No single bill and no single set of sanctions 

is going to deliver the government of the Islamic Republic. But in 

light of this rather pathetic history of Executive Branch evasion, 

one may legitimately wonder what would have happened had the 

White House had less latitude to ignore decades of investment in 

Iran’s energy sector. 

Successive administrations will argue that the track record for 

discouraging investment in Iran is a good one. Indeed, by the count 

at our own AEI IranTracker project, 18 companies have pulled out 

of Iran in the last couple of years, including some that are key to 

Iran’s refining and energy production sectors. But I would suggest 

that many of those decisions have been prompted by aggressive divestment legislation now passing in U.S. States—Congressman Ted 

Deutch being behind the first and leading one of those—the terrorfree investment movement, Iran’s own mafia-like business environment, growing fear of an Israeli military strike, and changing perceptions in European countries of the threat posed by Iran. 

Looking at the list of companies that have reportedly ceased 

business in Iran, it is striking that the vast majority—13 of the 

18—are located in the United States or Europe. 

Moreover, as the pattern of overall investment in Iran shifts 

away from our European allies toward less responsible stakeholders in the international system such as China, there will be 

continuing opportunities to implement the Iran Sanctions Act—and 

a growing imperative to do so. 

The GAO has cautioned that its standards do not equate to a determination by the Department of State. And that is fair enough. 

Determinations by State will need to be careful; companies themselves should absolutely be required to certify that they are not engaged in sanctionable transactions with Iran under the ISA. But if 

they are not asked, they are certainly never going to tell. 

Your efforts, Mr. Chairman, and those of your colleagues who 

have pursued the question of U.S. indirect subsidies to Iran and 

more effective sanctions legislation, are the beginning of a very important process. We can no longer rely on the good faith of a wellintentioned Executive Branch to ensure that Iran is isolated using 

all means available. Rather, it must be the Congress that sets the 

agenda, identifies the problems, closes the loopholes and guarantees enforcement of the law of the land. 

Thank you very much. 

Chairman LIEBERMAN. Thank you very much, Ms. Pletka. That 

was an excellent statement. 

13 

Each of the Members of the Committee will have 7 minutes on 

this first round. 

I want to begin with you, Ms. Pletka, and ask if you would venture an opinion, and speak a little bit more than you have already 

about how you explain the reluctance of the Executive Branch, regardless of whether there have been Democratic or Republican 

Presidents, to enforce the sanctions legislation. What is going on? 

What is behind all this? 

Ms. PLETKA. I do not think there is a single answer. Clearly, in 

the department of a very fair and just answer, it is difficult to identify companies without a shadow of a double. GAO identifies 40- 

plus companies. Our own IranTracker list lists more than 200 companies. So clearly there is—— 

Chairman LIEBERMAN. Two hundred companies that are doing 

business—— 

Ms. PLETKA. Companies worldwide that are doing business in 

Iran. 

Chairman LIEBERMAN. Right. 

Ms. PLETKA. Florida listed a number of countries. I think that 

the Executive Branch has always been very leery about putting out 

false information. That being said, there is an opportunity for them 

to investigate. They have always claimed over the years that this 

complicates our diplomacy, that it affords an ability by Iran to 

drive a wedge between us and our European allies, between potential Security Council members who will stand with us—Russia, 

China, and others—and that is fine. Even the investigations, however, provide a chilling atmosphere that could close off options for 

Iran, and they have not done that. 

The other problem is what my late boss, Senator Jesse Helms, 

used to call the problem of the Foreign Service, and that was about 

making the world safe for cocktail parties. What will they say when 

I go and sit down and ask the Chinese why their businesses are 

facilitating the Islamic Republic if I also have to sit down and have 

some cheese with them and talk about sanctions? 

This is a big part of the problem from my perspective, and I 

think that is why the Congress needs to be behind this. 

Chairman LIEBERMAN. Thanks. Let me go to the first possible explanation, which is the possibility that it is difficult to bring these 

lists together. 

Mr. Christoff, let me ask you first, how long did it take the GAO 

to compile the list of companies involved in commercial activity in 

Iran? 

Mr. CHRISTOFF. Well, we spent about 6 months with three fulltime people, first trying to develop a good methodology, and then 

2 solid months of searching the 200 industry publications and coming up with a preliminary list. 

Chairman LIEBERMAN. And, likewise, Congressman Deutch, can 

you tell us how long it took the State of Florida to generate a similar list of firms doing business in Iran? 

Mr. DEUTCH. Sure. The State Board of Administration reached 

out to a number of organizations and research firms, first to gather 

an initial list. They then ran that list through their own risk management firms that they typically use, and then ultimately 

14 

scrubbed that list internally. The whole process took them only 

months to compile. 

I would, if I may, Mr. Chairman, point out that while there is 

some discussion about whether a company belongs on the list or 

not, certainly for those companies that the SBA in Florida reached 

out to who confirmed that indeed they are doing business in Iran, 

or for the 13 of the 41 companies that the GAO has reached out 

to, who, in fact, have confirmed that they are doing business in 

Iran, there is no reason for further analysis, it seems to me. Those 

should be the initial countries placed on that list. 

Chairman LIEBERMAN. Well said. I will come back to the first 

point, which is that hearing the relative ease with which GAO and 

the State of Florida assembled this list, leads me to say that it requires a kind of willing suspension of disbelief to think that the 

State Department has been investigating this question for 12 years 

without making a single determination—well, there were three 

during the Clinton years, but then those three were immediately 

waived. And, look, a lot of good work has been done in different administrations, particularly the last two, by the Treasury Department to essentially put pressure on firms and to stop them from 

doing business in Iran. But overall the reality is that nothing we 

have done has, in my opinion, affected at all the onward movement 

of the Iranian nuclear weapons program. And perhaps this sorry 

record of enforcement explains best of all why that is the case. 

Congressman Deutch, let me ask you again, what has been the 

reaction of companies that have been identified by the State of 

Florida? And, particularly, have any of them tried to contest Florida’s actions in court? 

Mr. DEUTCH. They have not. The response to the State Board of 

Administration sounds comparable to the response that the GAO 

received. There are some companies who defended their actions 

and were very clear to point out that they do not belong on a list, 

they are not doing business, and they wanted to explain why. 

There are a number of companies who have confirmed indeed they 

are doing business, and they understand that the result is, according to the letters that the SBA provided to them, that the State 

would then divest holdings in those firms. And there are a significant number who have simply ignored the SBA throughout the 

process. But there have been no threats, there have been no lawsuits, and there is a growing recognition, at least by some of these 

companies, that this is something to which they need to pay attention. 

Chairman LIEBERMAN. Mr. Christoff, I think by my count you 

said that 17 of the 41 firms responded in one way or another. Give 

us a sense of what the response was. 

Mr. CHRISTOFF. All 17 affirmed the information that we had provided in our draft report. 

Chairman LIEBERMAN. They did. Right. 

Mr. CHRISTOFF. I think it was interesting that some of the firms 

corrected our understanding of what their agreements were with 

the Iranian Government. Reports indicted that Royal Dutch Shell, 

for example, had signed an agreement in which they had a 25-percent stake in developing a natural gas field. They wrote back and 

15 

said, no, it is 50 percent, it is not 25 percent, but we are still deciding whether or not we want to pursue that investment. 

Chairman LIEBERMAN. Was that the one that you referred to? I 

believe you said in your testimony that one of the firms contested 

what you said or denied that they were—or did I misunderstand? 

Mr. CHRISTOFF. No, none of the firms disputed what we had 

found among those 17. 

Chairman LIEBERMAN. OK. I thank the three of you. My time is 

up. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Mr. Christoff, I want to follow up on the questions that the 

Chairman was asking you about the State Department’s efforts 

over the past 12 years. I assume that during the course of your 

study you contacted the State Department. Did you get a sense of 

how far the Department has progressed in researching which companies may be in violation of the Iran Sanctions Act? 

Mr. CHRISTOFF. I think we have seen additional resources that 

State is now dedicating to this effort vis-a-vis prior Administrations. When we did our report in 2007, there was one individual 

over at the State Department that was responsible for trying to develop some information. 

Senator COLLINS. Just one? 

Mr. CHRISTOFF. Yes. There appear to be more individuals that 

are trying to develop a list, but I am not certain when that list will 

be offered to the Congress. I know you all have sent letters to the 

State Department transmitting our list, and the Congressional Research Service’s list, and asking them to comment. And I believe 

you are still waiting to hear back from the State Department as 

well. 

Senator COLLINS. What do you think is a reasonable time frame 

for the State Department to compile a list similar to the list that 

GAO compiled? 

Mr. CHRISTOFF. If you assert a credible methodology, which I believe GAO did—we spent 2 to 3 months using what we believed to 

be a high threshold, a gold standard in terms of identifying companies. One can develop a credible list in that time. 

Senator COLLINS. Congressman, you mentioned in your testimony the efforts of the SEC to strengthen disclosure requirements 

for companies engaged in business in Iran so that potential shareholders are aware of whether or not a company is doing business 

with Iran. I have pushed the Chairman, Mary Schapiro, on this 

issue and did so in a recent Appropriations Subcommittee hearing 

just a couple of weeks ago. And the fact is the SEC has made very 

little progress in carrying out the mandate that this information be 

disclosed to investors. 

I wondered if you could comment on what steps you think the 

SEC should take to strengthen the disclosure requirements. 

Mr. DEUTCH. Sure. Thank you. If our goal is to have the benefit 

of full information—and the party best able to provide that information obviously is the company that is doing business in Iran— 

for the SEC to determine that investments in Iran are material, 

meet the materiality test and, therefore, must be disclosed on their 

SEC filings, that disclosure would then be made available to shareholders. It would be made available to the general public. And as 

16 

I said earlier, at a time when sanctions are being discussed here 

and at the United Nations, it seems certainly to me, and I think 

to most observers, that the decision of a company to invest in Iran 

is material and that its shareholders deserve to know that. That 

would be the best way to make that information available rapidly 

and almost immediately. 

Senator COLLINS. Ms. Pletka, you talked about the difficulty that 

the Federal Government has had over administrations in this area. 

If the U.S. Government were to deny Federal contracts to companies doing business in Iran, do you believe that most of those corporations would cease their activity? Is that a sufficient incentive, 

if you will, for them to stop doing business with Iran? 

Ms. PLETKA. I think that many of them would think twice. Part 

of the problem is that they have really never been forced to make 

that choice. It has not been presented to them as an either/or proposition. 

Certainly there are some that would continue, and we have a 

choice to make at that point. That is why there is a waiver in the 

last. If, in fact, we are required to buy fuel for Afghanistan, for example, from a particular company and we have to do it for national 

security reasons, there is a waiver in law. But companies could also 

be afforded the opportunity to make the choice between the two 

governments. 

I also want to add something, by the way, that has not come up 

that is important. At the time of the 1998 decision on the GazpromTotal-Petronas investment in Iran, when the Secretary of State at 

that time, Madeleine Albright, did a determination and a waiver, 

foreign countries did threaten the United States to take us to the 

World Trade Organization (WTO). And that is another factor that 

I do want to highlight. It is not fair to give a serious reason and 

a flippant reason and leave everything out in between. That is an 

issue. Secondary sanctions are opposed by many countries, and 

these are perceived as secondary sanctions. So I just want to put 

that on your radar screen as something worth understanding. 

Senator COLLINS. Congressman, when Florida enacted its law, 

did it have an impact on the decisions made by the corporations 

that were no longer receiving investments from Florida’s pension 

funds, to your knowledge? 

Mr. DEUTCH. Florida’s decision alone to enact tough divestment 

legislation was not sufficient to move any company to withdraw 

from Iran. However, as a result of Florida’s efforts and those in 19 

other States, there have been decisions made not to proceed on contracts that had been signed, and there were further statements 

that have been made about the decision to withhold the decision 

to go forward to see how these divestment laws continue to play 

out. 

The point is—and I think this is a point that has been made previously by other members of the panel—one of these items alone, 

one layer of sanctions may not suffice to move companies, but when 

you shine the light on these companies and risk the various sanctions that we are discussing, then that type of pressure might well 

move those companies to make decisions which will ultimately impact the regime in Tehran. 

Senator COLLINS. Thank you. Thank you, Mr. Chairman. 

17 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

Just for the information of Members, next is Senator Brown, 

then Senator McCaskill, Senator Ensign, and we are honored to 

have a guest appearance today by Senator Gillibrand. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Thank you, Mr. Chairman, and thank you for 

holding this very important hearing. Being new here, I am flabbergasted, quite frankly, at the failure by the administrations, 

without casting stones, to enforce our laws. And I have always felt 

that we need to use draconian sanctions immediately against Iran 

to ensure that they do not become nuclear-capable and start exporting weapons and terrorism throughout the region. I think it is 

critical, and I am shocked that the present Administration is not 

devising a plan to handle that or enforcing and really putting its 

foot down to say, OK, it is time, we really need to get cracking here 

and enforce our laws, and to send a very strong message that we 

are not going to tolerate anymore people circumventing our laws or 

just ignoring the fact that we need to get serious. 

In the New York Times article, that came out is deeply troubling. 

I know that triggered, obviously, us having a hearing, Mr. Chairman. I was wondering if I could direct a question to Ms. Pletka. 

As you know, over the past decade the Federal Government has 

awarded $107 billion plus to companies doing business in Iran, including $15 billion paid to companies that defied American sanctions law, and the current law, as you know, requires the U.S. Government to deny entry to aliens who we reasonably believe will 

commit unlawful acts. Do you think that non-American chief executive officers (CEOs) of companies that do business in Iran and contravene our sanctions regime should be denied entry on those 

grounds? And would this be an effective sanctions tool if enforced? 

And the reason I ask that is because we are exploring, hopefully 

in a bipartisan measure, to propose legislation, and I am interested 

in working with my colleagues on this that would, in fact, do that, 

to basically deny visas to CEOs and their families as another tool 

in the toolbox. 

Ms. PLETKA. Thank you, sir. I think that visa restrictions are always a useful tool. They are personal, and they tend to get people’s 

attention very quickly. 

I do think that offering that opportunity to the President and 

whoever he delegates to carry out the law gives him an opportunity 

to do that. I do not think that it is something that would be effective were it applied in blanket fashion. But I do think that it would 

enable companies to make a very sharp choice between the opportunities that they see in Iran and the desire to come to the United 

States for whatever purposes. Visiting the United States is not a 

right. It is a privilege. And I think that anytime that you can use 

that in a way that is effective for our national security, you are 

moving in a good direction. 

Senator BROWN. It seems to me that you have to follow the 

money, as usual, and the fact that we could certainly involve the 

United Nations to do certain things, but we really need to get European involvement and make sure a lot of the European Union 

countries that are actually doing very serious business in Iran, ultiVerDate Nov 24 2008 08:45 Oct 18, 2011 Jkt 057936 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 P:\DOCS\57936.TXT SAFFAIRS PsN: PAT
18 

mately recognize and have to determine whether they want a nuclear Iran and whether that outweighs the financial gains. 

Do we need a new law, or should we just enforce the ones that 

we have now? Or is it a combination of the above? What type of 

solutions can any of you offer? And, Congressman, I appreciate that 

is a great idea. That is certainly something we can do. 

Ms. PLETKA. Successive presidents have enormous authorities 

under the International Emergency Economic Powers Act (IEEPA), 

to do all sorts of things to restrict. I think that when we think 

about these things we do need to recognize that we live in a world 

in which most of us believe in free trade and in globalization. And 

I think that we need to understand that when we go after companies and we go after company leaders, we do invite retaliation by 

foreign governments against our own company directors. And so we 

need to be careful and thoughtful when we think about this. 

One of the things that strikes me is that we have an opportunity 

with companies that are engaged in some of the most egregious activities—in other words, companies that are helping Iran’s nuclear 

program, helping Iran’s missile program, helping the Iranian Revolution Guard Corps to promote terrorism—these companies should 

be a special carveout in my estimation. There I think that you 

should feel very enthusiastic about the notion of slapping visa sanctions on the directors of those companies because those are the people that are responsible for not just endangering American lives 

but for the deaths of Americans over the years. 

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

Chairman LIEBERMAN. Thanks very much, Senator Brown. I 

agree with you. Senator McCaskill. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you, Mr. Chairman. 

Common sense tells me that what we ought to do is tell every 

American President that they cannot stand in front of a microphone and talk about sanctions against Iran ever again if they do 

not begin to take the sanction laws that are on the books more seriously than what this hearing has demonstrated. And this is not the 

first time we have covered this subject matter. I know that I had 

the opportunity to talk to General David Petraeus about it at a 

hearing in the Armed Services Committee. I know there was a 

hearing in the Armed Services Committee about this. It is no wonder Iran is so disrespectful if we cannot get our act together to enforce the laws that are on the books. Passing more laws is not 

going to do any good if we do not have the political will to do what 

we need to do. 

I understand the issue of diplomacy and that part of the problem 

is that, our friends do not want us to enforce, and, therefore, if we 

do not enforce against them, then our not so friendly nations say, 

wait a minute, you did not enforce against them, so why are you 

now picking on us? And that is a problem. 

Mr. Christoff, in the GAO report, do you get a sense of the deliberations that are going on in terms of this subject matter? I am trying to get a handle on where is it in government that people are 

sitting around a table and saying, well, we got that law on the 

19 

books, should we ignore it? Should we try to enforce it? Is that conversation even going on somewhere? And if so, where? 

Mr. CHRISTOFF. I think it is starting at the State Department. 

Some of the brief discussions that we had with the new Administration and the office working these issues at the State Department 

indicate that discussion is beginning. We did not see any of these 

discussions when we issued a report in 2007 and looked at the 

State Department’s enforcement of the Iran Sanctions Act. 

I would also note that the State Department is capable of enforcing other aspects of sanctions against Iran. It has, as we said in 

our 2007 report, issued sanctions against 111 firms or entities that 

violated the nonproliferation portion of the collective sanctions 

against Iran. Many of those companies were Chinese companies. 

But it has not moved forward on that portion of our collective sanctions that deal with the energy sector. 

Senator MCCASKILL. So they are selectively picking out some 

parts of the law they like and ignoring the parts of the law they 

do not like, in essence? 

Mr. CHRISTOFF. Well, I do not want to put those words in their 

mouths, but by their actions, it appears that it is more difficult for 

them to impose sanctions on energy companies through ISA. 

Senator MCCASKILL. What about the issue of changing names of 

companies? I am a big believer that you have to have accountability. Who is in charge of investigating whether or not companies 

are changing their names in order to evade sanctions? Where 

would the responsibility for that lie? 

Mr. CHRISTOFF. That I do not know. 

Senator MCCASKILL. Would you like to take a stab at it, Ms. 

Pletka? You have been around this subject matter for probably—— 

Ms. PLETKA. Too long. 

Senator MCCASKILL [continuing]. More years than you want to 

admit. 

Ms. PLETKA. Yes, that is probably true. 

Senator MCCASKILL. Who in the grand labyrinth of government 

is supposed to be in charge of even tracking what companies fall 

under these sanctions much less enforcing them? 

Ms. PLETKA. That is an excellent question. In a quarter of a century, I have never been able to figure out who actually wears the 

chief’s hat on this issue. Theoretically, the intelligence community 

is tracking companies that change their names. Lots of companies 

do not change their names and are serial violators of our proliferation law and various Iran sanctions, particularly Chinese companies. 

It is absolutely remarkable that we together have been able to 

generate an enormous amount of information that is apparently entirely mysterious. And on the energy side, I think that where you 

have seen a change for the good at the Department of State, in this 

Administration we have seen a change for the bad on the energy 

side. The Energy Information Agency no longer provides significant 

amounts of information about companies doing energy business in 

Iran. And so rather than getting more information, we are getting 

less. 

Senator MCCASKILL. Mr. Chairman, it seems like maybe what we 

need to do is start with figuring out who is in charge. I think 

20 

maybe we have avoided accountability on this because we have not 

flown down long enough to figure out who is the person in government that is not doing their job, and as long as we do not identify 

who that person is, they are not going to do their job. It is mindboggling to me that we do not know who to yell at. 

Yes, Congressman Deutch. 

Mr. DEUTCH. Senator McCaskill, I worry that at least with respect to identifying the companies, whether or not to impose sanctions is the next step, but in terms of identifying the companies, 

I think we have determined here that we have made this a harder 

task than, in fact, it may be. 

In Florida, on a quarterly basis, the Pension Board publishes a 

list of companies who are doing business within the energy sector 

in Iran, and part of that time is spent reviewing exactly this issue 

of company name changes and subsidiaries, and efforts sometimes 

to shield, sometimes just corporate restructurings to ensure that 

the correct names remain on that list. I am not sure ultimately 

who should have responsibility, but the Department of Energy, 

again, as Ms. Pletka points out, has published these reports on a 

regular basis, factual reports. That might be a place to identify 

companies. 

Senator MCCASKILL. Well, welcome to Congress. I think you are 

going to be a great addition to the intellectual heft of the body in 

which you serve, and clearly you have a great work ethic, and we 

welcome you here. 

Let me briefly talk about companies that claim to do business 

with Iran on their Web sites. There is a company that we have 

been trying to make accountable. Senator Collins is a cosponsor of 

the Rocky Baragona law. Kuwait and Gulf Link Transport (KGL) 

killed a soldier of ours in Iraq through their negligence and have 

evaded responsibility for that by avoiding personal jurisdiction in 

the United States, and we are trying to fix that law by requiring 

companies that do business with us to accept jurisdiction as part 

of their contractual obligation to do government business with the 

United States. 

KGL brags on its Web site that it does business with an Iranian 

shipping company. And I am wondering, in Florida, Congressman 

Deutch, would somebody bragging on their Web site that they do 

business in Iran, would that be sufficient for the officials in Florida 

to consider them a company that would not be included? 

Mr. DEUTCH. If, Senator McCaskill, they fall within the requirements of the Florida act, which is titled the same as the Iran Sanctions Act, then certainly as the Pension Board and its outside research firms conduct their research, self-disclosure by a computer 

would certainly warrant inclusion on the list and would trigger the 

correspondence with that company going forward. 

Senator MCCASKILL. It seems like self-disclosure would be the 

easiest way to nail them. 

Mr. DEUTCH. It does. 

Senator MCCASKILL. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks, Senator McCaskill. 

Senator Collins and I have been talking about what is an appropriate follow-up, and one thing we are thinking about is that we 

should direct a letter to, particularly, the Secretary of State, also 

21 

the Secretary of Defense, presenting the GAO report and asking for 

a response. What are you going to do about it? Why is this happening? But it strikes me that we should start with a clear identification of who at the State Department is responsible, so we will 

put that together, and we will ask Members of the Committee to 

sign. Thank you. 

Senator Ensign. 

OPENING STATEMENT OF SENATOR ENSIGN 

Senator ENSIGN. Thank you, Mr. Chairman. It is amazing how 

much there is agreement going around the table today. 

Senator MCCASKILL. Look out, it might catch on. 

Senator ENSIGN. Yes, be careful. [Laughter.] 

And I think it is because there is a lot of frustration. There has 

been a lot of frustration over the years with sanctions that have 

not been enforced, and I think that no matter whether you are a 

Republican or Democrat, when you see something that is wrong out 

there, it is very frustrating to a lot of us. 

One of the questions that I would like to get to is under the IranNorth Korea-Syria Nonproliferation Act, the Administration is supposed to submit a report every 6 months. Do we know the last time 

that a report was submitted to the Congress? 

Ms. PLETKA. It was 2 years ago, I think, they submitted a report. 

Senator ENSIGN. I think it was 2008, and from what I understand, they have no plans to submit their next report. This gets 

back to who at the State Department is responsible. We pass these 

laws saying you must do this, but then there is no penalty when 

they do not do it. And that is something that, the Congress, really 

the only thing we have is basically the purse strings if they do not 

do something like that, and that is something that we should start 

considering when we actually—do we really mean what we say 

when we want these reports every 6 months? 

This gets to my next question. You know, we have been exploring 

how these entities have done business in Iran, how they are still 

able to do business with the U.S. Government to get contracts. In 

the course of the GAO study of this matter, did the GAO make an 

assessment of why the State Department has not sanctioned anyone under this act? 

Mr. CHRISTOFF. No. You would have to go back to the 1998 decision when the State Department waived sanctions against several 

foreign firms. Some of the reasons that the State Department cited 

were: Concerns about maintaining solidarity with the European 

Union; concerns about Strategic Arms Reduction Treaty (START) 

negotiations with the Russians; and the Asian financial crisis with 

the Malaysian firm. That is the only evidence out there as to why 

the State Department has not enforced the Iran Sanctions Act. 

Senator ENSIGN. Ms. Pletka, you have been around this for a 

long time. Do you have any idea of why the State Department has 

not sanctioned anyone under this Act? Because they have loopholes 

that they can—we used to say drive a truck through, but maybe 

more of a freight train or an oil tanker would be more appropriate. 

Ms. PLETKA. In fact, yes, the Chairman asked a similar question, 

and I think that, frankly speaking, that is a question best directed 

to State. There is always an excuse. There is always something 

22 

going on in diplomacy. Part of the difficulty of the structure of our 

government is that when the Department of State is responsible for 

the conduct of diplomacy and the conduct of the imposition of sanctions and decisions, they tend to weigh one against the other. 

An interesting question was asked a moment ago, which is, why 

are we so much more serious about the nonproliferation violations 

than we are about the energy sanctions? And a lot of that has to 

do, again, with the structure of the Department of State. The 

Under Secretary for International Security and Nonproliferation 

and that Bureau traditionally has been far more serious about violations of the missile technology control regime and our various 

Arms Export Control Act violations and nuclear proliferation, then 

the Bureau of Near East Affairs has been serious about problems 

with Iran. 

It is a major challenge, and oversight is the answer. 

Senator ENSIGN. This feeds right into my next question about the 

current bill that is in conference, the Iran Sanctions Act, to expand 

the authority of the President to impose sanctions upon entities 

providing refined petroleum products. There are reports out there 

to put into the bill a cooperating country exemption, and so a couple of questions go along that line. If there was a cooperation country exemption put in the bill, could China be considered a cooperating country under current law—or under a law like that? 

Ms. PLETKA. Well, it depends who you ask. If you ask me, the 

answer is no. But there is a cooperating country exemption in this 

bill, because if you cooperate, then you are not committing a 

sanctionable act and you will not be sanctioned. It is really pretty 

straightforward. If you do not do it, then you are cooperating, and 

you are not going to be sanctionable. 

So the notion that you have to provide a blanket exemption to 

countries that in the judgment of somebody—I think we still cannot figure out who—is a really big mistake, and I think that this 

really goes to the bona fides of the Administration in negotiating 

on this bill and their intention to enforce whatever ends up coming 

out of conference. 

Senator ENSIGN. What if, say, the Russians decide to give certain 

missiles, the SA–20 or SA–21, would that be considered cooperating? 

Ms. PLETKA. I think the Administration has suggested that they 

are getting good cooperation from the Russians and that they are 

getting good cooperation from the Chinese. And what they characterize as good cooperation is a willingness to sit down in New York 

at the United Nations and discuss the imposition of sanctions. And 

our standard apparently is that they are willing to come and discuss them, not that they are willing to agree to a stringent set of 

sanctions but that they are merely willing to sit down with us, because apparently good behavior is constituted by just sitting down. 

And, yes, the Russians have reiterated as recently as last month 

that they were going to be transferring a S–300 air defense system 

to the Iranians that would enable them to withstand a serious attack from outside. 

Senator ENSIGN. Thank you. 

Mr. Chairman, I think that some of the answers to the questions 

illustrate the problems that everybody has been asking here, and 

23 

why I think there is so much frustration in the Congress with what 

is going on with diplomacy when it comes to Iran, because it is 

making our country look weak, it is making these sanctions completely ineffective. And if we really want to stop some of the proliferation issues and have some teeth behind it, we actually have 

to enforce the current laws. As Senator McCaskill said, what is the 

use of having new laws if our current laws are not even being enforced? 

So we need to get much tougher, and I am glad to hear in a bipartisan way that people are talking about getting tougher. 

Chairman LIEBERMAN. Thanks, Senator Ensign. Thanks for that 

statement. Thanks for your excellent questions. 

Senator Gillibrand has a real interest in this subject and this 

legislation. She asked if she could come by and ask some questions, 

and we are happy to give you that opportunity now. 

Senator Gillibrand, it is a pleasure to have you here. 

OPENING STATEMENT OF HON. KIRSTEN E. GILLIBRAND, A 

U.S. SENATOR FROM THE STATE OF NEW YORK 

Senator GILLIBRAND. Well, thank you, Mr. Chairman. I am extremely grateful for your leadership on this issue and holding this 

hearing. Thank you, Madam Ranking Member, as well for your 

leadership. 

I was most alarmed when I read a New York Times article in 

March that said the Federal Government has awarded more than 

$107 billion in contract payments, grants, and other benefits over 

the past decade to foreign and international American companies 

while they were doing business with Iran, and did an internal analysis and found that $15 billion was paid to companies that defied 

our sanctions law. So, obviously, this is something that we have all 

been discussing about how so much of American contracts could be 

going to companies doing business with Iran. 

I do not know if you would know this question, but if we are 

doing business with them and Iran is doing business with them, 

relatively who is doing more business? Is it worth more to them to 

maintain our business or do they do more with Iran? 

Mr. CHRISTOFF. Well, those are some good questions that we 

might be able to research for you and submit for the record. 

Senator GILLIBRAND. That would be helpful because, obviously, 

as legislators we want to solve this problem and we want to know 

how we can influence behavior, and not only enforce the sanctions 

laws but figure out how we could perhaps work behind the scenes. 

And to that point, the Treasury Department has been very effective in getting 80 banks to pull out of Iran when sanctions on the 

strategy sector have not been implemented. And so we have worked 

well through the Treasury Department to influence behavior. Are 

there any ways that we should be doing that in the energy sector, 

working behind the scenes perhaps more effectively than we have 

done overtly? 

Ms. PLETKA. There is no question that there are a lot of opportunities in the energy sector, and those can also be undertaken by 

the Treasury if other branches of the government are unwilling. I 

think the problem for the Treasury Department and for this new 

office under Stuart Levey that was created in 2004 is a limitation 

24 

on resources. There are additional resources in this bill for Under 

Secretary Levey’s office to do more designations, to do more investigations, but information is key and they need more of it. They 

need to move forward more quickly. The problem is that, we are 

now looking at 14 years since the Iran Libya Sanctions Act was 

passed, and if we are going to take another 14 years to get to this 

point, we are going to be beyond Iran having a nuclear weapon. 

So the Congress needs to encourage them not just to move into 

different areas, but to move a little bit more quickly. 

Senator GILLIBRAND. Right. Now, you mentioned the Treasury 

Department doing other responsibilities. The Treasury Department 

is responsible for Iran export sanctions, but the Commerce Department oversees Syrian sanctions and other export licenses. But one 

of the fundamental challenges for the Treasury Department is they 

do not have an electronic tracking system and they have an inability to inspect shipments or hold exporters accountable. So how 

could you address that shortcoming in the Treasury Department’s 

ability? And is it justifiable that they still then maintain the responsibility of Iran sanctions if they do not have those capabilities? 

Ms. PLETKA. I think it is a little bit of a question of apples and 

oranges. You are talking about export controls in this case, and I 

do not think that the challenge that we are facing is one in which 

we are worried about things getting through the cracks and being 

exported from the United States to Iran. Rather, we are worried 

that we are, because money is fungible, enriching companies that 

are doing business in Iran with taxpayer dollars at the same time. 

Defense Secretary Robert Gates has talked about revisions to our 

export control laws and rationalization of the export administration 

of this country so that we do a better job and, the right arm knows 

what the left arm is doing. But the licensing process is not one that 

has directly affected the ability of the Treasury Department to enforce. 

I think that the ability of the Treasury Department to enforce is 

most severely impacted by a limitation on resources, and if I may 

put it in the vernacular, a really bad attitude on the part of some 

parts of the government in moving forward. 

Senator GILLIBRAND. Right. But I am worried with exports because of dual-use issues. There is obviously a concern that if we are 

exporting airplane parts that are then being used for military use 

and similar types of transferable technology, that we have some 

measure to investigate whether what we are sending over there is 

being appropriately used and not going to strengthen Iran’s military intentions. 

Ms. PLETKA. End-use requirements are very important, and certainly it is a very important area for oversight. At this point, however, we are looking at Iran moving to a third-generation centrifuge. We are looking to them working very closely with China, 

possibly with North Korea and with other countries, trying through 

illegal front companies mostly, Iranian Revolutionary Guard Corps 

(IRGC) front companies, to get stuff from Europe. They are not 

looking to us as much. So that last step I would say is not going 

to be in getting dual-use equipment from the United States. It is 

highly sensitive—— 

Senator GILLIBRAND. They will get it from somewhere else. 

25 

Ms. PLETKA [continuing]. Equipment from other countries. 

Senator GILLIBRAND. Can I just shift gears to a separate issue 

that I want to address? One of the concerns is that our sanctions 

do not touch upon natural gas. Why do you think our current sanctions or the bills in conference address the goods, services, and 

technologies that aid in production and export of liquified natural 

gas? 

Ms. PLETKA. The truth is that you should be asking the author 

of the legislation before me. I think it is important—— 

Senator GILLIBRAND. Do you think it should, though? Or do you 

think it—— 

Ms. PLETKA. I think it is very important to be consistent. I think 

it is very important to be specified. I also think that it is very important not to afford the Administration, the Executive Branch, the 

opportunity to say that Congress has written such overbroad legislation that it is impossible to enforce. So if we are going to move 

forward with not just oil but gas, liquified natural gas, etc., and we 

are going to go to all parts of a supply chain and the technology, 

then the key is for the legislation to be extraordinarily targeted 

and extraordinarily specific. After all, we are really not interested 

in expending our taxpayer dollars and resources going after folks 

who are shipping pencils to the National Iranian Oil Company. We 

are interested in things that are actually key to their advancement 

and the production of refined products, gas, etc. 

So it is necessary to be specific, not just in legislation but in report language, and I agree with you it is important not to create 

new loopholes, because goodness knows they will be found and they 

will be driven through. 

Senator GILLIBRAND. The last issue in my few seconds remaining, I have read a lot of reports that the Revolutionary Guard has 

begun to take up the slack in areas where sanctions have actually 

worked. Do you have any thoughts or comments on that to inform 

our panel? 

Ms. PLETKA. That is absolutely true. Over the last few years, beginning for the most part in the Ahmadinejad presidency, the Iranian Revolutionary Guard has begun to play a dominant role in the 

Iranian economic sector. And while I think that the Administration 

is doing exactly the right thing—as Secretary of State Hillary Clinton said, that Iran is really becoming a military dictatorship. In 

targeting the IRGC, unfortunately, I do not think that we have 

caught up in terms of identifying the companies that are now 

owned by the IRGC or the role that they play in the government. 

If you look at—and we are about to produce a long list of the 

companies that have been taken over. Iran has been engaged in a 

2-year-long process of privatization, which has, in fact, not involved 

the devolution from government ownership to private ownership, 

but government ownership to IRGC ownership. 

Senator GILLIBRAND. Right. 

Ms. PLETKA. And so the IRGC is absolutely involved in every 

part of the Iranian economy, including, by the way, in the financial 

sector, yet we have yet to sanction IRGC-owned banks—something 

that should be fairly easy under our own laws, certainly, but even 

under relevant U.N. Security Council resolutions that have already 

been passed. So it is a great opportunity. 

26 

Senator GILLIBRAND. Thank you. 

Thank you, Mr. Chairman. Thank you, Madam Ranking Member. 

Chairman LIEBERMAN. Thanks very much, Senator Gillibrand. 

That last matter of sanctioning the IRGC, which really is now 

dominating increasingly large sections of the Iranian economy— 

and, of course, also funding terrorism and directing their most critical parts of the Iranian military—is a focus now of the conferees 

on the current bill. 

So really on Senator Collins’ behalf and mine, I thank the three 

of you for the time you gave. This has been a very informative, important, and I would say energizing hearing, no pun intended. But 

the facts here are very compelling, and it is why in addition to our 

concern that Iran has continued to go forward headlong toward a 

nuclear capability without any regard to what we have done, the 

facts cry out for us to adopt new legislation, but also to begin to 

put pressure—and we will try to start to do this with the letter we 

are talking about—on the State Department to enforce the existing 

legislation. 

You joked a bit about making the world safe for cocktail parties, 

but there is a way in which—it is easy for us to say, but I believe 

it so I will say it—that diplomacy occurs within the confines of the 

relationships. Sometimes negotiators to a private disagreement will 

in the end try to satisfy each other in the conference room negotiating, sometimes forgetting what is happening outside. Sometimes 

members of conference committees do that as well. And so there is 

an actual human tendency to do that, but it forgets what is at work 

here. 

As you all know—and I will not hold you to a political opinion, 

Mr. Christoff, but the other two, I will—the experts on Iran all say 

that the only prayer of a chance we have to stop their nuclear program is if they have no doubts about our will, our strength, and 

our steadfastness. And right now we are sending a very uncertain 

signal to them. 

Senator Collins, do you want to add anything? 

Senator COLLINS. Thank you, Mr. Chairman. I just want to 

thank you for holding this hearing. All of us are aware of the problem. It has been going on for a long time, and I think all of us are 

determined to bring about enforcement of current laws as well as 

to strengthen those laws. But as we have all said, sanctions have 

no impact if they are not enforced. 

Chairman LIEBERMAN. Hear, hear. Thank you all. We are going 

to keep the record of the hearing open for 15 days for any additional statements or questions from the Members or the witnesses. 

With that, the hearing is adjourned. 

[Whereupon, at 12:25 p.m., the Committee was adjourned.] 

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