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[Senate Hearing 110-718]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 110-718
 
                     MEETING THE IRANIAN CHALLENGE
=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 9, 2008

                               __________

       Printed for the use of the Committee on Foreign Relations

                   Available via the World Wide Web: 
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                COMMITTEE ON FOREIGN RELATIONS          

           JOSEPH R. BIDEN, Jr., Delaware, Chairman          
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 GEORGE V. VOINOVICH, Ohio
BARACK OBAMA, Illinois               LISA MURKOWSKI, Alaska
ROBERT MENENDEZ, New Jersey          JIM DeMINT, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, Jr., Pennsylvania   DAVID VITTER, Louisiana
JIM WEBB, Virginia                   JOHN BARRASSO, Wyoming
              Antony J. Blinken, Staff Director          
       Kenneth A. Myers, Jr., Republican Staff Director          

                             (ii)          

                            C O N T E N T S

                              ----------                              
                                                                   Page

Biden, Hon. Joseph R., Jr., U.S. Senator From Delaware...........     1

Burns, Hon. William J., Under Secretary for Political Affairs, 
  U.S. Department of State, Washington, DC.......................     6

      Prepared statement.........................................    10

Lugar, Hon. Richard G., U.S. Senator From Indiana................     5

Additional material submitted for the record.....................    35

                                 (iii)

                     MEETING THE IRANIAN CHALLENGE

                              ----------                              

                        WEDNESDAY, JULY 9, 2008

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3:02 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Joseph R. 
Biden, Jr. (chairman of the committee) presiding.
    Present: Senators Biden, Kerry, Feingold, Bill Nelson, 
Menendez, Cardin, Casey, Webb, Lugar, Hagel, and Murkowski.

        OPENING STATEMENT OF HON. JOSEPH R. BIDEN, JR.,
                   U.S. SENATOR FROM DELAWARE

    The Chairman. The hearing will come to order. Mr. 
Secretary, welcome and I apologize for starting late. As you 
know, we have some important votes.
    Thank you very much. It's nice to know I can't be heard 
without a microphone.
    I was telling my colleagues here, I said I started to walk 
in and Bertie, who runs this committee, said: Don't go in yet, 
Mr. Chairman; we've got an overflow crowd in the hall and we've 
got to fill up another room. So I want to explain, he's the 
reason I was an extra 2 minutes late. But I was here.
    Welcome, Mr. Secretary. It may hurt your reputation, but 
you're among friends here. There's a great deal of respect for 
you on both sides of the aisle and both sides of the lectern 
here on this committee. So it's great for you to take the time 
to be with us.
    Let me get right to the point of today's hearing and let me 
be blunt. In my view, as a result of the policies the 
administration has pursued the last 6 years, I believe that 
it's Iran and not freedom that has been on the march in the 
Middle East the last 6 years. I think Iran's influence has 
grown in Iraq. Its proxy Hezbollah has become ascendant in 
Lebanon. Its ally Hamas dominates Gaza. It's testing 
intermediate range missiles and Iran is getting closer to a 
nuclear weapon capacity by mastering the process of enriching 
uranium.
    The issue is not whether or not Iran presents a real 
security challenge. It does over time. The question is whether 
we have a realistic view of that challenge and a coherent 
policy to deal with that challenge. Iran, to state what seems 
to be the obvious, but it's not so obvious to many of our 
colleagues and people in town, Iran is not 10 feet tall. Iran 
is not the Soviet Union with 42 divisions ready to move through 
the Folda Gap. It is not Panzer divisions of the German army in 
the late 1930s. Despite its large oil resources, it faces 
serious economic problems, including high inflation and 
unemployment. It has very few friends and its people chafe 
under the social and political repression that exists within 
that country.
    It spends about $7 billion a year on defense every year, 
about what we spend for 2 weeks in Iraq--$7 billion a year; we 
spend that in 2 weeks in Iraq.
    But Iran's acquisition of a nuclear weapon would 
dramatically destabilize an already unstable region of the 
world and probably fuel a nuclear arms race in my view in the 
region. It is profoundly in our interest to prevent that from 
happening.
    Our choices it seems to me are fairly straightforward. We 
either engage, we maintain the status quo, or we use some sort 
of military force, whether it's directly against Iran itself or 
in the gulf or against its interests. If we don't engage, then 
we're stuck with the Hobson's choice between an ineffectual 
policy that allows our partners but not the United States to 
engage Iran on its nuclear program and military strikes that 
could quickly spiral out of control.
    Last week, in response to an incentive package that the 
Permanent 5 members of the United Nations Security Council and 
Germany, the so-called P5+1, Iran has said it's willing to 
begin comprehensive negotiations. Time will tell. We cannot 
take them at their word, but they have stated they are 
prepared. But it did not indicate that it will suspend its 
uranium enrichment activities as a precondition for those 
talks.
    Now, as you consult with other capitals on the response to 
Iran's response, I respectfully urge you, Mr. Secretary, to 
find creative ways to advance the dialogue with Iran by 
building on the steps that the administration has already 
taken. Among those steps was Secretary Rice's decision to 
personally sign a letter to the Iranian Foreign Mnister 
transmitting the incentives package. That may seem like a minor 
gesture to everyone but you at the table, but the truth of the 
matter is I'm told her signature was taken as a signal of a 
real support for the incentives package, not just the idea of 
our European friends or the Permanent 5, not just by Tehran, 
but it was also taken seriously, her signature, by the P5 plus 
Germany, that we were really in it, we really were part of this 
initiative.
    Other similar steps could solidify the P5+1 coalition. For 
instance, I've seen reports suggesting the administration is 
considering establishing an American diplomatic presence in 
Tehran for the first time in 30 years. I think that's a good 
idea. A diplomatic presence would increase our knowledge of the 
forces at work inside Iran. It would give us a stronger 
diplomatic hand to play, and it would decrease the chances of 
miscalculation. It would also help us more effectively operate 
exchange programs so as to increase contacts between Americans 
and the Iranian people.
    For those who say aren't we giving up something in return 
for nothing from the Iranians, I would argue what I've just 
stated is something in terms of our interests. I would also 
suggest the world should see whether or not Iran would accept--
would Iran accept such a mission, because it will tell us a lot 
in my view about the seriousness in being willing to negotiate.
    More broadly, Mr. Secretary, I think the time has come for 
us to strike a new bargain with our P5+1 partners. The net 
effect of demanding preconditions that Iran rejects is this: 
That we get no results and Iran gets closer to a bomb. And by 
the way, the P5+1 already is negotiating with Iran. What else 
could we call the process in which the P5 presents a detailed 
offer to Iran, which comes back with a counteroffer, which 
produces a response from the P5+1? I call that a negotiation. 
That's what negotiations are. I don't know what else you'd call 
that.
    I believe the United States should agree to directly engage 
Iran first in the context of the P5+1 and ultimately country to 
country, just as we did in North Korea. Remember, after we 
pulled out of the Agreed Framework we insisted that North Korea 
fully disclose and abandon its uranium enrichment program as a 
precondition for resuming talks. Pyongyang refused, and instead 
increased its stockpile of plutonium by 400 percent. We finally 
got smart and reengaged without precondition and now we have a 
realistic chance of securing a verifiable end to North Korea's 
nuclear weapons program. There's a way to go. We have to 
verify. But there is real progress.
    Direct U.S. engagement with Iran in country to country 
negotiations is something that the European Union, Russia, and 
China have told me personally, their representatives, and I 
imagine my colleagues, that they would welcome.
    In exchange, we should insist on firm commitments from 
those governments--if we were to do this--to impose serious 
sanctions if Iran continues to defy the U.N. Security Council 
by not suspending enrichment and related work on plutonium 
reprocessing. Engaging Iran and sanctioning Iran are not only 
compatible, in my view they are mutually reinforcing, 
notwithstanding the contrary argument that always is made in 
this town. Again, let me say: Engaging Iran and sanctioning are 
not only compatible, they are mutually reinforcing. Sanctions 
can provide the leverage for negotiations.
    I know this point will not be lost on you, Mr. Secretary, 
given your central role in the outreach to Libya. We also need 
to do a much better job with our public diplomacy. I'm not sure 
how many people--I will not take the time, in the interest of 
my colleagues, to lay out the grand work you did with regard to 
Libya. But I remember getting the call--and I guess you were 
probably partly to blame for it--not too many years ago saying: 
There's a plane waiting for you at the airbase to fly to meet 
with Qadafi.
    So why me? They said because they wanted a Democrat, 
basically, to go over and face to face look at Qadafi and make 
clear to him that I supported the President's position if he 
did what was required. The point being, if we could talk and 
sit down with Qadafi, who did engage directly in terrorist 
activities, we ought to be able to sit down and engage with 
Iran.
    We should exploit the cracks within Iran's ruling elite and 
between its rulers and its people. The Iranian people need to 
know that their government is choosing isolation over 
cooperation. Right now, the way we position ourselves, we're 
made to look like the bad guy. Always rebroadcast in Iran is 
the veiled threats of the United States of America, when in 
fact the Iranian people don't like their government very much 
to begin with, and I think it's very important they fully 
understand that it is us who are willing to engage and not 
their government if their government chooses not to engage.
    So does the wider international community need to 
understand this. We need to publicize the incentives offered to 
Iran. Those include greatly expanded trade and properly 
safeguarded, state of the art nuclear reactors suited to 
producing energy and not for producing materials for weapons 
programs. The Foreign Ministers of the P5+1 should use every 
opportunity to stand together and make clear to the world, not 
just to the Iranians, all the benefits that Iran is forgoing.
    When it comes to countering Iran's regional influence, we 
have to be smarter with our diplomacy. I respectfully suggest, 
Mr. Secretary, we can undermine Iran's connection with 
Hezbollah in my view by actively supporting Israeli-Syrian 
peace talks. We can weaken Iran's ally Hamas with success in 
the peace process, that undercuts the claim that terrorism is 
the path to a Palestinian state.
    As to Iran's influence in Iraq, the idea that we could wipe 
out every vestige of that, as some of my colleagues suggest, is 
a fantasy. It's a fantasy. Even with more than 140,000 American 
troops in Iraq, our ally in Baghdad, the Prime Minister of 
Iraq, Mr. Maliki, greets the Iranian leader Ahmedinejad with 
kisses on both cheeks, travels to Tehran to consult, to 
explain, to seek approval. Like it or not, Iran shares a long 
border with Iraq. Iran and Iraq share a long history. The idea 
that we can somehow expunge that from the consciousness of both 
nations I think is fantasy.
    The best way to promote more responsive Iranian behavior in 
my view, Mr. Secretary, in Iraq is for Iran to confront the 
possibility that instability could spill over the borders of 
Iraq into Iran. We can do that by making clear our intention to 
begin to redeploy American combat forces out of Iraq, not 
withdraw all of them. But we do not need 140,000 troops there.
    Right now Iran likes it exactly like it is, with the United 
States bogged down and bleeding and our ability to present a 
credible military threat short of an all-out Armageddon, a 
credible military threat, considerably reduced in the eyes of 
the leaders in Tehran.
    Mr. Secretary, I believe that now is the time for 
aggressive diplomacy for Iran, including direct U.S. 
engagement, if for no other reason than to demonstrate to our 
allies that we are not the problem and put the onus on the 
Iranians either to engage forthrightly or demonstrate to the 
world they are the problem and unwilling to do so.
    There is still a realistic chance, not a guarantee, but I 
believe there's a realistic chance that the world can change 
Iran's behavior. If we go the extra diplomatic mile, the world 
is much more likely to stand with us if, God forbid, diplomacy 
fails and we need to engage in stronger action.
    We didn't do that in Iraq. We should not make that mistake 
twice.
    I look forward to your testimony, and I always look forward 
to the chairman's comments as well.
    Senator Lugar.

          OPENING STATEMENT OF HON. RICHARD G. LUGAR, 
                   U.S. SENATOR FROM INDIANA

    Senator Lugar. Thank you very much, Mr. Chairman. I join 
you in welcoming our friend Secretary Burns back to the 
committee. We appreciate especially your efforts to work 
closely with our committee and with the Congress, and we look 
forward to your testimony on the critical topic of American 
policy toward Iran.
    Iran's leaders have thus far rebuffed the international 
community's offer to negotiate an acceptable arrangement for 
their nuclear program. As a result, thanks in part to United 
States leadership, the U.N. Security Council has voted three 
times to impose sanctions on Iran and may do so again.
    Clearly, we do not want to undercut multilateral diplomatic 
efforts undertaken by European allies and the United Nations 
Security Council. Sanctions on Iran that have come out of this 
process have been hard-won and this multilateral approach to 
the problem I believe has directly bolstered United States 
efforts to encourage foreign governments and banks to curtail 
commercial benefits to Iran, thereby enhancing the impact of 
United Nations sanctions.
    The task for American diplomats continues to be solidifying 
an international consensus in favor of a plan that presents the 
Iranian regime with a stark choice between the benefits of 
accepting a verifiable cessation of their nuclear program and 
the detriments of proceeding along their current course.
    The questions for U.S. policy include: What can be done to 
accelerate the United Nations process? What else can we do to 
strengthen global cohesion and determination to ensure that 
Iran does not develop a nuclear weapons capability? And, are we 
maximizing our economic and regional leverage while maintaining 
diplomatic channels that will minimize the possibilities for 
miscalculation, improve our ability to interpret what is going 
on in Iran, and strengthen our efforts to enlist the support of 
key nations?
    Several weeks ago, newspapers reported that Secretary Rice 
had mentioned during a flight the possibility of establishing a 
U.S. visa office or some similarly modest diplomatic presence 
in Iran, as the Chairman has just mentioned. Reportedly, the 
idea was motivated by an interest in facilitating more exchange 
and more outreach with the Iranian people. State Department 
spokesmen downplayed the report, saying nothing was 
contemplated in the near term.But I would be much interested if 
you have any thoughts or any news on this idea in what I 
believe is a very forward-looking context.
    Similarly, do we believe that the current negotiation 
format, led by Germany, France, and the United Kingdom, gives 
us the best chance for success? Though we are coordinating 
closely with this group, should U.S. diplomats be engaging more 
directly in this multilateral effort? In short, should we have 
a seat at the table when Mr. Solana next visits?
    Finally, without losing focus on the immediate 
nonproliferation issue, we cannot fail to take into account the 
more complex long-term situation presented by Iran. Neither a 
successful diplomatic agreement on the nuclear issue nor the 
use of military force against Iran's nuclear facilities would 
change finally the underlying reality that we will continue to 
have to contend with Iran on a wide variety of issues far into 
the future. Iran's young and educated population, its natural 
resource wealth, and its strategic location make it a relevant 
player in the Middle East that we will not be able to ignore.
    Some thought has to be given to establishing a more stable 
long-term relationship between Iran and the United States. Such 
a relationship is difficult to conceive, admittedly, at this 
time in history. Iranian policies in Iraq, Lebanon, and the 
Israeli-Palestinian arena threaten our immediate interests in 
the Middle East. Iran's provocative foreign policy and the 
bombastic rhetoric of its president have fed concerns among its 
neighbors that it seeks to dominate the region. But history 
demonstrates repeatedly that conditions change and 
transformations are possible. We need to make sure that we are 
incorporating an over-the-horizon view into our policy 
judgments.
    I noted in reference to the chairman's earlier thoughts 
about the perspective on Iran a comment made by Fareed Zakaria 
in a Newsweek magazine article in which he gave a statistic 
that our economy is 68 times the size of Iran's, our military 
budget 110 times the size of Iran's. It's good to have that 
perspective. Likewise, it is very necessary to think about a 
long-term bilateral relationship between the two nations, based 
upon the promise of the young and the fact that there is a 
continuity of resources and vitality in that country that will 
simply not go away.
    Once again, it's a pleasure to have you before us, 
Secretary Burns, and we look forward to your insights on these 
issues.
    I thank you, Mr. Chairman.
    The Chairman. Thank you.
    Again, Mr. Secretary, it's a delight to have you here. As I 
said, you have universal respect on this committee. We 
appreciate your being here, and the floor is yours.

    STATEMENT OF HON. WILLIAM J. BURNS, UNDER SECRETARY FOR 
  POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC

    Secretary Burns. Thank you very much, Mr. Chairman, Senator 
Lugar, members of the committee. I want to thank you for the 
opportunity to appear before the committee today to discuss 
U.S. policy toward Iran. As you've mentioned, I've just 
returned from 3 years as Ambassador in Moscow, and I look 
forward very much to working with all of you in my new 
position.
    I'd ask that my written statement be included in the record 
and, with your permission, I'd offer a very brief oral summary 
and highlight a few key points.
    The Chairman. The entire statement will be placed in the 
record.
    Secretary Burns. Thank you.
    First, the behavior of the Iranian regime poses as serious 
a set of challenges to the international community as any 
problem we face today. Iran's nuclear ambitions, its support 
for terrorism, and its efforts to undermine hopes for stability 
in Iraq and Afghanistan, including lethal backing for groups 
attacking American troops, are all deeply troubling. So are its 
destructive actions in Lebanon, its longstanding rejection of a 
two-state solution for Israelis and Palestinians, and the 
profoundly repugnant rhetoric of its leaders about Israel, the 
Holocaust, and so much else.
    Compounding these concerns is Iran's deteriorating record 
on human rights. Ten years ago we saw signs of opening in 
Iran's political and social systems. Today, sadly, Iranian 
citizens are subjected to increasingly severe restrictions on 
basic rights and increasingly blatant manipulation of the 
electoral process.
    Second, it's important to understand not only the dangers 
posed by Iranian behavior, but also the vulnerabilities and 
complexities of Iranian society. To be sure, the Iranian regime 
is a potent regional adversary, tactically cunning and 
opportunistic and good at asymmetric conflict. But as you said, 
Mr. Chairman, it is not 10 feet tall. It often substitutes 
assertiveness and self-aggrandizing pronouncements for enduring 
power, promoting the illusion of Iran as a real counterweight 
to the United States or to the institutions of global order, 
especially the United Nations and the International Atomic 
Energy Agency.
    The truth is a little bit more sobering for Iran. Because 
of its behavior, it can count on few allies in the world beyond 
the unimposing trio of Cuba, Belarus, and Venezuela, and 
sometimes Syria, and no real friends that could offer strategic 
reassurance, global investment, or a secure future in a 
globalized world.
    Its neighbors are all wary. Most Iraqi leaders want normal 
relations with Iran, not surprisingly. But as the Maliki 
government's capacity and confidence slowly grow, its priority 
is to assert Iraq's own sovereignty. The readiness of the Iraqi 
Government and security forces to confront Iranian-backed 
militias has also produced new support and cooperation from its 
Arab neighbors. So far Jordan, Bahrain, and the United Arab 
Emirates have decided to send Ambassadors back to Baghdad and 
we're pressing other Arab governments to do the same.
    Meanwhile, Syria's active involvement in indirect peace 
talks with Israel is a reminder to Iran that even its regional 
partners may have higher priorities than the relationship with 
Iran.
    Beneath its external bluster, Iran faces a number of 
internal contradictions. Despite $140 a barrel oil, its economy 
is stagnating and a remarkably inept Iranian leadership is 
failing its own people. Inflation is running at 25 percent and 
food and housing costs are skyrocketing. Because of bad 
economic management, the oil windfall has failed to generate 
anywhere near the 1 million new jobs that Iran needs each year 
just to keep up with its population growth or to bring 
desperately needed diversification to the economy.
    In these circumstances, it's fair for Iranians to ask 
whether the cost of its defiant nuclear program, which could 
run into the tens of billions of dollars, is really worth it. 
Iranians need only look across the gulf to the spectacular rise 
of an advanced, innovative economy in Dubai, the rapid 
expansion of Qatar's natural gas exports and gas-based 
industries, and the efforts of Saudi Arabia and other oil-rich 
states to reduce their debt, undertake needed reforms, and 
invest in future capacity to appreciate the opportunities 
squandered by their own leaders.
    In Iran, the fourth largest oil producer in the world, 
nearly half of all refined petroleum products still need to be 
imported. With two-thirds of its population under the age of 
30, Iran is also a society with a mounting appetite for 
modernity, advanced technology, and connections to the rest of 
the world. Its younger generation is far more attuned to what 
those connections can offer than warped, isolated, impoverished 
places like North Korea, and far more likely to feel the pull 
that comes through the Internet and satellite television and 
travel abroad.
    My third point, against that backdrop, is that the purpose 
of our policy is to change the behavior of the Iranian regime, 
making common cause with as much of the international community 
as we can. We should not let the Iranian regime off the hook 
about its behavior or allow it to divert attention from its 
domestic failings and external adventurism under the also 
pretext that it is under existential threat from the outside. 
The problem is the regime's behavior, which endangers not only 
the international community, but the self-interest of the 
Iranian people.
    Our strategy is built on tough-minded diplomacy, maximizing 
pressure on the Iranians at multiple points to drive home the 
costs of continued defiance of the rest of the world, 
especially on nuclear issues.
    At the same time, however, we're trying to make clear to 
Iran and its people what they stand to gain if they change 
course.
    My fourth comment considers the sticks side of the 
equation, the progress, sometimes frustratingly slow, but 
nonetheless tangible, that we've made in sharpening the down 
sides for Iran of its continued refusal to heed the U.N. 
Security Council or the IAEA. Three Chapter VII sanctions 
resolutions have significantly complicated Iran's pursuit of 
its nuclear ambitions, as well as its international financial 
position.
    While deeply troubling, Iran's real nuclear progress has 
been less than the sum of its boasts and it has not yet 
perfected enrichment. Iran's front companies and banks are 
being pushed out of their normal spheres of operation, away 
from the dollar and increasingly away from the euro, too. The 
cost of export credits to Iran has increased by 30 percent and 
the overall level of credits has diminished. A growing number 
of major international financial institutions have cut ties 
with Iran over the past year and more are moving in that 
direction.
    In this respect, renewed willingness by European Union 
states to tighten pressure on Iran is especially welcome. Two 
weeks ago the EU adopted new sanctions against 38 individuals 
and entities, including imposing an assets freeze on Iran's 
largest bank, Bank Melli. Last week the EU began formal 
consideration of additional measures. We are consulting quietly 
with other major players, such as Japan and Australia, about 
what more they can do.
    Our partners in the P5+1--Britain, France, Germany, Russia, 
and China--remain committed to a two-track approach and that 
would mean consideration of new steps beyond Resolution 1803 if 
Iran refuses our recent incentives package and ducks its U.N. 
Security Council and IAEA obligations.
    To reinforce multilateral actions, the United States has 
also implemented a series of autonomous sanctions against Iran. 
In particular, the Departments of Treasury and State have 
carried out an effective campaign to limit Iran's access to the 
international business community. Indeed, yesterday we 
designated 11 additional Iranian entities and individuals for 
proliferation activities.
    These measures, combined with warnings such as the ones 
issued last year and early this year by the Financial Action 
Task Force, reverberate in financial sectors, making Iran less 
hospitable for business and aggravating the impact of the 
regime's economic mismanagement.
    My fifth and final point focuses on the carrots or 
incentives side of the equation, on our intensifying efforts to 
make clear to the Iranian people what's possible with a 
different pattern of behavior. Javier Solana's recent visit to 
Tehran helped highlight the opportunities before Iran if it 
cooperates with the international community. Solana carried a 
package of incentives including an offer of assistance on state 
of the art light water reactor technology, along with a letter 
signed by the P5+1 Foreign Ministers, including Secretary Rice.
    None of us dispute Iran's right to pursue civilian nuclear 
power for peaceful purposes. But Iran needs to answer the 
questions posed by the IAEA, comply with U.N. Security Council 
resolutions, and restore confidence in its intentions. Major 
powers like South Korea have realized the benefits of civilian 
nuclear energy without the need to enrich and reprocess and 
that is a path that is open to Iran, too.
    While skepticism about the Iranian regime's reaction to 
international incentives is almost always a safe bet, we're 
working with our P5+1 partners in an intense public diplomacy 
campaign to explain what we're offering directly to the Iranian 
people, as well as to others in the international community, 
like leading members of the nonaligned movement, who might also 
help drive home the advantages of cooperation.
    We want the Iranian people to see clearly how serious we 
are about reconciliation and helping them to develop their full 
potential, but also who's responsible for Iran's isolation. The 
truth is that Iran's nuclear weapons ambitions bring it less 
security, not more. They set back, rather than advance, Iran's 
ability to play the significant regional and international role 
that its history, culture, and geopolitical weight should bring 
it.
    Interpreting Iran's domestic debates is always a humbling 
business, but there are some interesting commentaries beginning 
to emerge after Mr. Solana's visit. In one newspaper column, 
the former deputy head of Iran's atomic energy organization 
wrote that: ``Spinning 3,000 or 4,000 centrifuges at semi-
industrial levels is useful for political maneuvering and 
talks, but if it means the imposition of technological, 
economic, and welfare hardship then it raises the question of 
what other vital interests are being harmed by immoveable, 
stubborn Iranian officials.''
    It's hard to say where any of this will lead, but it at 
least suggests that it is well worth the effort to explain and 
publicize what we are putting on the table. The Iranian regime 
has provided an initial rely to the P5+1 proposals and has 
proposed a further meeting with Mr. Solana in the coming weeks 
to discuss this in more detail.
    We're also trying to find creative ways to deepen our own 
engagement with Iran and its people, who remain amongst the 
most pro-American populations in the region. And while that is 
admittedly a low bar these days, it's striking how curious 
Iranians are about connections to Americans. With the generous 
support of Congress, we're in the second year of successful 
people-to-people exchange programs. In cooperation with the 
National Basketball Association, for example, we're bringing 
the Iranian Olympic basketball team here next week for the NBA 
Summer League. We're committed to using educational, cultural, 
and sports exchanges to help rebuild bridges between our two 
societies after 30 years of estrangement.
    Mr. Chairman, I have no illusions about the grave dangers 
presented by the behavior of the Iranian regime or the 
difficulties of changing that behavior. I am convinced that we 
cannot do it alone and that a strong international coalition is 
crucial. Hard-nosed diplomacy, backed up by all the tools that 
are at our disposal and as much leverage as we and our partners 
can muster, is an essential ingredient. As Secretary Rice said 
earlier this year, ``America has no permanent enemies, we 
harbor no permanent hatreds.''
    Diplomacy, if properly practiced, is not just talking for 
the sake of talking. It requires incentives and disincentives 
to make the choices clear to those with whom you are dealing 
that you will change your behavior if they're willing to change 
theirs. That is the kind of approach that helped produce 
significant breakthroughs with Libya several years ago, 
including its abandonment of terrorism and the pursuit of 
nuclear weapons. It is the kind of approach that is beginning 
to produce results in our multilateral diplomacy with North 
Korea. It may or may not produce results on Iran, with whom we 
have had a relationship burdened by deep-seated grievances and 
suspicions and a long history of missed opportunities and 
crossed signals. But it is important for us to try, bearing in 
mind that our audience is not only the Iranian regime, but also 
the Iranian people and the wider international coalition we are 
seeking to reinforce.
    At a minimum, it seems to me it is important to create in 
this administration as strong an international diplomatic 
mechanism as we possibly can to constrain Iranian behavior, on 
which the next administration can build. Our choices are not 
going to get any easier in the months and years ahead, but they 
will be even more difficult if we don't use all our diplomatic 
tools wisely now.
    Thank you very much again, Mr. Chairman. I look forward to 
your questions.

    [The prepared statement of Secretary Burns follows:]

 Prepared Statement of William J. Burns, Under Secretary for Political 
           Affairs, U.S. Department of State, Washington, DC

    Mr. Chairman and members of the committee, it is a pleasure to 
appear before you today to testify on the strategic challenges posed by 
Iran. The behavior and the policies pursued by Iran's current 
leadership pose profound and wide-ranging challenges for our interests, 
for our friends and allies in the Middle East and in South Asia, and 
for the international community as a whole.
    These policies include Iran's nuclear ambitions; its support for 
terrorist groups, particularly Hezbollah, Hamas, and Palestine Islamic 
Jihad; its longstanding rejection of a two-state solution to the 
Palestinian-Israeli conflict; its efforts to sow violence and undermine 
stability in Iraq and Afghanistan, including lethal support for groups 
that are directly responsible for hundreds of U.S. casualties; and 
finally, the strategic implications of Iranian behavior for gulf 
security. Across the broader Middle East, Iran's actions jeopardize the 
peaceful and prosperous future that the region's responsible leaders, 
with the support of the United States and the international community, 
are striving to build.
                         iran's vulnerabilities
    Iran's vulnerabilities, and the complexities of Iranian society, 
need to be considered along with the challenges posed by Iran's 
behavior. For its part, Tehran seems to relish heightening concerns by 
promoting the illusion that Iran is on the ascendance. We are all 
familiar with the repugnant rhetoric, employed by some Iranian leaders 
intended to aggrandize Iran as a powerful counterweight to the U.S. as 
well as the institutions of global order, especially the United Nations 
and the International Atomic Energy Agency (IAEA). However, Iran is not 
10 feet tall, nor is it even the dominant regional actor. Iran's regime 
has some real insecurities--not least the widespread alarm and 
resentment that its policies and rhetoric have generated throughout the 
region and the international community at large. In the late 1990s, 
Iran endeavored to rebuild its ties to its neighbors and the world as a 
whole. However, today, Iran has no real friends anywhere that could 
offer strategic reassurance, vital investment, or a secure future in a 
globalized world. Many of its neighbors retain wary relations, its 
alliances are limited to a handful of countries, such as Syria, 
Belarus, Cuba, and Venezuela, and its destabilizing actions have drawn 
the international community closer in unprecedented fashion.
    And, while Iran may benefit from a degree of instability in Iraq, 
Afghanistan, Lebanon, and the Palestinian territories, it is also 
facing a new and more challenging situation in many of these arenas. 
The complexities of internal politics and a revival in responsible 
regional diplomacy are complicating Iran's pursuit of regional 
hegemony.
    In Iraq, for example, Iran's destabilizing activities are beginning 
to encounter new obstacles in the form of a more capable and coherent 
Iraqi Government. Most Iraqi leaders want normal relations with Iran, 
but as the central government's capacity and confidence grows, its 
priority is to assert Iraq's own sovereignty. The Iraqi Security 
Forces' move into Basra earlier this year, and similar operations 
elsewhere in southern Iraq, in Baghdad, and now in northern Iraq are 
clear examples of indigenous Iraqi efforts to assert the central 
government's authority and counter Iraqi militants, including militias 
receiving Iranian support. Prime Minister al-Maliki's recent meetings 
in Tehran, where he lodged protests against Iran's support for 
terrorist groups in Iraq, made clear the limits to Iranian-enabled 
lethal attacks in Iraq. In addition, the readiness of the Iraqi 
Government and security forces to confront Iranian-backed groups has 
also produced new support and cooperation from its Arab neighbors. So 
far, Bahrain, Jordan, and the UAE plan to send Ambassadors to Baghdad, 
and we hope other Arab governments will heed their example and do the 
same.
    The Doha Agreement, which allowed a partial resolution of that 
crisis, is an example of a new and positive activism on the part of 
Arab governments, in part due to their concern over Iran's 
destabilizing activities and growing regional aspirations. The strong 
Arab role in the process sent a direct message to Iran that the 
leadership in Tehran will not be given free rein to further undermine 
the democratic process in Lebanon through its support to Hezbollah. We 
are watching with interest Iran's relationship with Syria. Syria has 
begun indirect peace talks with Israel, and this follows Syria's 
attendance at last fall's Annapolis Peace Conference, a move that 
apparently surprised the Iranian leadership and led to some adverse 
commentary from Iran. Syria appears to be conducting a policy toward 
Israel that is independent from Iran's, presumably leading some in Iran 
to worry that in the future the extremely close relationship between 
the two governments could weaken.
    We also see the concern of other governments translated into new 
cooperation and an expanding coalition of countries that oppose Iran's 
aggressive behind-the-scenes policies. Many regional governments that 
feel threatened by Iran are working more energetically to counter and 
diminish its influence in the region. This is evidenced by the changed 
dynamic between Iraq and its neighbors, including the reintegration of 
Iraq into regional affairs through its participation in Gulf 
Cooperation Council meetings with Egypt and Jordan in a GCC plus 3 
configuration. In addition, gulf nations participating in the Gulf 
Security Dialogue are working cooperatively among themselves and with 
the United States on 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. To that end, in direct contrast to Iran, some regional 
governments have chosen to conclude nuclear cooperation agreements in 
partnership with the U.S., without the development of an indigenous 
fuel cycle, contradicting Iran's claims that the West seeks to prevent 
the pursuit of nuclear energy for peaceful purposes. This is also 
consistent with the choice made by South Korea, and others.
    In addition to the political and diplomatic vulnerabilities Iran's 
leadership has created for itself, Iran's current leaders also confront 
well-documented internal challenges, the direct product of the current 
leadership's extraordinary economic mismanagement.
    Ten years ago, we saw hopeful signs that Iran's Government was 
slowly beginning to appreciate the political and economic imperatives 
of democracy. Today, unfortunately, those small steps toward moderation 
and greater popular participation have been all but erased by the hard-
liners who hold sway in Tehran. The international community rightly 
criticized the Iranian Government's treatment of its own people, and 
the regime's record of human rights abuse has only grown worse over 
this past year. The regime regularly commits torture and other forms of 
inhumane treatment on its own people--including labor leaders, women's 
rights activists, religious and ethnic minorities, and critics of the 
regime, 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.
    It is an irony that despite its abundance of hydrocarbon resources, 
Iran's policies have made it necessary to rely on imports of refined 
petroleum products to meet internal demand. The Iranian Government is 
failing its own people. Iran's nuclear activities may eventually cost 
billions of dollars, which could be better spent to benefit the Iranian 
people. Inflation in some sectors is running well above 25 percent--a 
heavy burden for the Iranian people and a profound vulnerability for 
the regime. Food and housing costs, especially in Iran's major cities, 
are high and rising. Many foreign investors, particularly from Iran's 
historic trading partners, are reluctant to commit capital in such a 
precarious political environment and while Iran continues to pursue 
threatening policies. Record oil revenues may sustain the regime for 
the time being, but thanks in large part to the disastrous policies 
pursued in recent years, this oil windfall has failed to generate the 
jobs, growth, and diversification that Iranians desperately need. 
Iranians need only look across the gulf--to the spectacular rise of an 
advanced, innovative economy in Dubai, the rapid expansion of Qatar's 
natural gas exports and gas-based industries, and the wise efforts by 
Saudi Arabia and other oil-rich states to reduce debt, undertake needed 
reforms, and invest in future capacity--to appreciate the opportunities 
squandered by their own leaders.
    Iran's people aspire to more. Their population, two-thirds of which 
are under 30, have a mounting appetite for modernity, advanced 
technology, and the better relations with the international community 
that would derive from expanded trade and economic development.
    We hope that the new dilemmas Iran is beginning to face at home, in 
the region, and in the broader international community, will provoke a 
serious reconsideration of its provocative policies, revive internal 
debates about the utility of moderation and responsibility, and move 
Iran toward a more cooperative and constructive path. Until that time, 
however, the U.S. and the international community remain committed to 
meeting the challenges posed by Iran.
                           the u.s. response
    The purpose of our policy is to change Iran's problematic policies 
and behavior by making common cause with as much of the international 
community as we can. Our goal is to convince Iran to abandon any 
nuclear weapons ambitions, cease its support for terrorist and militant 
groups, and become a constructive partner in the region. As President 
Bush has said, ``all options are on the table, but the first option for 
the United States is to solve this problem diplomatically.'' This 
requires tough-minded diplomacy, maximizing pressure on the Iranians at 
multiple points to drive home the costs of continued defiance of the 
rest of the world, especially on the nuclear issue. At the same time, 
however, we are trying to make clear to Iran and its people what they 
stand to gain if they change course. As Secretary Rice said at Davos 
earlier this year, ``America has no permanent enemies, we harbor no 
permanent hatreds. Diplomacy, if properly practiced, is not just 
talking for the sake of talking. It requires incentives and 
disincentives to make the choice clear to those with whom you are 
dealing that you will change your behavior if they are willing to 
change theirs. Diplomacy can make possible a world in which enemies can 
become, if not friends, then no longer adversaries.''
    This committee is intimately familiar with the dual-track strategy 
that we have employed in concert with our P5+1 partners--the U.K., 
France, Germany, Russia, and China--to put before the Iranian 
leadership a clear choice, so that it chooses a better way forward. 
Javier Solana's June 14 visit to Tehran to present the updated 
incentives package was an essential element of this approach, stressing 
the significant political, economic, technological, and energy benefits 
that could accrue to Iran if its leaders chose cooperation over their 
current course.
    President Bush emphasized last month at the U.S.-EU summit that we 
seek to address this issue through a multilateral framework. He said: 
``Unilateral sanctions don't work . . . One country can't solve all 
problems . . . A group of countries can send a clear message to the 
Iranians, and that is: `We are going to continue to isolate you. We'll 
continue to work on sanctions. We'll find new sanctions if need be if 
you continue to deny the just demands of a free world.' ''
    Consistent with the President's vision, Iran's failure to restore 
the international community's confidence in its intentions has not gone 
without consequences. The U.N. Security Council has adopted four 
resolutions on Iran, including three imposing Chapter VII sanctions. 
While some have questioned the impact of these measures, we do see a 
tangible effect. Two and half weeks ago, the European Union adopted 
sanctions on 38 additional Iranian individuals and entities, including 
prohibiting business with, and imposing an asset freeze on, Iran's 
largest bank, Bank Melli. The EU began formal consideration of 
additional measures last week. These actions, taken together, undermine 
Iran's ability to portray this problem as a bilateral one, and also 
weaken Iran's argument that the U.S. and the West are isolated in this 
cause.
    The international community is more unified than in the past on the 
necessity for Iran to fully and verifiably suspend its proliferation 
sensitive nuclear activities and reestablish international confidence 
in the peaceful nature of its nuclear program. There is also a mounting 
consensus for Iran to come clean on its past efforts to build a nuclear 
warhead, based on the information presented in recent reports by the 
IAEA Director General which describe Iran's continued failure to 
cooperate with the IAEA investigation into Iran's weaponization 
activities.
    While Iran seeks to create the perception of advancement in its 
nuclear program, real progress has been more modest. It is apparent 
that Iran has not yet perfected enrichment, and as a direct result of 
U.N. sanctions, Iran's ability to procure technology or items of 
significance to its missile programs, even dual use items, is being 
impaired. In addition to limiting Iran's access to proliferation 
sensitive technologies and goods, key individuals involved in Iran's 
procurement activities have been cut off from the international 
financial system and restricted from travel, and Iran's banks are being 
pushed out of their normal spheres of operation. Last November, Iran's 
OECD sovereign credit risk rating was downgraded from a 5 to a 6, on a 
scale of 0 to 7, and as a result, the cost of official export credit 
from OECD countries to Iran and its state-controlled enterprises has 
increased by approximately 30 percent, while availability of credit has 
shrunk. A number of export credit agencies have withdrawn or 
dramatically reduced exposure (notably those of the U.K., Canada, 
Italy, and France), and almost all first-tier banks have also withdrawn 
business from Iran.
    The U.N. Security Council, U.S., and EU designation of Iranian 
banks further hinders Iran's reach. The most recent U.N. Security 
Council Resolution requires that states exercise vigilance with respect 
to the activities of banks in their jurisdictions with all banks 
domiciled in Iran and their branches and subsidiaries abroad. It 
mentions Banks Melli and Saderat, in particular. The Financial Action 
Task Force, a group composed of 32 countries including each of the five 
permanent members of the U.N. Security Council, has issued two serious 
warnings in less than a year, warning of the risks posed to the 
international financial system by deficiencies in Iran's antimoney 
laundering and counterterrorist financing regime. And the world's 
leading financial institutions have largely stopped dealing with Iran, 
and especially Iranian banks, in any currency. They do not want to risk 
unwittingly facilitating the regime's proliferation or terrorism 
activities. All of this adds up, keeping Iran on the defensive, forcing 
it to find new finance and trade partners and replace funding channels 
it has lost--often through more costly and circuitous mechanisms.
    Government and private sector action on Iran has a psychological 
impact, as well. Iran has expressed its desire to assume the economic 
and political role it believes it deserves in the region, and to be 
seen as a legitimate player on the global stage. But the series of U.N. 
Security Council resolutions has shown the world--and Iran--that the 
international community will not allow an irresponsible actor such as 
Iran to expand its power unchecked. The effects of Iran's growing 
international stigma may, in the end, be as substantial as the direct 
economic impact of any sanctions. Losing the ability for a single 
Iranian bank, such as U.N.-designated Bank Sepah, to conduct business 
overseas is painful to Iran. Having major international financial 
institutions refuse to do any business with Iran because of the 
legitimate business risks that such trade present may be worse. This 
increasing pressure is only being amplified by the regime's own 
economic mismanagement, as it fails to deliver on its promises to 
improve the lot of average Iranians.
    We have been working with our regional partners to help them 
develop the kind of cooperation that will help them better manage the 
political, diplomatic, and security challenges Iran poses. These 
efforts are beginning to show signs of success. Examples include inter-
Arab cooperation to help dampen the political crisis in Lebanon, the 
Gulf Security Dialogue, and the new interest on the part of the Arab 
governments in dealing with the Government of Iraq.
    Finally, in tandem with the diplomatic and financial measures that 
are focused on the Iranian regime, we remain committed to charting a 
new course for U.S.-Iranian relations by intensifying our engagement 
with the Iranian people, with the hope of bridging the divide. We are 
now in the second year of a successful people-to-people exchange 
program. Partnering with the U.S. Olympic Committee, we invited 15 
members of the Iranian table tennis national team to the States last 
week. This group included the first female Iranian athletes who have 
ever been to the U.S. on this program. In cooperation with the NBA, we 
will bring 25 members of the Iranian Olympic Basketball Team here next 
week for the NBA Summer League. We also hope to bring the Iranian 
soccer team to the U.S. later this year. Over the long term, we hope to 
build connections among our people through educational, cultural, and 
other exchanges which can overcome 30 years of estrangement that has 
severed links between our societies.
    The United States stands with the Iranian people in their struggle 
to advance democracy, freedom, and the basic civil rights of all 
citizens. We believe the Iranian people have made clear their desire to 
live in a modern, tolerant society that is at peace with its neighbors 
and is a responsible member of the international community. We are 
confident that if given the opportunity to choose their leaders freely 
and fairly, the Iranian people would elect a government that invests in 
development at home rather than supporting terrorism and unconventional 
warfare abroad; a government that would nurture a political system that 
respects all faiths, empowers all citizens, more effectively delivers 
the public services its people are asking for, and places Iran in its 
rightful place in the community of nations; a government that would 
choose dialogue and responsible international behavior rather than 
seeking technologies that would give it the capability to produce 
nuclear weapons and foment regional instability through support for 
terrorist and militant groups.
                         looking to the future
    In summary:
    We have presented the Iranian Government with a historic 
opportunity to do two things: To restore the confidence of the 
international community in its nuclear intentions, and to give its own 
people the access to technology, nuclear energy, education, and foreign 
investment that would truly open the way to economic prosperity.
    We have made clear that we do not object to Iran playing an 
important role in the region, commensurate with its legitimate 
interests and capabilities, but also that Iran is far more likely to 
achieve its desired level of influence if it works with the 
international community and its neighbors, rather than if it works 
against them. We recognize that it would be useful for Iran to be ``at 
the table'' on major international matters if Tehran is willing to 
contribute in a constructive fashion.
    The dual-track strategy to which we often refer in connection with 
the nuclear file, in fact, applies more broadly. Engaging in a 
diplomatic process on the broad range of issues at stake between our 
two states and working toward the restoration of Iran's relationship 
with the international community would offer clear benefits for Iran 
and the Iranian people. But equally so, any continuation on its present 
course will entail high and increasing costs for Iran. Putting that 
choice to the Iranian leadership as clearly and acutely as possible is 
the core of our policy.
    What we seek, let me emphasize, is a change in Iran's behavior--a 
change in how it assesses and interacts within its own strategic 
environment. We should not let the Iranian leadership entrench itself 
on the false pretext that it is under threat from the outside. We have 
committed repeatedly and at the highest levels to deal diplomatically 
with the Iranian regime. The fact that this diplomatic dialogue has 
been limited to less than satisfying talks in Baghdad is the 
unfortunate choice of the Iranian leadership. As the recent 
presentation of yet another P5+1 offer makes clear, we do not exclude 
engagement. We remain ready to talk to Tehran about its nuclear program 
and the array of other American concerns about Iranian policies, as 
well as to address any issues Iran chooses to raise in a diplomatic 
context.
    The Iranians are not completely closed off, and neither should the 
United States be. Careful consideration suggests that in certain 
contexts, we should have overlapping interests with Iran--for example, 
in a stable, unified Iraq at peace with its neighbors, in a stable 
Afghanistan, and in stemming narcotics trafficking. Broadly speaking, a 
responsible Iran can and should play an important, positive role in the 
region. This is possible, if Iran is willing to work constructively 
with the international community and its neighbors.
    We recognize that we have not yet achieved our desired goals: Iran 
has still not agreed to suspend uranium enrichment and other 
proliferation sensitive nuclear activities. Iran has not ceased 
unconventional warfare and some of its policies continue to contribute 
to regional instability. Iran's current leadership may be so dogmatic 
or paralyzed by internal disagreements that it cannot agree in the near 
term to terms so obviously to its advantage. With our long-term goal of 
persuading Iran to change its current course in mind, our immediate 
actions are intended to clarify the price of defiance by forcing Tehran 
to find new finance and trade partners and replace funding streams it 
has lost. We have made several notable successes, and will continue to 
work toward the objective of triggering a strategic recalculation in 
Iran's thinking.
    Again, thank you for the opportunity to appear before the Senate 
Foreign Relations Committee to discuss this important subject and I 
would be pleased to answer your questions.

    The Chairman. Well, Mr. Secretary, at the risk of damaging 
your credibility, your statement was music, at least to my 
ears. I quite frankly wish we had heard that statement in 2003 
or '04 or '05 or '06 or '07. As usual, Mr. Secretary--I'm not 
being solicitous--you are always straightforward in your 
testimony. It's appreciated and it's welcome, because you give 
perspective and one of the things lacking in this discussion 
about Iran is perspective.
    So let me start off again by thanking you. I wasn't going 
to say this, but it reminds me that Senator Kerry and Senator 
Lugar and I and maybe others--I apologize if I leave someone 
out--were, at the invitation of the White House, down in the 
Cabinet Room not many months ago when the President came back 
from a trip and he asked our opinion. I was making the point 
that, quite frankly, the less rattling of the saber the better, 
because all it did was unite the Iranian people behind a 
government they don't like.
    I said that--I said it's a little bit like, the only way to 
get the North End and Southie in Boston to get together is 
threaten to bomb Boston. Senator Kerry said: No; say something 
about the Boston Red Sox and that would unite them.
    But let me again thank you and get right to my question 
here. One of the things you often hear stated as a rationale 
why we have to be more bellicose in our relationships--and 
again I, like you, have no illusions about the present Iranian 
regime. I have no illusions that diplomacy will carry the day. 
I have no illusions also that we can do this by ourselves.
    But one of the things you often hear is that, you know, 
these guys--and this is how it's phrased: These guys are likely 
to supply nuclear weapons or nuclear capability or weapons of 
mass destruction to al-Qaeda. How do al-Qaeda and Iran view one 
another?
    Secretary Burns. Well, Mr. Chairman, I think there's a 
wariness in that relationship, at least as I understand it over 
the years. So that we have had concerns about al-Qaeda members 
who have been harbored in Iran over the years. But it's a 
relationship obviously that we watch very carefully, but 
there's certainly a wariness there, I think.
    The Chairman. My recollection is that al-Qaeda is primarily 
Sunni and that Iran is overwhelmingly Shia. I find it an unholy 
relationship, to think that that is the place where the Iranian 
leadership would move.
    I want to skip around just a little bit here if I may, Mr. 
Secretary. As you know, there's legislation before the United 
States Senate, referred to as the Iran Sanctions Act, that 
would require if passed in its present form the administration 
to investigate companies, regardless of where they're located, 
companies in the countries of our allies, our friends, members 
of the P5 as well as others, who invest more than $20 million 
in Iran's energy sector and to possibly, for us to possibly 
extraterritorially sanction those foreign companies for their 
actions in Iran.
    Now, it sounds good. It sounds like it's a thing that would 
diminish the ability of the Iranians to be able to generate a 
nuclear capacity, a weapons capacity. But how would passage of 
such legislation here affect in your view the administration's 
efforts to keep the P5+1 coalition together, coherent, and as 
unified as it appears to be right now?
    Secretary Burns. Well, Mr. Chairman, the passage of that 
legislation as it exists now I think would complicate that 
effort, precisely at the moment when we're beginning to see a 
greater willingness, especially on the part of the European 
Union, now under the French Presidency, to take more assertive 
steps on economic sanctions. The designation of Bank Melli, the 
largest of Iran's banks, 2 weeks ago was a very significant 
step and it's a message that's not lost on the Iranian regime.
    So at precisely the moment when I think we're having some 
success--we're not moving as far and as fast as we would like, 
but we're having some success in mobilizing that coalition--our 
concern would be that the legislation that's been proposed 
would complicate that effort.
    Second, I think it might also complicate the kind of 
mechanism that we leave in place for the next administration, 
because, like you, I absolutely believe that we're not going to 
solve this problem diplomatically alone, that we need to make 
as much common cause as we can with the international 
community.
    There's a third concern that goes beyond your comments in 
at least one of the pieces of legislation, which has to do with 
the United States-Russian 123 agreement, civil-nuclear 
cooperation, which I won't go into now. But there again, I 
think our concern would be that that would undermine our 
ability to work with the Russians in the nuclear field, both on 
Iran and more widely, to help prevent the spread of nuclear 
weapons.
    The Chairman. Quite frankly, I don't presume to speak for 
the chairman, but I know he shares this view and he's--I'm not 
being solicitous--been the leader in this area for the last 20 
years. I just find it absolutely incomprehensible that we may 
very well pass a piece of legislation that essentially 
nullifies an agreement we've made with Russia, that is the very 
thing that will allow us to be able to get further cooperation 
from Russia on dissuading and making it more difficult for Iran 
to pursue the objective we think is the worst possible outcome.
    I just find it--I'm not sure people have thought this 
through.
    But at any rate, I think we're going to need your input, 
your straightforward analysis of what the consequences of 
essentially losing that agreement would be on this overall 
effort, because quite frankly the thing where the 
administration has made the most success in my view with regard 
to Iran has been in the economic side, on the banking side. It 
has not dictated that foreign banks or foreign investors cannot 
be involved with the banking system or the financial 
arrangements with Iran, but the effect has been it has put an 
incredible chill on other banks dealing with banks in Iran and 
it has put a real crimp in their economy.
    I'm going to submit for the record, because I'm sure all my 
colleagues know, but a lot of the people listening to this will 
not understand what the Financial Action Task Force is. It's a 
group of 32 countries, including the five Permanent Members of 
the United Nations Security Council. And it has issued serious 
warnings in less than a year of the risk posed to the 
international financial system by deficiencies in Iran's 
antimoney-laundering and counterterrorist financing regime. It 
has had an incredibly negative impact on the banking system, 
legitimately, in Iran.

    [The information referred to by Chairman Biden follows:]

                             About the FATF

    The Financial Action Task Force (FATF) is an inter-governmental 
body whose purpose is the development and promotion of policies, both 
at national and international levels, to combat money laundering and 
terrorist financing. the Task Force is therefore a ``policy-making 
body'' which works to generate the necessary political will to bring 
about national legislative and regulatory reforms in these areas.
    Since its creation the FATF has spearheaded the effort to adopt and 
implement measures designed to counter the use of the financial system 
by criminals. It established a series of recommendations in 1990, 
revised in 1996 and in 2003 to ensure that they remain up to date and 
relevant to the evolving threat of money laundering, that set out the 
basic framework for anti-money laundering efforts and are intended to 
be of universal application.
    The FATF monitors members' progress in implementing necessary 
measures, reviews money laundering and terrorist financing techniques 
and counter-measures, and promotes the adoption and implementation of 
appropriate measures globally. In performing these activities, the FATF 
collaborates with other international bodies involved in combating 
money laundering and the financing of terrorism. For more on mutual 
evaluations see Monitoring the Implementation of the Forty 
Recommendations.
    The FATF does not have a tightly defined constitution or an 
unlimited life span. The Task Force periodically reviews its mission. 
The FATF has been in existence since 1989. The current mandate of the 
FATF (for 2004-2012) was subject to a mid-term review and was approved 
and revised at a Ministerial meeting in April 2008. for more 
information on the FATF's role, please see the FATF's standards.
History of the FATF
    In response to the mounting concern over money laundering, the 
Financial Action Task Force on Money Laundering (FATF) was established 
by the G-7 Summit that was held in Paris in 1989. Recognizing the 
threat posed to the banking system and to financial institutions, the 
G-7 Heads of State or Government and President of the European 
Commission convened the Task Force from the G-7 Member States, the 
European Commission and eight other countries.
    The Task Force was given the responsibility of examining money 
laundering techniques and trends, reviewing the action which had 
already been taken at a national or international level, and setting 
out the measures that still needed to be taken to combat money 
laundering. In April 1990, less than 1 year after its creation, the 
FATF issued a report containing a set of 40 recommendations, which 
provide a comprehensive plan of action needed to fight against money 
laundering.
    In 2001, the development of standards in the fight against 
terrorist financing was added to the mission of the FATF. In October 
2001 the FATF issued the Eight Special Recommendations to deal with the 
issue of terrorist financing. The continued evolution of money 
laundering techniques led the FATF to revise the FATF standards 
comprehensively in June 2003. In October 2004 the FATF published Nine 
Special Recommendations, further strengthening the agreed international 
standards for combating money laundering and terrorist financing--the 
40+9 Recommendations.
    During 1991 and 1992, the FATF expanded its membership from the 
original 16 to 28 members. In 2000 the FATF expanded to 31 members, in 
2003 to 33 members, and in 2007 it expanded to its current 34 members. 
For more see FATF Members and Observers (http://www.fatf-gafi.org).

    I just think I'm critical of the administration, as you 
well know, on its Iranian policy, but this is a place where I 
find it has been pretty darn effective, as referenced by the 
chairman in his statements.
    Let me pursue this a little further. The same legislation 
I'm referring to would effectively block this--actually, I've 
already referenced it, the 123. Let me move on.
    How would you describe the Russian and Chinese stance, if 
you know, within the FATF We understand that they've been among 
the more resistant parties in applying tougher sanctions on 
Iran, that is China and Russia. Now, how high a priority in 
your view do both Russia and China assign to Iran's nuclear 
program and their concerns relative to it?
    Secretary Burns. Well, Senator, I think the Russians and 
Chinese do share the same strategic objective in the sense that 
neither leadership needs to be persuaded that it's a bad idea, 
a real bad idea, for this Iranian regime to acquire nuclear 
weapons, and they have worked with us, which is not an 
insignificant thing, over the last couple of years on three 
Chapter VII Security Council resolutions. And they have stood 
firmly along with the rest of the P5+1 in making the concerns 
of the international community clear to the Iranian regime.
    They have also not moved as far and as fast and as hard as 
we would prefer in those Security Council resolutions in the 
breadth and depth of sanctions, which we think will have an 
even more significant impact on the Iranian regime. So it can 
be a painful and sometimes frustrating process, but I think we 
have made progress. I think we can make more progress along 
both tracks of our approach.
    In other words, just as you were saying before, one track 
which shows the consequences to Iran and its people--further 
economic pressures, more isolation--and the other which makes 
clear what it stands to gain.
    The Chairman. One of the things I really was encouraged by 
in your statement is that you're the first administration 
witness--and there may be others, but the first that I have 
heard before this committee--who has pointed out what I think 
is a very critical point, that the need to publicize to the 
world and within Iran the carrots as well as the sticks that 
the international community is offering is vitally important in 
terms of internal pressure, internal division within Iran.
    Which leads me to my last question in the last 30 seconds I 
have here. Is it your understanding--and if it's not 
appropriate to answer in this forum, just say so. But is it 
your understanding that China and Russia favor setting aside 
suspension as a precondition for further discussions or their 
encouragement of discussions country to country by us and Iran?
    Can you speak to that?
    Secretary Burns. Sure, Senator. No; my understanding is 
that the P5+1, including the Russians and Chinese, are still 
committed to the negotiating posture which we've laid out, 
which Solana repeated to the Iranians a few weeks ago. That is 
a negotiation that's based on suspension for suspension. In 
other words, the P5+1 commit to suspending the applications of 
the current U.N. Security Council resolutions and in return as 
negotiations begin the Iranians would suspend all enrichment 
and reprocessing activity.
    The Chairman. But is it suspension for suspension or 
suspension for discussion?
    Secretary Burns. Well, the suspension for suspension would 
be the basis for the discussions. But that's the basis on which 
we've made clear that Secretary Rice, for example, would be 
prepared to join the other P5+1 Foreign Ministers in those 
negotiations.
    The Chairman. Thank you very much. My time is up.
    Senator Lugar.
    Senator Lugar. Mr. Secretary, just following through on 
that question, I suggested in the opening statement the need, 
as we discuss the carrots with Iran, which Javier Solana is 
planning to do, that there be a United States presence at the 
table, perhaps Secretary Rice herself. But in any event, is 
there the possibility that we will be there, so that there is a 
very clear perception on the part of anybody in Iran who is 
able to know about these negotiations about the seriousness of 
there being relief of a great number of sanctions and other 
difficulties, as well as the goodwill implied by the so-called 
carrots and benefits that are involved?
    Secretary Burns. Well, Senator Lugar, I think it was 
significant, and the significance was not lost on the Iranians, 
that Secretary Rice joined the other P5+1 Foreign Ministers in 
signing the letter that accompanied the incentives package. Our 
position is a very clear one. We're prepared, Secretary Rice 
herself is prepared, to join personally negotiations on the 
basis of the proposal that the P5+1 has made, and that remains 
our position.
    So we've tried to find as many ways as we can to reinforce 
the fact that the United States is serious about the proposal 
in which we've joined the P5+1, both parts of it, both the 
incentives and the disincentives.
    Senator Lugar. As I understand, these talks could occur in 
the latter part of July, or is there a 6-week hiatus, or what 
is the timing of the Solana visit?
    Secretary Burns. I don't believe that Mr. Solana has yet 
pinned down a time for another meeting with his Iranian 
counterpart. But I think it is likely to take place in the next 
few weeks.
    Senator Lugar. Following through just on those 
conversations and Senator Biden's questions about the Russians, 
is there a possibility that the Russians would also be at the 
table? Would they take part physically in that conversation 
with the Iranians?
    Secretary Burns. I'm not sure, Senator, honestly. The 
format I don't think has been determined yet. Certainly when 
Mr. Solana presented our proposals in Tehran a few weeks ago 
the Russian representative, my counterpart, was there along 
with my other P5+1 counterparts. So we've made every effort, 
and the Russians have as well, to make clear that we're 
standing together on this two-track approach.
    Senator Lugar. The reason I raise the question--and your 
expertise would certainly be instructive here--is that a show 
of respect for Russia's place is important literally in terms 
of our bilateral relations with the Russians, quite apart from 
the necessity of being on the same wavelength if at all 
possible with the Russians with regard to nuclear issues 
generally and nuclear issues in Iran specifically.
    This is one reason why I appreciate the chairman raising 
the 123 agreement with the Russians. This is a critical part of 
our diplomacy right now with regard to the availability of 
peaceful nuclear advancement for many nations who might use 
this bank of expertise as well as fuel that the two of us would 
provide as an alternative to what the Iranians are doing.
    Our ability to meld these factors together would seem to me 
to be critically important, and the participation of the 
Russians with the carrots as well as the sticks would seem to 
me to be very appropriate. That's why I raised the question, 
without pressing you to know an answer that you don't have, but 
as something to be considered certainly by our department.
    Secretary Burns. Yes, sir, Senator Lugar. And I do agree 
with you--we've discussed this many times before--that the 
Russian role, as frustrating as it sometimes can be--and ours 
is certainly a complicated relationship today, which mixes 
cooperation on some issues with competition and sometimes 
political conflict on others. But when you look--and you know 
this better than anyone--at the challenges in the nuclear 
field, whether it's the broad challenge of preventing the 
spread of nuclear weapons or the specific challenge of Iran, 
there is no partner with whom our cooperation can produce more 
than Russia in strategic terms, in plugging the biggest 
remaining gap in the NPT regime, which is the current ability 
of member states to enrich and reprocess within the regime 
right up until the point of nuclear weapons capability.
    We and the Russians have both proposed some very similar 
and creative ideas for plugging that gap, including 
international fuel centers, the provision of assured fuel 
supply to countries, essentially to demonstrate that there's a 
pathway to civilian nuclear programs for peaceful purposes that 
does not involve enrichment and reprocessing. That's where the 
123 agreement I think is an important ingredient in cementing 
our cooperation.
    With regard to Iran specifically, I think as you look over 
the course of the last 2 years, when, not coincidentally, we 
were negotiating the 123 agreement, we have seen some positive 
movement on the part of the Russians. And it's sometimes been 
slow, but it's been represented first in the three Security 
Council resolutions I mentioned before, the three Chapter VII 
resolutions, in the way in which the Bushehr project has been 
transformed so that now the Russians provide the nuclear fuel 
and then take back the spent fuel, demonstrating to the 
Iranians and the rest of the world that you don't need to 
master the fuel cycle, you don't need to enrich and reprocess, 
to have a peaceful nuclear program.
    Finally, as I've had the opportunity to discuss with some 
of you in closed session, there have been tangible steps taken 
by the Russian Government to ensure that Russian companies or 
entities are not engaged in illicit activities in the Iranian 
nuclear program.
    So in the nuclear field I think we have seen some practical 
steps. That does not change the reality that in some other 
areas Russian behavior in Iran remains troubling. The supply, 
for example, of air defense securities to Iran is something we 
strongly oppose and have sanctioned the Russians for, using 
other levers. But it just seems to me that the 123 agreement is 
an important tool to cement cooperation in the nuclear field on 
Iran as well as in our broader strategic cooperation.
    Senator Lugar. I appreciate that statement very much. There 
was a small piece of news this past week, not really commented 
in widely in the press, in which the Russian Duma by a vote of 
roughly 330 to 60 once again ratified a very important part of 
the Cooperative Threat Reduction program. By this time people 
have almost forgotten what that was all about, but you have not 
forgotten, and this is the basis upon which we continue to take 
warheads off of missiles, destroy missiles, destroy submarines, 
work in cooperative threat reduction with the Russians 
themselves.
    This is proceeding despite all the ups and downs that 
you're describing diplomatically, and this is why I sort of 
press the issue of trying to pull together with the Russians on 
something where I think we have common interests that they will 
perceive, but critically important diplomatically vis-a-vis 
Russia and Iran.
    Let me just ask a final question about the financial 
measures and specifically the bank situation. Although there 
will always be arguments on the motivation of the North Koreans 
coming back to the negotiating table, some suggest that banking 
measures that stifled their ability to move currency and to 
conduct transactions were the most critical thing we could have 
done. This was something that threats of military action or 
sanctions would never achieved with a government that was 
prepared to see people starve. But with regard to the financial 
arrangements, this got to the heart of the state itself, the 
central government.
    So I am curious. In conversations that you know of are we 
at a point at which we are really able to say to the Iranians, 
we have you stopped and you will recognize this as you take a 
look at your bank account, that in essence you may think that 
you have wealth, but it's going to be an internal process for 
you, as opposed to one in international trade, and if you have 
problems with refining gasoline for your people now, you will 
really have problems in the future?
    Coming to the table while we're offering the carrots, but 
with the certainty that we already know from financial 
operations that are far too complex for me to understand or to 
describe, how you really tie up a country in an electronic age. 
This is a different kind of, not warfare, but very aggressive 
activity.
    It doesn't involve killing people and bombing people and so 
forth. You just simply cut off the account at the bank and 
therefore stifle growth, cripple financial dealings and 
significantly alter the incentives.
    I think that probably the Iranians understand this, but I'm 
just curious as to whether our allies understand the 
effectiveness, and whether they're prepared really to be 
thoroughgoing with this arrangement.
    Secretary Burns. Well, I think, Senator Lugar, that the 
recent EU step--the assets freeze on Bank Melli, which is 
Iran's largest commercial bank--is a very encouraging sign in 
that respect----
    Senator Lugar. Very important.
    Secretary Burns [continuing]. Because Bank Melli is the 
bank through which the Iranian regime does a lot of business. 
And it seems to me that that, coupled with the other steps, 
both multilaterally as well as the autonomous U.S. steps 
against the Iranian banking system, are beginning to take a 
toll.
    There's more that we can do. We certainly haven't exhausted 
all the diplomatic possibilities or the economic possibilities, 
especially in the financial sector. I think it's encouraging to 
see the EU take that step. It gives us another argument we can 
use, for example, in the gulf, where oftentimes, whether it's 
Dubai or other places, people in the past--and I've heard the 
same argument--have said, well, why should we act when in 
London or some other European capital Iranian banks can 
function. Now there's a pretty good counterargument to that, 
given the step that the European Union has taken.
    So I think we have an opportunity the mobilize more 
pressure, but I think we are making some progress in that area.
    Senator Lugar. Thank you very much.
    The Chairman. Thank you, Mr. Chairman.
    With the permission of our witness--and I mean this 
sincerely--we're going to vote in just a few minutes. It's an 
important vote. The leader has asked us to be, at least on the 
Democratic side, in our chairs before this vote begins, which 
will begin in a few minutes.
    My friend from Florida only has one question. He can ask as 
many questions as he wants, but he only has one question. What 
I respectfully suggest we do is I'm going to yield to the 
Senator from Florida. When he finishes, maybe we could adjourn 
until the vote is over. That'll be about 15 minutes on Senate 
time. It's supposed to be 6 minutes or 7 minutes, but I'd say 
between 10 and 25 minutes. I can't guarantee that, but I 
promise, because your testimony and the questions all of us are 
asking, it's good for each of us to hear the totality.
    So is that all right with you?
    Secretary Burns. Yes, sir.
    The Chairman. All right. With that, what I'm going to do is 
I'll turn the gavel, the questioning and the gavel over to my 
friend from Florida, and when he finishes, unless you want to 
stay----
    Senator Lugar. No.
    The Chairman [continuing]. When you finish your questions, 
if you'd recess to the call of the chair, which should be 
immediately after the vote, which is to occur in the next 5 
minutes.
    Senator Bill Nelson. Mr. Chairman, you don't want me to 
turn the gavel over to the Senator from Indiana when I leave?
    The Chairman. I'm happy to have you do that, but he's going 
to leave too, I think. So it's going to be you by yourself. 
You're on your own, boy. [Laughter.]
    You know what I mean? As Lawton Chiles would say, ``You're 
on your own, boy.'' All right.
    Anyway, I yield to my friend from Florida.
    Senator Bill Nelson [presiding]. It'll be two quick 
questions. What is the significance of the missile launch 
today?
    Secretary Burns. Senator, the missile launches that we saw 
today are very disturbing, provocative, and reckless. They're a 
reminder that Iran is continuing to try to expand and develop 
its missile program.
    Senator Bill Nelson. Let me refine my question.
    Secretary Burns. Yes, sir.
    Senator Bill Nelson. What is the significance of the timing 
of the launch today?
    Secretary Burns. It's always a humbling experience to try 
and determine the motives behind particular actions on the part 
of this Iranian regime. Sometimes they act in conflicting ways. 
On the one hand we see some positive noises about the proposals 
that Mr. Solana made and on the other hand in recent days we've 
seen not only the missile launch, but some extremely reckless 
and pugnacious public statements.
    Senator Bill Nelson. The fact that there was a sequence of 
nine launches of the Shahab-3, any significance to that 
sequence?
    Secretary Burns. Subtlety has never been a hallmark of 
Iranian behavior and it's a way, it seems to me, of reinforcing 
the point they're trying to make.
    Senator Bill Nelson. There was a former FBI agent named Bob 
Levinson who disappeared a year and a half ago on Kish Island 
in the Persian Gulf. The administration basically dropped this 
case for a year, and about 6 months ago, with the persistence 
of a distressed spouse and seven children, this has now come 
way up in the attention of the administration and there are 
some things that are happening.
    Since you're the number three in the State Department and 
this Senator has visited various other Departments of the 
United States Government, can you assure me that Mr. Levinson's 
case is a priority issue for Secretary Rice and the State 
Department leadership?
    Secretary Burns. Yes; it certainly is, Senator, and I look 
forward to seeing Mrs. Levinson next week, and we will continue 
to press as hard as we can on this issue.
    Senator Bill Nelson. A lot of this is extremely sensitive 
information, but for purpose of this open forum is there 
anything that you want to share that would be an update on Mr. 
Levinson's case?
    Secretary Burns. Senator, there's not much in this format 
that I can share, but I'd be glad to meet with you to provide a 
more detailed update. We're continuing to press this case hard. 
We've pressed the Iranian regime on several occasions using the 
Swiss channel. We still have not gotten satisfactory responses. 
We've encouraged other governments to raise this issue and are 
appreciative of those who have. We'll continue to push very 
hard, and I'd be glad to in another setting to describe in more 
detail what we've done and where we are.
    Senator Bill Nelson. If such a negotiation does proceed 
that you've been discussing with the chairman and the ranking 
member, who are the players within Iran that have the clout to 
broker the deal?
    Secretary Burns. Well, as I said before, humility is always 
a good starting point in trying to decipher the Iranian 
political system. Certainly the United States over the last few 
decades has gotten it wrong from time to time. But I do think 
it's clear that the Supreme Leader, Ali Khamenei, is the 
ultimate decisionmaker in Iran. There are a number of centers 
of power within the regime. There often seems to be an active 
debate about tactics, whether it's over economic policy or even 
the nuclear issue. The current President represents one of 
those power centers, but there are others as well.
    So I think the best thing we can do from the point of view 
of American interests and the interests of the international 
community is try to sharpen as best we can the choice that I 
described before, in other words the consequences of a failure 
to abide by Iran's international obligations, not only for the 
Iranian regime but for its people, and also what Iran and its 
people stand to gain by changing their behavior and meeting 
those international obligations, especially in the nuclear 
area.
    Senator Bill Nelson. In this case would it not be the 
Supreme Leader that would be the decisionmaker?
    Secretary Burns. He certainly is the ultimate 
decisionmaker, it seems to me, in Iran.
    Senator Bill Nelson. Well, let's talk about President 
Ahmedinejad. Is his influence on the wane or on the rise?
    Secretary Burns. It's hard to characterize it that way. 
He's certainly very outspoken about his views, but the reality 
it seems to me is that it's the Supreme Leader who is the 
ultimate decisionmaker.
    Senator Bill Nelson. All right, the committee will stand in 
recess subject to the call of the chair.
    Thank you.
    [Recessed.]
    Senator Hagel [presiding]. The committee will come to 
order.
    This may be my last opportunity to chair a hearing, Mr. 
Secretary, so I'm going to take advantage of it. I have my 
papers in order and it's certified and legal that I can go 
ahead and bring our committee together. My colleagues are on 
their way back, as you know, from a vote and Chairman Biden 
said to get started, so we wouldn't hold you up any longer.
    Thank you again, Mr. Secretary, for coming. As always, we 
appreciate your good work and your leadership as well as your 
colleagues'.
    I want to pick up on the line of questioning that Senator 
Lugar had with you, Mr. Secretary, on some of the points that 
you had made in discussing the recent P5+1 offer that had been 
delivered by Secretary Solana and the Iranian response and in 
particular, the point that both Senator Biden and Senator Lugar 
made about American presence at the followup meeting, which I 
believe you had said in response to Senator Lugar's question 
that you thought it would probably come in the next few weeks, 
that another meeting would take place.
    My question is, Has there been discussion within the 
administration about an American representative at that next 
meeting? That's my first question.
    Secretary Burns. Senator, as I said, our position remains 
that Secretary Rice herself would be prepared to sit down in 
the negotiation along with the P5+1 Foreign Ministers on the 
basis of the suspension for suspension proposal that the P5+1 
has made. We've also tried to demonstrate, hopefully in the 
runup to negotiations on that basis, the seriousness with which 
we support the proposals that Mr. Solana presented, in 
particular her signature on the letter that Mr. Solana 
delivered along with that package of incentives.
    So we've tried to make very clear not only our support but 
our active involvement in this process, and the seriousness of 
the choice that we and our partners have posed for the 
Iranians.
    Senator Hagel. That active involvement would include the 
consideration of an American there with Solana on the next 
visit?
    Secretary Burns. Well, sir, at this stage our position is 
just as Secretary Rice has outlined it and as I described it 
before. But we have certainly made very clear our support for 
this effort and the seriousness with which we view it.
    Senator Hagel. So then I take it from that answer that 
there's not been serious discussion within the administration 
about the possibility of having an American representative at 
the next meeting or at some point in the future with Mr. 
Solana?
    Secretary Burns. Senator, our position is just as I 
described it.
    Senator Hagel. Has there been any discussion as far as 
you're aware of a Russian presence at a followup meeting with 
Mr. Solana?
    Secretary Burns. Certainly the Russians, my Russian 
counterpart, did take part in the presentation that Mr. Solana 
made in Tehran a few weeks ago. The format for this follow-on 
meeting hasn't been determined yet as far as I know, so it's 
certainly possible that you could see political director level 
people there, including the Russians. But I don't think that's 
been decided yet.
    Senator Hagel. Thank you.
    You noted in your testimony--and I had an opportunity to 
read your complete statement as well--as did Chairman Biden and 
Senator Lugar, that the complexities within the Middle East and 
certainly that are represented within Iran--I believe your 
comment was something to the effect that the complexities that 
exist in its society, in Iranian society, as well as the entire 
region--would dictate a regional strategy and a context for 
that strategy, meaning the Syrian peace, obviously, as you 
noted, Hamas, Hezbollah. We have not really touched much upon 
Iraq here at this hearing, although we have to some extent, as 
Chairman Biden noted, the current Iraqi leadership in and out 
of Tehran. Ahmedinejad, as you know, of course a few weeks ago 
was in Baghdad. Most of the Malaki government had been exiled 
in Iran and have relationships.
    And that has been ongoing, which I have always viewed that 
as positive. But in that larger universe of strategic thinking 
and with this administration having about 6 months left in 
office and, you have noted, wanting to hand off to the next 
administration a position that has us on some higher ground 
diplomatically, give me your strategic context of how we are 
going about that?
    I think you should include in that, as I'm sure you would, 
the current engagement between Israel and Syria that was 
initiated, brokered, by the Turks, and any other piece of that 
that you can mention, because obviously that relationship 
between the Israelis and the Syrians would have an effect, does 
have an effect, on the Syrian-Iranian relationship, and all 
those factors that are in play in this larger context.
    So I know that's a big wide-open question, but I think we 
should try to focus that down and narrow that down, especially 
in regard to what do you think this administration can 
accomplish, what do you hope to accomplish in the next 6 
months, with all those factors now in play? And I think we all, 
most of us, if I heard your testimony, recognize that this is 
going to require a regional strategy, not country by country--
that's part of it, too--but the larger dynamic and the larger 
context.
    And obviously we've talked about Russia and China playing 
in that, just as the 123 agreement is a good example. We need 
the Russians. The Russians need us. They are critical to 
whatever we can do advancing a diplomatic solution with Iran.
    Thank you.
    Secretary Burns. Thank you, Senator. I think in terms of 
the broad strategy in the region, the first thing that it's 
important to understand is that you have to connect the dots. 
In other words, you have to, in terms of promoting American 
interests, pursue a strategy which is going to deal in parallel 
with a number of very important challenges, and you highlighted 
most of those that occur to me.
    But my point is it's not an a la carte menu. We have to be 
serious about a whole range of issues which go from economic 
modernization and helping societies to open up greater economic 
opportunities. It certainly includes the challenge of creating 
more modern political institutions over time.
    But it also includes building relationships and partners to 
deal with regional problems like the spread of weapons of mass 
destruction and violent extremism. It certainly goes right to 
the heart of issues at the core of the concerns of most people 
in the region, like the Arab-Israeli conflict, both in its 
Palestinian-Israeli dimension and, as you mentioned, the 
Syrian-Israeli as well as Lebanese-Israeli tracks.
    So I think as you look at the challenges over the coming 
months and for years beyond that, it's important for us to be 
serious first in doing everything we can to stabilize the 
situation in Iraq and create a more hopeful set of 
circumstances there. That means engaging Iraq's neighbors and 
deepening their stake in Iraq's stability. As I mentioned 
before, we've seen some encouraging signs from Arab states that 
they're willing to do more, especially as they've seen the 
Iraqi central government beginning to expand its confidence and 
its capacity a little bit.
    It's important to stabilize and do everything we can to 
help stabilize the situation in Afghanistan. It's important to 
look at building regional mechanisms such as the so-called GCC 
plus 3, the six gulf countries plus Egypt, Jordan, and Iraq, 
which I think is a good mechanism in terms of harnessing the 
common interests of those states, not least because of the 
signal it sends to Iran.
    I think you rightly mentioned the value of the indirect 
talks between Syria and Israel which the Turks have helped to 
facilitate over recent months. That's something that we 
encourage. And I think the net result of all these things, if 
you just look at the particular challenge of Iran, is on 
balance very positive, because what it does is help to sharpen 
the choice that I was describing before for the Iranian 
Government and its people. It helps to create a clearer picture 
of what's possible in the region and what's possible for 
Iranians if they change their behavior on the nuclear issue and 
in other areas.
    It also helps sharpen the consequences for them--the 
likelihood of greater isolation, of being out of step with the 
kind of trend lines that I hope we can promote in the region. 
That's all much easier said than done, but it just seems to me 
that those are the main challenges before us as we look out the 
next 6 months, but then well beyond.
    The Chairman [presiding]. Mr. Secretary, I have many more 
questions, but we and the staff have had an opportunity to 
spend some time with you and you've had a long day. You were 
over in the House as well today. I just want to end at least my 
comments and questioning with a request.
    I'd ask you to seriously take a look at how we interact 
with civil society in Iran. Specifically, I really would urge 
the administration to issue a general license to permit 
American charities to expand their own--excuse me--to be able 
to expend their own funds inside Iran supporting human rights, 
women's rights, and other civil society activities inside Iran.
    The high hurdles in place today have had a really chilling 
effect on the groups with which I've spoken and my staff on 
American nongovernmental activities inside Iran. I find these 
to be incredibly self-defeating and I think they have, these 
hurdles, have a perverse impact of supporting the policies of 
Iranian hardliners who don't want the Iranian people to 
interact with any outside human rights or prodemocracy NGOs or 
forces.
    So I'd like to ask you to take a hard look if you would at 
this policy. I know you to be conscientious about this. When 
you do, if you could let us know whether or not the 
administration would be able to support a general license for 
American NGOs. I think it would be--it would be presumptuous of 
me to say, I think it's totally consistent with your testimony 
and the administration's enunciated position today, and it 
would just be appreciated if you'd take a look at it.
    Secretary Burns. I'd be glad to do that, sir.
    The Chairman. Mr. Chairman.
    Senator Lugar. I'd just like to ask a general question. As 
you return to these responsibilities and attempt to establish 
your own judgment about Iran, what are the basic sources of 
information we have about the country? Clearly there are 
international news services to some extent, maybe some of our 
own reporters from time to time, although this is less likely, 
I guess. Perhaps the Iranian Government makes available some 
statistics. But, aside from the nuclear question or the 
questions of war and peace, do we have good data about 
agriculture production, about income levels in various 
provinces of the country, and the interaction of those areas 
with the central government, infrastructure repairs or new 
infrastructure of the country, or what role are television or 
computer technology or the new aspects of the electronic world 
playing in the country?
    I ask about this simply because it seems to me that this 
kind of information is important obviously to people in the 
legislative business, such as ourselves, even more important 
perhaps to you as one who may be interacting with those who are 
making policy for the country. It seems to me that one of our 
great problems in the past, to pick another country, North 
Korea, has been that we have very, very little access to 
information in the country, and this was deliberately the 
policy of the North Koreans, I suspect, to deny this knowledge, 
not just to us but to the rest of the world.
    Occasionally, through the World Food Program or through 
other situations in which we intersected with North Korea, we 
found a great deal and that was helpful in terms even of our 
humane policies toward the country. But I stress this because 
I'm hopeful that our policy will never proceed on 
misinformation, lack of information, and by this I don't mean 
covert intelligence; I mean literally the kind, the bulk of 
data that leads us to successful thoughts about what is going 
on and therefore maybe greater originality in the formation of 
our own policies.
    What have you found to be at least the general sources and 
how adequate are they about Iranian information, and to what 
extent are there people that you have encountered in Iran who 
are willing to make more information rather than less 
available? Are there those who see a need for a more 
encyclopedic outlook on our part to be a good thing?
    Secretary Burns. Thank you very much, Senator Lugar. 
Certainly Iran is not nearly as opaque a society or a political 
system as North Korea is. But our sources of information are 
not complete, in part because we haven't had a diplomatic 
presence on the ground for 30 years, as we do in most every 
other country in the world.
    But there are other sources of information. You mentioned a 
number of them, whether it's journalists who come in and out, 
it's other foreign embassies with whom we're in touch, or 
Iranians who come out from time to time and take part in 
academic conferences. So there is a lot of information out 
there, but it's not always complete, and I would be the last 
person to suggest that our appreciation or our insights into a 
lot of those very important sectors of Iranian society or the 
Iranian economy are complete. There's certainly more that we 
could learn.
    Senator Lugar. Well, you mentioned no diplomatic presence 
for 30 years and at the beginning of that period, that is 30 
years ago, our information was not very good either. At that 
point Secretary Blumenthal, who was then-Secretary of the 
Treasury, decided to take a mission, perhaps at the behest of 
President Carter, and he asked me as a junior Senator to go 
along with him, maybe to give a bipartisan cast to the 
situation. But I was honored to do that.
    We went to Tehran and we were in the Embassy there which 
was to be occupied by others a few months later. Already it was 
clear just if you had eyes to see. A theater was blown up on 
one end of the square near our Embassy. Something had happened 
there. Americans who were coming to see the Secretary had 
to leave by 6 p.m. because a safety curfew or so forth had been 
imposed. And there were rumors that the Ayatollah was regularly 
broadcasting from Paris. Even just regular Iranians were 
telling us about the excitement of these broadcasts on the 
forthcoming activity.
    As we talked to the Secret Service people, the Savak, they 
had a point of view that was very interesting. The Shah himself 
had a very interesting point of view.
    I make a point of saying all of this because I would 
suggest that at that point our country did not have the same 
opportunity that Secretary Blumenthal and I had to see and to 
report. Now, unfortunately it was very, very late in the game 
and the Shah had unfortunate views which were not very accurate 
likewise, quite apart from the Savak, and the rest of us could 
only sort of fill in where we hoped our policy might go. But 
nevertheless, the consequences of that have been very severe 
for 30 years, that there really was not that much engagement.
    Now, our Ambassador at the time I'm sure was doing his best 
to inform his superiors back in Washington, but obviously 
whatever he was communicating was inadequate for the purpose 
because folks just didn't get it back here.
    This is why I am hopeful that as we move toward the so-
called carrot and stick approach, the meetings and so forth, we 
try to think through how using the resources of our allies, 
friends in Iran, neighbors, and so forth, to begin filling in 
the blanks in terms of general information, because we are much 
more likely to make better policy, better calculations, on that 
basis, rather than on sweeping doctrinal views, which I'm 
afraid characterize much of the rhetoric about Iran now and 
hopefully not our official analysis.
    Thank you very much, sir.
    Secretary Burns. Thank you.
    Senator Kerry [presiding]. Thank you very much, Senator 
Lugar. It's fallen to me to close this out. Senator Hagel, I'm 
going to ask some questions, but did you have more afterward?
    Senator Hagel. I have two--two questions after you're 
finished.
    Senator Kerry. Well, I'm not going to be long because I've 
got some visitors waiting.
    Secretary Burns, welcome and I'm sorry I have to go in and 
out here. We just had a wonderful moment on the floor of the 
United States Senate. You may have heard. Senator Kennedy came 
back to vote and made the difference, and we managed to pass 
the Medicare bill. That was a good moment.
    I just came back from a trip to Saudi Arabia, Egypt, and 
the Middle East. I must say I was really struck by two things. 
One was the preoccupation of all of these countries with Iran. 
There was a statement by one of those countries' leaders, quite 
angry, that the United States had served up to Iran on a 
platter a country called Iraq. And there was a feeling that 
Iran has complicated these countries' options. We have 
complicated these countries' lives significantly through our 
lack of judgment, ineptitude, or whatever.
    Almost all of these countries counseled us not to go into 
Iraq in the beginning, and I'm sure you're aware of that. So 
now we're working to try to put these complicated pieces back 
together.
    What also struck me was when I was in Sharm al-Sheikh and 
met with President Mubarak briefly during the African Union 
meeting. I can't tell you how disturbing it was to have Robert 
Mugabe there, and to listen to some of those countries make 
excuses. It struck me that we've reached a strange point in 
global affairs. Senator Lugar is a great student of global 
affairs, as is Senator Hagel.
    I'm not sure that the leaders of the past would have been 
as quiet, undisturbed, and unmotivated to come together as many 
leaders are today. In a sense, the world has lost outrage about 
Zimbabwe, about Darfur, and about many other places where 
people are interfering, where people are blowing people up, and 
where there's a very clear departure from the standards that 
folks gave their lives for and worked hard to achieve in a 
global context for most of the last century.
    So it's in that context that I'm really disturbed by the 
administration's approach. Now, your comments, I was here for 
that part of it, and your testimony is a change, but it's a 
change that comes on July 4, months before the next election. 
Frankly, there is little ability for this administration to do 
the kind of lifting that needs to be done in order to change 
the dynamics with which we're currently presented.
    I noticed in your own comments that you talked about how 
you want to leave the next administration with something that 
is X, Y, or Z. That's admirable, but when you say we shouldn't 
let the Iranian regime off the hook, I blanched a little bit. 
That is exactly what has happened for the last 7 years. They've 
been let off the hook. And for 3\1/2\ of those years, the 
British, French, and Germans were working diligently to try to 
create some kind of initiative, and we gave them the stiff arm 
and stood at arm's distance. We set up a condition. The 
condition was give up your enrichment before anything else 
happens. That has resulted in nothing else happening, but it 
has resulted in about a 400-percent increase in Iran's 
enrichment activities.
    At some point you've got to stop and say: ``This isn't 
working; you're digging a hole.'' What bothers me is that the 
world is sitting here and it's disturbing. I had the privilege 
of meeting with former Prime Minister Tony Blair a few weeks 
ago and we talked about this. It was interesting to hear his 
perspective now that he's departed office. He was talking about 
how you have global leaders saying: ``You can't have this,'' 
but how you also have global leaders who haven't really crossed 
the threshold of making the decision to back up that policy.
    People who are good at reading the tea leaves are sitting 
there reading them and they know this. Hamas is stronger, 
Hezbollah is stronger, and Iraq is confused. We hope Iraq is 
coming out of that confusion, but it is hard to tell at this 
point.
    I think you see where I'm going here. The dynamic is: How 
do you change this? Let me share with you examples of that loss 
of outrage. There's been a lot written in recent months about 
the potential of Israel, the United States, or both using 
military force to deal with Iran. Obviously none of us here 
believe that option should be taken off the table. It is an 
option.
    But there has not been a lot written about what global 
unified true sanctions would achieve. We did it in South 
Africa. I was on this committee when we did it. I remember the 
talk about how multilateral action is more effective than 
unilateral action.
    Incidentally, in terms of the loss of outrage, Burma is 
another example. Lighthearted little sanctions that do almost 
next to nothing, and we all know what China's interests are, et 
cetera.
    So I don't think, Mr. Secretary, that we're doing a very 
good job of leveraging our morality, our values, our interests, 
and creating the kind of unified global effort necessary to 
calm the world down, to deal with terror that's popping up in 
country after country now--Afghanistan, the Indian Embassy, 
Baghdad. I mean, you run around.
    Let me throw a few things at you. An international arms 
embargo could have a profound impact. Resolution 1747 called 
for it, but it didn't require it. Are we serious if we don't 
require something and just call for it?
    With Resolution 1737, you could eliminate the exemption for 
sanctions on the Bushehr nuclear reactor project. Russia has 
some issues there, but those should be on the table as well.
    Or, consider a broad freeze on Iran's facility assets 
abroad. Resolutions 1737 and 1747 freeze assets, but only on 
specific entities and individuals. If you want to have an 
impact on the Iranian middle class and the technocrats, let's 
get serious about restricting the flow of capital, restricting 
investments, controlling energy, et cetera.
    A ban on the inspection of international flights to and 
from Iran would have a significant impact as well. We did that 
from Libya after Pan Am 103 and it had a profound impact on 
Tripoli.
    Consider a ban on worldwide investments in Iran's energy 
sector. A ban on exports of refined oil or other products and a 
ban on purchases of Iranian oil and related trade.
    There are a number of more serious things about which I 
don't hear enough talk and that I don't see on the 
international table. These are things I think ought to be the 
subject of discussion before we're talking about going to war 
again with 150,000 troops on the ground in a country that is 
already pretty bogged down.
    Now, I'd like you to comment on that possibility of 
sanctions. The final comment I want to make is on, as you say 
in your testimony, the diplomatic tool as a possibility and our 
envoys in Baghdad. I happen to know how restricted our message 
has been, and I think you do too. It's not a full and 
legitimate diplomatic engagement or dialogue. Our Ambassadors 
and our interlocutors are instructed what to say and can't go 
beyond it. It's a message of do this or else.
    So share with us strategically how we can get into a better 
discussion of these sanctions, build this larger consortium of 
energy and effort, and finally, begin not to hold out the 
punishment before we engage, as we have done historically with 
China, with Russia, and with the Soviet Union--quite 
successfully, I might add.
    Secretary Burns. Thank you very much, Senator Kerry. On the 
first broader strategic question, I think you have very 
accurately highlighted the reality that there's a lot more that 
can be done through diplomatic means, through means of 
tightening economic pressure, to sharpen the choice for 
Iranians. We have, I would submit, made some progress in that 
direction. The recent steps that the EU has taken, especially 
with regard to Iran's largest bank, Bank Melli, are a reminder 
of the impact that those kind of steps can have, but they're 
also a reminder that there's more that can be done.
    The challenge, as you well know, is how do you mobilize 
others to take those steps? That involves leadership on our 
part, our willingness to take autonomous steps, as we have with 
regard to some Iranian banks before others were prepared to do 
it. But it also involves us being engaged in a genuine give and 
take with our partners as well to demonstrate that we're 
willing to invest in both tracks of our policy, to make clear 
that whenever we take a diplomatic step or think about a form 
of tightening pressure or a possible incentive, that what we 
have in mind is not just the Iranian regime and the impact it's 
going to have on the Iranian regime, but also the Iranian--the 
broader Iranian audience, the Iranian people, for whom we're 
trying to sharpen this choice, but also I think the 
international coalition we're trying to build, because there's 
a lot of steps that we've taken and that we may take in the 
future that I think may help to reinforce that international 
coalition and over time, if Iran is not willing to change its 
course and change its behavior and meet its international 
obligations in the nuclear field, will enable us to build 
greater and greater multilateral pressure, because that's--
because that I think is what--and you've cited some other cases 
where this has been true over the last 20 or 30 years--it's 
that multilateral pressure that ultimately is going to have a 
greater impact.
    Senator Kerry. I couldn't agree with you more, but it's 
such a tragedy that we're only getting to this now in July 
2008. It seems to me that this strategy was obvious a number of 
years ago. I'm not picking on you. You weren't there. You had a 
different portfolio. You're new to this role.
    Secretary Burns. But let me just--all I wanted to add--I'm 
sorry, Senator--is I think over the last couple of years in 
particular we have taken steps in that direction. Sometimes 
they've been frustratingly slow, not because we wanted them to 
be slow, but because it's difficult to challenge and mobilize 
our partners.
    But we have begun to move in that direction. My only point 
is there's more we can do and I think if we're ambitious and 
creative about it there's more that can be accomplished in the 
coming months that can put us in a stronger diplomatic position 
and help sharpen that choice for Iranians.
    Senator Kerry. We all wish that. I think that the signature 
of the Secretary on the publicized P5+1 offer letter has had an 
impact, and I think that goes to underscore the degree to which 
engagement can perhaps make a difference here.
    I don't want to belabor this now. I'd like to ask some more 
questions, but honestly I'm not able to. But it did strike me 
in the conversations I had in Israel that, while there are 
perhaps deep--and you know this--deep reservations about the 
ability of some of these things to have an impact, they 
obviously view this in existential terms and it's their terms, 
which are more real and immediate, and we have to be 
sympathetic to that.
    Nevertheless, they did acknowledge that these other kinds 
of sanctions on a global basis could have a profound impact and 
make a difference. I think how they're offered, how they are 
proffered, 
is particularly important. I think that the United States needs 
to assume, to some degree, a different attitude here. I don't 
mean diminishing our declaration of the seriousness of the 
situation or our commitment to resolve it one way or the other. 
I mean simply approaching the table as a diplomat, in a way 
that allows people to come back to you and talk to you and not 
feel as if it's a take it or leave it, all or nothing, 
threatening kind of discussion.
    I think to the degree that we are able to maneuver that way 
we're going to open up more channels of communication and, 
frankly, open up possibilities.
    So I look forward to that, and I wish you success in that 
effort.
    I'm told Senator Feingold is coming. I'll yield to Senator 
Hagel. I'll just be in the back room and then I'll come back 
in. Thanks.
    Senator Hagel. Senator Kerry, thank you.
    I just have one additional question, Secretary Burns. As we 
all recognize, Iran shares borders with the two countries where 
America is currently at war. We have 150,000 troops roughly in 
Iraq, roughly 35,000 troops in Afghanistan, and we'll be 
putting more American troops in Afghanistan. And the common 
denominator, among many, is that Iran shares a border with both 
Afghanistan and Iraq.
    We talked a little earlier this afternoon about Afghanistan 
obliquely and I want to come back to that in a moment. But we 
referenced more directly the Iraq-Iran connection with the 
current leadership in both and their engagement. We can term it 
any way we like, but it's clearly engagement. I think, for all 
the flaws and imperfections in this business, engagement is 
almost always preferable to the alternatives.
    Now, we recognize and you certainly do, even though your 
portfolio didn't have all the specific responsibilities when we 
first went to war in Afghanistan the Iranians cooperated with 
us on different issues, one being on illicit drugs crossing 
their border; unrest on their eastern border. And they didn't 
cooperate with us, as you know, because, I don't believe, they 
wanted to do us a favor or it was President Bush's or Vice 
President Cheney's winning personality. It may have been. But 
they did it very simply because it was in their common 
interest. It was clearly in their interest and that's what 
engagement is about, because that's what gets to a negotiation. 
Both sides have to get something out of the deal. There's a 
reason for both sides to sit down, just exactly what's going on 
in North Korea today, the six-party talks. All six parties to 
those talks have a reason to be there. It is in the common 
interest of all six nations, just as it was in the interest of 
Libya and the United States, and every conflict where we 
eventually resolve it with some kind of a diplomatic 
resolution, just as General Petraeus told this committee, as 
you know, 3 months ago, there is no military solution in Iraq. 
Well, of course not.
    So with that as a bit of a base to work from, I want to go 
back to something that was mentioned, and I think you brought 
it up and maybe it was in response to Senator Biden, in noting 
the most recent P5+1 proposal Mr. Solana took to the Iranians. 
I think you termed it suspension for suspension. Or another way 
I heard it is freeze for freeze, that, as you have explained 
it, freeze in place or suspend it in place, no more of this and 
this side will do no more of this, and then hopefully we can 
start working our way towards something.
    Now, as far as I know that's a new part of the proposal, 
and I'm going to ask you to respond to that. This dynamic that 
was put forth in this most recent proposal was something new, 
and my understanding is that it was to try to get around, 
essentially get us out of the diplomatic cul de sac we find 
ourselves in with Iran on our insistence, the U.S. insistence, 
and our allies, that preconditions be met before we will talk 
to you. And the Iranians have said, no, we're not going to do 
that.
    I've never quite understood why we would do that to 
ourselves, but nonetheless we are where we are and we've got to 
find a way to back out of that so obviously all sides can save 
some face here and we can get ourselves back onto some serious 
ground to try to engage a serious issue in a serious way to 
find a serious resolution.
    Now, would you enlighten us a little bit more on what you 
understand that part of the proposal to be and what its 
significance is, if there is any?
    Secretary Burns. Sure, Senator Hagel. Our goal again, just 
to repeat, remains very clear and that is through concerted 
diplomacy to ensure that Iran does not acquire nuclear weapons 
capability. The negotiating proposal that we and the P5+1 have 
put on the table is aimed at negotiations based on suspension 
for suspension. But Mr. Solana has also introduced the idea of 
freeze for freeze as an interim step, as a way of talking about 
how you get to negotiations.
    The idea of freeze for freeze is that for a fixed, short-
term period of 6 weeks we would agree to freeze, we the P5+1 
would agree that we would not seek any new Security Council 
action against Iran, and during that same fixed period Iran 
would not engage in any new nuclear activity. In other words, 
it wouldn't add additional centrifuges to its effort.
    Again, I would emphasize we're talking about a step that's 
designed to get to negotiations, a fixed period for a fixed 
goal, which is to begin negotiations, as we have made clear for 
some time, based on suspension for suspension. So that's the 
concept, and I think that within the P5+1 it's further evidence 
of our seriousness about reaching a diplomatic solution of this 
very, very serious problem.
    Senator Hagel. If I may--and thank you for the explanation. 
So if this is accepted, and it may well be--I don't know if the 
Iranians have responded completely or affirmatively to this. 
But if it is accepted--and I assume it's been accepted by the 
six parties on our side or it wouldn't have been in the 
proposal. But if the Iranians accept it, then what would be the 
next step?
    Does this mean then that the United States would be 
directly engaged in the next step with the Iranians or our 
partners? Or what does this mean as to the next step?
    Senator Kerry. Can I just, before you answer that? I'm 
going to leave the gavel with our good ranking member.
    Senator Hagel. Is Senator Feingold coming back?
    Senator Kerry. He is not. Apparently he's not going to be 
here. So I appreciate that.
    Senator Hagel. Thank you.
    Senator Kerry. Thank you very much.
    Secretary, thanks so much for being with us. We appreciate 
it.
    Secretary Burns. Senator Hagel, on the question of American 
participation, direct American involvement, our position 
remains as I described it before. In other words, what 
Secretary Rice has said publicly, that she would be prepared 
personally to engage at the ministerial level with the 
Iranians, along with their P5+1 partners, in negotiations on 
the basis of suspension for suspension.
    The freeze for freeze concept is an idea that was 
introduced in Mr. Solana's conversations as a way of getting us 
to that point and of demonstrating our collective seriousness.
    Senator Hagel. Thank you, Mr. Secretary.
    Mr. Chairman.
    Senator Lugar [presiding]. Well, thank you very much, 
Senator Hagel.
    On behalf of the committee, Secretary Burns, we thank you 
again for coming before us for your opening statement, which is 
a part of the record, as well as your oral testimony, and your 
great responses to our questions. We appreciate your service 
and wish you well, and please give our best to the Secretary as 
she proceeds in all the ways we have suggested.
    The hearing is adjourned.

    [Whereupon, at 5:13 p.m., the hearing was adjourned.]

                              ----------                              

              Additional Material Submitted for the Record

   Additional Questions for the Record Submitted to Under Secretary 
              William J. Burns by Senator Russell Feingold

    Question. I'd like to ask you about the National Intelligence 
Estimate--or NIE--which was released last December and which assessed 
that Tehran halted its nuclear weapons program in 2003. The NIE also 
assessed that Iran has the scientific, technical and industrial 
capacity to eventually produce nuclear weapons if it decides to do so. 
This is deeply troubling and requires our continued--and collective--
vigilance. But a coherent policy to keep Iran from developing nuclear 
weapons requires that we are all operating from the same facts, or at 
least the same intelligence assessments. Tom Fingar, the Deputy 
Director of National Intelligence for Analysis, has said that, to his 
knowledge, nobody who has actually read the entire NIE has challenged 
its judgments. Do you agree with the NIE's judgments and does the NIE 
represent the current intelligence assessments on which U.S. policy is 
based?

          a. The President has reportedly said that Iran has declared 
        that it wants a nuclear weapon. Is that statement accurate?

          b. The Vice President has reportedly said that Iran is 
        involved in the enrichment of uranium to weapons-grade levels. 
        Are you aware of any evidence supporting this statement?

    Answer. The 2007 National Intelligence Estimate on Iran is the U.S. 
Intelligence Community's latest in a series of documents on Iran's 
nuclear program and intentions. It is important to consider the 
totality of the NIE's conclusions. In this NIE, the U.S. Intelligence 
Community assesses with high confidence that Iran halted its nuclear 
warhead development work, as well as clandestine uranium enrichment and 
conversion activities, in the fall of 2003 in response to international 
scrutiny and pressure.
    However, the U.S. intelligence community also assesses that Iran, 
at a minimum, is preserving an option to develop nuclear weapons in the 
future. The U.S. intelligence community noted that Iran is continuing 
to engage in work that could be applied to the production of nuclear 
weapons, including uranium enrichment and other conventional military 
and commercial projects. Further, the NIE makes clear that the U.S. 
Intelligence Community cannot provide assurances that Iran has not or 
will not restart its nuclear weaponization-related work.
    The development of nuclear weapons generally depends on three 
pillars: fissile material production; the ability to construct a 
warhead; and, a useable delivery system. The production of fissile 
material is the most time-consuming aspect of nuclear weapons 
development and the same centrifuges that can produce low enriched 
uranium for reactors can produce highly enriched uranium for weapons. 
The International Atomic Energy Agency (IAEA) continues to report on 
Iran's efforts to enrich uranium and to expand its capacity to do so. 
It is for that reason that the Intelligence Community did not 
dramatically change from the last NIE its estimated timetable for 
Iran's capability to produce highly enriched uranium that could be used 
in a nuclear warhead, assessing with moderate confidence that this 
could be achieved in the 2010-2015 timeframe, while noting it could 
also take longer. The Department's Intelligence and Research Bureau 
assessed that the capability was unlikely to be achieved before 2013. 
Iran's missile tests of 9 July demonstrate again that it has missiles 
capable of delivering weapons of mass destruction.
    Iran's failure to disclose fully its past nuclear weapons-related 
work--or to provide substantive explanations for the extensive 
documentation made available to the IAEA by approximately 10 member 
states amplifies our concern that Iran is attempting to preserve a 
weapons option for the future.
    If Iran wishes to establish international confidence in its nuclear 
intentions, its leadership should cooperate fully with the IAEA, answer 
its many outstanding questions, and suspend its uranium enrichment-
related, reprocessing, and heavy water-related activities as required 
by the UN Security Council. The ball is Iran's court.

    Question. The State Department has said that Iran provides 
Hezbollah with weapons, training, and political, diplomatic, and 
organizational aid. It has also said that while Hezbollah is closely 
allied with Iran and often acts on its behalf, it also can and does act 
independently. To what extent is Iran responsible for Hezbollah's 
activities in Lebanon?

    Answer. Iran is Hizballah's largest state sponsor. Iran and 
Hizballah have had a long-standing relationship in Lebanon. Iran 
provides Hizballah with funding, weapons, training, political and 
diplomatic support. In return, Hizballah often works with Iran to 
accomplish Iranian goals. The relationship between the two continues to 
grow. We remain concerned about Iranian support to Hizballah, some of 
which violates Chapter VII obligations under UNSCRs 1701 and 1747.
    The U.S. has continued to appeal directly to governments in the 
region whose territory and airspace has been used in Iranian-sponsored 
efforts to re-supply Hizballah. The U.S. is working closely with 
regional partners, particularly the Governments of Turkey, Lebanon, 
Iraq, and Jordan, to prevent further weapons transfers to Hizballah and 
other terrorist groups. More broadly, we seek the involvement of all 
allies to condemn and confront Iranian support for terrorism in their 
dealings with the Iranian government, diplomatically as well as 
commercially. We are sharing intelligence with our European partners, 
as well as allies in the region, with the goal that this information 
will better enable actions to prevent Iran from illegally transporting 
weapons or using the international financial system to finance 
terrorism.

    Question. On June 23, ABC News reported that there may be an 
opening of a US presence--an ``interests section''--in Iran as part of 
our effort to reach out to the Iranian people in various ways. Can you 
confirm whether the administration is planning to open an ``interests 
section'' in Iran and if yes, what will be its main objectives? What 
might we expect from having such a presence?

    Answer. The Department cannot comment publicly on the internal 
deliberations. However, we have a long-standing and strong interest in 
reaching out to the Iranian people.

    Question. In referring to a potential direct military clash with 
Iran while still fighting in Iraq and Afghanistan, Chairman of the 
Joint Chiefs Admiral Mullen recently stated that ``[o]pening up a third 
front right now would be extremely stressful for us. [t]his is a very 
unstable part of the world, and I don't need it to be more unstable.'' 
Do you believe that the recent U.S. Navy exercises carried out in the 
Gulf might further raise existing tensions? As State seeks to maintain 
a united international front and strengthen existing UN sanctions, do 
you think such actions are helpful?

    Answer. I would refer you to the U.S. Navy regarding any particular 
naval exercises in the Gulf. Generally, our naval exercises provide 
opportunities for our forces and those of our friends and allies to 
improve their military readiness, interoperability, and command and 
control systems. Additionally, executions of credible and professional 
military exercises instill mutual confidence in all partners involved. 
We also hope that the exercises and participation by friendly and 
allied states will encourage caution on the part of potential 
adversaries.

    Question. How would bilateral sanctions on Iran's central bank help 
or harm multilateral diplomatic efforts? What about tightening existing 
bilateral sanctions on US companies that invest in Iran by sanctioning 
parent companies? This is a loophole I have sought to close through 
legislation that would toughen ISNA, but I understand the State 
Department has concerns that such an expansion might have an adverse 
affect on our transatlantic relationships. Can you address this 
concern?

    Answer. As a matter of policy, we do not comment on possible 
options that we may want to employ. On March 20, the Treasury 
Department's Financial Crimes Enforcement Network (FinCEN) issued an 
advisory to U.S. financial institutions about the risk Iran poses to 
the international financial system. This advisory explicitly references 
Bank Markazi, Iran's Central Bank, for deceptive financial practices 
and underscores the concern that it may be facilitating transactions 
for sanctioned Iranian banks.
    While we continue to closely monitor Bank Markazi, any direct 
measures against the Central Bank would require careful consideration 
before they are enacted for their potential impact on the Iranian 
population and ongoing multilateral efforts. Designation of the Central 
Bank would be a significant step that could have repercussions for 
Iran's ability to control inflation and respond to other economic 
crises. In addition, such action could also adversely impact private 
sector trade, energy prices, and delivery of humanitarian assistance. 
Designation of Iran's Central Bank may find strong resistance among the 
international community, thereby undermining our steady efforts to 
maintain firm multilateral pressure on Tehran. These concerns do not 
eliminate this option, however, we would need to carefully consider the 
ramifications before taking such an action.
    Foreign subsidiaries of U.S. companies are often incorporated in 
other countries and act outside of U.S. jurisdiction. We have lobbied 
countries around the world to take actions to pressure Iran, including 
by developing their own sanctions against Iran. In addition we hold 
direct consultations with foreign companies about the risks of 
investment in Iran. We will continue to apply sanctions on companies 
and entities that support Iran's WMD, delivery system and advanced 
conventional weapons systems under the Iran, North Korea, and Syria 
Nonproliferation Act (INKSNA).

    Question. How are you addressing Iran's overall strategic influence 
in Iraq and how does that impact our policy towards the region?

    Answer. Due to its geography, size, and natural resources, Iran is 
an important player in the region. However, we are deeply concerned by 
Iran's destabilizing influence in the region, including its threats 
toward other countries in the region, its sponsorship of terrorism, and 
its pursuit of sensitive nuclear technology.
    President Bush noted on 10 April that the Iranian regime has a 
choice to make: it can choose to live in peace with its neighbors, 
enjoying strong economic, religious and cultural ties, or it can 
continue to arm, fund and train illegal militant groups, which are 
terrorizing the Iraqi people and turning them against Iran. If Iran 
continues down the current path, Iran's leaders should know that we 
will take active measures to protect our interests, and our troops, and 
our Iraqi partners.
    As pledged by the President, our forces, in cooperation with our 
Iraqi and Coalition partners, have destroyed Iranian-supported lethal 
networks, recovered large weapons caches, and disrupted cross-border 
arms trade. In the past few years, we have learned a great deal about 
these networks and their Qods Force sponsors, particularly from 
individuals captured and detained by our forces. This knowledge has 
allowed us to improve our methods for tracking and disrupting their 
operations.
    We are encouraged by the Iraqi government's recent successful 
actions against Iran-sponsored groups in the South and East, and we 
believe that Iraqi-led efforts toward Iran will yield the best results 
in terms of convincing Iran to play a productive role in Iraq's future. 
We continue to support our Iraqi partners toward this end.

                                 ______
                                 

   Additional Questions for the Record Submitted to Under Secretary 
            William J. Burns by Senator Robert P. Casey, Jr.

    Question. Do the United States and Israel share a common assessment 
of Iran's nuclear program, the progress Iran has achieved to date on 
nuclear weapons capability, and the remaining steps required for Iran 
to produce a nuclear weapon if it makes that decision? If not, what are 
the differences?

    Answer. The U.S., Israel, and indeed most of the international 
community agree that Iran is continuing to develop technologies that 
would provide it with a nuclear weapons capability despite our best 
efforts with a combination of diplomatic engagement and multilateral 
and unilateral sanctions to convince Iran that they should cease these 
activities. We also agree that at this time, the emphasis should remain 
on diplomacy--both incentives and sanctions--but that it also is 
critical that Iran understand that no option is off the table, 
including a military one. The U.S. and Israel agree that this is the 
last option, but it remains a viable one. I would be happy to share 
more information regarding our assessment in a classified setting.

    Question. Has the U.S. government provided a clear signal to the 
Israeli government on how the United States would regard a potential 
Israeli military strike on Iranian nuclear facilities? Have we given 
the Israelis a ``green light'' or a ``red light'' on such action, or 
have we carefully avoided that discussion up to this point?

    Answer. The Department is not aware of Israeli plans for a military 
strike. The international community--including Israel--has publicly 
committed to support the P5+1 dual track strategy which includes 
escalating pressure on Iran to persuade its leaders to abandon their 
nuclear weapons ambitions, while holding open the prospect of 
negotiations and benefits that could accrue to the Iranian people if 
Iran changes course.

The U.S. Approach to Iran
          Last week, Seymour Hersh published a provocative article in 
        The New Yorker, titled ``Preparing the Battlefield.'' Hersh 
        wrote that last year, Congress agreed to a request from 
        President Bush ``to fund a major escalation of covert 
        operations against Iran, according to current and former 
        military, intelligence, and congressional sources. These 
        operations, for which the President sought up to $400 million 
        dollars, were described in a Presidential Finding signed by 
        Bush, and are designed to destabilize the country's religious 
        leadership. The covert activities involve support of the 
        minority Ahwazi Arab and Baluchi groups and other dissident 
        organizations. They also include gathering intelligence about 
        Iran's suspected nuclear-weapons program.''

    Question. Is the United States funding covert operations on Iranian 
territory aimed at destabilizing the Iranian regime? Please provide 
this answer in a classified format if necessary.

    Answer. As a matter of general policy, we do not comment on 
intelligence matters. Our policy goal remains to change Iran's 
behavior.

    Question. Does the U.S. government assess that the Iranian regime 
is susceptible to destabilization by various ethnic minority groups 
inside Iran?

    Answer. Iran is a very diverse nation, with sizable Azeri, Kurdish, 
Arab, and Baluch populations. While Iran's constitution guarantees 
ethnic minorities certain rights, in practice, these groups face 
varying degrees of repression. Few groups call for separatism, but 
instead complain of political and economic discrimination. Iran's 
minorities occasionally attempt to demonstrate for their rights, and 
are prevented from doing so by the Iranian government. For example, in 
May 2006 there were large-scale riots in the Azeri majority regions of 
the northwest following publication of a newspaper cartoon considered 
insulting to Azeris. Police forcibly contained the protests, and police 
officials reported that four persons were killed and several protesters 
were detained.

P5+1 Approach to Iran
          At today's hearing, you acknowledged that Javier Solana, on 
        behalf of the five Permanent Members of the UN Security Council 
        and Germany, offered Iran last month a possible ``freeze for 
        freeze,'' whereby, if Iran agrees to not expand its current 
        uranium enrichment capability, e.g. install additional 
        centrifuges, the P5+1 will agree not to press for additional 
        sanctions at the United Nations.

    Question. Please confirm the details of Solana's offer to Iran are 
accurate.

    Answer. The P5+1 refreshed package includes a range of incentives 
designed to persuade Iran to suspend enrichment- and reprocessing-
related activities and enter into negotiations on a long-term agreement 
to address international concerns with Iran's nuclear program. These 
incentives include wide-ranging economic, technological, and scientific 
benefits. The P5+1 have provided copies of the updated incentives 
package to members of UN Security Council, the IAEA Board of Governors, 
and have also made its contents public after delivery to Iran. High 
Representative Solana plans to travel to Geneva on July 19 to further 
discuss the incentives package and compliance with international 
obligations with Iran.

    Question. Why did the United States and our international partners 
walk back from their previous insistence that the P5+1 would only 
engage in negotiations with Iran only when it agreed to suspend all 
existing uranium enrichment activities, not just halt any additional 
activities?

    Answer. The P5+1 position has not changed. Secretary Rice has 
stated on many occasions that she stands ready to negotiate with Iran 
on any issue, anywhere, anytime, once Iran suspends its enrichment-
related and reprocessing activities as required under three UN Security 
Council Resolutions. The freeze-for-freeze proposal is a creative idea 
that the P5+1 developed to attract Iran to the negotiating table. If 
Iran agrees to stop all new nuclear activity, the P5+1 will also halt 
consideration of new UNSC measures during a time-limited period of six 
weeks in order to get Iran to the negotiating table. This is a short-
term, interim step intended to get Iran to a suspension.

    Question. Does the P5+1 incentives package to Iran, which includes 
a series of political and economic ``carrots,'' also include a 
comprehensive security guarantee to Iran if it meets our trepidations 
on its nuclear program and other areas of concern? If not, why is such 
a security guarantee not on the table?

    Answer. The P5+1 refreshed incentives package includes an offer for 
a conference on ``regional security issues.'' This does not constitute 
comprehensive or any other type of security guarantees by the P5+1, 
which we do not believe are appropriate in these circumstances. 
Resolving the international community's serious concerns about Iran's 
nuclear ambitions would be an important step toward Iran playing a 
constructive, rather than a destabilizing role in the Persian Gulf 
region; this would naturally have a positive impact on Iran's security. 
We are committed to the security of the Persian Gulf through our close 
and continuing security partnership with the members of the Gulf 
Cooperation Council. The P5+1 offer does not interfere in any way with 
these commitments.
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