U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

80–940PDF 2013

PREVENTING A NUCLEAR IRAN

HEARING

BEFORE THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS

FIRST SESSION

MAY 15, 2013

Serial No. 113–34

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

ADAM KINZINGER, Illinois 

MO BROOKS, Alabama 

TOM COTTON, Arkansas 

PAUL COOK, California 

GEORGE HOLDING, North Carolina 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

STEVE STOCKMAN, Texas 

RON DESANTIS, Florida 

TREY RADEL, Florida 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

LUKE MESSER, Indiana 

ELIOT L. ENGEL, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

JUAN VARGAS, California 

BRADLEY S. SCHNEIDER, Illinois 

JOSEPH P. KENNEDY III, Massachusetts 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Wendy R. Sherman, Under Secretary for Political Affairs, 

U.S. Department of State .................................................................................... 5

The Honorable David S. Cohen, Under Secretary for Terrorism and Financial 

Intelligence, U.S. Department of the Treasury ................................................. 19

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Wendy R. Sherman: Prepared statement .................................... 8

The Honorable David S. Cohen: Prepared statement ........................................... 21

APPENDIX 

Hearing notice .......................................................................................................... 68

Hearing minutes ...................................................................................................... 69

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 71

The Honorable Eliot L. Engel, a Representative in Congress from the State 

of New York: Material submitted for the record ............................................... 73

Written responses from the Honorable Wendy R. Sherman to questions submitted for the record by the Honorable Dana Rohrabacher, a Representative 

in Congress from the State of California ........................................................... 74

Written responses from the Honorable David S. Cohen and the Honorable 

Wendy R. Sherman to questions submitted for the record by the Honorable 

Adam Kinzinger, a Representative in Congress from the State of Illinois ..... 75

Written responses from the Honorable Wendy R. Sherman and the Honorable 

David S. Cohen to questions submitted for the record by the Honorable 

Mark Meadows, a Representative in Congress from the State of North 

Carolina ................................................................................................................ 78

(1)

PREVENTING A NUCLEAR IRAN 

WEDNESDAY, MAY 15, 2013

HOUSE OF REPRESENTATIVES,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 1:19 p.m., in room 

2172, Rayburn House Office Building, Hon. Ed Royce (chairman of 

the committee) presiding. 

Chairman ROYCE. This committee will come to order. Today we 

are here to discuss Iran’s growing nuclear threat as well as U.S. 

and allied efforts to stop it. For this committee there is no higher 

priority. 

The committee last heard from Under Secretary Sherman and 

Under Secretary Cohen in October 2011. We welcome them back. 

Since that time, thanks to the bipartisan work of this committee, 

several sanctions aimed at Tehran’s financial lifeline have been implemented, many of them over the objections of the administration. 

But Iran has seen its oil revenue drop by 40 percent. Official inflation has climbed to 30 percent, with unofficial estimates being 

twice as high. So well done, but not enough. 

In the year and a half since our witnesses last appeared, the 

International Atomic Energy Agency tells us that the total installed centrifuges at the facilities at Natanz and Fordow have increased from 8,500 to more than 15,700. That is an 85 percent increase since the last hearing. Some of these centrifuges are more 

advanced, perhaps five times as powerful as earlier models. A key 

facility is buried deep under the mountain. 

Iran continues to stonewall the IAEA on its development of nuclear explosive devices. It does not take a physicist to comprehend 

Iran’s intentions, developing a nuclear arsenal. 

I am convinced that Iran will continue on this path until the 

sanctions bite so bad that the regime must relent or face upheaval. 

That is where we need to get. 

Meanwhile, Iran works to undermine governments in the region 

and around the globe. Iran’s support is keeping the brutal Assad 

regime afloat. It has resupplied Hezbollah with at least 25,000 new 

rockets, and I saw the impact of some of those rockets in Haifa in 

2006 when they were raining down on the city, targeting the trauma hospital, targeting civilian sectors of that city. 

In recent years there have been Iranian-sponsored attacks on 

plots in Bulgaria, India, Thailand, Georgia, Azerbaijan, Cyprus, 

Kenya, and one here in Washington, DC, as well, and I would hate 

to see an Iran emboldened by nuclear weapons. 

2

There are also real concerns about Iran’s interaction with North 

Korea, because earlier this year the committee heard testimony 

that Iran and North Korea had signed a scientific cooperation 

agreement, the same type of agreement that North Korea had 

signed with Syria before building their reactor, the reactor that 

was destroyed by Israel. 

But it is not just the sharing of missile and nuclear technology 

that has us concerned. It is the sharing of a diplomatic playbook. 

Even the head of the United Nations has recognized that Iran, like 

North Korea, will use talks as a cover to build a bomb. 

From day one the Obama administration has reached out to the 

Iranian regime. Unfortunately, that hand has been met with more 

centrifuges, more missiles, and more stonewalling. We don’t yet 

seem to realize that this regime, which beats and imprisons its own 

people, is determined to keep its nuclear program. 

So I am convinced, as are 325 of my colleagues, that only when 

the Iranian leadership truly feels a choice between maintaining 

power and the bomb does our diplomacy have a chance to succeed. 

That is why Ranking Member Engel and I have introduced H.R. 

850, The Nuclear Iran Prevention Act, to continue to turn up the 

economic and political heat on the regime. We look forward to moving this legislation out of committee next week. 

It is cliche ́ to say the clock is ticking. I just hope we are able to 

act before the clock stops ticking. 

I will now turn to Ranking Member Engel for his opening remarks. 

Mr. ENGEL. Mr. Chairman, thank you for calling this very timely 

hearing on our strategy to deny Iran a nuclear weapons capability. 

I know both our witnesses, and I am impressed by their work and 

their credentials, so I would like to thank both of you for appearing 

today and for your hard work on this very, very important issue. 

I believe that ending the Iranian nuclear weapons program is the 

greatest national security challenge facing our Nation. A nucleararmed Iran or one with a perceived nuclear weapons capability 

would gravely undermine the foundations of the nuclear nonproliferation regime and the peace, security and stability of the entire Middle East. And since the Iranian leadership has threatened 

to destroy the State of Israel, the dangers from this nuclear scheme 

are of the highest order. 

Over the last several years this committee has been at the forefront of efforts to enact the strongest sanctions ever levied against 

Iran’s nuclear program. I continue to hope that we can achieve a 

peaceful resolution of the Iranian nuclear crisis, and these sanctions are a critical and indispensable element of our two-track diplomatic strategy, pressure and negotiations. 

Secretary Sherman, in early April you represented the United 

States at the latest round of P5+1 negotiations with Iran in 

Almaty, Kazakhstan. At that meeting Iran rejected yet another 

offer from the P5+1 in which some international sanctions would 

reportedly be lifted in return for Iran suspending some of its most 

sensitive uranium-enrichment work. And once again we walked 

away from negotiations virtually empty-handed. 

Let us face it, it wasn’t our willingness to talk that brought Iran 

to the negotiating table. The Iranian regime will only respond to 

3

pressure. And I don’t think they will ever negotiate in good faith 

unless we continue to ratchet up the pressure, and we will do that 

when the committee marks up the bipartisan Nuclear Iran Prevention Act next Wednesday. I am pleased and honored to work on 

that with our chairman, Chairman Royce, and we do it with one 

mind. There is no difference between the two of us on this very important issue of Iran and nuclear weapons. 

We must act with a sense of urgency. While the regime feigns 

sincerity on negotiations for the international press, they continue 

to move full speed ahead with their nuclear weapons program. According to the IAEA, Iran is installing advanced centrifuges faster 

than expected, dramatically increasing the pace of uranium enrichment. There has been no progress on the IAEA’s effort to resolve 

outstanding questions about the nuclear program’s military dimensions, and Iran has still not allowed IAEA inspectors access to 

Parchin, where the regime is almost certainly concealing illicit nuclear activities from the international community. 

So, with another failed round of negotiations in our rear-view 

mirror, and with this information from the IAEA in mind, I look 

forward to hearing from our witnesses on what exactly is the administration’s strategy to end Iran’s nuclear weapons program. I 

would also like to hear our witnesses discuss what tools they have 

at their disposal to increase pressure on the Iranian regime, but 

have yet to utilize. 

Finally, my most sensitive question: I am convinced that President Obama is serious when he says Iran will not develop a nuclear weapon on his watch, but I believe that Congress must know 

the following: When will the administration be forced to abandon 

the diplomatic option? Secretary Kerry says we cannot let the talks 

become an interminable process. At what point should they be terminated if no progress is made? 

I want to make something clear to Iran: Your nuclear weapons 

program is not necessary, nor will it succeed. The United States 

will not allow this to happen. Congress will continue to insist on 

a full and sustained suspension of enrichments. On this we have 

bipartisan and strong support. We will demand clarity on the military dimensions of Iran’s nuclear program, and we will insist that 

the IAEA have complete access to do its job. 

If rapid progress is not made in all of these areas, we will continue to press forward with even stronger sanctions. Again, that is 

what the chairman and I are trying to do, and we have over 300 

cosponsors to our bill. 

I am eager to hear how our witnesses assess the effectiveness of 

our current sanctions, and, most importantly, I look forward to 

hearing about the administration’s strategy to end Iran’s nuclear 

weapons program once and for all. 

Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Engel. 

We will now go to Ms. Ros-Lehtinen, chairman of the Middle 

East subcommittee, for 1 minute, and followed by Mr. Deutch, 

ranking member of that subcommittee. 

Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman, and 

thank you for the witnesses as well. 

4

Iran continues to pose one of the greatest threats not only to U.S. 

national security, but also to global peace and security. Tehran continues to provide financial, material and logistical support for terrorist groups like Hezbollah, who undermine our interest in Syria. 

It remains an ally of Assad, the murderous thug in Syria, arming 

the regime, and sending its own Quds Force soldiers to fight alongside Assad’s troops. 

Negotiations have been useless. Iran refuses to honor its international obligations related to its ballistic missile and nuclear programs, and yet we continue down this road. Iranian authorities 

deny access to those investigating the terrible human rights violations that are rampant in the country. 

We have got to learn from the mistakes of the past so that we 

don’t keep making them, and I am interested in hearing from Mr. 

Cohen about the actions that his agency has taken to discourage 

Iran from using Venezuela and other areas to circumvent U.S. 

sanctions. 

Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Ms. Ros-Lehtinen. 

Mr. Deutch. 

Mr. DEUTCH. Thank you, Mr. Chairman. Thanks to you and 

Ranking Member Engel for calling this hearing today. 

Secretaries Sherman and Cohen, we greatly appreciate your 

being here with us today, though it seems, frankly, that we have 

been here before discussing the efficacy of U.S. sanctions and the 

status of Iran’s quest for nuclear weapons. 

I want to commend each of you for the work that you have done 

and the undeniable effect that sanctions have had on Iran’s economy. Iran is virtually isolated from the international financial markets. Its oil exports have been halved. But where are we now? 

The only bar for success, the ultimate judge of success of sanctions is Iran ending its nuclear weapons program, and thus far we 

are no closer to stopping Iran’s brutal human rights abuses, its 

support for Assad’s heinous crimes in Syria, or preventing Iran’s 

sponsorship of terror around the world. 

This unfortunately leaves many to wonder how our policy of 

sanctions and diplomacy ultimately can work. There are discussions that diplomacy with Iran must be on hold until after Iran’s 

elections in June. Well, what happens for the next 6 weeks, and 

how long can we afford to wait as Iran continues to install centrifuges increase its enriched uranium stockpile? 

I look forward to your insights into the coming weeks and 

months and the discussion we will have today. Thanks for being 

here. 

Thank you, Mr. Chairman. 

Chairman ROYCE. Thank you, Mr. Deutch. 

We will now go to Mr. Sherman, ranking member of the Terrorism, Nonproliferation, and Trade Subcommittee. 

Mr. SHERMAN OF CALIFORNIA. Since the late 1990s, I have been 

calling for the toughest sanctions on Iran. Various administrations 

have disagreed. Often this House has passed tough bills, only to 

see them die or get watered down in the Senate. The administration has sanctioned 23 Iranian banks, but has failed to sanction the 

rest. 

5

Those who say soft sanctions will cause Iran to abandon its nuclear program cannot explain the first decade of this century during which we had soft sanctions and fast centrifuges. This committee will be taking up the Nuclear Iran Prevention Act, which I 

have joined with many others in introducing, especially our chairman and ranking member, and we need to make that bill as tough 

as possible, and let us go into conference with the Senate with the 

strongest possible bill. 

Let us say that in order to have a contract with the U.S. Government, you must certify on behalf of all of the corporate group that 

you sell nothing to Iran except agricultural and medical products, 

and let us include in whatever bill we send to the floor and the 

Senate the strongest possible sanctions. 

Thank you, Mr. Chairman and Ranking Member. 

Chairman ROYCE. Thank you, Mr. Sherman. 

This afternoon we are joined by senior representatives from the 

State and Treasury Departments. Under Secretary Sherman has 

held numerous positions at the State Department, including Counselor for the Department and Assistant Secretary for Legislative 

Affairs. 

Under Secretary Cohen’s career at the Treasury Department has 

been focused on fighting money laundering and financing of terrorism. Prior to his Senate confirmation in 2011, he served as Assistant Secretary for Terrorist Financing. 

Welcome again to both of you. Without objection, the witnesses’ 

full prepared statements will be made part of the record. Members 

are going to have 5 legislative days to submit statements or questions or any extraneous materials for the record. 

We again would ask that you summarize your statements to 5 

minutes, and we will begin with Ambassador Sherman. 

STATEMENT OF THE HONORABLE WENDY R. SHERMAN, 

UNDER SECRETARY FOR POLITICAL AFFAIRS, U.S. DEPARTMENT OF STATE 

Ambassador SHERMAN. Thank you very much, Mr. Chairman, 

Ranking Member Engel, and Members of Congress and of this committee. Good afternoon, and thank you for the invitation to testify 

about one of our top foreign policy and national security priorities, 

Iran. 

Iran’s leaders want the world to think of their country as a legitimate power and a regional leader, yet the costly and destructive 

decisions the regime is making day after day undermine Iran as a 

credible player on the world stage. What is more, Iran’s policies, 

from its nuclear weapons ambitions to its destabilizing regional activities to its abysmal record on human rights create a range of 

challenges to the United States and to every country committed to 

peace and stability. 

The Obama administration takes every single one of these challenges seriously. We know that our success depends on effective 

collaboration here in Washington and with our allies and partners 

around the world. 

We are pursuing a number of avenues to deal with Iran: Resolutions and other actions at the United States, the Human Rights 

Council, the IAEA and other multilateral organizations; wide-rangVerDate 0ct 09 2002 15:47 Aug 20, 2013 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051513\80940 HFA PsN: SHIRL
6

ing and deep sanctions, ensuring we have the appropriate force 

posture; leveraging bilateral relationships to raise a red flag when 

Iran seeks to open a new Embassy, and engaging the Iranian people through virtual diplomacy. Every day every bureau in the Department of State and virtually every department in the U.S. Government has their eye and their actions on Iran. 

We are making clear that Iran’s international legitimacy and the 

end of their isolation depends on the choice Iran’s leaders are facing right now: Change course or continue to pay the cost of intransigence. Indeed, we meet here today on the day that High Representative Ashton is having dinner with Dr. Jalili of Iran, now a 

Presidential candidate, to push hard on the basis on which negotiations might go forward. We meet on the day that the IAEA is meeting with Iran in Vienna to press again in advance of the June 

Board of Governors meeting. And we meet on a day when the U.N. 

General Assembly is debating Syria and Iran’s role in it. 

I would like to discuss a few details about the administration’s 

policy toward Iran. I will begin with the nuclear program. From the 

start of this administration, President Obama has been clear the 

United States will not allow a nuclear-armed Iran. He has also 

been clear that Iran’s leaders have a choice: Live up to their international obligations, or continue down the path toward isolation. 

As Iran’s leaders have continued to defy international consensus, 

we have put in place a dual-track policy of ratcheting up pressure 

in the form of sanctions and other measures while pursuing a diplomatic solution. 

The sanctions, as many of you have said, have hit the Iranian economy hard. Iran’s crude exports have plummeted, costing $3 billion to $5 billion per month to Iran. The rial has depreciated more 

than 50 percent over the past few months, and official inflation is 

at 32.2 percent, although informal estimates are significantly higher. Even with sanctions in place, we are making sure that humanitarian trade continues so that the Iranian people aren’t facing impossible hardship. 

At the same time, we and our P5+1 partners are pushing for a 

diplomatic solution. We have offered Iran the opportunity to reduce 

tensions and move toward a negotiated solution. Unfortunately, so 

far the Iranians have fallen far short with their response. As I 

mentioned, a meeting is happening probably as we are meeting to 

see whether Iran is really ready to put substance on the table. 

We are clear-eyed in our approach to the P5+1 talks and seek 

concrete results. After all, while the window for negotiation is still 

open, it will not remain so forever. We will give diplomacy every 

chance to succeed because it is the only way to maintain international support for whatever options we must take, but it cannot 

go on forever, and ultimately the onus is on Iran. 

Beyond Iran’s nuclear ambitions, we are also concerned about 

their destabilizing influence across the entire Middle East and beyond, support to the Assad regime and sustaining the campaign of 

violence against the Syrian people. Their aid to terrorist organizations is threatening our ally, Israel, and innocent civilians worldwide. That is why we are deepening our military partnerships 

across the region, particularly with Israel in the gulf, to defend 

against attacks from the very groups supported by Iran’s leaders. 

7

I know I am running out of time, so I am going to talk fast—

faster. 

I want to reiterate our commitment to seeing the safe return of 

Robert Levinson, Saeed Abedini and Amir Hekmati, American citizens missing or detained in Iran. Today and every day in this country families are wondering where their loved ones are, whether 

they are safe, and when they might come home. We are not going 

to back down until those Americans are home safe and sound. 

We are, of course, deeply concerned about the campaign of repression Iran’s rulers are waging against their own people: Abuse 

of those who speak out against their government and harassment 

of their families; students, lawyers, journalists and bloggers facing 

endless intimidation, discrimination and incarceration. 

Over 5,000 years Persian civilization has given the world innovations in culture, art, medicine and government, but today that historic greatness has been set far, far back. Iranians are owed the 

rights, freedom and dignity that we cherish here as the bedrocks 

of our Nation and all people around the world deserve. 

I will finish by saying that we are closely watching the upcoming 

election. Four years ago the Iranian people spoke out for human 

rights, basic dignity and greater opportunity. The regime responded by shooting demonstrators in the streets and frightening 

families in their homes. And today Iran’s Guardian Council, 

unelected and unaccountable, is sorting through Presidential contenders, eliminating hundreds of candidates. We take no sides in 

the election, but we know that the desires and aspirations of the 

Iranian people must start with free, fair and transparent elections. 

We are clear-eyed about the challenges that lie ahead dealing 

with the Iranian regime. Congress and this administration have 

stood side by side in dealing with this threat to our security and 

to global security. I am confident we can continue to work together 

on this critical concern. 

Thank you. 

Chairman ROYCE. Thank you, Ambassador Sherman. 

[The prepared statement of Ambassador Sherman follows:]

8


80940b-1.eps

WRITTEN STATEMENT 

WENDY SHERMAN 

UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS 

U.S. DEPARTMENT OF STATE 

House Committee on Foreign Affairs 

"Preventing a Nuclear Iran" 

May 15,2013 

Chainnan Royce, Ranking Member Engel, distinguished Members of the 

Connnittee: Thank you for inviting me here today to discuss the Administration's 

approach to the multiple challenges posed by Iran - by its nuclear ambitions, its 

support for international terrorism and destabilizing activities in the region, and its 

human rights abuses at home. I want to use this opportunity to speak clearly about 

these challenges; to layout the multi-vectored strategy we are pursuing to COID1ter 

them; and to be clear about the consequential choices ahead for America and our 

allies, but especially for Iran, its rulers, and its people. 

The Nuclear Challenge 

Iran's nuclear activity - in violation of its international obligations and in defiance 

ofthe international community - is one ofthe greatest global concerns we face. A 

nuclear-armed Iran would pose a threat to the region, to the world, and to the future 

ofthe global nuclear proliferation regime. It would risk an an11S race in a region 

already rife with violence and conflict. A nuclear weapon would embolden a 

regime that already spreads instability through its proxies and threatens 

chokepoints in the global economy. It would put the world's most dangerous 

weapons into the hands of leaders who speak openly about wiping one of our 

closest allies, the state ofIsrael, otfthe map. In confronting this challenge, our 

policy has been clear: we are detern1ined to prevent Iran from acquiring a nuclear 

weapon. Our preference is to resolve this through diplomacy. However, as 

President Obama has stated unequivocally, we will not allow Iran to obtain a 

nuclear weapon, and there should be no doubt that the United States will use all 

elements of American power to achieve that objective. 

Iran's Supreme Leader Ayatollal1 Khamenei has asked why it is that the 

international conuuunity does not believe that Iran's nuclear program is for 

peaceful purposes only. The answer is simple: Iran has consistently concealed its 

nuclear activities and continues to do so, denying required access and information 

- 1 -
9


80940b-2.eps

to the International Atomic Energy Agency. As a signatory to the Nuclear NonProliferation Treaty, Iran has responsibilities to the international community, and it 

is that blatant disregard for those responsibilities that has made Iran the subject of 

tour UN Security Council resolutions imposing mandatory sanctions. 

From his very tlrst months in oftice, President Obarna put torward a clear choice to 

the Iranian government: Meet your international responsibilities on your nuclear 

program and reap the benetlts of being a full member ofthe international 

commlmity, or face the prospect of further pressure and isolation. Untortunately 

Iran has so far chosen isolation. There is still time for it to change course, but that 

time is not indefinite. I want to be clear that our policy is not aimed at regime 

change, but rather at changing the regime's behavior. 

The Dual-Track Policy 

Since this Administration took oftice in 2009, we have pursued a dual-track policy. 

Working with the P5+ I - the five members ofthe UN Security Council - China, 

France, Russia, the United Kingdom, and the United States, plus Gennany, lmder 

the auspices ofthe European Union - we have actively pursued a diplomatic 

solution to international concerns over Iran's nuclear program. As a result of 

Iran's continuing disregard tor its international obligations, we have ratcheted up 

the pressure on the Iranian government. We have built and led a global coalition to 

create the toughest, most comprehensi ve sanctions to date on the Iranian regime. 

The international C01l1111unity is united in its determination to prevent a nucleararmed Iran. 

Today, Iran is isolated and sanctions are having a real impact on the ground, 

exacerbated by the regime's own mismanagement of its economy. Iran exports 

over 1 million fewer barrels of crude oil each day than it did in 2011, costing Iran 

between $3-$5 billion per month. All 20 importers ofIranian oil have either 

signitlcantly reduced or eliminated oil purchases from Iran. Financial sanctions 

have crippled Iran's access to the international financial system and fueled the 

depreciation of the value of Iran's currency to less than half of what it was last 

year. Foreign direct investment into Iran has decreased dramatic all y as maj or oil 

companies and international firms as diverse as Ernst & Young, Daimler AG, 

Caterpillar, EN I, Total, and hundreds more have divested themselves from Iran. 

The International Monetary Fund projects the Iranian economy will contract in 

2013, a signitlcant decrease from the over 7 percent growth six years ago, and far 

below the perfollnance of neighboring oil-exporting countries. Put simply, the 

Iranian economy is in a downward spiral, with no prospect for near-term relief. 

- 2-
10


80940b-3.eps

And we continue to increase the pressure. Iranian oil exports will continue to 

decline as we implement the law through om engagement with the last remaining 

six importers ofIranian oil. Iran's currency will remain volatile as we block Iran's 

revenue streams and block its access to funds held abroad. And we will continue 

to track, identify, and designate individuals and entities assisting Iran's 

proliferation efforts and attempting to evade sanctions on Iran. Last week, the 

State Department sanctioned four Iranian companies and one individual for 

providing the Iranian govermnent with goods, technology, and services that 

increase Iran's ability to enrich manium, which is prohibited by UN Secmity 

Council resolutions. On March 14, the State and Treasury Departments imposed 

sanctions on Dr. Dimitris Cambis and his company Impire Shipping for operating 

vessels on behalf ofthe National Iranian Tanker Company (NITC) that disguised 

the Iranian origin ofthe crude oil. On July I, the Iran Freedom and CounterProliferation Act of 20 12 takes full effect, targeting an array of sectors and 

industries in Iran. Looking forward, as long as Iran continues on its current 

unproductive path, the Administration will continue to assess and implement 

potential additional sanctions on sectors and industries that can serve as pressme 

points. We look forward to continued strong collaboration with members of 

Congress to develop smart sanctions and increase pressure on the regime, while 

maintaining the strong coalition we have built through sustained diplomatic efforts 

with partners. 

In fact, one ofthe keys to om successful ratcheting up ofthe pressme on Iran is 

that we are not doing so alone. The European Union has enacted its own stringent 

sanctions regime, including an oil import ban that resulted in all 27 EU member 

states ceasing oil purchases from Iran. Australia, Canada, South Korea, Japan, and 

others have enacted their own sets of domestic measmes, strengthening the 

international sanctions regime and sending a clear message to Iran: adhere to yom 

international obligations, or face increasing pressme from the international 

community. And, even among partners who are frankly skeptical of sanctions, we 

have seen robust implementation of UN Security Council resolutions and 

cooperation on specific sanctions issues. We continue to coordinate closely with 

all of om international partners, ensming stringent implementation of existing 

sanctions and encouraging strong domestic measures on Iran. As we move 

forward, it will be critical that we continue to move together and not take steps that 

undo the progress made so far. Doing such would signal divisions to Iran that it 

could and likely would exploit. 

- 3 -
11


80940b-4.eps

Even as we significantly increase pressure on the Iranian regime, we remain 

committed to ensuring that legitimate, humanitarian trade can continue for the 

benefit of the Iranian people. We take no pleasure in any hardship our sanctions 

might cause the Iranian people in their everyday lives, and it is u.s. policy to not 

target Iranian imports of humanitarian items. We have worked hard to ensure U.S. 

regulations contain an explicit exception from sanctions for transactions for the 

sale of agricultural commodities, food, medicine, or medical devices to Iran as long 

as the transactions do not involve a designated entity or otherwise proscribed 

conduct. And when natural disasters have struck Iran, we have been ready to 

assist. Following a tragic earthquake in northwest Iran in August 2012, the 

Administration issued a general license to facilitate U.S. support to the Iranian 

people as they responded to and rebuilt from the natural disaster. In all our etlorts 

on Iran, we have demonstrated that supporting the Iranian people and pressuring 

the policies oftheir government are not mutually exclusive. 

As we have built unprecedented pressure on the Iranian regime, we have also 

intensified our efforts towards pursuing a diplomatic solution to the nuclear issue. 

Since his tirst days in otlice, the President has emphasized our readiness, working 

with members of the P5+ 1 to seek a negotiated resolution regarding Iran's nuclear 

program. The P5+ I has been incredibly unified, and we have worked closely and 

well with the Russians and Chinese. On February 26,2013, the P5+ 1 met with 

Iranian representatives in Almaty, where the P5+ I jointly presented Iran with an 

updated, balanced proposal that offered Iran a real opportunity to take steps toward 

reducing tensions and creating the time and space to negotiate a comprehensive 

solution to the nuclear issue. As in prior talks, Iran was presented with a strong 

and united message: address the international's community's concerns or face 

mOlmting pressure. Interestingly, Iran's initial public response was positive and 

they signaled a potential turning point. 

Yet, when on April 5, 2013, the P5+ 1 returned to Almaty to hear Iran's tormal 

response to our proposal, the Iranians once again fell short. While the P5+ 1 had a 

substantive exchange of views with Iran during the talks, in the end, Iran's 

counterproposal to the P5+ 1 initiative was very disappointing. According to this 

counterproposal Iran would place little or no constraint on its current nuclear 

activities, while demanding that major sanctions be removed immediately. Given 

the significant h'lJlfbetween the two sides, the P5+ 1 members did not believe 

scheduling another rOlmd was warranted at that time, and instead agreed to return 

to capitals to discuss the latest developments with their respective governments. 

They agreed that EU High Representative Catherine Ashton would then follow up 

- 4-
12


80940b-5.eps

with Iran on next steps, and indeed Ashton and Iran's Chief Nuclear Negotiator 

Saeed Jalili are scheduled to meet in Istanbul today, May 15. 

We are looking for signs that Iran is prepared to move to address substantively all 

aspects of the proposal we discussed in Almaty. We are not interested in talks for 

talks' sake, but we must give diplomacy every chance to succeed. And, while we 

leave the door open to diplomacy, we will continue to maintain unrelenting and 

increasing pressure. 

We have approached these negotiations realistically, conscious of our difficult 

history. We continue to seek concrete results in our talks, not empty promises. 

The onus is on Iran. 

Support for Terrorism 

Beyond its illicit nuclear activity, we also have grave concerns about Iran's 

destabilizing activities in the Middle East, particularly its support for Bashar Asad 

in Syria; its support for terrorist organizations like Hizballall; and its lllacceptable 

attacks on imlOcent civilians worldwide. These activities are not going unchecked. 

Iran is the world's foremost state sponsor of terrorism, which it uses as a strategic 

tool of its foreign policy. Led by the Islamic Revolutionary Guard Corps (IRGC)-

Qods Force and the Ministry ofTntelligence and Security (MOTS), the "Tran Threat 

Network" comprises an alliance of surrogates, proxies, and partners such as 

Hizballah, HAMAS, and Iraqi Shi'a militants, among others. Iran funds, trains, 

and equips these terrorist organizations, in whole or in part, to use in attacks 

arOlmd the world. This clandestine threat network destabilizes cOlmtries 

throughout the Middle East and threatens regional security. Iran's leaders have 

aimed most of their threats at one of our closest allies, blatantly declaring their 

desire to see the destruction ofthe state ofIsrael. We have a moral obligation to 

ensure that Iran never has the tools to make good on that threat. 

Israel is not Iran's only target, however. Iranian national Mansour Arbabsiar pled 

guilty last year to plotting with members ofthe Qods Force to murder the Saudi 

Arabian ambassador by bombing a crowded restaurant here in Washington, DC. 

The attempt to assassinate a foreign diplomat in our nation's capital is an 

intolerable escalation of Iranian terrorist activity. 

Iran has also sponsored and directed terrorist attacks against Israeli civilian and 

diplomatic targets worldwide. On February 13,2012, a magnetic bomb was 

- 5 -
13


80940b-6.eps

placed under the vehicle of an Israeli diplomat's wife in New Delhi, India, 

seriously injuring her and three Indian nationals. The following day, a similar 

device was discovered lmder a vehicle belonging to the Israeli embassy in Tbilisi, 

Georgia, and safely defused. At the same time, Thai police arrested three Iranian 

nationals in Bangkok in connection with explosions at a private residence that 

subsequently revealed bomb-making materials and makeshift grenades intended 

for use in attacks against Israeli targets. 

In Jlme 2012, Kenyan authorities arrested two Iranian members of the Qods Force. 

Armed with 33 pounds of military-grade plastic explosives, they pillimed deadly 

attacks on Westem and Israeli targets. On May 6, a Kenyan court sentenced them 

to life imprisonment for terrorism-related oftenses. 

Lebanese Hizballah continues to be a key partner and substantial part ofTran's 

threat network. Iran provides hlmdreds of millions of dollars to Hizballah armually 

lli1d has long been Hizballah's primary trainer lli1d arms supplier. Hizballal1 and 

the Iranian leadership share a worldview and strategic vision and are seeking to 

exploit the current lmrest in the Middle East lli1d North Africa to their advlli1tage. 

We remain focused on Hizballah activity worldwide, lli1d have devoted a great deal 

of diplomatic effort over the past several years to raising awareness of Hizballah 

activity with European partners, well before last Slill1l11er'S attack in Bulgaria, in 

which six Israeli tourists were killed in a terrorist bombing, lli1d arrest in Cyprus of 

a suspected Hizballah operative. 

Thwarted attacks involving Irlli1illi1s lli1d Iranian proxies like Hizballal1 in Cyprus, 

Thailand, and Kenya - to name a few examples - show a clear willingness on the 

part of our international partners to target and prosecute Iranian terrorist 

activity. As evidenced by these disruption and prosecution efforts across Africa, 

East Asia, lli1d Europe, we lli1d our international partners have become increasingly 

eftective at targeting Iranian support for terrorism. 

Regional Meddling and Support for Asad 

In Syria, Iran has made it clear that it fears losing its closest ally lli1d will stop at no 

cost, bome by both the Syrian and Iranian people, to prop up the Asad regime. 

Today, Iran is training, arming, flmding, aiding and abetting the Asad regime and 

its atrocious crackdown on its own people. It is coordinating its intervention in 

Syria with Hizballah, which is itself engaged in training pro-regime militlli1ts who 

attack Syrian civilians, and in direct fighting on behalf ofthe Asad regime against 

the Syrian people. Iran and Hizballah fighters are also directing the activities of 

- 6-
14


80940b-7.eps

Iraqi militia groups which have been enlisted to join in the Asad regime's war 

against the Syrian people. Iran has shown that it is willing to potentially 

destabilize an entire region ifit means keeping the Syrian regime as an ally. 

Countering such efforts remains a key priority for the Administration and we are 

focused on preventing Iran from continuing to support the Syrian regime 

tinancially, materially, and logistically. The Administration has used its authorities 

in several executive orders to highlight the role ofTran in the Syrian regime's 

violation ofhLUnan rights and hold accountable those responsible. 

These facts further highlight Iran's continued efforts to expand its nefarious 

interference in the region. In January, Yemeni authorities seized, in Yemeni 

territorial waters, a 40-ton Iranian shipment of weapons and explosives destined 

tor Iranian-supported Huthi extremists. These activities interfere with Yemen's 

ongoing political transition, and are destabilizing to the wider region. It is no 

surprise then that, according to a 2013 Zogby survey of20 Arab and Muslimmajority countries, Iran is now viewed unfavorably in a majority of Arab countries 

and its appeal to mainstream Arab public opinion has virtually collapsed from its 

2006 peak. 

As Iran's isolation grows, we are working through existing regional counterterrorism partnerships to address the Iranian threat, and the interdiction in Yemen 

is a successful example ofthat cooperation. We are also deepening our military 

partnerships across the region. We consult regularly on security matters with our 

partners in the Persian Gulf and maintain a substantial presence in the region, to 

keep a watchful eye on Iran, counter potential Iranian aggression, reassure our 

allies, and protect the free flow of commerce through the Strait of Hornmz. We are 

also in close and constant contact with Israel to coordinate our policies and have 

taken lU1precedented steps to protect Israel's Qualitative Military Edge - including 

support for the Iron Dome defense system to stop Iranian-supported militant 

groups from tiring Iranian-supplied rockets into Israeli communities. 

Levinson, Abedini, and Hekmati Cases 

Just as we are concerned about Iran's destabilizing regional activities abroad, we 

remain concerned about fran's treatment of U.S. citizens detained and missing in 

Iran. The U.S. government is dedicated to the return of American citizen Robert 

Levinson and U.S.-Iranian dual nationals Saeed Abedini and Amir Hekmati. Mr. 

Levinson went missing from Kish Island, Iran, on March 9, 2007, and his 

whereabouts remain unknown. We continue to call on the Iranian government to 

make good on its promises to assist the U.S. government in tinding Mr. Levinson 

- 7 -
15


80940b-8.eps

so that he can be reunited with his family. Mr. Hekmati, a fonller U. S. Marine 

who served in Afghanistan, was detained in Iran since August 20 I I, and endured a 

closed-door trial with little regard for fairncss or transparency. Mr. Abedini has 

been detained in Iran since September 2012 on charges related to his religious 

beliefs, and reportedly has suffered physical abuse by Iranian officials in prison. 

Despite our repeated requests, Iranian authorities have failed to provide them with 

adequate medical treatment or pennit visits from our protecting power. We will 

continue to raise these cases directly and publicly as we also pursue all available 

options lmtil all three of these Americans return home safely. 

Human Rights 

We are equally disturbed by the regime's ongoing campaign of repression against 

its own people. Such oppression has included the harassment and intimidation of 

tamily members of those who speak out for freedoms, the torture of political 

prisoners, and the limitation of freedom of expression and access to infornlation. 

These acts of aggression have created a culture of fear in which few dare to voice 

dissent or challenge regime officials. Students, lawyers, journalists, and bloggers, 

ethnic and religious minorities, artists and human rights activists are all targets for 

abuse, intimidation, or discrimination. 

Labeled by press advocacy group Reporters Without Borders as an "enemy of the 

internet," Iran filters online content and blocks access to the internet to prevent 

Iranian people from acquiring knowledge and unbiased infonllation about their 

own country and the outside world. We are committed to raise the cost of 

repression and help Iranians break through the "electronic curtain" the regime is 

erecting to conummicate with one another and share their story with the world. 

As Dr. Martin Luther King said, "Injustice anywhere is a threat to justice 

everywhere," and this is true, too, as we advocate for the rights and freedoms of 

the Iranian people. We have helped raise awareness of regime abuses and held 

Iranian officials responsible for their actions. Working with the authorities you 

provided us, we have imposed sanctions - including asset freezes and visa bans -

on 30 Iranian individuals and entities for engaging in serious human rights abuses 

or censorship activities that limit freedom of expression, including the IRGC, the 

MOIS, Iran's Cyber Police, and the Islamic Republic ofIran Broadcasting. And 

while we know that public discussion ofthese incidents does not always help the 

people taking risks on the ground, make no mistake: we have stood - and will 

continue to stand - fully and tirmly behind the aspirations of the Iranian people. 

- 8-
16


80940b-9.eps

We have lent our voice to those the regime has tried to silence, speaking out in 

defense of numerous political prisoners, such as noted human rights defender 

Nasrin Sotoudeh, Christian pastor Y oucef Nadarkhani, journalist Zhila BaniYaghoub, and Kurdish rights activist Seddigh Kaboudvand. We will continue to 

highlight such cases and coordinate our actions with our international partners, as 

we did in 2011 at the UN Human Rights Council to create the mandate of the 

Special Rapporteur for Human Rights in Iran, whose exhaustive reports have 

detailed the extent of unspeakable abuses in Iran. Likewise, we will continue to 

support the annual Canadian-led resolution at the UN General Assembly to 

condenm Iran's human rights practices, a measure which has passed for 10 

consecutive years. 

Outreach to the Iranian People 

Coupled with our concerns about human rights are our concerns about the wellbeing ofthe Iranian people. Every day, we hear from the Iranian people directly 

through our public diplomacy programs and Farsi-language social media 

platfonns. The Virtual Embassy Tehran, launched in December 2011, has over 2 

million hits and our Farsi-language Facebook, Twitter, Google+, and YouTube 

channel have also been enorn10usly successful. The 170 videos on our YouTube 

channel have more than 1 million views and our Facebook page has over 120,000 

tans, 60 percent of whom are inside ofIran and who access our sites even though 

the Iranian regime blocks the site. 

What we see through our interactions is that the Iranian people are being 

detrimentally affected by the misplaced priorities, corruption and mismanagement 

oftheir government. Instead of meeting the needs of its own people, the Iranian 

regime has chosen to spend enornlOUS amOlmts of its money and resources to 

support the Asad regime as well as its militant proxies around the world, and to 

pursue the development of weapons of mass destruction. Instead of investing in its 

people, Iran continues to restrain their vast potential through censorship, 

oppression, and severe limitations on their social, political and even academic 

freedoms. 

As the President and the Secretary have said, in the United States our 0\'111 

c011l11l1mities have been enhanced by the contributions of Iranian Americans. We 

know that the Iranian people come from a great civilization whose 

accomplisluuents have eanled the respect of the world. That is why in his 2013 

Nowruz message, the President emphasized that there is no good reason for 

Iranians to be denied the opportlmities enjoyed by people in other cOlmtries. 

- 9-
17


80940b-10.eps

Iranians deserve the same freedoms and rights as people everywhere and all 

nations would benefit from the talents and creativity of the Iranian people, 

especially its youth. It is a shame that much of the world realizes this and the 

Iranian government has yet to do so. 

Presidential Elections 

Let me conclude by addressing a topic we are watching closely: Iran's June 14 

presidential election. Following the last election in 2009, when the regime 

violently quashed the hopes and dreams of ordinary Iranians who went into the 

street to demand their fundamental rights, we have seen a deliberate and 

unrelenting level of repression in the lead-up to these elections. 

As we speak, behind closed doors, Iran's unelected and unaccountable Guardian 

COlllCil is vetting Iranian presidential contenders, using vah'lle criteria to eliminate 

potential candidates. Without a transparent process, it is difiicult for us to say 

whether Iran's elections will be free, fair, or represent the will ofthe Iranian 

people. 

We take no sides in Iran's presidential election. The decision about who leads Iran 

is for the Iranian people, who should have every opportunity to express freely and 

openly their opinions, ideas, and hopes for the future oftheir country. But we do 

call on the Iranian authorities to conduct a free and fair election that not only 

confol1lls to international standards of transparency and accountability but is just 

and represents the will ofthe Iranian people. 

Conclusion 

In sum, Iranians deserve better. Their govermnent has chosen to isolate them, 

stlllt their economic growth, repress their ability to speak freely, and connect the 

people ofIran with the most heinous acts ofterrorism and regional adventurism. 

Iran's government can choose to end these policies at any time and put their 

people's well being first. 

As the President said, we have no illusions about the difficulty of overcoming 

decades of mistrust. It will take a serious and sustained effort to resolve the many 

differences between Iran and the United States. We do not expect to always agree, 

but rather for Iran to be an honest and responsible member ofthe international 

community, a community where members honor their commitments and keep their 

word or pay the price. 

- 10 -
18


80940b-11.eps

We share Congress' concern about Iran and want to continue our hand in hand 

efforts to ensure that Iran does not continue on a path that threatens the peace and 

stability of the region and tramples the freedoms of its citizens. We welcome your 

ideas on how we can sustain and expand our efforts. 

Thank you. 

- l1 -
19

Chairman ROYCE. Mr. Cohen. 

STATEMENT OF THE HONORABLE DAVID S. COHEN, UNDER 

SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, U.S. DEPARTMENT OF THE TREASURY 

Mr. COHEN. Chairman Royce, Ranking Member Engel, distinguished members of the committee, thank you for the opportunity 

to testify today. 

No issue is of greater concern or urgency than preventing Iran 

from obtaining a nuclear weapon. As Under Secretary Sherman 

said, that is why from our first days in office this administration 

has pursued a dual-track strategy that offers Iran the opportunity 

for diplomatic engagements, while at the same time making abundantly clear that if Iran continues to refuse to comply with its 

international obligations, we, along with our partners in the international community, will apply increasingly powerful sanctions on 

Iran. That is exactly what we have done, and that is what we are 

committed to continuing to do, in close collaboration with Congress, 

so long as Iran refuses to engage meaningfully with respect to its 

nuclear program. 

In my written testimony I describe in detail the expanding scope, 

intensity and impact of U.S. sanctions on Iran and how these new 

authorities, coupled with robust implementation and enforcement, 

have had a very significant impact on Iran. I would like to highlight just a few points. 

First, and most importantly, creating this powerful sanctions regime has been and must continue to be a joint effort between the 

Congress and the administration. Through the enactment and energetic implementation of key pieces of legislation, including 

CISADA and the NDAA, we have isolated Iran from the international financial system and driven down Iran’s oil exports by 

some 50 percent, depriving Iran of a critical source of revenue. 

In addition, to enhance the sanctions pressure on Iran, over the 

past year the President has adopted five Executive Orders that extend and strengthen the legislative sanctions framework, including 

orders that block the property of the entire Government of Iran, including its central bank, that make dealings with the National Iranian Oil Company and its trading arm, NICO, subject to sanctions, 

and that enhance the NDAA by authorizing sanctions on foreign 

banks that facilitate the acquisition from any party of Iranian petroleum, petroleum products or petrochemicals. 

A few months ago the Iran Threat Reduction Act went into effect, 

which effectively locks up Iran’s oil revenues in the few countries 

that still buy Iranian oil by requiring that that revenue can only 

be used to pay for bilateral trade or for humanitarian imports. As 

of February 6 of this year, Iran’s dwindling oil revenue cannot be 

repatriated to Iran, transferred to a third country, or used to facilitate third-country nonhumanitarian trade. 

Second, we have aggressively implemented and enforced the entire sanctions framework. Since the beginning of 2012, we have imposed sanctions on 22 individuals and 54 entities, and added almost 200 aircraft and ships to the sanctions list. We have imposed 

sanctions on banks, businesses, government entities and individuals involved in Iran’s WMD proliferation activities, its support for 

20

international terrorism, and its support for the brutal Assad regime. 

We have also targeted Iran’s increasingly desperate efforts to 

evade our sanctions, and just this morning we imposed sanctions 

on an exchange house and a trading firm in the UAE for providing 

services to designated Iranian banks, taking direct aim at a growing mechanism of sanctions evasion, nonbank financial institutions. 

Third, we see clear evidence that these efforts are having an impact. As I noted, Iran’s crude oil and condensate exports have 

dropped by roughly 50 percent between January 2012 and early 

2013, costing Iran between $3 billion and $5 billion a month. In 

2012, Iran’s GDP fell by some 5–8 percent, the largest drop since 

1988, the final year of the Iran-Iraq war, and the first contraction 

in 20 years. The value of Iran’s currency, the rial, has plummeted, 

losing over two-thirds of its value in the last 2 years. 

And we also see the impact of our sanctions in less tangible, yet 

more significant ways. During the negotiating sessions in Almaty, 

Kazakhstan, the Iranian side sought sanctions relief in exchange 

for concessions on their nuclear program. They would not have 

done so had the impact of sanctions not affected their calculus. 

Finally, we are committed to doing more. We will work to increase Iran’s economic and financial isolation through the implementation, as of July 1, of the Iran Freedom and Counterproliferation Act of 2012. We will work to target additional sources of Iranian revenue, including from the petrochemical sector. With our 

colleagues at State, we will maintain our robust outreach efforts to 

foreign governments and the private sector to explain our sanctions, to warn them of the risks of doing business with Iran, and 

to encourage them to take complementary steps. We will continue 

aggressively to target Iran’s proliferation networks, support for terrorism, sanctions evasion, abuse of human rights and complicit financial institutions. And we will continue to work closely with Congress in each and every one of these endeavors because we know 

that we share a common objective, ensuring that Iran does not obtain a nuclear weapon. 

Thank you. 

Chairman ROYCE. Thank you, Mr. Cohen. 

[The prepared statement of Mr. Cohen follows:]

21


80940a-1.eps

Written Testimony 

David S. Cohen 

Under Secretary for Terrorism and Financial Intelligence 

U.S. Department of the Treasury 

May 15,2013 

House Committee on Foreign Affairs - "Preventing a Nuclear Iran" 

INTRODUCTION 

Chainnan Royce, Ranking Member Engel, and distinguished members of the Committee, thank 

you for the opportunity to testify today on the Treasury Department's application of sanctions 

pressure as one part of the U.S. government's effort, coordinated with counterparts around the 

world, to counter the threat posed by Iran's nuclear and ballistic missile program. Our continued 

close collaboration with this Committee and your colleagues in Congress is essential to our 

success in addressing thi s threat. 

As this Committee will appreciate, no issue is of greater concern or urgency than preventing Iran 

from obtaining a nuclear weapon. As the President recently warned, an Iran in possession of 

such a weapon would increase the risk of nuclear terrorism, undermine the global 

nonproliferation regime, trigger an arms race in the Middle East, and embolden a regime that has 

ruthlessly repressed its citizens. 

That is why this Administration, from its first days in office, has tenaciously pursued a dual-track 

strategy that offers Iran a path to reclaim its place among the community of nations while 

making clear that we, along with our partners in the international community, would apply 

increasingly powerful and sophisticated sanctions on Iran ifit continues to refuse to satisfy its 

international obligations with respect to its nuclear program. As we have repeatedly made clear, 

Tehran faces a choice: it can address the call of the international community to give up its 

nuclear ambitions and begin reintegrating itself diplomatically, economically and financially into 

the world community, or it can continue down its current path and face ever- growing isolation 

INCREASING PRESSURE ON IRAN 

Since my last appearance before this Committee, the scope, intensity, and impact of U.S. 

sanctions on Iran have expanded through the enactment of legislation, the adoption of executive 

orders, and the energetic implementation and enforcement of the entire sanctions framework. 

These efforts have heightened the economic pressure and imposed a very significant strain on the 

Iranian regime. 

Designating Iranian Banks and their Financial Partners 

When I last appeared before the Committee, I described the Administration's extensive efforts to 

implement the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 20 I 0 
22


80940a-2.eps

(CISADA). CISADA calls for the exclusion from the U.S. financial system any foreign financial 

institution that knowingly facilitates significant transactions or provides significant financial 

services for Iranian financial institutions designated in connection with Iran's nuclear or missile 

proliferation activity, or its support for international terrorism. 

The mere fact that we have CISADA at our disposal has been sufficient to drive the 

overwhelming majority of banks away from business with Iran's designated banks, isolating 

those Iranian banks from the global financial system. To date we have employed this authority 

against two foreign banks, China's Bank of Kunlun and Iraq's Elaf Islamic Bank, for facilitating 

millions of dollars' worth of transactions for several designated Tranian banks. Were there any 

question about our willingness to apply CISADA sanctions, these actions clearly demonstrated 

that we will target sanctionable activity, wherever it may occur. 

Targeting the Central Bank ofTran and Tran's Oil Revenues 

Just over a year later, in December 2011, the President signed into law the National Defense 

Authorization Act for Fiscal Year 2012 (NDAA), which threatens CISADA-like consequencesthat is, terminating or restricting correspondent account access to the U.S. - for foreign financial 

institutions that transact with the Central Bank of Iran (CBI) in a way not authorized by U.S. law. 

Significantly, the NDAA also marked a new phase in our sanctions campaign by targeting Tran's 

economic lifeblood: its oil exports. 

The logic behind the measures in the NDAA is two-fold. First, it seeks to isolate the CBI from 

the international financial system - a step begun a month earlier when we designated the entire 

jurisdiction ofTran as a "primary money laundering concern" under Section 311 of the USA 

PATRIOT Act These actions undercut the CBI's ability to facilitate the conduct of designated 

Tranian banks and to support Tran's illicit activities within Tran and abroad. 

Second, because the CBT is the primary bank into which Tran receives oil payments, the NDAA 

intensifies economic pressure on the regime. To prevent Iran from benefiting from a spike in oil 

prices that might be caused by a rapid reduction ofTranian oil in the market, the NDAA was 

designed to encourage Iran's oil customers to undertake significant but incremental reductions in 

their Trani an oil imports, giving customers and alternative suppliers a measure of time to adjust 

and accommodate this reduction. This law - working in tandem with our efforts targeting Iran's 

access to the international financial system - has had an enormous impact on Tran's oil revenues. 

Locking Up Iran's Oil Revenues 

The impact of the NDAA was further enhanced by a powerful measure contained in the Iran 

Threat Reduction and Syria Human Rights Act of 2012 (TRA) that entered into effect on 

February 6, 2013. Under Section 504 of the TRA, any country that has received an NDAA 

"significant reduction" exception - meaning that its banks can pay Iran for its significantly 

reduced oil imports without risk of correspondent account sanctions - must now ensure that 

those revenues are used only to facilitate bilateral trade or humanitarian trade. Iranian oil-import 

revenue cannot be repatriated to Iran, transferred to a third country, or used to facilitate thirdcountry trade, except for humanitarian purchases. This is a very powerful provision, as it 

2 
23


80940a-3.eps

effectively "locks up" Iranian revenues in the few countries that still buy Iranian oil and denies 

Iran the free use of its diminishing oil revenue. 

Tightening the Sanctions Regime Through Executive Orders 

To further enhance the pressure on Iran, the President in 2012 issued five executive orders 

targeting Iranian activity. I would like to highlight two in particular, that we have used to target 

Iran's efforts at sanctions evasion and to put further pressure on its energy exports. 

In response to Iran's continued abuse of the financial sector, the President in February 2012 

issued Executive Order (EO.) 13599. Among other things, E.O. 13599 blocks all property of the 

Government ofIran, including the Central Bank ofIran, and allows us to impose sanctions on 

any person - Iranian or non-Iranian - who acts for or on behalf of the Iranian government, 

regardless of the type of activity. Under this executive order we imposed sanctions on a Greek 

businessman, Dmitris Cambis, and a group offront companies for using funds supplied by the 

Government ofIran to purchase oil tankers, and then disguising the origin of the Iranian oil 

transported on those vessels. 

In July 2012, the President issued E.O. 13622, which enhances the NDAA by authorizing 

sanctions on foreign banks and persons that facilitate the activities of, or provide material 

support to, the National Iranian Oil Company (NIOC) or its energy-trading subsidiary, the 

Naftiran Intertrade Company (NICO), or that facilitate the acquisition - from any party - of 

Iranian petroleum, petroleum products, or petrochemicals. This authority also gives us the 

ability to target those who provide material support to the Central Bank of Iran or who sell gold 

to the Government ofIran. We have used this measure to important effect in our engagement 

with foreign partners, warning countries about the risk of undertaking this conduct and, we 

believe, deterring it. 

Expanding Energy, Shipping, and Shipbuilding Sanctions 

Last, I would like to discuss a new authority, the Iran Freedom and Counter-Proliferation Act of 

2012 (IFCA), which was enacted in January 2013 and becomes fully effective on July 1, 2013. 

IFCA expands our existing sanctions by giving us new tools to target Iran's ports, energy, 

shipping, and shipbuilding sectors, as well as Iran's supply of certain metals and industrial 

materials. It also provides for additional sanctions on banks that transact with any designated 

Iranian entity, not just those designated for WMD proliferation, terrorism, or human rights 

abuses. To help ensure this new legislation has the greatest impact possible, we have conducted 

extensive outreach to foreign governments and companies to explain the ever-increasing risks 

that business, and financial transactions incident to that business, with Iran poses. 

REC[NT ADMINISTRATION ACTIONS 

The pressure we have brought to bear on Iran is the result not only of the creation of additional 

authorities, but also the aggressive implementation of those authorities. Since the beginning of 

2012, Treasury, in consultation with our interagency partners, particularly the Department of 

State, has imposed sanctions on 22 individuals and 54 entities, and has added almost 200 aircraft 
24


80940a-4.eps

and ships to the sanctions list. 1 will briefly describe a few recent actions emblematic of our 

work to expose Iran's WMD proliferation activities, its sponsorship of international terrorism, its 

support to the brutal Assad regime, and its abuse of human rights. 

WMD Proliferation 

Disrupting and disabling Iran's WMD procurement networks and proliferation activities through 

the use of the counter-proliferation executive order, E.O. 13382, remains one of our primary 

objectives. Last week, for example, we designated an Iranian financial institution - the Iranian 

Venezuelan Bi-National Bank - as engaging in financial transactions on behalf of a previously 

designated Iranian bank. That brings to 28 the number of Iranian financial institutions that have 

been designated under either E.O. 13382 or the counter-terrorism executive order, E.O. 13224. 

Notably, each of these designated Iranian-linked financial institutions can trigger CISADA 

sanctions, meaning that any foreign financial institution that knowingly facilitates significant 

transactions for any of these 28 financial institutions risks losing its access to the U.S. financial 

system. 

This action follows the designations of some fifteen entities in November and December oflast 

year that targeted the international procurement operations of Iran's Atomic Energy Organization 

of Iran (AEOI), the Iran Centrifuge Technology Company (TESA), and Iran's uranium 

enrichment efforts. Actions taken under E.O. 13382 build upon the hundreds of Iran-related 

designations we have made under this authority over the past eight years. 

Terrorism 

As we focus on Iran's WMD programs, we remain mindful that Iran is still the world's foremost 

state sponsor of international terrorism, in particular through its Islamic Revolutionary Guard 

Corps-Qods Force (IRGC-QF). Iran continues to provide financial and military support to 

several terrorist organizations, including Lebanese Hizballah, which is responsible for the 

bombing last summer of a tourist bus in Burgas, Bulgaria. 

In November 2012 we exposed a senior IRGC-QF officer and senior official of the Iraqi terrorist 

group Kata'ib Hizballah (KH), which is backed by the TRGC-QF and whose training has been 

coordinated with Lebanese Hizballah in Iran. KH is responsible for a rocket attack that killed 

two UN workers in Baghdad and for numerous other acts of violence in Iraq. Treasury also 

maintains vigilant watch over the activities of al-Qa'ida operatives working out of Iran in an 

effort to expose and isolate them. In October 2012, for example, we designated a key facilitator 

for al-Qa'ida, the latest in a series of actions exposing some half a dozen members of al-Qa'ida 

operating in Iran, under an agreement between Iran and al-Qa'ida. 

Iran's financial, material and logistical support for the Assad regime's brutal campaign of 

violence against its own citizens also remains an area of intensive focus. Last year the President 

exposed the IRGC-QF for its support to the Syrian General Intelligence Directorate - a key 

instrument of Assad's repression - in the Annex to E.O. 13572, which targets those responsible 

4 
25


80940a-5.eps

for human rights abuses in Syria. We have also taken action under this authority against the 

IRGC-QF's commander Qasem Soleimani and his deputy, as well as the Iranian Ministry of 

Intelligence and Security, Iran's primary intelligence organization. As part of the effort to expose 

Iran's role in abetting Assad's atrocities, Treasury has also targeted Iran's national police, the 

Law Enforcement Forces, along with its chief Ismail Ahmadi Moghadam and his deputy, which 

have also aided the Syrian regime's crackdown. 

Iran's support to the Assad regime also is clearly reflected in Hizballah's aid to the Assad 

regime. As we observed last year when we designated Hizballah and its leadership for providing 

support to the Government of Syria under E.O. 13582, Iran has long provided Hizballah with 

military, financial, and organizational assistance. Iran's IRGC-QF has led these efforts, working 

with Hizballah to train Syrian government forces and establish and equip a pro-Assad militia in 

Syria that has filled critical gaps in Syria's military. 

We also continue to focus on Syria and Iran's ongoing proliferation activities. Last year, for 

instance, we sanctioned Iran's SAD Import Export Company under E.O. 13382 for acting on 

behalf of Iran's Defense Industries Organization, itself sanctioned under this authority, for 

shipping arms to the Syrian military and supplying goods for the production of mortars 

Human Rights 

The people of Syria are only the latest to suffer from Iran's wanton disregard for human rights. 

Its own citizens, as we have witnessed for decades, continue to bear the brunt of the regime's 

abuses. Under E.O. 13553, Treasury and State have the authority to sanction Iranian officials 

who are responsible for or complicit in serious human rights abuses against the people ofTran on 

or after June 12, 2009. This executive order complements other authorities in CIS ADA, the 

TRA, and EO 13628 that target persons who transfer goods or technology likely to be used in 

serious human rights abuses or that have engaged in censorship activities against the people of 

Iran. 

Under E.O. 13628, we recently sanctioned the Islamic Republic of Iran Broadcasting and its 

managing director, the Iranian Cyber Police, and nearly a dozen other entities and individuals for 

their involvement in abusing the human and democratic rights ofTran's citizens. We continue to 

keep close watch on events in Iran, especially as the upcoming presidential elections draw near, 

and will not hesitate to expose those who deny the Iranian people their democratic and human 

rights. 

Sanctions Evasion 

As Iran is turned away from reputable international tinancial institutions and partners, it 

increasingly relies on deception and concealment to evade international sanctions to meet its 

tinancial needs. We have worked tirelessly to expose those who aid these etforts In May 2012 

the President issued EO. 13608, which allows us to target those who facilitate Iran's evasion of 

sanctions. And last month under our WMD proliferation authority E.O. 13382, the 

Administration exposed a major network run by Iranian businessman Babak Zanjani, including 

5 
26


80940a-6.eps

banks in Malaysia and Tajikistan, that helped move billions of dollars on behalf of the Iranian 

regime, including tens of millions of dollars to an IRGC company. 

IMPACTS ON IRAN 

The international sanctions regime - of which our sanctions are just one, albeit very important, 

part - has had a significant effect on key sectors of the Iranian economy, as well as on the Iranian 

economy as a whole. More importantly, these economic effects have had an impact on Iran's 

leadership. Perhaps the clearest evidence of this comes from the recent negotiating sessions in 

Almaty, Kazakhstan. During those meetings, the Iranian side sought sanctions relief in exchange 

for concessions on their nuclear program. They would not have done so had the impact of 

sanctions not affected their calculus. 

Petroleum Sector Impacts 

us. and EU sanctions on Iran's petroleum sector have been particularly powerful. Of the more 

than twenty countries that imported oil when the NOAA went into full effect on June 30,2012, 

only a handful continue to do so today. Iran's crude oil and condensate exports have dropped by 

roughly 1.3 million barrels per day, or some 50%, between the enactment of the NOAA and 

early 20\ 3. The EU's decision to ban the import of oil into Europe, effective in mid-20\ 2, 

contributed in no small part to this fall. These lost sales cost Iran between $3 billion and $5 

billion a month. Iran's petrochemical exports have also been hit, decreasing by at least 7.6 

percent in 2012 from the previous year. 

Shipping Sector Impacts 

As our authorities have expanded to encompass Iran's petroleum sector, we have also used them 

to target Iran's ability to export its primary commodity. Under E.O. 13599, we sanctioned Iran's 

primary crude shipper, the National Iranian Tanker Company (NITC), over two dozen of its 

affiliates and over 60 of its vessels. Like the Islamic Republic of Iran Shipping Lines (IRISL), 

which our sanctions have largely driven out of business, NITC has sought to deceive the world 

maritime community, by changing the names of its vessels, turning off its transponders and 

engaging in ship-to-ship transfers to obscure the origin ofIranian oil. While these evasion 

efforts may work for a short while, they are not sustainable and are eventually detected, as last 

week's action against the Cambis network's Sambouk Shipping FZC clearly demonstrates. 

Economic Impacts 

As Iran finds it increasingly difficult to earn revenue from petroleum sales and to conduct 

international tinancial transactions, Iran's economy has been severely weakened. Iran's own 

economic mismanagement has only exacerbated these effects. 

Take, for instance, the broadest measure of Iran's economic activity, its gross domestic product 

(GDP). Treasury assesses that in 2012 Iran's GDP fell by some 5 to 8 percent - the largest drop 

since 1988, the final year of the Iran-Iraq war, and the first contraction in twenty years. This 

decline has impacted the Government of Iran's budget, causing it to run in 2012 its largest deticit 

6 
27


80940a-7.eps

in 14 years, which could amount to some 3 percent ofGDP. We believe Iran's GDP will 

continue to shrink in 2013 in the face of reduced government and consumer spending and 

declining oil exports, as well as the ramping up of additional sanctions. 

Iran's economic contraction is manifest in its recent budget bill, which projects almost 40 

percent less oil revenue than did the previous year's budget law. To help make up the shortfall, 

Iran's parliament is currently considering tax increases of some 38 percent. And in March, 

Iran's Supreme Audit Court released figures showing that for the first nine months of the Iranian 

year only 53 percent of projected budget revenues had been realized. 

We have also begun to see the impact of the bilateral trade restriction in Section 504 of the TRA, 

which went into effect in February. This measure has limited Iran's access to its foreign 

exchange reserves and impeded the Government ofTran 's ability to support the rial. Supported 

by our extensive outreach efforts, this powerful provision is rendering Iran's reserves 

increasingly inaccessible. 

Iran's currency also has been hit hard. At the beginning of 2012, one US dollar purchased 

16,000 rials in the open market. As of April 30 of this year, one dollar was worth about 36,000 

rials. (See Chart 1, appended.) The open market value of the rial has lost over two-thirds of its 

value in the last two years. 

Faced with a rapidly depreciating rial, in September 2012 the Central Bank of Iran established a 

Currency Trading Center (CTC) to allocate foreign exchange for certain preferred imports at a 

preferential rate of about 24,000 rials to the dollar. Apparently faced with dwindling supplies of 

hard currency, just a few weeks ago the CBI substantially limited the list of imported goods that 

qualified for the CTC's preferential rate. 

Inflation, partly due to the volatility and depreciation of the rial, is another telling metric. As of 

April 20, 2013, the official Statistics Center ofIran twelve-month average inflation rate was 

approximately 30 percent, while the point-to-point inflation rate was nearly 39 percent. 

Independent analysis suggests the actual inflation rate is significantly higher. 

These figures become increasingly stark when we compare Iran to its neighbors or similarly 

situated countries. Compared to groupings of countries in the Middle East and Africa, Iran's 

stock of foreign capital, as measured by the Bank ofInternational Settlements, is down 57 

percent for the two-year period ending December 2012, representing a reduction in lending of 

some $9.5 billion. This figure contrasts with a 13 percent increase in BIS banks' lending 

exposure to all developing countries. (See Chart 2, appended.) This shortage of capital is at 

least one reason why Iran's automobile sector is now encountering significant difficulties, 

manufacturing at some 50 percent of nominal capacity and facing substantially reduced exports. 

Claimed Impact on Humanitarian Trade 

There have been some reports of shortages of some medicines in Iran, and that some banks may 

be reluctant to process payments for the export of pharmaceuticals and other humanitarian goods 

to Iran. At the same time, however, we have also been told by maj or pharmaceutical companies 

that they are able to deliver their products to Iran and receive payment. 

7 
28


80940a-8.eps

Regardless of this discrepancy, we take this issue very seriously. President Obama has made 

clear that we have nothing but respect for the people of Iran. The goal of our sanctions on Iran is 

to expose and impede the Iranian government's continued pursuit of its nuclear and ballistic 

missile programs, and to help persuade the Iranian leadership that its only viable choice is to 

come into compliance with its international obligations. 

That is why it has been the longstanding policy of the United States to allow the export to Iran of 

humanitarian items, such as food, medicine, and medical devices. Our sanctions broadly 

authorize the sale and export to Iran of nearly all types offood and medicines, as well as basic 

medical supplies. No special pennission is required to sell these humanitarian goods to Iran. 

And foreign financial institutions can facilitate these pennissible humanitarian transactions, as 

long as the transaction does not involve a U.S.-designated entity, such as a bank sanctioned for 

supporting Iran's nuclear program. 

To allay any concerns or misunderstandings, several months ago Treasury's Office of Foreign 

Assets Control (OFAC) published detailed guidance clarifying our long-standing policies 

regarding humanitarian assistance and related exports to the Iranian people. I encourage anyone 

concerned about this issue to read OFAC's guidance, which is appended to this testimony. 

Moreover, we and our colleagues in the State Department have met with governments, banks, 

and phannaceutical exporters in Europe and Asia to ensure that they understand the reach and 

limits of our sanctions. 

So let's be clear about this issue. Whatever shortages may exist, and whatever reluctance foreign 

banks may have to process transactions, the root cause is not our sanctions programs, it is the 

actions of the Iranian government. 

This fact is perhaps best illustrated by a recent incident involving Iran's former Health Minister, 

Marzieh Vahid Dastjerdi. Late last year, Minister Dastjerdi publicly complained that the Iranian 

Central Bank had failed to provide the Health Ministry with the $2.4 billion in hard currency that 

had been budgeted for the Ministry's import of medicines and medical devices. Instead, the 

Central Bank made only $600 million - a quarter of the budgeted amount - available to the 

Ministry. Pointing out that short-changing the Health Ministry so drastically would threaten 

shortages of medicines and medical devices, the Health Minister objected. Instead of heeding 

her warnings, the Ahmadinejad government fired Minister Dastjerdi 

And to the extent that foreign banks may be reluctant to facilitate permissible transactions with 

Iran, that too is due to the actions of the Iranian government. It is by now well-established that 

Iranian banks have abused their access to the international financial system by deceiving their 

banking counterparties about the true nature of the transactions in which they engage by hiding 

transactions that facilitate Iran's nuclear and ballistic missile program among otherwise 

legitimate transactions. This has led many foreign banks to restrict, if not terminate entirely, 

their interactions with Iranian banks. It is thus entirely understandable that foreign banks that 

maintain relationships with Iranian banks may nonetheless be wary about facilitating otherwise 

permissible transactions. 

8 
29


80940a-9.eps

NEXT STEPS 

Despite our success in increasing pressure on Iran, we have yet to see the regime change its 

fundamental strategic calculus regarding its nuclear program. Nonetheless, the Administration 

remains convinced that sanctions pressure has an important role to play in helping to bring about 

a negotiated resolution. Accordingly, our commitment to the dual-track strategy - and to 

applying ever more effective and potent economic and financial pressure on Iran - has never 

been greater. We look forward to continuing to work with Congress on this endeavor. 

Let me briefly share with you some thoughts on where we go from here. 

Increasing Iran's Isolation 

First, we will continue to identify ways to isolate Iran from the international financial system. 

We will do so by maintaining our aggressive campaign of applying sanctions against individuals 

and entities engaged in, or supporting, illicit Iranian activities and by engaging with the private 

sector and foreign governments to amplify the impact of these measures. As part of this effort 

we will also target Iran's attempts to evade international sanctions through the use of non-bank 

financial institutions, such as exchange houses and money services businesses. And we will 

explore new measures to expand our ability to target Iran's remaining links to the global 

financial sector. 

In particular, we are looking carefully at actions that could increase pressure on the value of the 

rial. In that connection, we will continue to actively investigate any sale of gold to the 

Government of Iran, which can be used to prop up its currency and to compensate for the 

difficulty it faces in accessing its foreign reserves. We currently have authority under E.O. 

13622 to target those who provide gold to the Iranian government and, as of July I, IFCA will 

expand that authority to target for sanctions the sale of gold to or from anyone in Iran for any 

purpose. 

Targeting Additional Sources of Revenue 

Second, we will continue to target Iran's primary sources of export revenue. In addition to oil 

and petroleum products, Iran exports substantial volumes ofpetrochemicals. Current authorities 

allow us to target those who purchase or acquire these commodities, as well as the financial 

institutions that facilitate these transactions. We believe targeting these actors, as well as those 

on the supply side of the equation in Iran, may offer a meaningful opportunity to gain additional 

leverage. 

Engaging with International Partners 

Third, with State, we will maintain our robust engagement and outreach etTorts to foreign 

governments and the private sector. Treasury regularly meets with foreign officials and financial 

institutions to explain our sanctions, to warn them of the risks of doing business with Iran, and to 

encourage them to take complementary steps. In response, we have seen jurisdictions and 

companies the world over respond positively to these overtures, multiplying the force of our 

9 
30


80940a-10.eps

sanctions many times over. As we have for CIS ADA and the NDAA, we have already begun to 

engage with foreign countries, banks, and businesses on the implications of IFCA, and will 

continue to do so as we move forward in our implementation of this important legislation. 

Aggressi ve Enforcement 

The Admini strati on campaign to target Iran's proliferation networks, support for terrorism, 

sanctions evasion, abuse of human rights, and complicit financial institutions is without 

precedent. It will only continue and grow more robust as Iran's failure to meet its international 

obligations persists. As I believe we have amply demonstrated, we are relentless in pursuing 

those who facilitate Iran's illicit conduct or otherwise enable the regime. That will continue 

unabated. 

CONCLUSION 

Despite our efforts to isolate and pressure Iran, we know there is far more to do. 

As Secretary Lew has said, "We will exhaust all diplomatic and economic means we can." What 

remains to be seen, he noted, is whether this will "change the mind of the regime so that it [is] 

ready to, in a diplomatic process, give up the pursuit ofnuc1ear weapons. That is the goa!." 

I know this Committee shares this objective, and I look forward to working with you and your 

colleagues in the Congress to advance our efforts to achieve it. 

10 
31


80940a-11.eps

11 
32


80940a-12.eps

12 
33


80940a-13.eps

13 
34


80940a-14.eps

As the Government oflean continues to ignore its internal!onal obligations, the 

U.N. Security Council and gov~'fl1ments around the world, induding the United 

States, have implemented a series of steadily tightening sanctions intended m 

impose consequences on l!'an', leadership for their failure to adhere to their 

obligations and alter their dangerous course. These sanctions have had a tangible 

imp:-'lct on tb~ Govcmrn.t:nt of Iran ~s to t.1igagc in illicit activitieb<\ mClk3ng 

concrete the costs and isolation that the of Iran will continue 10 face so 

long as its leadership chooses to ignore tl,eir international obligations. 

From the start, the United States and it" international partners have worked to 

ensure t.hat l'he~e sanctions do not prohibit the ,delivery ofhumanit~rian a."'Isistal1cc 

and experts ofbul'nllnilarian good~ II) Iran, Ac!;ordillgly, under U.S, law, the sale 

and exp0l1 of nl'llrly all types OflPlli"l and medicine loJran are broadly authorized, 

and require n'o specific lice'nse or spedal aurhorizaliol' rramlne Department of the 

Treasury's OFtice of]"oyeign Assets Control (OFAe) or ""yother agency of the 

U.S. gO\(emmell! TI,e sale ~nd c.xport ofhasic,medical supplies are Iike,,,;se 

broadly'allthorizl'll. Other types of humanitarian exports may be lI\!thorizod 

pursuant to a license from orAC. 10 such ins.tancc" where!:!.;';. persolls 

3re cithL'T a'uthorizc,d to engage in hllnlrulJb:Jf~an exports to 

Iran, abroad are genemJly permittee under U.S law to 

proC!lSS all fmancial necessary 19 facilitate the trade,' 

1. OVERVIEW OF CURRENT ltS, POLICU:S 

FOI" U.S. persons, including financial institutions: 

U.s. persons, including fill!1)1ciai institutions, are subject 10 a number of speci lie 

prohibitions dealings with Iran, Nonetheless, OFAC administers V.S, 

Ia-ws and a \\cay that aHo\vs Americans to continue their humanitarian 

Iranian people withoul providing suppert to the Government of [ran, 

Government's commitment to far.Hitat~t1g humanitarian engagement \\'ith 

the Iranian people is manifest in its longstanding policy 10 authori?e eXpCl!1S (}r reCI.arllyllJg (;lItdalH'f< on HilImll!~it:mriao: A~,,1~1anl.:e lUHIi .It{illafcd [,;,ports 10 the Jnmhm t·(!.#ple 

P.agli' 2 

14 
35


80940a-15.eps

export., of humanitarian goods, stich as agricultural wmmoditiei<, medicine, and 

medical devices, to trail. 111<: follo\\;ng policies also demonstrate this commttment: 

• Eo"d~i~lll\1 mediciQlliiJilld 1ll'l.l1li'111 sqlll1(j§. OFAC's general licenses ullow 

for the export or re~expon by U.S. persons of certain food items, medicines, 

and ba,ic medical supplies for Iran withollt further specific authorit.atioll. 

sUbJect to cel1ain limitations. Financiallransaclions in support aftrade in 

certain food, medicine. and medical devices from the US. (or from a foreign 

eOlmlry), may also be conducted wiwoot specifIC OFAC authorization. 

Mibjecl to eertain restrictiOns. F{)r details {)n these aforemtmtioned 

restrictions, to sec!iol1 Jraniao Financial Sanctions 

Regulations, C.F.R. Part 561 

Transactions and Sunctiotls R'C/5\lilitk!$, 

Donations to the lnmjan and 

medicine intended (0 

:lf~:~2~~!t:~;;~~~~~ U.S. $anC1ioml regulations permit l to process noncommerciuL perSI)!l~l remittances to 

These tran~actjons may include a personal transfer {If fmldsIToin Ihe 

States te> Iran to assist a family member or friend. provided that the 

payment is processed through a{bjrd'country Hnancial institntion before 

reaching Iran, i.e., not a direct ltaIl8fe~ !i:om'llc U.S. hank tn ~n '1ran'an bank, 

which i5aprQh.ibite<.1 trnllsactiollS under cmen.! US. law. 

all 

categories of U.s. persons. including entities receiving jJ'om the 

Department of State to engage inlhe proposed adh,ily, the Broadcasting 

Board of Governors, and omer appropriate agencies ofthe U.S. Government, 

seeking to in certain human rights, humanitarian, and democracyrelated with respect 10 Irall. 

Chllifying fiufdlUl{'e ml HUlH3f1itari:m AMf1!oi!uu',t, lUltli IRchdtld [tl!OTts tu fill! Iranian People 

Pag~3 

15 
36


80940a-16.eps

issued a 

temporary authorization that US. persons to make dotlations to 

nongovcrnmenlltl organizations 10 aid tho,,, ajrectcd by the Bam earthquake 

in Inm. In respollse (0 Iran's recent earthquakes 2012. OFAC 

isslled a authorization allowing U.;'.-'Jtl.'CIl 

~o'\'ell1l11elJllal V'~;'UiWI"VI" 10 transfer funds related \0 earthquake relief 

benefit of PCrSOllJ; inllan. 

Fllr t1drd-country financial institutions! 

U.S, policy docs not prohibit the involvement ofthird-eoUlltry financial institutions 

in the processing of funds traITSfers to or li:om Iran to authorized or 

exempt lransaction~. subject to certain exceptions, example. OFAC", general 

license for lhe transfer of personal remittances hroadly allows third-country hanks 

to handle the transfer of tlmds to or fl'Ollllran. unless cenmn prohibited pllrtners are 

involyoo, such as a financial institulion desigaaled under OFAC's WMD or 

counter-terrorism authorities. Tn addition, U.S, sanctions law contains explicit 

exceptions that allow foreign tlnancialillstitutions to condu.ct or facihtate 

trans..aclioi1i'1 for the sale of agliculiuml cOinmod,itie:-i. HK1d. medicine, or medical 

devices to Iran without penalty, as long as the u'unsaction docs nol involve a 

designated entity or Olhcrwis~ proscribed conduct Third wuntry institutions 

may COlltact OFAC's Compliance OffiCI> at 1-800-540-6322 to clarify sallction., 

concerns regarding humanitarian transactions with 1 ran. 

n. PROCEDURES FOR LICENSE APPLlCA TlONS AND OTHER 

CLARfFYING GUIDANCE 

The guidance pro" ided below is ';111ended to assist lJ'.S. 

license for hurnanitalian 'bsistimce anti relate(l 

license 3ll!horimtiQll. ill ucklitiOIl, it 

determine tbeir "ligibiiJty to 

license or that are 

license fl:urn 

are no application fees. 

Cladfyiu:f,; ('UUI1U1Cf' (ttl Hurnllll:i.t:llrillll /ls,ishmce and lh+.Ited f:Xll0rts to the k.aulutli }'ooldePage 4 

16 
37


80940a-17.eps

and basic mc{iicai supplies, arc gencrally authorized and can occur without 

further specific authorization from OPAC For 

eXiomtation to Iran commodities., 

thilli do not under the gcuen;l aulhorizaHons~ OFAC will consider 

specific license applications em a basis. Anyone considering 

in a tr:msaction involving medicine or medical devices 

to cOll,ull section, 560.530 and 560532 of the Iranian Tram-act;ons 

and Sanction!; Regulalions, 31 CF R Part 5l'ifj (lhe !TSR). [Guidance on 

how to apply for" TSRA license cap. be fOllnd here.] 

delertnine commrul.lty cl~sSifjcatjirms flu' "',rm .... < 

items classil1ed "" EAR99 under the A<lmiini"t .. alt;"'" are 

cligible for such cxpm.1aljon. 

~:~~~~::~4i 011 the p remittance.s !O Iran, pkase refer 

.relnitllances to Iran mil)!" involve those 

sml.1l'1lerl, .• I. in properly are blocked solely 

p"rsuant to the o"\\cned or controlled by thc Government of 

Iran. [Add,lional darilicat;oll is nls() provided on (WAC's FAQ ~ J 

• Uemocracy and human righf"s.lll Irall and academic lind cultural 

exchanges: For U.S. persolls, information Oil th" spccLfic licensing of 

projects and activities related 10 Iran designed (0 directly benetlt the Iranian 

people in the areas Irall, and .cademic and 

cuituraJ exchanges; can be 

Clarifying (iuidl1l1CI!" Btl HUlnanitlllrillA .\~",istatu;e .IIII'd Hl<'ilatNI f:I'IJilm hJ Inc lr.ani:m Penpte 

PageS 

17 
38


80940a-18.eps

For further detailed iilfontlatiotl Of !:ui.Mntt, pl"as" <:onl"". OFAC's !JoUi"" 31 

8116.540-6322 or 11:12.1'>22-24911. 

Cblrifyi'ng (.lddIJIH;1' on HUrt1UlJit:uiafi A .....,ishm.ce and R~l:It('d .:,.,pori",lu the J'ranilllt Poopl-e> 

P/1!~6 

18 
39

Chairman ROYCE. I will make a quick announcement here. Members, following this committee hearing, Ambassador Sherman and 

Mr. Cohen will make themselves available to answer questions requiring a classified setting. We will do that in the SCIF. Everyone 

is encouraged to attend. We will go now to questions. 

I am encouraged by the fact, actually in both testimonies of Ambassador Sherman and yours, Mr. Cohen, that you express a willingness to work with the committee to continue to give the administration more options to pressure the Iranian regime. However, 

turning to the P5+1 negotiations that you referenced in your written testimony, I know that many committee members were concerned to read in the press that we had been offering to ease precious metal sanctions. And as you put it, Mr. Cohen, in your testimony, Iran is desperate for sanctions relief. So now is the time, we 

feel, to step up the pressure. And on that note you testified that 

we will actively investigate any sale of gold to the Iranian regime. 

With its currency now in free fall, the Iranians desperately need 

to acquire gold, and as you note, you have an Executive Order that 

would allow you to target those who would provide gold to the regime. As of July 1, the law will allow you to go after those providing gold to anyone inside Iran. 

There have been reports that there has been a pickup in gold 

sales, and that is the question I want to ask of you. Who specifically have you sanctioned for gold or related transactions with the 

Government of Iran, and given that the transfer of any precious 

metals or gold to Iran will be in violation of U.S. law after the 1st 

of July, what is the Obama administration going to do before July 

1 to prohibit transfer of gold to Iran? 

Mr. COHEN. Mr. Chairman, we are obviously aware of those reports, and we are tracking very closely the sale of gold to Iran, because, as you note, as of last July the Executive Order adopted by 

the President makes sanctionable the sale of gold to the Government of Iran. 

We have been very clear with our counterparts around the world 

and with the private-sector actors that this provision is one that we 

take very seriously and that we intend to enforce, and I can assure 

you that we are looking very, very carefully at any evidence that 

anyone outside of Iran is selling gold to the Government of Iran. 

If I could have just one more moment, I think there is some important information on this topic that I want to share with you in 

the closed session afterwards that I think bears on your question. 

Chairman ROYCE. Okay. We will look forward to that. 

There is a new report that estimates that between July 2012, 

when the Executive Order was signed, and last month, Iran received over $6 billion in gold. Now, that is about 10 percent of 

Iran’s total $60 billion oil exports for 2012. So for the first quarter 

of this year, gold exports to Iran amounted to $1.33 billion. 

The other question I would just ask you is what action is the 

Obama administration prepared to take against Turkey’s stateowned bank, Halkbank, whose continued business dealings with 

Iranians through gold fly in the face of international sanctions? 

Mr. COHEN. Mr. Chairman, this administration, I think, has 

demonstrated that it will apply our sanctions without fear or favor. 

We have applied sanctions to persons and entities in countries that 

40

are our allies, in countries that are not so much our allies. We pursue the facts, we pursue the evidence, and we will continue to do 

so. 

With respect to the gold provision in the legislation that goes 

into effect on July 1, we have also been out around the world making certain that anybody who is engaged currently in the sale of 

gold to Iran, to the private citizens in Iran, understand that as of 

July 1 any sale of gold to Iran, whether to the government or to 

private citizens, is sanctionable under the new provision that goes 

into effect as of July 1. We have been clear that that July 1 date 

is a real date, and that after July 1 any sale of gold to Iran is 

something that we will pursue vigorously. 

Chairman ROYCE. Let me go to Ambassador Sherman for a question. 

Last month’s talks in Kazakhstan did not seem to achieve any 

progress toward curbing the ambitions in Iran toward their weapons, and in response Secretary Kerry said the talks cannot be allowed to become a process of delay. We have heard similar statements over the last 5 years, yet, of course, we continue to talk, and 

Iran continues to enrich. 

I was going to ask you about press reports that have indicated 

that the P5+1 offered to ease some level of sanctions on Iran if it 

demonstrated seriousness. In order for Iran to receive relief from 

the U.S. sanctions, what actions, then, are we demanding of 

Tehran, and is it still the position of the U.S. that Iran must suspend all nuclear activity as required by several U.N. Security 

Council resolutions? I don’t think we are relenting on that. Let us 

hear from you. 

Ambassador SHERMAN. Thank you very much, Mr. Chairman. 

Indeed, the ultimate goal of any negotiation is that Iran come 

into full compliance with U.N. Security Council resolutions, as you 

suggest. So that is the goal. What we have put on the table, and 

did so a couple of meetings ago with Iran in Baghdad, was a proposal that is a confidence-building measure to address their over 5 

percent enriched uranium efforts, their stockpiles in Fordow, in return for very, I must say, small but with some meaningful actions 

in the sanctions regime, as well as to assist in a couple of other 

efforts around nuclear cooperation, in part to follow through on the 

safeguards that are necessary. 

We did this because we want to get some time to negotiate a 

comprehensive agreement to come into full compliance, and that 

takes time, as you know, Mr. Chairman, because you understand 

this problem quite well. Stopping their nuclear program and all the 

components of it is a very highly technical matter. And so everything that we do takes a lot of implementation, a lot of monitoring 

and verification to ensure that there is compliance. 

When we were at Almaty this last time, it was much better in 

process terms in that there were quite substantive discussions, all 

on the nuclear program, all on the elements of the nuclear program 

we have been discussing, and quite a bit of direct back-and-forth 

with each one of us, including with me. And as Secretary Cohen 

indicated, for the first time Iran evidenced their concern about 

sanctions and the need for sanctions relief to come into compliance. 

41

So it is a measure of the importance of sanctions, no doubt about 

it. 

But the P5+1, we are entirely united. We thought that what Iran 

offered in response to our confidence-building measure was far too 

little. As one of my colleagues put it, we are on 100-kilometer—this 

was a European—a 100-kilometer effort. Our confidence-building 

measure maybe is 20, 25 kilometers along the way, and we thought 

our package was balanced with 25 kilometers in return. To be generous, Iran put 5 kilometers on the table and wanted 75 to 100 kilometers in return, and that is not going to happen. 

Even though some of my colleagues in the P5+1 obviously have 

a variety of views, we stood united. We told Iran we could not 

schedule another meeting until they went back and talked to their 

government and were ready to put more substance on the table. 

Then we would consider meeting again. And, indeed, that is the 

message that the High Representative is delivering at dinner tonight, to see what the Iranians are coming to the table with and 

whether it is worth pursuing a meeting. 

The one last thing I want to say is we must ensure that we do 

everything we possibly can to show that diplomacy has or has not 

worked, because whatever actions we ultimately may have to take 

will require international support. So we must show that we have 

taken every last opportunity at a peaceful solution. 

Chairman ROYCE. Thank you, Ambassador Sherman. 

We will go to Mr. Engel of New York. 

Mr. ENGEL. Thank you, Mr. Chairman. 

I want to piggyback on a couple of the chairman’s questions. 

Can you confirm whether Turkey continues to send gold to Iran 

in exchange for natural gas? 

Mr. COHEN. Congressman, there is no question that there is gold 

going from Turkey to Iran. In large measure what we see is Iranian citizens purchasing gold as a way to protect themselves from 

the declining value of the rial. So in some respects this gold trade 

that we see that is increasing is a reflection of the success of our 

sanctions in driving down the value of the rial. 

With respect to whether Turkey is paying Iran for its gas imports in gold, we can go into this in greater detail in the closed session, but I think the short answer to that is we do not see that occurring. 

Mr. ENGEL. Wouldn’t you agree—I mean, I would think that such 

an arrangement is a violation of U.S. law. Wouldn’t you agree? 

Mr. COHEN. I think it would be. 

Mr. ENGEL. Thank you. 

We talk about Iran, Ambassador Sherman, you mentioned that 

they weren’t really putting much on the table, and that was the 

message that Lady Ashton is going to be conveying today at that 

talk. At what point, though, do we say, enough? You know, I know 

it is a difficult question, obviously, because there are a million nuances, but when will the administration no longer consider diplomacy to be an option? At some point I think obviously we need to 

make a judgment on that. 

Ambassador SHERMAN. Sure, and we make those judgments on 

a constant basis every time we sit down to talk with the Iranians. 

42

Congressman, what I would say is that the President has said 

that he believes there is still time for diplomacy, as does Secretary 

Kerry. In fact, our close ally, Israel, the Prime Minister of Israel 

has said there is still time for diplomacy. 

But we all know that the clock is ticking, and in our classified 

session we can talk about more the various clocks that are ticking 

and at what point we will even increase our concern beyond what 

it is today. But I don’t think the time has run out yet for diplomacy, and as I indicated to the chairman, we have to give it every 

effort. The world needs to know we have tried in every way to 

reach a peaceful solution. 

Mr. ENGEL. Thank you. 

I want to ask a question about Russia. How cooperative is Russia 

regarding Iran sanctions and other aspects of the Iran issue? Have 

our disagreements with Russia over Syria affected our ability to cooperate with them vis-a`-vis Iran? Let me ask you that question, 

and then I have a follow-up question. 

Ambassador SHERMAN. Sure. 

We actually have a very, very good working relationship with 

Russia when it comes to Iran. They are obviously producers of oil, 

so oil has not been an issue with Russia. They are, in fact, enforcing the U.N. Security Council resolutions and have not come into 

conflict with us on our unilateral sanctions. 

Sergey Ryabkov, who is my counterpart in Russia, is quite a terrific professional. He represents his country’s interests vigorously, 

but works in a very united fashion with the P5+1 in a very professional manner. 

Mr. ENGEL. I am concerned with Russia’s support for Assad in 

Syria. In your view, why is Russia backing Assad so strongly even 

at the cost of their reputation in the Middle East and fanning the 

flames of Islamic extremism? Is it primarily to show themselves to 

be an alternative to the U.S.? Because recent reports have shown 

that Assad is gaining, and my fear is that we could end up with 

an Assad regime, just without Bashar Assad at the helm. 

I believe that the falling of Assad would be a blow to Iran, because Assad is obviously Iran’s proxy, weapons going from Iran 

through Syria into Lebanon, weapons that Israel just took out, but 

that has been a constant. So what is Russia doing? Is it primarily 

showing themselves to be an alternative to the United States? 

Ambassador SHERMAN. Well, I think, Congressman, Russia has 

many both geostrategic and commercial interests in Syria, and 

Syria has been its anchor in the Middle East, and so it has a lot 

invested. 

I don’t believe, as Secretary Kerry has noted after his meeting 

with President Putin and Secretary Lavrov, that Russia is necessarily tied to any one individual in Syria, but rather wants to 

protect its interests in Syria. I think that it is a positive thing that 

the United States and Russia, under the auspices of the U.N. and 

working with partners and allies around the world, are moving to 

organize a Geneva II to have the opposition sit down with representatives of the regime to get to a transitional government with 

full executive powers by mutual consent. And by that very definition, it will not include Assad, because the opposition would never 

consent to Assad being part of that transitional government. 

43

So we think this is a positive thing. There is no cease-fire attached to this. The actions on the ground will continue. I think that 

both General Idres and the Syrian opposition coalition are trying 

to organize and strengthen their efforts. There are many players in 

the world that are helping them to do that. We are with nonlethal 

means. So I think that we are on a path working with Russia to 

get to a better place and to end the violence that has cost at least 

82,000 lives, millions of refugees and internally displaced people, 

and horrific attacks. 

Mr. ENGEL. Let me just say in conclusion, I really believe that 

we have a vital national security interest in ending the strategic 

relationship between Iran and Syria and severing Hezbollah’s lifeline to Tehran, and I hope we all continue to work toward that 

goal. 

Ambassador SHERMAN. I quite agree. 

Mr. ENGEL. Thank you. 

Thank you, Mr. Chairman. 

Chairman ROYCE. We go now to Ileana Ros-Lehtinen of Florida. 

Ms. ROS-LEHTINEN. Thank you very much, Mr. Chairman. 

As you know, for years this committee has led the Congress in 

efforts to stop Tehran’s nuclear progress. We have enacted several 

rounds of sanctions, legislation that has worked to stun the regime, 

exacting pain on Iran’s economy. 

Under Secretary Cohen, I would like to commend and applaud 

the Office of Terrorism and Financial Intelligence for its work in 

enforcing and improving sanctions on the Iranian regime. Last 

week Treasury designated an Iranian financial institution, the Iranian Venezuelan Bi-National Bank, using authorities aimed at 

freezing the assets of proliferators of weapons of mass destruction 

and their supporters. Keep it up. Thank you. 

For years I have been concerned about Iran’s increased efforts in 

the Western Hemisphere, especially the strong footprint that it 

continues to have in Venezuela. Several Presidential candidates in 

Iran right now have arrest notices issued by Interpol because of 

their participation in the bombing of the AMIA Jewish Community 

Center in Argentina. What further actions can your Department 

take to discourage Iran from using Venezuela, and from getting 

into other countries to circumvent U.S. sanctions? What is your assessment of Iran’s activities in the Western Hemisphere? 

We have got to continue to ensure that companies or financial institutions that are violating U.S. sanctions are not overlooked, are 

held accountable, but I have been more than dismayed by the lack 

of urgency from the administration on this threat to our national 

security, and the security of our ally, the democratic Jewish State 

of Israel, that is in jeopardy. 

Without learning from the mistakes that we have made with the 

North Korean nuclear program and the Six-Party Talks, the administration still believes that Iran can be disarmed with diplomacy. It views Iran’s nuclear program through rose-tinted glasses, 

refusing to see what is self-evident to all: Diplomatic overtures 

have not and will not ever work with Iran. 

Ambassador Sherman, when you testified before this committee 

in October 2011, you said correctly, sanctions are most effective 

when they are severe and when they are enforced. Yet 2 years later 

44

the administration continues its engagement policy. Do you believe 

that engagement with Iran will yield positive results? What concessions has the administration offered to keep negotiations on the 

table, if any? 

And the latest round of P5+1 negotiations with Iran have ended 

in failure yet again, as you pointed out. The only thing that has 

changed is Iran being closer to nuclear weapons capability. It is 

like Charlie Brown and the football. When will the administration 

learn that Lucy will still pull that football away? 

I agree that sanctions must be fully and vigorously enforced. 

Why then does State continue to not fully implement certain sanctions? Why do you provide waivers on others, like repeatedly providing 20 sanction waivers to countries buying Iranian crude oil? 

Also this week the administration announced that the U.S. will 

not participate at the ambassadorial level in the upcoming conference on disarmament upon hearing that Iran is set to chair this 

session, but stopped short of saying that we will withdraw completely, and so we miss yet another opportunity to bring about 

change at the U.N. Iran chairing the disarmament conference is 

like allowing the inmates to run the prison. We should make it 

clear to the U.N. that it must immediately remove Iran from 

chairing this conference, bar it from attending, or lose U.S. support 

and funding. Will we ever do that? 

I will start with you, Mr. Cohen, 1 minute. 

Mr. COHEN. Well, first, Congresswoman, let me say thank you 

very much for your kind words. I know that for the hundreds of 

dedicated career civil servants who work in the Treasury Department, what you have to say is very much appreciated, and I appreciate your words. 

With respect to the actions that we take in Venezuela, and the 

Western Hemisphere more generally, as you note, we designated 

the Iranian Venezuelan Bi-National Bank last week. We have in 

the past designated IRGC-related entities that are involved in the 

construction industry in Venezuela. 

We are very much focused on any efforts by Iran to expand its 

footprint in South America and Central America. Whether it is 

through the IRGC, through their intelligence services, through 

their efforts to export oil, whatever it may be, this is something we 

are tracking extremely closely and are poised to respond. 

Ms. ROS-LEHTINEN. Thank you very much. My time is up. Thank 

you, Ambassador. 

Chairman ROYCE. We will go now to Mr. Sherman of California. 

Mr. SHERMAN OF CALIFORNIA. First let me say that there is no 

contradiction among those of us who believe in maximum sanctions 

and continued negotiations. In 1918, we negotiated with the Kaiser’s Germany while not only sanctioning, but also waging all-out 

war. 

The sanctions we have now are clearly insufficient, but they are 

stronger than the ones we had 3 years ago, which begs the question 

why weren’t we doing 10 years ago, 15 years ago what we are doing 

today, certainly after 2002 when we were aware of the Iranian nuclear program? The reason for that is that there have been advocates in the last three administrations of soft sanctions, of ‘‘be nice 

to them, and they will be reasonable to us.’’

45

And I don’t know what our policy is now. I know that more sanctions are going to require methodology and technical work. We 

have to think of new ones. You have to get them applied. But we 

first face the policy issue. Do we want strong sanctions, or do we 

want ‘‘pedal to the metal, absolute everything we can do’’ sanctions? I heard from Mr. Cohen about increasing sanctions. Gee, 

shouldn’t we have them at the pedal-to-the-metal level now? And 

I wonder whether there is still support in the foreign policy agencies for being less than totally tough on Iran, or is it our policy to 

be absolute pedal to the metal, to sanction and pressure the Iranian Government and economy in every way we possibly can as we 

develop new methodologies? 

Are we being softer than maximum in an effort to curry favor 

with Iran? Ambassador Sherman? 

Ambassador SHERMAN. Congressman Sherman, we are absolutely 

pedal to the metal, because it is a dual-track policy——

Mr. SHERMAN OF CALIFORNIA. Thank you. I don’t know whether 

Mr. Cohen has a response as well. 

Ambassador SHERMAN. I just want to, if I may, sir, add one thing 

to that. We have to be pedal to the metal, but make sure that the 

pain is felt on Iran first and foremost. So we have to do it in a way 

that makes sure that as we work with our friends and allies 

around the world, they are not getting more pain than Iran is. And 

I know you are working carefully with us to do so. 

Mr. SHERMAN OF CALIFORNIA. Okay. Let us see about pedal to 

the metal. 

Mr. Cohen, we have got the Bank Kunlun of China, which has 

been sanctioned, but it doesn’t do any business with the United 

States, so the sanction is meaningless. Its parent corporation is the 

China National Petroleum Corp., which does do business with the 

United States and has not been sanctioned. Are we in effect telling 

all of international business, you can do all the business you want 

with Iran, as Kunlun Bank has, just do it in a separate subsidiary 

so your parent corporation can do business in America, and you 

will have a separate subsidiary to do business with Iran? 

Are we going to sanction China National Petroleum Corp., or are 

we just going to say, you can do business with Iran; just set up a 

separate subsidiary? 

Mr. COHEN. Congressman, the sanction against Bank of Kunlun 

has had real effect. As you know, Kunlun did not have any corresponding accounts with the United States, but it did have a number of corresponding accounts with other banks around the world. 

Mr. SHERMAN OF CALIFORNIA. Mr. Cohen, if I can reclaim my 

time, it is obvious that the sanctions could be much tougher and 

much more significant. You can say there was some slight effect on 

Bank of Kunlun, but why have we not sanctioned the China National Petroleum Corp., which would obviously have a much bigger 

impact than the little bit of impact that may or may not have occurred with regard to Kunlun? 

Mr. COHEN. The conduct at issue that led to the sanction of the 

Bank of Kunlun was transactions by a financial institution with 

designated Iranians banks. We applied sanctions to the Bank of 

Kunlun, and then we went to every one of Kunlun’s correspondents 

around the world and——

46

Mr. SHERMAN OF CALIFORNIA. Mr. Cohen, you are not answering 

the question. Why haven’t we sanctioned China National Petroleum Corp., the parent corporation? 

Mr. COHEN. Well, the technical answer, Congressman, is that the 

authority to sanction Bank of Kunlun is an authority to sanction 

a financial institution. That is the authority we have. 

Mr. SHERMAN OF CALIFORNIA. So are you going to be advocating 

in our next bill that we give you any authority you might need? Is 

the administration in favor of giving you the tools to sanction the 

China National Petroleum Corp.? 

Mr. COHEN. I think the answer, Congressman, is what Ambassador Sherman——

Mr. SHERMAN OF CALIFORNIA. Let me sneak in one more question, and that is why haven’t we sanctioned all Iranian banks? You 

have done 23. Why haven’t you done the rest? 

Mr. COHEN. We have sanctioned 28 Iranian financial institutions. 

We have sanctioned those institutions where we have evidence that 

they have either supported Iran’s nuclear program or supported its 

international terrorist activity. Every single one of the banks for 

which we have evidence, we have applied that. 

Mr. SHERMAN OF CALIFORNIA. Excuse me. All these banks are operating under the regulation and control of the Iranian Government, which is a terrorist organization. You should sanction all the 

banks immediately. If you are going to have to wait for a smoking 

gun on every Iranian bank, all they have to do is create three or 

four more, and they can continue to do business. Every bank that 

responds—if you are going to say you are pedal to the metal, you 

got to do all Iranian banks, not just say, well, they created a new 

one, and we don’t have a smoking gun for that one yet. 

I believe my time has expired. 

Chairman ROYCE. We go now to Mr. Smith of New Jersey. 

Mr. SMITH. Thank you, Mr. Chairman. 

Thank you, Ambassador Sherman, for raising the issue of the 

Levinson, Abedini, and Hekmati cases, which are very, very important. 

A few weeks ago Naghmeh Abedini testified before a Lantos 

Commission hearing that Frank Wolf chaired and said that she 

had asked the State Department for help, and she said they told 

her, nobody can do anything for you. All of us welcomed with gladness and gratitude when Secretary Kerry made a very strong statement on behalf of Saeed Abedini, an American pastor who is now 

in prison. I wonder if you could update us as to exactly how he is 

doing and what has been done to try to effectuate his release. 

Ambassador SHERMAN. Thank you. 

We remain very concerned about Mr. Abedini. He was spearheading, as some of your colleagues may not know, the construction 

of an orphanage in 2009 when the Revolutionary Guard detained 

him and threw him into prison. And it really is an incredible outrage. And as you noted, on March 22, Secretary Kerry issued a 

statement expressing his concern over reports that Mr. Abedini had 

suffered physical and psychological abuse in prison; that Iran had 

continued to refuse consular access by Swiss authorities, who is our 

protecting power in Iran; and calling for his immediate release. 

47

We condemn, and I will again here today, Iran’s continued violation of the universal right of the freedom of religion, and call on 

the Iranian authorities to respect Mr. Abedini’s human rights and 

release him. I quite understand why his family feels that not 

enough has been done. As a wife, as a mother, if one of my children 

or my husband were in a prison, I would never think there was 

enough until they were home safe and sound with me. 

Mr. SMITH. Thank you. I appreciate that very much. 

In December, Secretary Clinton renewed an exemption to our 

Iran sanctions that targeted Chinese financial transactions with 

the Central Bank of Iran, citing significant reduction of Beijing’s 

purchases of Iranian oil over the prior 6 months. But the publicly 

available data suggests that no such reduction had taken place. 

I would ask you, has it? Will you provide the committee with the 

data that supports the Department’s exemption decisions? And my 

understanding is we are talking about between 1–1.4 million barrels in totality that are being exported a day. If you could respond 

to that? 

Ambassador SHERMAN. Indeed, China reduced its oil imports 

from around by 21 percent in 2012 compared to the previous year, 

and I think, as part of his written testimony, Under Secretary 

Cohen offered a chart to show the downturn in oil imports overall 

from out of Iran, exported out of Iran. 

In terms of the next exception that China would be eligible for, 

which comes up in June, we are looking at the data. The data always lags behind. We are waiting for April data, obviously. It will 

probably be the last month we will get to see. And we will look at 

that data and make a decision about how to proceed. As you know, 

China is the largest importer of Iranian oil. Is larger—probably is 

the largest importer of oil in the world, given its growing development——

Mr. SMITH. Can I ask you on that—only because I only have so 

many minutes. Isn’t the export of Iranian oil to China its lifeline? 

You know, when you talk about ratcheting up the kinds of sanctions, will it really cause the change? 

Ambassador SHERMAN. Indeed. And we press China constantly, 

and it is significantly reduced because it doesn’t want to bear the 

risk of importing Iranian oil, but its needs are growing and huge. 

I will say one thing that is very important: Because of the volume, 

as you point out, is so large, any reduction by China would be as 

a percentage equal to volume reduction twice that of a reduction 

by India, three times a reduction of South Korea, four times a reduction of——

Mr. SMITH. But is there a concern that if we really were dead serious and were not looking to provide an exemption and didn’t play 

into the idea of reductions versus elimination, that China would 

not adhere to the sanctions? Is that a concern? 

Ambassador SHERMAN. Well, China, like many countries in the 

world, even friends and allies and partners, doesn’t appreciate 

what they see as unilateral sanctions. But they are trying to diversify their oil supply, they are trying to reduce their risk. Their energy needs, as you can imagine and as you know well, are enormous. 

48

Mr. SMITH. Very quickly, because I am running out of time. As 

we all know, Chairman Emeritus Ros-Lehtinen wrote the Iran 

Threat Reduction and Syria Human Rights Act of 2012, a very 

comprehensive and significantly strengthening law; it strengthens 

Iran Sanctions Act and other relevant laws. I could ask you questions about various sections of it because there is so much to it. But 

part of it directs the President to impose five or more sanctions 

with regards to vessels. And it also authorizes the President to ban 

ships from entering a port in the U.S. for up to 2 years if they violate it. Where are we on implementing that part of the sanctions? 

Ambassador SHERMAN. We are looking at those. In every one of 

these cases, and it is true for all of the sanctions, we have to have 

evidentiary documentation that will stand up in court. And so we 

are working to do this. And I should note that Secretary Clinton, 

before she left, and this has been enforced and strengthened even 

further by Secretary Kerry, named a sanctions coordinator in the 

State Department because she felt we were not focused enough on 

the enforcement that we needed to and didn’t have a strong enough 

partner for Undersecretary Cohen, and Ambassador Dan Fried is 

that coordinator. 

Mr. SMITH. Is it proactive or reactive or a combination of both? 

Ambassador SHERMAN. It is proactive. 

Mr. SMITH. Thank you. 

Chairman ROYCE. Go now to Mr. Deutch of Florida. 

Mr. DEUTCH. Thank you, Mr. Chairman. 

First, as I stated in my opening remarks, I do want to commend 

you both again for the extraordinary job that you have done on 

sanctions enforcement. 

And Ambassador Sherman, I want to thank you for noting in 

your testimony that finding my constituent Robert Levinson remains a priority for the department. It is incredibly encouraging 

for me and I know for his family to hear you say that. And I appreciate it. And I urge you to continue doing all that you are committed to doing. 

You said that in your testimony that you are looking for signs 

that Iran is serious about talks. And I want to ask you what those 

signs are. But I want to walk through how we have gotten to this 

point first. Since the 2009 elections in Iran, there have been nine 

political-level meetings between the P5+1, plus a 15-month break 

between 2011, 2012. That number doesn’t include technical-level 

meetings or meetings like today’s between Lady Ashton or the 

where the U.S. isn’t present. 

At the end of the 2010 Geneva talks, State Department spokesman said that he hoped it would be the start of something serious. 

In 2011, in Istanbul, a Western diplomat was quoted as saying, 

‘‘The meeting was about finding out if Iran was serious about negotiating and that hasn’t been answered yet.’’

Fast forward to April of last year, after talks in Istanbul, when 

Catherine Ashton called them ‘‘the start of a sustained process of 

serious dialogue.’’ And by June of last year, after talks in Moscow, 

Secretary Clinton said that ‘‘there are gaps on each side; the choice 

was Iran’s to close those gaps.’’ In your testimony, you said that 

after the April talks in Almaty that you didn’t feel another round 

of meetings of P5+1 was necessarily warranted. So some have sugVerDate 0ct 09 2002 15:47 Aug 20, 2013 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051513\80940 HFA PsN: SHIRL
49

gested that Iran won’t be serious about negotiating until after its 

elections. Couple of questions. Are we willing to wait until the end 

of the summer for another round of talks? And, how can we tell if 

they are serious? Is there a difference between sustained political 

dialogue and negotiations? Is talking for the sake of talking getting 

us any closer to Iran giving up its nuclear program? If you could 

try to respond to those, I would appreciate it. 

Ambassador SHERMAN. All very good questions, Congressman. In 

terms of the election, we assess—and we can talk about this further in the closed session—that there is one decision maker when 

it comes to Iran’s nuclear program, and that is the Supreme Leader. And he will remain the Supreme Leader after the June 14 Presidential election. So, in absolute terms, the election will make no 

difference. The election may make some difference, however, to the 

extent that, depending upon who is elected and what their economic—domestic, economic situation looks like, may put pressure 

on the attention, the time and the focus and the efforts by the Supreme Leader to hold onto the regime. We don’t know what the 

outcome will be, so we don’t know what impact it will have on his 

nuclear decision-making. 

As I said, or implied, we do not believe the Supreme Leader has 

yet made the strategic decision to make the deal that needs to be 

made with the international community about Iran’s nuclear ambitions. What will make him make that change? I believe it will be 

a combination of very severe, very well enforced international sanctions led by the U.S. and the European Union, but internationally 

enforced. And it will come about because the Supreme Leader will 

decide that the risk to his survival is too great and that he wants 

to show his people that their economy will improve. 

Mr. DEUTCH. So let me ask you. Let me just put something on 

the table that has not been discussed. Every discussion that we 

have about stopping Iran’s nuclear weapons program says that we 

have to have the toughest possible sanctions coupled with a credible military threat. Every discussion. And I acknowledge that we 

have worked hard to do both. 

The question is, the credible military threat, if it is credible, 

means that the possibility of military action, with all that that entails, between where we are now and the use of military force, it 

seems there is also the most extreme form of economic power that 

we could wield, which would be a full-scale international embargo 

with the necessary carve outs for humanitarian aid. That is never 

discussed. Yet we seem okay to talk about the military option. Is 

that something that should be on table for the Supreme Leader to 

understand that we are serious about this? 

Ambassador SHERMAN. We have all, in fact, discussed this, and 

I know you have discussed it up on Capitol Hill. And we have discussed it with some of our allies and partners. It is a very complex 

undertaking because it requires the international community. 

There are some legal issues involved with taking such action. I 

think that we are going as far as we possibly can go in working 

with Congress. We will see what other sectors we can, in fact, sanction and endorse and to move forward with. And I think we can 

ratchet up the pressure probably without confronting some of the 

50

difficulties and achieving what we have discussed, and that is 

whether that is a viable option. 

I think the other thing we have to do is look at whether there 

is any other way that Iran could find itself out of the quagmire it 

has created for itself. And the President has long said that if Iran 

ever, ever meets its international obligations, as President Bush 

said as well, they have a right to a peaceful civilian nuclear program under the NPT. And of course, there would have to be additional safeguards and monitoring. And if, in fact, the Supreme 

Leader means what he says by the fatwa that Iran does not—

shouldn’t have a nuclear weapon because it is not allowed by his 

declaration by the fatwa, then they have a way to show that is the 

case. 

Mr. DEUTCH. Ambassador, I would just simply suggest that all 

of the difficulties that may come with analyzing how to impose the 

maximum level of sanctions pale in comparison to the difficulties 

the international community would face if Iran became a nuclear 

power. That is just something that I would remind you of. 

I yield back. Thank you Mr. Chairman. 

Chairman ROYCE. We will go now to Mr. Rohrabacher of California. 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. 

And I want to thank our witnesses for coming here. I will have 

to say that several of the issues that I planned to ask about have 

been covered. 

I want to congratulate some of my friends, even on the other side 

of the aisle. Mr. Sherman certainly looked at an issue that I was 

concerned about and continue to be concerned about. 

Let me see if I get this right. At this point, China is not—has 

not been given a waiver in its relationship to buy oil from Iran? 

Is that correct? So China——

Ambassador SHERMAN. It is not a waiver; it is an exception. Because the idea of the NDAA and of the oil sanctions is that if a 

country significantly reduces their importation of Iranian oil, they 

get an exception from other sanctions that could be imposed upon 

them if they weren’t making those significant reductions. So China 

will be up for another 180-day exception if they have continued 

their reductions on the beginning of June. 

Mr. ROHRABACHER. And how much oil has been reduced, consumption, China? 

Mr. SHERMAN. We do not know yet because the data is not all 

in for the month of April, which will be the last month we will be 

able to look at before——

Mr. ROHRABACHER. What has given you the reason for—yes. 

Ambassador SHERMAN. For the first 180 days, they did do a significant reduction of 21 percent. That was based on a great deal of 

information, including publicly available data. 

Mr. ROHRABACHER. So you are convinced and we are convinced 

that the Chinese have significantly decreased their consumption of 

Iranian oil. Is that correct? 

Ambassador SHERMAN. They have. And their total volume of the 

need of oil has gone up. So whatever importation they are doing 

is a smaller percentage of their total as well. 

Mr. ROHRABACHER. No. They decreased their actual consumption. 

51

Mr. SHERMAN. Yes. They have. And we will see whether they 

have in the second 180 days as well. 

Mr. ROHRABACHER. I am not talking about some complicated formula here. Their consumption of Iranian oil has decreased. Is that 

correct? 

Ambassador SHERMAN. Yes. 

Mr. ROHRABACHER. Okay. Thank you very much. 

I have been concerned that this administration from day one has 

not been as tough on the regime in other ways, other than these 

sanctions, which are debatably tough one way or the other. 

But, for example, in support of those people who opposed the regime, it appears to me that we have sent the wrong message if we 

want to encourage those who oppose the regime. And, for example, 

you see some people out here in these yellow coats. I think that 

they represent the MEK. They recently have been pushed into a 

camp in Iraq, which I am sure you are aware of. And that camp 

was recently attacked. Do you think that the mullah regime in Iran 

has played any role in trying to initiate these types of attacks on 

the MEK, which I might add is an exiled group that is unarmed? 

Ambassador SHERMAN. Congressman, I am very, very concerned 

about the people in Camp Liberty. 

Mr. ROHRABACHER. Right. 

Ambassador SHERMAN. And we are concerned about the threat to 

their lives. 

Mr. ROHRABACHER. And do you think the Iranian Government 

has played a role in initiating these attacks? 

Ambassador SHERMAN. We can talk about that in the classified 

session. 

But what I will say, Congressman, is there are opportunities for 

the people of Camp Liberty to resettle. There have been offers 

made by countries like Albania to take many of them. And, to be 

very frank, Congressman, the leadership of the MEK, both in 

Camp Liberty and in Paris, has kept the people of Camp Liberty 

from knowing what their options are. And I so care about their 

lives and the threat to their lives in the camp that I hope that the 

leadership of the MEK will allow them to know their options. 

Mr. ROHRABACHER. My time is going up. And it is interesting 

that you spent your time that you just allocated attacking the victim instead of the person who—instead of the people launching 

rockets into an unarmed group of exiles, you spent your time attacking the exiled leader. 

Ambassador SHERMAN. No. I am actually—I actually want to protect that from that. 

Mr. ROHRABACHER. I have got 23 seconds left. And I am sorry 

that is the way we have to do it here. 

I would give you an extra 10 minutes if I could. 

But let me just note—what I just said is in keeping and consistent with the fact that after the Green Revolution, which you 

have noted was a response, these demonstrations in response to a 

corrupt election, and a brutalization of those people who managed 

to speak up, that we did not impose great hardship on that regime. 

I didn’t hear us step forward at that time. 

They were chanting in the streets, ‘‘Which side are you on, Mr. 

Obama?’’ They didn’t know which side the United States was on. 

52

And if we are going to have the people of that country eliminate 

this threat to the entire world, which is their responsibility and our 

responsibility to help, we have got to show more strength than 

that. We have got to be doing more than attacking the victim or 

ignoring the victim. 

And the last thing, we don’t even have our broadcasting to Iran 

in Azeri and Beluch, languages that could resonate with the people 

who oppose that regime. 

There is a lot more we could be doing, Madam Ambassador. I appreciate the good job that you are trying to do, and we will cooperate with you. 

Ambassador SHERMAN. Thank you. 

Chairman ROYCE. We go now to Mr. Cicilline of Rhode Island. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

And thank you to our witnesses. 

I think it should be clear that everyone on this committee, and 

I think everyone in Congress who has given this thought, recognizes that a nuclear Iran is a threat to the peace and stability of 

the region and, frankly, peace and stability of the world. 

And I appreciate the seriousness of the sanctions effort that both 

of you have exhibited and the excellent work that you have done 

and the bipartisan approach that Congress has taken to this issue. 

And I would like to ask you both, first and foremost, to follow 

up on Congressman Deutch’s question, you know, as we ratchet up 

sanctions, which, of course, we need to do, while we are engaging 

in activities, so is Iran. And so I wonder if some of the recommendations that some have made about, for example, a complete 

ban on international lending, with the International Monetary 

Fund withdrawing all holdings in Iran’s Central Bank and suspending Iran’s membership in that body, whether sanctions, which 

would include virtually all trade with Iran, with the exceptions of 

food and medical products, whether or not we should be at least actively pursuing those and talking about that kind of set of sanctions, whether that would significantly increase our leverage. Because I recognize we want to continue to hope that diplomatic efforts will work, but for those who are looking at this from outside, 

it may appear that we just ratchet up a little, and it is going to 

be too late because we get—so I would love to hear your thoughts 

on whether or not an approach that would look at more comprehensive and a complete kind of isolation of Iran ought to be the goal, 

knowing that is complicated to achieve but would take some time 

but for Iran, Iranian leadership to see it as a real threat. 

Then the second question—I will ask both questions and then 

ask you to answer them—relates really to Afghanistan. There has 

been some evidence presented that Iranian currency traders are 

using Afghanistan to acquire U.S. currency, particularly wealthy 

Iranians. And that the Iran-owned bank in Afghanistan, Arian 

Bank I believe is the name, is being used to facilitate this. And, 

in fact, the Special Inspector General for Afghanistan Reconstruction reported in late January 2013 that Afghan security forces 

might be using some U.S. funding for the purchase of fuel from 

Iran. That would, obviously, I think, be very disturbing to learn. 

So I would like to know what the status of that is and how we 

might be prevent that from happening. 

53

And thank you again for being here. 

Mr. COHEN. Congressman, your first question about how to 

ratchet up sanctions is a very good one. And I am going to try to 

answer it succinctly. Because I think there are two different 

threads that need to come together here. 

On the complete ban idea, I think it is very important to recognize that our financial sanctions, the way that we have locked 

down Iranian revenue, the way we have cut off access of Iranian 

banks to the international financial system, is broad based. It is—

it affects the Iranian economy across all sectors and has a very significant impact, some of which we have already detailed. 

I think it is critically important that we continue to pursue 

broad-based financial sanctions in that fashion. 

The second thread, though, is targeting particular commercial 

transactions, in particular, sectors of activity in Iran. So the new 

law that is about to come into effect on July 1, IFCA, targets the 

energy sector, the shipping sector, the shipbuilding sector. As we 

look at ways to ratchet up sanctions on commercial activity, looking 

at it as a sectoral approach on commercial activity makes sense. I 

think together a sectoral approach with the broad-based financial 

sanctions work in tandem in a way that really does create a tremendous amount of pressure on the Iranian leadership. Obviously, 

we are very much engaged with——

Mr. CICILLINE. Is there any reason we shouldn’t do all those sectors now, rather than building one after the other? 

Mr. COHEN. The question, Congressman, is efficacy. And as we 

move and look at different sectors, it is important that we target 

the ones that have a real impact on the Iranians, that we can 

maximize that impact without, frankly, spending a lot of ammunition shooting at things that have little, little good to be—little impact. 

On the—the question of the Arian Bank/fuel issue, if I could, I 

think it is probably better to talk about that in the classified session. 

Mr. CICILLINE. Thank you. 

Chairman ROYCE. We will go to Mr. Brooks of Alabama. 

Mr. BROOKS. Thank you, Mr. Chairman. I turn to some of the 

written statements that the witnesses have provided us. And, first, 

I will read from Ambassador Sherman’s remarks:

‘‘A nuclear-armed Iran would pose a threat to the region, to the 

world, and to the future of the global nuclear proliferation regime. A nuclear weapon would put the world’s most dangerous 

weapons into the hands of leaders who speak openly about 

wiping one of our closest allies, the state of Israel, off the map. 

As President Obama has stated unequivocally, we will not 

allow Iran to obtain a nuclear weapon, and there should be no 

doubt that United States all elements of American power to 

achieve that objective.’’

Ambassador Sherman, I want to explore what you mean by the 

phrase ‘‘we will not allow,’’ I repeat, ‘‘not allow Iran to obtain a nuclear weapon, and there should be no doubt, no doubt that the 

United States will use’’—will use—‘‘all elements of American 

power’’—again, I’ll repeat that—‘‘all elements of American power to 

54

achieve that objective.’’ That is very strong language. When you 

state ‘‘all elements of American power,’’ are any of America’s military capabilities off the table? 

Ambassador SHERMAN. Congressman, I think the President has 

been very clear that all options are under consideration. I think 

that everyone in the world would prefer there be a peaceful resolution to this situation. But no one should have any doubt about 

where the President of the United States stands on this. He will 

not allow Iran to have a nuclear weapon. He has stood side by side 

with many of our partners and allies around the world, including 

Israeli Prime Minister Netanyahu, and said as much. So there is 

no pulling back from that stance, at all. 

Mr. BROOKS. So when you say ‘‘all elements,’’ you mean all elements. 

Ambassador SHERMAN. I do. 

Mr. BROOKS. That being the case, then, is it fair to say that 

President Obama is prepared to use, if necessary, America’s nuclear arsenal to stop Iran from building nuclear weapons? 

Ambassador SHERMAN. I think it is probably most useful not for 

me to elaborate point by point on a situation that we have not yet 

faced. We have many elements of American military power, and we 

are able to achieve results in many, many ways. 

Mr. BROOKS. Let me go to a second one, although I anticipate 

you will give a similar response. Then, President Obama is prepared to launch, if necessary, an Iraq- or Afghanistan-style ground 

invasion in Iran to stop Iran from developing nuclear weapons. 

Ambassador SHERMAN. Again, you are quite right, Congressman, 

we have many ways to fight Iran’s efforts to gain a nuclear weapon. And they are wide-ranging, and they are along a very long continuum. And we will look at whatever we need to do to ensure that 

Iran does not obtain a nuclear weapon. 

Mr. BROOKS. Just so that there is no ambiguity about my perception, when you use the phrase of ‘‘all elements of American power,’’ 

to me, that means, if necessary, America’s nuclear arsenal or, if 

necessary, an invasion of Iran ala Afghanistan, Iraq style. So I am 

not sure if that is what you intended. But that kind of language 

means that to me, and that is what I was trying to clarify. 

Not long ago, I met with Israeli Prime Minister Benjamin 

Netanyahu in Jerusalem. He said unequivocally that Iran will not, 

will not get nuclear weapons. My question is, if Israel attacks Iran 

to destroy Iran’s nuclear weapons program, will America back 

Israel up with direct military assistance in order to ensure, first, 

that Israel is successful in destroying Iran’s nuclear weapons program and, second, to help ensure that Israel is able to protect itself 

from counterattacks? 

Ambassador SHERMAN. I think you have heard the President of 

the United States say, you have heard Secretary Kerry say, and I 

will say that we stand shoulder to shoulder with Israel. And 

Israel’s security is important to us as our own security. And I think 

that you have seen in our support and Congress’ generous support 

Iron Dome, that commitment. In the recently agreed-to new set of 

weapons sales to Israel that——

55

Mr. BROOKS. Okay. If I could interject, because I only have 15 

seconds left. I understand that Israel is important. But my question is, will we back them up militarily? 

Ambassador SHERMAN. We have a relationship with Israel to ensure their security. 

Mr. BROOKS. Thank you, ma’am. 

Chairman ROYCE. Ms. Lois Frankel from Florida. 

Ms. FRANKEL. Thank you very much. 

And thank you to the panel. 

And, first of all, I want to join with both colleagues commended 

your activities and the sanctions, economic sanctions in Iran. And 

I thank you for that. 

As many of my colleagues have already stated, Iran is the largest 

state-sponsor of terror, lending support to Hezbollah, Hamas, and 

other anti-Western militant groups. Iran’s extremist regime is also 

a gross violator of basic human rights that consistently suppresses 

political dissent through intimidation, imprisonment, and torture. 

And the international community is right to be greatly concerned 

by the possibility of this, what we hear is a radical, oppressive regime, acquiring the world’s most dangerous weapon. I am not going 

to ask—there have been a lot of good questions today. I think a lot 

of people don’t understand, not necessarily in this room, but that 

Iran’s drive for nuclear weapons is a threat not only to the United 

States and Israel but to the entire global community. And the question I have is this: Could you tell us in your opinion what you think 

the effect of Iran getting the nuclear weapon would have on the 

proliferation of nuclear weapons in the Middle East and any other 

place in the world, if you could be specific? And how would it, for 

example, affect negotiations with a country like North Korea? 

Ambassador SHERMAN. Congresswoman, I think you make a very 

important point, which is that we obviously don’t want Iran to have 

a nuclear weapon because of what it might do with a nuclear weapon and how it would use to it project its power in the region and 

in the world and the kind of world that Iran would want it to be 

and the insecurity and instability that it would wreak havoc, not 

only in the Middle East, but much further, I believe. But also what 

it would mean in terms of additional proliferation. So that one 

could imagine that Saudi Arabia, Japan, even South Korea, Brazil, 

South Africa, many countries that had foresworn nuclear weapons 

might decide for their own security as deterrents that they needed 

to have a nuclear weapon. And I think none of us would want to 

imagine a world where there were more nuclear weapons powers 

as against fewer of them. Indeed, the United States and Russia, 

which have the greatest arsenal of nuclear weapons, have been on 

a trajectory to reduce the number of nuclear weapons we have. And 

as the President said in his Prague speech, it may not happen in 

his lifetime, but he looks forward to the day when there aren’t any 

nuclear weapons left. 

It is ironic, Congresswoman, that we had the last Almaty session, the last two sessions in Almaty, Kazakhstan. Because 

Kazakhstan, in fact, in the early 1990s, after the fall of the Soviet 

Union, gave up its nuclear weapons because it thought that it 

didn’t bring them greater security, it brought them more insecurity. And that is indeed the fact for Iran as well. They should see 

56

it in what is happening to them now. They are getting economic 

insecurity, if not fundamental insecurity, because of their nuclear 

weapons ambitions. 

Mr. COHEN. I would add only that I completely agree with Undersecretary Sherman. 

Ms. FRANKEL. Thank you, Mr. Chairman. I would waive the rest 

of my time. 

Chairman ROYCE. Thank you, Mrs. Frankel. 

We will go now to Mr. Cotton, who took first place, fastest time, 

for this morning’s charity event benefiting the Wounded Warriors. 

And I will mention in addition the Cottontail Rabbits, which included bipartisan staff from this committee, also won top prize as 

fastest team. 

Mr. Cotton. 

Mr. COTTON. Thank you, Mr. Chairman. As always, we work in 

a bipartisan fashion on this committee. 

Ms. Ambassador, are there IAEA inspectors at the uranium 

mines in Saghand and Gachin? 

Ambassador SHERMAN. No, not presently. My experts tell me. 

Mr. COTTON. Do we know why that is the case, given the IAEA 

inspector’s presence at the other parts of Iran’s nuclear supply 

chain? 

Ambassador SHERMAN. The young man who is behind me, Richard Nephew, is a technical expert in this regard, as is Dr. Jim 

Timbie, who is with me. And the Safeguards Agreement of the 

IAEA only requires the presence at the most sensitive facilities, 

where we do have quite an extensive inspection regime. But, indeed, one of the things that we want from Iran through the process 

with the IAEA is additional safeguards and initial monitoring. 

So we certainly understand your point. And, indeed, as I mentioned in my testimony, the IAEA is meeting with Iran today trying to move on a structured approach where they would agree on, 

in fact, what could then be inspected by Iran—by the IAEA. They 

have not been able to get that structured approach, protocol agreed 

to. And there will be a Board of Governors meeting of the IAEA 

meeting at the end of June, and my suspicion is there will be great 

disappointment in Iran’s responsiveness. 

Mr. COTTON. My point being that those start the supply chain. 

And it is possible that there are conversion facilities, like the one 

at Isfahan, or enrichment facilities, like the ones at Natanz and 

Fordow, of which we are not aware. Is that your understanding my 

point? 

Ambassador SHERMAN. I do understand your point. And what I 

would suggest is that perhaps you—hope your schedule will allow 

you to join the classified session. 

Mr. COTTON. Thank you. 

Next question. We talk frequently about sanctions. Then that 

leads to talk to acts of war. On most occasions, we are talking 

about an offensive act of war, such as an air strike or a strike with 

naval gunfire. There are also defensive acts of war under international law, such as a naval blockade. Do you have any assessment on the impact of Iran’s economy as a whole or the nuclear 

program in particular, the effects of a hypothetical naval blockade? 

57

Ambassador SHERMAN. I do not. But happy to discuss it further 

in the classified session. 

Mr. COTTON. Do you have any assessments of the scope and 

number of scientists working on Iran’s nuclear program. 

Ambassador SHERMAN. Again, I would save that for the classified 

session. 

Mr. COTTON. I have seen reports of cooperation, scientific cooperation agreements between North Korea and Iran. Those reports suggest something along the lines of the 2002 cooperation 

agreement that North Korea had with Syria that led ultimately to 

the destruction of the nuclear site in Syria, 2007. What is the scope 

of that potential agreement in your assessment? 

Ambassador SHERMAN. Again, we can talk further about the detail of any of this in the classified session. 

What I will say and it follows up on what Congresswoman 

Frankel asked as well, we do know that the DPRK watches what 

happens to Iran, and Iran watches what happens to the DPRK. 

And we know historically about times where, either directly or 

through other conduits, there has been cooperation among countries. Everyone is very well aware of the history with Pakistan, for 

instance, and A.Q. Khan in a network of proliferation. So it is very 

important, and we think very carefully about where there may be 

interactions that affect one or the other of these situations. But 

happy to discuss it further in a classified session. 

Mr. COTTON. Shifting slightly somewhat. The President in the 

past called Syria’s use of chemical weapons a potential red line or 

game changer. Given our reaction now that our intelligence services, as well as those of allied Western governments have confirmed 

the use, at least on a limited scale, of chemical weapons in Syria, 

do you see potential for Iran’s Government being emboldened to believe that perhaps our words are not as strong as we would suggest? 

Ambassador SHERMAN. I actually don’t think that is happening 

at this time. But you are welcome to get the IC’s assessment when 

we do meet in classified session. What I would say is the intelligence community, as we published, has agreed with varying levels 

of confidence that chemical weapons were used in small amounts 

in at least two instances in Syria. But having high confidence in 

the intelligence community, for which I have great admiration, is 

not in fact all that one needs to take some of the actions that many 

people have contemplated. And the President wants to be very prudent about the steps he takes, as he should be. 

We have unfortunate experience in our history where we have 

taken action and it turned out that the intelligence assessment was 

either misinterpreted or not accurate. So I think he is not being 

very thoughtful about how he is proceeding here. But, rest assured, 

we are gathering additional data and making additional judgments. 

Mr. COTTON. Thank you. 

Mr. Cohen, my regrets, but thank you for your service. 

Mr. COHEN. Thank you, Congressman. 

Chairman ROYCE. Let’s go to Mr. Keating of Massachusetts. 

Mr. KEATING. Thank you, Mr. Chairman. 

Secretary Cohen, thank you for the time you have taken today 

in your testimony. I would like to follow up on an issue that has 

58

been raised before the Departments of State, Commerce and Treasury by the members of this committee, as well as by members of 

the Permanent Select Committee on Intelligence regarding reports 

that two Chinese companies, Huawei and ZTE, have exported millions of dollars worth of sensitive technologies used to restrict and 

censor freedom of speech within Iran. 

In a report issued earlier this year, the U.S. China Economic Security Review Commission referenced the Reuters investigation in 

which it said that ZTE provided Iran with over $130 million in 

communication surveillance equipment as well as some U.S. IT 

products and subsequently agreed to transfer additional embargoed 

U.S. communication system. Under Section 106 of the Comprehensive Iran Sanctions Accountability and Divestment Act, U.S. Government agencies are banned from procuring goods and services 

from a company that exports technology to Iran that is used to disrupt, monitor, restrict Iranian nationals’ freedom of speech. 

Can you provide us with an update as to whether or not the Department of Treasury has found that these companies should be 

subject to the procurement ban under CISADA? Can you elaborate 

further on Section 106 and how it can be used to better ensure 

freedom of speech in Iran? And are there examples of the effective 

use of this? 

Mr. COHEN. Congressman, I am aware of the inquiry as to ZTE 

and Huawei. In part, I think we should follow up on this in the 

closed session. But I can say that this is an issue that we have 

looked at very carefully. We are committed here at Treasury as 

well as the State Department to implementing—and Congress also 

has a role in implementing Section 106 of CISADA—in implementing of provision when we find evidence of a violation and taking steps to—that are spelled out in the statute. 

More broadly, we have in place number of authorities that address the use of information technology by the Iranian regime to 

abuse the human rights of its citizens, to affect their ability to communicate, to monitor their activities. We have applied sanctions 

under what is known as the Gravity Executive Order, which is focused on the abuse of information technology, on close to a dozen 

entities. And we are looking very carefully at what is coming up 

with the elections in Iran in the next several weeks to see whether 

the Iranian Government uses its control over the information networks in Iran in a way that would lend themselves to additional 

actions under those authorities. So to say we can follow up on this 

more in the classified session, but this is an issue, the ability of 

Iranian people to communicate with one another, to do so in a free 

manner, that is very important to us. 

Mr. KEATING. Yes. I look forward to that, and thank you for that. 

I look forward to the briefing. Because I think that it is not just 

a human rights issue, which is extremely important, it also undercuts I think the effectiveness of the sanctions, too. When groups 

can’t communicate fully and openly about their perception of the 

results of the sanctions. And one of the purposes of that is to share 

that kind of feeling among the citizens there and hopefully have 

that bring pressure on a more democratic approach and one that 

certainly will move them away from nuclear procurement. So I look 

forward to that. 

59

With that, I yield back, Mr. Chairman. 

Chairman ROYCE. Thank the gentleman. 

We will now need to go to 3 minutes for the remaining members, 

but we will go Mr. Meadows. 

Mr. MEADOWS. Thank you, Mr. Chairman. 

And I thank you for not highlighting my time from this morning’s run, as I am sure I will be using more Bengay than Mr. Cotton. 

I want to go ahead and follow up a little bit on the P5+1 negotiations. And some analysts, Ambassador Sherman, have indicated 

that as Iran walks away from these negotiations, the deals typically get sweeter. Would you agree with that assessment? Or I will 

let you clarify that. 

Ambassador SHERMAN. Thank you for asking the question. No. 

When we were—originally put the Baghdad proposal on the table, 

as I said, it dealt with three elements as a first confidence-building 

measure, the enrichment of over 5 percent uranium, the stockpiles 

of that, and Fordow. There are many ways to skin each of those 

cats. And so in our efforts to try to move the negotiation, we made 

a couple of small but really insignificant changes to what we were 

requiring. 

I would also say, not to take your time, and I hope the chair will 

allow you an extra minute. I just wanted to tell you and the rest 

of the committee my colleague handed me a note that after meeting 

with Iran in Vienna today, Mr. Nackaerts of the IAEA said, ‘‘We 

could not finalize the structured approach document that has been 

under negotiation for a year and a half,’’ and acknowledged, ‘‘our 

best he was have not been successful so far.’’ No date for a further 

meeting was set. And so this means that the Director General 

Amano will go to issuing a report at the end of this month, and 

there will be a Board of Governors’ meeting in early June to decide 

what, if anything, further can be done. 

Mr. MEADOWS. Thank you for that message. 

And so let me switch a little bit to Europe and Iran. Europe has 

been a valuable partner in working with us in terms of sanctions, 

you know, billions of dollars worth of oil, you know, and truly dried 

up, so to speak. However, it seems like the European Union appears to still be handling transactions in Euros, which essentially 

allows for the bypassing of some of these sanctions. What are we 

doing to try to persuade the EU from stopping this practice? 

Mr. COHEN. Congressman, you are exactly right. The European 

Union has been a tremendous partner in our efforts to apply sanctions on Iran, and what they have done has made a dramatic difference in the force and power of our sanctions. With respect to 

euro transactions, we are very actively engaged with the Europeans to ensure that there is no ability for Iran to clear Euros 

through Europe in a way that would not be caught by the existing 

European sanctions, the existing European framework that very 

significantly restricts the ability of Iran to transact. I think we are 

making good progress, and I would say—I see my time is up. Just 

one final point. The ability of Iran to move Euros through Europe 

depends on, in the first instance, some country, some financial institution violating our sanctions. Particularly the sanctions that 

went into effect on February 6. So regardless of whether the EuroVerDate 0ct 09 2002 15:47 Aug 20, 2013 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 F:\WORK\_FULL\051513\80940 HFA PsN: SHIRL
60

peans have a protection put in place, we have a protection put in 

place to prevent Iran from getting access to those Euros. And we 

intend to ensure that that does not get violated. 

Mr. MEADOWS. I can see my time has expired. I appreciate the 

chairman’s indulgence, and I will submit the rest of the questions 

for the record. 

Chairman ROYCE. Very good. Thank you, Mr. Meadows. 

We go now to Mr. Schneider of Massachusetts. 

Mr. SCHNEIDER. Illinois. 

Chairman ROYCE. Illinois. Thank you. 

Mr. SCHNEIDER. Thank you, Mr. Chairman. 

I thank both of you for your time here, your testimony, and your 

service. I have read quite a bit lately about how Iranians are 

adapting, trying to find ways, not just around the sanctions but 

ways to live within the sanctions, diversifying their economy, moving away from the dependence, overdependence on the energy sector. I would be curious, Mr. Cohen, you talked about—to me, it is 

a sense of increasing the intensity, the force and power of the sanctions, as well as the frequency or closing the time between ratchets 

as we increase that intensity. 

What efforts are there to eliminate the ability of the Iranians to 

adapt their economy so the sanctions take less bite? What opportunity is there to crease the pace as we go forward? 

Mr. COHEN. Well, Congressman, I think it is a very good question. Because there is reporting that you see in the press about, 

you know, Ahmadinejad, in particular, saying, and the Supreme 

Leader saying we need to move away from an oil economy, we need 

to, you know, transform the Iranian economy and not be so dependent on oil revenue. Frankly, if they are ever able to do that, it is 

not going to be anywhere close to the near term. They are hugely 

dependent, hugely dependent on their ability to sell oil. And there 

are a small number of additional revenue sources in the Iranian 

economy. But I think two-thirds of their earnings come from, historically, have come from their oil sales, two-thirds or three-quarters. So what we are doing in targeting in particular oil sales, targeting their ability to get access to the revenue from the oil sales, 

is not something the Iranian economy—the Iranians are going to 

be able to adapt themselves away from in anything in the near 

term. 

And in second part of your question is the pace, intensity of the 

sanctions. We are committed to working with this committee, working with Congress to put into place additional measures. The administration itself is actively engaged in looking at ways that we 

can take action to apply additional sanctions. We are enforcing the 

sanctions in a very vigorous way. So we are, if anything, picking 

up the pace of both our enforcement efforts as well as the creation 

of new authorities. 

Mr. SCHNEIDER. Let me take you in a slightly different direction, 

and that is with Iranian supply of Syria transiting weapons 

through Iraq. It is a grave concern. Today we saw that there were 

rockets falling on the Israeli side of Mount Hermon. This is an 

issue of, like you said, of great concern. What actions are we taking? What can we do to reduce or eliminate the ability of Iran to 

transfer weapons through Iraq? 

61

Ambassador SHERMAN. We will discuss this further and in more 

detail in the classified session. But what I can say, Congressman, 

is Secretary Kerry has had very direct conversation with Prime 

Minister Maliki, as have others. And as a result of those talks, we 

are seeing more inspections of planes that are flying over Iraq, 

headed toward Syria. Or potentially headed toward Syria. We have 

seen a change in behavior. Is it sufficient yet? In my view, not 

quite sufficient yet. But we are putting on very serious talks with 

the Iraqis about what they must do. And, in fact, what other countries must do. And we have had instances, which we can talk about 

in that session, where countries have been aware of transiting, 

have interdicted, and stopped both weapons and goods that are 

going to Syria as well as a lot of successful interdictions in terms 

of abating sanctions toward Iran. 

Mr. SCHNEIDER. Great. Thank you. And I will look forward to 

speaking in the next session. 

Chairman ROYCE. Mr. Radel from Florida. 

Mr. RADEL. Thank you, Mr. Chair. 

One thing I love about this committee is the spirit of bipartisanship that we have here. We are beyond R or D or party lines. We 

work together for what is best for the United States. 

That said, we had Secretary Kerry here not too long ago, who 

said something I think we can all agree on. When it comes to the 

talks that we have had over and over, he says, the talks ‘‘cannot 

be allowed to become a process of delay which in and of itself creates a greater danger.’’

Let me take a step back here for a second. When we look at 

North Korea, for example, we have seen decade after decade, talk 

after talk. Now a change of regimes from father to son. And yet we 

are still threatened by this dictatorship of North Korea. The only 

American contact I think we have had is Dennis Rodman, showing 

up there to play some basketball. Look, I love Rodman as much as 

the next guy, having lived in Chicago in the 1990s. But I don’t 

think that he is fit to be an Ambassador or Representative of the 

United States. 

When we go back to Iran, when do we say enough is enough? 

Ambassador Sherman, I would ask you, do we have any kind of 

clear-cut definition when we say that this is just stalling, and we 

are done with talks? 

Ambassador SHERMAN. Congressman, it is—I wish it were a simple equation. And—but it is not. Because we have to constantly calculate where Iran is in their nuclear program, which we can discuss in detail in the classified session. We have to consider where 

our international partners are, because we have to exhaust every 

possibility for diplomacy for a peaceful solution. Because if we are 

to take other action, we must have international support to do so. 

So this is not a simple equation. I wish it were direct, linear, 

clear; I wish I could tell you today what the moment will be. The 

President has said, the Secretary has said there is still more time. 

Prime Minister Netanyahu has said that as well. But that time is 

not definite, and we are in constant assessments, not only within 

our own Government, with other governments, including with 

Israel, on those assessments of where we are on the various clocks 

to make those choices. 

62

Mr. RADEL. Agreed. And it is undoubtedly reassuring to hear 

that from the Prime Minister Netanyahu in Israel. We would all 

like a peaceful solution to this at the end of the day. I thank you 

for your service. 

Just real quick. Is there anything that, in terms of looking and 

suspending nuclear activity, is there any clear-cut answer to—are 

we asking for them to suspend it all? For the record, could you 

state where we stand on that? 

Mr. SHERMAN. For the record, we have said that the end of this 

story is full compliance with U.N. Security Council sanctions and 

all of their obligations under the NPT. 

Mr. RADEL. Great. And I look forward to our conversation later. 

Thank you both, Mr. Chair. 

Ms. ROS-LEHTINEN [presiding]. Thank you very much. 

Congresswoman Meng of New York is recognized. 

Ms. MENG. Thank you, Mr. Chairman. 

Thank you, Mr. Ranking member. 

And thank you, too, Ambassador Sherman and Mr. Cohen for 

being here today. 

In 2009, it appeared that the Iranian people or a large percentage of them truly rose up against are the regime. Iran is a young 

country that is increasingly disaffected with its regime. We are now 

upon another Iranian election, one without a relatively liberal candidate. Can anything be done to, again, galvanize and support the 

pro-democratic forces, and what is your assessment of the Iranian 

public sentiment on the eve of their Presidential elections? 

Ambassador SHERMAN. Congresswoman, I wish I could tell you 

that all of the voices of those who may not like where their government is today are speaking up or feel that they can speak up. But 

that is not the case. There is tremendous repression in Iran. And 

the destructive actions that were taken in 2009 have had a lasting 

impact. The Green Movement, as it was then, which was actually 

most focused on undermining—getting rid of voter fraud as the 

election approached, really does not exist as an organized entity. 

There are, of course, other voices in Iran. But they are often 

thrown in jail or their families are harassed or their businesses are 

closed. The State Department, along with other partners in the 

U.S. Government, are doing everything we can to ensure that people can talk with each other, that they have avenues for speech. 

We have a Virtual Embassy Tehran, which is a Web site. And we 

do everything we can to make sure that that isn’t jammed and people have access to it. We have Farsi speakers who communicate, 

and we will certainly take Congressman Rohrabacher’s suggestions 

about additional languages into account. But we are trying to do 

everything we can to support the space, not for us to take sides—

it is up for the Iranian people to decide who they want as their 

leadership—but to make sure transparent, free, and fair election. 

And it appears we are very far from that today. 

Ms. MENG. Thank you. 

I yield back my time. 

Ms. ROS-LEHTINEN. Thank you very much. 

And now we go to Mr. Messer of Indiana. 

Mr. MESSER. Thank you. I thank the chair and the ranking member. 

63

I certainly want to say thank you to Ambassador Sherman and 

Mr. Cohen. 

I was encouraged by your testimony about the impact of sanctions on the Iranian economy. Clearly, it is having a big impact on 

their currency. But, of course, the goal of the sanctions is not to 

just simply cripple the Iranian economy, the goal of the sanctions 

is to change their behavior as to the nuclear enrichment program. 

And I am not trying to throw this out as a trick question, I just 

would ask for your assessment, what impact or any impact have we 

seen on these sanctions as their—to their behavior in the nuclear 

enrichment program. 

Ambassador SHERMAN. I would say a couple of things. First of 

all, Iran knows that they pay a cost for their continuing intransigence. And that was not always true. You all have said it yourselves, for many years, that was not true. But now there is an 

international regime unlike any other. So every day they pay a 

cost, and that cost only increases and ramps up. There is only more 

cost to be held. 

Secondly, as Undersecretary Cohen mentioned in his testimony, 

in the last round, at Almaty 2, as we call it, Iran really put the 

need for sanctions relief on the table. In the past, there had been 

quite a bit of happy talk along the lines of what Congressman 

Schneider mentioned, which is, you know, Iran saying, oh, you 

helped us diversify our economy. This is great. We are doing greater scientific technology. It has made us create new things. This 

time, all of that was gone. It was all about, ‘‘we need sanctions relief, and let’s talk about how little we can do to get it.’’

Mr. MESSER. So, I don’t want to put words in your mouth, but 

I am hearing you say we see some diplomatic movement. 

Ambassador SHERMAN. Yes. 

Mr. MESSER. We are aware of no efforts that have changed as far 

as their efforts to obtain a nuclear bomb. 

Ambassador SHERMAN. No. I think I said earlier, my own assessment—and we can talk in the classified about the intelligence community’s assessment—is that the Supreme Leader has not made 

the strategic decision to really give his people what they need, 

which is security and prosperity, rather than face the continued 

cost——

Mr. MESSER. Just to follow up in my limited time, kind of following up on the comments by Representative Meng, do we have 

any indication that public sentiment in Iran—do they blame the 

West for their economic troubles, or are they beginning to understand it is their own leadership’s fault? 

Ambassador SHERMAN. Again, we can ask the intel community. 

But the public polling data that I have seen shows a mixed bag. 

I think that Iranian people are frustrated with the economic mismanagement of Iran, which is, quite frankly, also a major factor 

here. But there is, obviously, a great deal of nationalism in Iran 

as well. 

Ms. ROS-LEHTINEN. Thank you very much. 

Dr. Bera is recognized. 

Mr. BERA. Thank you, Madam Chairwoman, Ranking Member. 

Thank you Ambassador and Mr. Cohen. 

64

I think we have touched on a number of issues, and both Democrats, Republicans, House, Senate, administration clearly understand that a nuclear-armed Iran is not a possibility. We clearly understand where that red line is. And we will do what is necessary 

to prevent that. 

Do we believe that the Iranian leadership understands where the 

red line is and understands what we are saying? 

Ambassador SHERMAN. One of the things I learned a long time 

ago as a diplomat is it is always hard to know exactly what the 

other side is thinking, because their history, their culture is different than ours. 

And I often sit on the opposite side of the table with Dr. Jalili 

and his delegation. And it is hard work for us to talk with each 

other as opposed to past each other. I think they understand the 

United States is the last remaining—military super power in this 

world and the last remaining super power in this world. And that 

we mean business. I think they are clear that we will do whatever 

is necessary to keep them from having a nuclear weapon. But at 

the same time, this is a culture of resistance that is based much 

in its history. So I wish I knew with exactitude the answer to that 

question. 

Mr. BERA. Now, let’s assume we are successful in preventing 

Iran from developing and obtaining their own nuclear technology. 

We on this committee have talked about North Korea, and we have 

touched on it. Is there any evidence that there is conversation between North Korea and Iran or any technology transfer that is 

going on? 

Ambassador SHERMAN. As I said a few moments ago, I am not 

sure you were here yet, Congressman, I think we should talk about 

this further in the classified session. There have been historic networks largely led by A.Q. Kahn out of Pakistan that have had an 

impact on all of the nefarious actions of countries around the world 

in terms of proliferation, but I think further discussion we should 

hold for a classified discussion. 

Mr. BERA. Great. I look forward to that discussion and I yield 

back. 

Chairman ROYCE [presiding]. I now recognize Mr. Weber. 

Mr. WEBER. Thank you. 

Madam Ambassador, you said in your exchange with Congressman Brooks that there was no pulling back from that stance. How 

about going forward? Are you prepared—or let me back up. 

You read a statement from today that said we have been at the 

negotiating table for a year and a half. Do you believe we have another year and a half timeframe before they get nuclear weapon capability? 

Ambassador SHERMAN. What the President said, Congressman, is 

from the time Iran makes a decision to go for a nuclear weapon——

Mr. WEBER. I am asking you, and I am short of time, forgive me, 

do you believe that from today——

Ambassador SHERMAN. I think we don’t know the answer to that. 

There are many factors——

Mr. WEBER. I think that is naive. We don’t have a year and a 

half. We just don’t have a year and a half. Let me make that point. 

65

In response to the other Congressman who said, We need the 

pedal to the metal, will you go back to the Secretary of State and 

will you say, Mr. Secretary, I recommend that we give the Israelis 

the bunker-busting bomb, that we give them the technology now, 

not to wait, because it is your recommendation that we don’t have 

a year and a half? And I agree with the tenor of what many of our 

colleagues are saying, is that we have had a lot of talk for a long 

time, and I think it is getting down to the ninth inning. Don’t you 

agree? 

Ambassador SHERMAN. I will certainly let the Secretary know 

your recommendation, Congressman. 

Mr. WEBER. Okay, that sounds like a good diplomatic answer. 

A very specific question. There is a $30 million administration 

request for funding of the Near East Regional Democracy Fund, a 

fund which is geared specifically toward helping support democratic reform in Iran. Isn’t it true, or why is it that that funding 

has gone almost exclusively toward Internet circumvention and 

technology updates? Why not to boots on the ground? Why not to 

the opposition reformists or democratic activists that are operating 

on the ground? 

Ambassador SHERMAN. Well, in fact, what we are trying to do is 

what we can do, which is to help people to create the open space 

for the kind of organizing that you are discussing. And in those 

who have talked with us about what the needs are, this is very 

high on the list. 

Mr. WEBER. Well, thank you. And I really do expect for you to 

go back to Secretary Kerry and to tell him that we don’t have a 

lot of time left. And he knows that, and I suspect we will talk more 

about it in the SCIF, but I hope we come up with concrete ideas 

to take countries like China and quit giving them exceptions, whatever you want to call them, and to make sure that they understand 

that we are fully committed to all of the sanctions. And if they are 

not complying with those, then they need to feel some of the weight 

of that as well. 

And I yield back a whopping 13 seconds. 

Chairman ROYCE. We now stand adjourned. 

I want to thank Ambassador Sherman and Mr. Cohen for their 

testimony. They have agreed to make themselves available to go 

into closed session, so we will do that immediately and ask members, you are all encouraged to attend. Thank you. We stand adjourned. 

[Whereupon, at 3:19 p.m., the committee was adjourned.] 

(67)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

68

f


80940n.eps

FULL COMMITTEE HEARING NOTICE 

COMMITTEE ON FOREIGN AFFAIRS 

US HOUSE OF REPRESENTATIVES 

WASHINGTON, DC 20515-6128 

Edward R. Royce (R-CA), Chairman 

May 15,2013 

TO: MEMBERS OF THE COMMITTEE ON FOREIGN AFFAIRS 

You are respectfully requested to attend an OPEN hearing of the Committee on Foreign Affairs, to be 

held in Room 2172 of the Rayburn House Office Building (and available live on the Committee website at 

httpllwww.ForeignAffairs.house.gov): 

DATE: 

TIME: 

SUBJECT: 

WITNESSES: 

Wednesday, May 15,2013 

115 p.m 

Preventing a Nuclear Iran 

The Honorable Wendy R. Shennan 

Under Secretary for Political Affairs 

US Department of State 

The Honorable David S. Cohen 

Under Secretary for Terrorism and Financial Intelligence 

U.S. Department of the Treasury 

By Direction of the Chairman 
69


80940m-1.eps

COMlVUTTEE ON FOREIGN AFFAIRS 

1vffi\:1JTES OF FULL COMl\UTTEE HEAR1~G 

Day Wednesday Date ___ -"f!""51'-'1-"S'-'ll'-'J'---__ ,Ro()m, ___ -=2c:.

'

-'-7=-2 __ _ 

Starting Time 1:19 p.m. ~:nding Time 3:19 p.m. 

Rece.ses :_0_: L-to __ 1 L-to __ ) L-to __ )( __ to __ ) L-to __ ) L-ID __ ) 

Pre,idinl< Membor(.) 

Chairman Ed Royce, Rep. Ros-Lehtinen 

Check all of the following that apply: 

Open Session [Z] 

Executive (closed) Session 0 Televised [ZJ 

TITLE OF HEARING: 

Preventing a Nuclear Iran 

COMMITTE,II MEI\'ffiERS PRESE:"<T: 

See Attached Sheet 

NON-COMM11"n:l'; /,n:MIWRS PRESE1'.-T: 

.:lVone 

Klectroni~.lly Recorded (taped) [ZJ 

Stenographic Record 0 

HEARL'<G WITNESSES: Same as meeting notice attached? Yes0 NoD 

(1/ "no", pleaJN u~( bdulV and include title, agency, department, or organization.) 

STATEMENTS FOR THE RheOM]): (List any statement' suhmittedjor Ihe record) 

Rep. C"""olly 

Rep. Engel on behl1lfofRel'. Veltl1;quez 

TlMI<: SCH~:IllIU:l) TO RECONVENE ___ _ 

or 

TIME ADJOl,:RNED 1:19 p,m. 

/ ~ ,/ // //c-

/:::........-/ /~ --' 

Je~ "I arter, Director of Committee Operations 
70

f


80940m-2.eps

Present 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

HOUSE COMMITTEE ON FOREIGN AFFAIRS 

"Preventing a Nuclear Iran" 

May 15,2013 

Member Present Member 

Edward R. Royce. CA X EliotL EngeL NY 

Christopher H Smith. NJ Eni F.H Faleomavaega. AS 

lleana Ros-Lehtinen, FL X Brad Sherman. CA 

Dana RohrabaehcL CA Gregory W. Mccks. NY 

Steve Chabot OH Albia Sires, NJ 

Joe Wilson, SC X Gerald E. Connolly. VA 

Michael T. McCaul, TX X ll1eodore E. Deutch. FL 

Ted Poe. TX Brian Higgins. NY 

Matt Salmon. AZ Karen Bass. CA 

Tom Marino, PA X Willianl Keating. MA 

JcffDuncan. SC X David Ciciliinc, RI 

Adanl Kinzinger, IL Alan Grayson. FL 

Mo Brooks. AL Juan Vargas, CA 

Tom Cotton, AR X Bradley S. Schneider, IL 

Paul Cook. CA X Joseph P. Kennedy III. MA 

George Holding. NC X Ami Bera. CA 

Randv K. Weber, Sr., TX X Alan S. Lowenthal, CA 

Scott Perry, PA X Grace Mcng, NY 

Steve Stockman. TX X Lois Frankel. FL 

Ron DeSantis. FL Tulsi Gabbard. HI 

Trey Radel. FL X Joaquin Castro, TX 

Doug Collins. GA 

Mark Meadows. NC 

Ted S. Yoho. FL 

Luke Messer. IN 
71


80940c-1.eps

The Honorable Gerald E. Connolly (VA-11) 

HCFA Full Committee Hearing: Preventing a Nuclear Iran 

Wednesday, May 15, 2013 

1pm 

Last Thursday, the State Department announced the imposition of sanctions on four Iranian nuclear 

support companies and one individual as Weapons of Mass Destruction Proliferators pursuant to 

Executive Order (E.O.) 13382. The four companies-Aluminat, Pars Amayesh Sanaat I<ish, Pishro 

Systems Research Company and Taghtiran I<ashan Company-were all blacklisted for providing goods, 

technology and services for activities that violated United Nations Security Council sanctions on Iran's 

nuclear activities. That same day, the Treasury Department announced sanctions against Iranian 

Venezuelan Bi-National Bank (IVBB) for acting as a financial conduit for the previously sanctioned 

Export Development Bank of Iran (EDBI). 

These are welcome developments, but the Committee's work is far from over. As one of the 

cosponsors of the Chairman's Nuclear Iran Prevention Act of 2013 (H.R. 850), I welcome the mark-up 

next week. The bill, which has been referred to three other Committees, lays out a number of 

provisions regarding the sanctions regime. Among other things, H.R. 850: 

Directs the Secretary of State to determine if Iran's Revolutionary Guard Corps (IRGC) meets the 

criteria for designation as a foreign terrorist organization and: (1) if so, designate the IRGC as a 

foreign terrorist organization; and (2) if not, report to Congress concerning those criteria which 

have not been met. 

Expresses the sense of Congress regarding the imposition of sanctions on certain Iranian 

government persons responsible for, or complicit in, human rights abuses, diversion of food 

and medicine, and censorship. 

Amends the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 

(CISADA) to subject to mandatory sanctions a financial institution that facilitates a significant 

transaction or provides significant financial services for a person that: (1) is subject to human 

rights-related sanctions, or (2) exports sensitive technology to Iran and is subject to the 

prohibition on procurement contracts. 

Excludes from such sanctions a transaction for the sale of agricultural commodities, food, 

medicine or medical devices to Iran. 

I nternational sanctions have had stark consequences for Iran, including the decline in value of the 

Iranian rial. Moreover, according to recent reports, because of "sanctions enacted by the United States 

and several European nations-and implemented by key allies-Iranian crude oil production fell to 3.0 

million barrels per day (mbd) in 2012, its lowest level since 1989.'" Other estimates put Iran's current 

oil exports to an even lower number; according to the Congressional Research Service, Iran's oil 

1 Securing America's Future Energy & Roubini Global Economics, "Decision Point: A Well-Supplied Global Oil Market Will 

Make 2013 the Year to Deal With Iran," April 26 2013 Issue Brief, 1. 

Page 1 of 2 
72

f


80940c-2.eps

The Honorable Gerald E. Connolly (VA-11) 

exports have declined to about 1.25 million barrels-a halving from the 2.5 million barrels per day Iran 

exported duMng 2011' 

Whatever metric one uses, it is clear that Iranian access to the international market has steadily 

declined since the imposition of U.S.-led multilateral sanctions against Iran. These sanctions are one of 

many tools and this Committee has attempted to ensure that the President has the legislative 

authority to discourage Iran, through multiple means, from enriching uranium. Given the Committee's 

impending actions on the Nuclear Iran Prevention Act, I would like to hear our witnesses' thoughts on 

the bill and how it would supplement the current sanctions regime against Iran. 

### 

Z Kenneth Katzman, "Iran Sanctions," Congressional Research Service, April 24 2013. 

Page 2 of 2 
73

MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE ELIOT L. ENGEL, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

f


80940d.eps
74

f


80940e.eps

Question 1: 

Questions for the Record 

Submitted by the Honorable Dana Rohrabacher 

To the Honorable Wendy R. ,,,'herman 

Was Iran behind the Feb. 9, 2013 rocket attack on Camp Liberty in Iraq which killed 5 

unarmed civilians and wounded some 25 others? Is Iran behind other acts of harassment of 

the camp, including another rocket attack in April? 

As Secretary Kerry stated in his April 17 testimony, we do believe that Tran was behind the 

February 9 attack on Camp Liberty. The safety and security of the residents continues to be of 

utmost concern, and the February 9 attack, coupled with the generally precarious security 

situation in Iraq currently, only underscores the necessity of relocating the residents of Hurriya 

outside of Traq in order to get them out of harm's way. To that end, we continue to urge the 

camp leadership to resume cooperation with the UNHCR relocation process, particularly 

interviews, in order to relocate members out of Iraq. 
75


80940f-1.eps

Question 1: 

Questions for the Record 

Submitted by the Honorable Adam Kinzinger 

To {he Honorable David ,'l'. Cohen 

Is the Administration considering expanding sanctions to more aggressively target luxury 

goods such as the Supreme Leader, Ayatollah Ali Khamenei's BMW conglomerate? 

It is longstanding Treasury policy not to comment on possible or ongoing investigations. 

However, the Treasury Department takes seriously its obligation to implement all financial 

sanctions and is constantly engaged in investigations to seek out sanctionable activity. 

Question 2: 

Many reports state that the Ayatollah is worth tens of billions of dollars in personal wealth. 

Has the Administration considered imposing harsher restrictions which could more 

directly impact the Ayatollah? 

Treasury and the Administration remain committed to enforcing U.S. sanctions and to targeting 

key sources of revenue for the Tranian regime that could be potentially redirected to support its 

nuclear program and support for terrorism. Most recently, in early June 2013, Treasury 

sanctioned the Execution of Tmam Khomeni's Order (ETKO), an extensive network of front 

companies that works on behalf of the Iranian government and is used to circumvent 

international sanctions and conceal billions of dollars in assets controlled by the Tranian 

leadership. EIKO oversees a network of 37 ostensibly private businesses, many of which are 

front companies. The purpose of this network is to generate and control massive, off-the-books 

investments, shielded from the view of the Iranian people and international regulators. 

Qnestion 3: 

Why has the Administration not yet songht to impose a sanction on Iran's nse of gold as a 

cnrrency since President Qbama issned Executive Qrder 13622 which bans gold exports to 

Iran? 

Treasury has a strong record of aggressively pursuing Iran's tinancial networks and 

implementing sanctions against Iran and those individuals, entities, and banks that violate our 

sanctions. Executive Order 13622 makes sanctionable the purchase or acquisition of precious 

metals, including gold, by the Government of Iran. Treasury has conducted extensive outreach to 

our foreign partners and to key players in the international gold market to raise awareness of the 

sanctions risk associated with gold sales to Iran. This issue has taken on even more prominence 

as of July I, 2013, when our authorities expanded to make sanctionable the purchase or 

acquisition of precious metals - including gold - to or from any person in Iran. Although 

Treasury does not comment on possible or ongoing investigations, you have my assurance that 

we will continue to aggressively target individuals, entities, or banks that engage in sanctionable 

activity, wherever they may be. 
76


80940f-2.eps

Qnestion 1: 

Questions for the Record 

Submitted by the Honorable Adam Kildnger (lL-16) 

1'0 the Honorable Wendy R. Sherman 

In the event that Prime Minister Benjamin Netanyahn's "red line" is crossed, what 

contingency plan does the Administration have in place to come to the aid of onr most 

important ally in the region? 

Israel is a vital ally and the cornerstone of our regional security commitments. Our security 

relationship with Israel is the deepest and broadest that it has ever been. We have extensive and 

ongoing contact with Israel to discuss a wide range of security issues, including how to address 

all facets of the challenge posed by Iran's nuclear program. We have also taken unprecedented 

steps to protect Israel's Qualitative Military Edge - including installing the Iron Dome defense 

system to stop rockets fired at Israel. 

The President has stated unequivocally that we will not allow Iran to obtain a nuclear weapon, 

and there should be no doubt that the United States will use all elements of American power to 

achieve this objective. The United States and Israel are in fi.1l1 agreement about this objective. 

We believe it is still possible for diplomatic and economic efforts to prevent Iran from achieving 

their goal. But while the diplomatic window is still open, the President has made clear that there 

should be no doubt that it will not be open indefinitely, and all options remain on the table. 
77

f


80940f-3.eps

Question 2: 

How is the Administration seeking to curb the effects Iran has on the growing problem in 

Syria? 

Iran has been a critical support line to the Asad regime, providing not only timds and weapons, 

but also strategic guidance and technical assistance, playing a significant role in keeping the 

Asad regime in power, enabling the regime's continued repression and slaughter of tens of 

thousands of Syrians, and exacerbating a conflict that has wide-reaching regional security 

implications. The fact of Iranian boots-on-the-ground in Syria was demonstrated on February 

13, when IRGC Qods Force general Hasan Shateri was killed inside Syria. 

Countering such efforts remains a key priority for the Administration and we are focused on 

preventing Iran from continuing to support the Syrian regime financially, materially, and 

logistically. The Administration has used its authorities in several executive orders to highlight 

the role of Iran in the Syrian regime's violation of human rights and hold accountable those 

responsible. 

We remain concerned with Iran's continued abuse ofIraqi airspace for arms shipments to Syria. 

During Secretary Kerry's March 24 visit to Iraq, he raised this issue with Prime Minister Maliki, 

and urged Iraq to either deny overflight requests for Iranian aircraft going to Syria, or require 

such flights to land in Iraq for credible inspection. We will continue to engage the most senior 

Iraqi otlicials on this issue. 
78


80940g-1.eps

Question 1: 

Questions for the Record 

Suhmitted hy the Honorahle Mark Meadows 

To the Honorahle Secretary Wendy R. Sherman 

Last month, Secretary Kerry in a visit to Baghdad pressed the Iraqi government to 

take action to stop Iranian arms shipments to Syria that have been crossing Iraqi 

airspace and traveling overland as well. Since the Secretary's visit media reports 

indicate Iraq stopped and searched some additional Iranian aircraft. Under 

Secretary Sherman, can you provide an update on Iraq's actions to stop the flow of 

arms to Assad? Is this a matter of capability or will? 

We remain concerned that Iranian anTIS shipments to Syria are crossing Iraq into Syria. 

During Secretary Kerry's March 24 visit to Iraq, he raised this issue with Prime Minister 

Maliki and urged that Iraq either deny overflight requests for Iranian aircraft going to 

Syria, or require such flights to land in Iraq for credible inspection. Since his visit, Iraq 

increased the number of inspections of flights bound for Syria. Weare encouraged by 

some steps the Iraqis have taken, and we have seen some disruption in flights over the 

past 60 days. That said, this remains an issue of urgent concern and regular diplomatic 

engagement. We will continue to press Iraqi officials at the highest levels to conduct 

credible inspections and ensure that Iran does not use Iraq as a transit route for cargo 

prohibited by UN Security Council Resolutions. 

Question 2: 

Under Secretary Sherman, more generally, how do you see assess the relationship 

between Iraq and Iran? 

While Iran continues to be an influential neighbor to Iraq, Iranian efforts to dominate Iraq 

are countered by the fact that Iraqis vigorously defend their sovereignty and 

independence. Iraq has taken actions that run counter to Iranian interests, such as 

increasing oil production just as Iranian exports were being taken off the market due to 

U.S. and EU sanctions. IfTraq had not taken this action, we believe worldwide oil prices 

would have spiked, ultimately reducing the impact of sanctions on Iran and hurting U.S. 

consumers. Iraq has also participated in regional international military exercises such as 

Eager Lion (a multilateral Command Post Exercise and a Field Training Exercise held 

annually in Jordan) and the International Mine Countenneasure Exercise held in the 

Arabian Gulf, and hosting P5+ 1 talks last May. Fearful of the effect of sectarian tensions 

in the region, Iraq seeks the reassurance of a long-tenn strategic partnership with the 

United States to protect it from spillover instability and interference or disproportionate 

influence by any of its neighbors, including Iran. 
79

Æ


80940g-2.eps