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S. HRG. 112–366

U.S. STRATEGIC OBJECTIVES TOWARDS IRAN

HEARING

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

DECEMBER 1, 2011

Printed for the use of the Committee on Foreign Relations

(

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

COMMITTEE ON FOREIGN RELATIONS

JOHN F. KERRY, Massachusetts, Chairman

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

RICHARD J. DURBIN, Illinois 

TOM UDALL, New Mexico 

RICHARD G. LUGAR, Indiana 

BOB CORKER, Tennessee 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

JAMES M. INHOFE, Oklahoma 

JIM DEMINT, South Carolina 

JOHNNY ISAKSON, Georgia 

JOHN BARRASSO, Wyoming 

MIKE LEE, Utah 

WILLIAM C. DANVERS, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

(II)

C O N T E N T S 

Page

Cohen, Hon. David S., Under Secretary for Terrorism and Financial Intelligence, U.S. Department of the Treasury, Washington, DC .............................. 8

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

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

Lugar, Hon. Richard G., U.S. Senator from Indiana, opening statement ........... 2

Sherman, Hon. Wendy R., Under Secretary of State for Political Affairs, 

U.S. Department of State, Washington, DC ...................................................... 4

Prepared statement .......................................................................................... 6

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

Kerry .............................................................................................................. 44

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Letter from Timothy F. Geithner, Secretary of the Treasury, to Senator Carl 

Levin, chairman of the Senate Committee on Armed Services ........................ 18

(III)

(1)

U.S. STRATEGIC OBJECTIVES TOWARDS IRAN 

THURSDAY, DECEMBER 1, 2011

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

The committee met, pursuant to notice, at 10 a.m., in room SD–

419, Dirksen Senate Office Building, Hon. John F. Kerry (chairman 

of the committee) presiding. 

Present: Senators Kerry, Menendez, Cardin, Casey, Webb, 

Shaheen, Coons, Udall, Lugar, Corker, Risch, Isakson, Barrasso, 

and Lee. 

OPENING STATEMENT OF HON. JOHN F. KERRY,

U.S. SENATOR FROM MASSACHUSETTS 

The CHAIRMAN. The hearing will come to order. 

Thank you all for being with us this morning. 

I am going to just have very, very brief remarks because we want 

to hear from the witnesses. 

Obviously, I think everybody understands that the question of 

Iran’s relationship with its neighbors and with the world is much 

on everybody’s mind. There could not be a more critical challenge 

in terms of proliferation and questions of terrorism in the region, 

and I think every one of us are deeply, deeply concerned about how 

we might be able to change this current equation in a way that is 

rational and beneficial to all parties. 

We have two very highly capable witnesses here this morning to 

help us examine this complicated situation, and, I hope, help us 

shed light on how we can positively influence Tehran’s behavior 

and confront this question of nuclear weaponization. Wendy Sherman has appeared many times before the committee and today 

marks her first appearance as the Under Secretary of State for 

Political Affairs, and I am delighted to welcome her here in that 

capacity. And appearing with her is David Cohen, the Under 

Secretary for Terrorism and Financial Intelligence at the Treasury 

Department. They are both very competent, dedicated, and experienced public servants, and we are happy to have them here to 

answer our questions today. 

Obviously, with the Quds Force allegedly plotting to kill the 

Saudi Ambassador to the United States right here in Washington, 

DC, and now with the world’s nuclear watch dog agency, the IAEA, 

issuing a very detailed and careful report about Iran’s activities 

relative to nuclear processing, these two developments highlight 

the breadth of the strategic challenge that we face. 

2

So I am not going to say more. I want to learn here today and 

listen carefully and I look forward to the testimony of both of our 

witnesses. 

Senator Lugar. 

OPENING STATEMENT OF HON. RICHARD G. LUGAR,

U.S. SENATOR FROM INDIANA 

Senator LUGAR. Mr. Chairman, I join you in welcoming our distinguished witnesses. I am hopeful they will illuminate administration strategy toward Iran’s nuclear program and other issues raised 

by Iranian activities in the Middle East. 

Iran continues to be a direct threat to United States national security, the security of our close ally Israel, and other United States 

interests in the region. The October disruption of an alleged plot 

to assassinate the Saudi Ambassador to the United States implicated the Iranian Government. Just days ago, the regime appeared 

to be complicit in the attack on the British diplomatic mission in 

Tehran. Iran’s material and financial support of Hezbollah and 

Hamas continues to undermine international efforts to promote 

peace and economic prosperity in the Middle East. And its lethal 

support and training for militants in Iraq and Afghanistan have 

threatened United States and coalition forces. 

Iran’s leaders have issued cynical statements of support for this 

year’s democratic movements across the Middle East and North 

Africa, even as they suppress dissent at home. In 21⁄2 years since 

the Iranian Government’s deadly repression of protests after the 

disputed 2009 Presidential election, the human rights situation in 

Iran has not improved. The regime persists in its persecution of 

many political activists, lawyers, students, journalists, trade unionists, and filmmakers. Iranian citizens lack basic freedoms that we 

Americans hold dear, including freedom of expression, freedom of 

assembly, and the freedom to choose their government through 

transparent, fair elections. As we debate how most effectively to 

constrain Iran’s nuclear ambitions, it is important to keep in mind 

those who continue to pay a personal cost for expressing their opposition to the Iranian regime. 

Against this backdrop, Iran continues advancing toward a nuclear weapons capability. The IAEA Board of Governors passed a 

near-unanimous resolution on November 18 calling on Iran to comply fully with its obligations under Security Council resolutions and 

IAEA requirements and urging Iran to intensify its dialogue with 

the agency to resolve outstanding questions. The move comes after 

the agency reported on November 8 that Iran continues to violate 

its obligations to suspend all enrichment-related and heavy waterrelated projects and expressed serious concern about the possible 

military dimensions of Iran’s nuclear program. 

On November 21, the United States strengthened bilateral sanctions against Iran—targeting entities that contribute to Iran’s 

ability to develop its petroleum and petrochemical resources 

through the provision of goods and services; designating entities 

and individuals involved with Iran’s proscribed nuclear procurement activities; and labeling Iranian financial institutions as primary money laundering concerns. These new sanctions build on a 

bilateral framework of existing measures in the Comprehensive 

3

Iran Sanctions and Accountability and Divestment Act of 2010 and 

the Iran Sanctions Act. Additionally, the United Kingdom announced new restrictions that cut off all financial ties between 

British financial institutions and Iranian banks. Canada also imposed further sanctions, prohibiting financial transactions with 

Iran and expanding the list of prohibited goods for export. The European Union announced new measures that will ban European 

companies from doing business with an expanded list of firms and 

organizations and will subject an expanded list of individuals to 

asset freezes and visa bans. 

Although these steps are significant, by themselves they are 

unlikely to be decisive in moving Iran toward accepting a verifiable 

end to its nuclear weapons program. Our task continues to be the 

achievement of an international consensus in favor of sanctions 

that would present the Iranian regime with the stark choice 

between continuing their nuclear weapons program and preserving 

the economic viability of their country. From decades of experience 

with sanctions policy, we know how difficult this might be to 

achieve. Sanctions are prone to circumvention and can create unintended consequences. We also know that some nations will not be 

full participants in a robust sanctions regime against Iran, and others may be obstacles. 

But international will for a decisive sanctions strategy has 

strengthened as Iran’s intransigence has continued. We also have 

seen indications of fissures within Iran’s Government as it contends with high unemployment, inflation, and dismal prospects for 

economic growth. Popular upheaval against the repressive Syrian 

Government not only weakens Iranian influence in the region, it 

underscores for the Tehran regime the domestic risks it assumes 

by incurring the economic consequences that come with nuclear 

noncompliance. 

The United States should be exploring every option to accelerate 

and intensify the economic pressure on the Iranian Government 

while working with allies to construct a more comprehensive 

approach to sanctions than has been achieved thus far. This should 

be a top priority of the administration and Congress. 

As I have frequently advocated, we also should be devoting substantial assets to communicating directly with the Iranian people 

and supporting their unfettered access to the Internet and social 

media outlets. The Iranian regime blocks satellite broadcasts and 

Internet access in order to control and manipulate information 

coming into and out of Iran. U.S. satellite TV, radio, and Internet 

operations all offer important lifelines to beleaguered human rights 

activists and supporters of democratic reforms. Access to communications technology can be a powerful stimulus for change, as we 

have seen during the Arab Spring. 

I look forward to hearing from our witnesses regarding the 

administration’s plans for further isolating the regime in Tehran. 

What is being done to enhance international economic sanctions 

and does the administration have a strategy for overcoming obstacles posed by China, Russia, and other nations? 

I thank the chairman. 

The CHAIRMAN. I thank you, Senator Lugar, very much. 

4

Secretary Sherman, if you would lead off, and then obviously 

Secretary Cohen. And we look forward to having a good dialogue 

with you. Thank you. 

STATEMENT OF HON. WENDY R. SHERMAN, UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS, U.S.

DEPARTMENT OF STATE, WASHINGTON, DC 

Ms. SHERMAN. Thank you very much, Chairman Kerry, Ranking 

Member Lugar, distinguished members of the committee. Thank 

you very much for inviting me and my colleague, U.S. Treasury 

Under Secretary David Cohen, to discuss the administration’s 

whole-of-government approach to the multiple threats posed by 

Iran, its nuclear ambitions, its support for international terrorism, 

its destabilizing activities in the region, and its human rights 

abuses at home. 

Before we start, I must note that we have yet had another example this week of Iran’s reckless, destabilizing disregard for international norms. The storming of the British Embassy was a 

dangerous affront to the international community, and the Government of Iran’s continued disregard for its obligations to protect diplomats deepens its isolation from the international community. In 

this crisis, we stand with our close colleagues from the United 

Kingdom and are encouraged by so many others who are showing 

their support in so many ways. 

Our overall policy regarding Iran is clear. First and foremost, we 

are determined to prevent Iran from acquiring nuclear weapons. 

Iran’s illicit nuclear activity is one of the greatest global concerns 

we face, as both the chairman and the ranking member have said. 

Since this administration took office, we have built and led a global 

coalition to create the toughest, most comprehensive set of sanctions to date on the Iranian regime. President Ahmadinejad, himself, recently characterized our sanctions as ‘‘the heaviest economic 

onslaught on a nation in history.’’

Our multilateral phased policy of increasing pressure on Iran has 

been effective. In January 2009, Iran appeared internally united 

and regionally influential, while the international community was 

divided on how to address Iran’s nuclear activities. Today, after 3 

years of increasing international pressure by the Obama administration, the regime is regionally isolated and the international community is united in its determination to prevent a nuclear-armed 

Iran. 

Just 10 days ago, this administration intensified that pressure on 

Iran in three ways: targeting the petrochemical industry, designating 11 more individuals and entities for facilitating Iran’s proliferation activities, bringing the total to over 280 designations 

under Executive Order 13382, and identifying Iran as a jurisdiction 

of primary money laundering concern under section 311 of the U.S. 

PATRIOT Act. 

These new actions augment the broad portfolio of tools already 

provided by the Congress. The list is long. We imposed the first 

sanctions ever under the Iran Sanctions Act, as amended by 

CISADA. Earlier this year, using INKSNA, the State Department 

sanctioned 16 foreign companies in May, including entities in 

China, Venezuela, and Belarus. We are vigilant with our human 

5

rights Executive order and have already sanctioned 11 senior 

Iranian officials and three entities, including the Islamic Revolutionary Guard Corps, and Quds Forces. 

All of these sanctions demand a whole-of-government approach, 

and the State Department works very closely with the Department 

of Treasury. We will elaborate certainly after our opening comments on our work together. 

The key to this and all we have done over the last 3 years is that 

we are not alone in our policy responses and sanctions on Iran. 

Today, the European Union has met to formalize additional sanctions on roughly 180 individuals and entities linked to Iran’s proliferation activities, and as you know, the U.K. closed its Embassy 

in Iran and kicked Iranian diplomats out of the U.K. 

On November 21, when we announced our latest round of measures, the U.K. and Canada concurrently adopted similar sanctions 

to isolate Iran’s financial sector. Three days earlier, on November 

18, the IAEA Board of Governors passed a resolution cosponsored 

by all P5+1 countries, including Russia and China, urging Iran to 

come clean about the possible military dimensions of its nuclear 

program. The final vote was 32 to 2, overwhelming by any standard. On that same day, the United Nations General Assembly sent 

its own message by adopting Saudi Arabia’s resolution condemning 

the assassination plot against its Ambassador to the United States. 

A clear majority supported that resolution, and more than onefourth of all U.N. member states cosponsored it. Sanctions are 

always more effective when they are multilateral, and sanctions on 

Iran are no exception. 

We are already looking forward to what comes next. Iran’s greatest economic resource is clearly its oil exports. Sales of crude oil 

line the regime’s pockets, sustain its human rights abuses, and 

feed its nuclear ambitions like no other sector of the Iranian economy. The Obama administration strongly supports increasing the 

pressure on Iran, and that includes properly designed and welltargeted sanctions against the Central Bank of Iran, appropriately 

timed as part of a carefully phased and sustainable policy toward 

bringing about Iranian compliance with its obligations. 

Beyond the international community’s concerns with Iran’s 

nuclear program, we continue to expose Iran’s egregious human 

rights situation which serves to deepen Iran’s isolation from the 

world community. On November 21, for the 9th year in a row, the 

U.N. General Assembly’s Human Rights Committee rebuked Iran 

for its serious human rights abuses by the largest margin ever. We 

welcome the U.N. Special Rapporteur for Human Rights for Iran 

highlighting the regime’s systematic repression of its citizens’ freedoms. We continue to collaborate with world leaders, religious leaders, and NGOs to address violations of religious freedom. 

Though the door to engagement with the regime remains open, 

if they decide to engage seriously with us to resolve the serious 

concerns we have with its nuclear program, we are clear that we 

distinguish between how we deal with the inexcusable behavior of 

the Iranian regime and our broader interactions with the Iranian 

people. That is why we will be very soon launching Virtual 

Embassy Tehran. This Web site will provide Iranians with accurate 

information about our policy, visa, and U.S. educational opportuniVerDate 0ct 09 2002 14:32 Apr 27, 2012 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\HEARIN~1\112THC~1\2011IS~1\120111~1.TXT BETTY
6

ties. We also engage Iranians through social media, including a 

Farsi Facebook page and a Twitter account, and through our broadcasting tools, Voice of America Persian and Radio Farda. We are 

taking measures to prevent Iran from jamming satellite signals 

and to approve software licenses that facilitate the free flow of information. These actions make clear our sincere desire to engage 

the Iranian people and further expand the internal debates among 

the Iranian leadership. 

This engagement I described with the Iranian people, alongside 

unbending pressure of the Iranian leadership to comply with its 

obligations, forms the core of U.S. policy toward Iran, and I look 

forward to discussing this in greater detail through your questions. 

Thank you. 

[The prepared statement of Ms. Sherman follows:]

PREPARED STATEMENT OF HON. WENDY R. SHERMAN

Chairman Kerry, Ranking Member Lugar, distinguished members of the committee, thank you for inviting me here today to discuss the administration’s approach to the multiple threats posed by Iran—by its nuclear ambitions, its support 

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

rights abuses at home. I am delighted to be joined by Under Secretary David Cohen. 

American policy regarding Iran is clear: First and foremost, we are determined 

to prevent Iran from acquiring nuclear weapons. Iran’s illicit nuclear activity is one 

of the greatest global concerns we face. Since this administration took office, we 

have built and led a global coalition to create the toughest, most comprehensive set 

of sanctions to date on the Iranian regime. President Ahmadinejad himself recently 

characterized our sanctions as ‘‘the heaviest economic onslaught on a nation in 

history.’’

Our policy leverages the power of multilateral action and of likeminded countries 

to pressure Iran to comply with its international obligations, coupled with an offer 

to engage diplomatically in the P5+1 context if Iran is serious about negotiating and 

addressing our and the world’s concerns about its nuclear program. 

Our policy has been effective: in January 2009, Iran appeared internally united 

and regionally influential, while the international community was divided on how 

to address Iran’s nuclear activities. Today, after 3 years of increasing international 

pressure, the regime is regionally isolated, and the international community is 

united in its determination to prevent a nuclear-armed Iran. This reversal is due 

in part to the measures taken by the United States and our allies to exact steep 

costs on Iran and its efforts to acquire nuclear weapons. By refusing our offer

to engage, Iran has demonstrated that it is responsible for our current impasse,

and we have mobilized broad support to hold Tehran accountable for its deceptive 

behavior. 

Just 10 days ago, we intensified the pressure on Iran in three ways: The President signed an Executive order targeting the development of Iran’s petroleum resources and maintenance or expansion of its petrochemical industry. Second, State 

and Treasury designated 11 individuals and entities for facilitating Iran’s proliferation activities, including four entities identified by State as key nodes in Iranian 

missile and nuclear procurement networks. This action brings the total to over 280 

designations under Executive Order 13382. Finally, the administration identified 

Iran as a jurisdiction of primary money laundering concern under section 311 of the 

USA PATRIOT Act. This finding makes clear that doing business with any part of 

the Iranian financial sector, including Iran’s Central Bank, private Iranian banks, 

and subsidiaries operating outside Iran, risks doing business with a financial system 

that shelters money launderers and terrorists. 

These new actions augment the broad portfolio of tools already provided by the 

Congress. Using the new authority provided by the Comprehensive Iran Sanctions, 

Accountability, and Divestment Act of 2010, the Department of State imposed the 

first sanctions ever under the Iran Sanctions Act, as amended, and has designated 

10 firms for investing in Iran’s energy sector or providing refined petroleum to Iran 

since 2010. Under the Iran, North Korea, and Syria Nonproliferation Act (INKSNA), 

the State Department sanctioned 16 foreign companies in May, including entities 

in China, Venezuela, and Belarus. We will continue our vigilance on the regime’s 

serious human rights abuses, and have already sanctioned 11 senior Iranian officials and three entities, including the Islamic Revolutionary Guard Corps, under 

7

Executive Order 13553, which was issued in 2010. All of these sanctions demand 

a whole-of-government approach and the Department of State works closely with 

the Department of the Treasury. My colleague, Under Secretary Cohen, and I can 

elaborate further on our work together. 

The key to this and all we have done over the last 21⁄2 years is that we are

not alone. The same day that we announced our measures, the U.K. and Canada 

adopted similar sanctions to isolate Iran’s financial sector. Today, the European 

Union will meet to formalize additional sanctions on roughly 200 individuals linked 

to Iran’s proliferation activities. On November 18, the International Atomic Energy 

Agency Board of Governors responded to the latest Director General’s report by 

passing a resolution urging Iran to come clean about the possible military dimensions of its nuclear program. The United States rallied the P5+1 members to cosponsor the resolution, which was adopted overwhelmingly and sent the message that 

Tehran’s pursuit of nuclear weapons is unacceptable. On that same day, the U.N. 

General Assembly sent its own message by adopting Saudi Arabia’s resolution condemning the assassination plot against its Ambassador to the United States. Cosponsored by more than a fourth of all U.N. Member States, the resolution condemned attacks against diplomats and called on Iran to comply with its international obligations. As we learned from cases around the world, sanctions are most 

effective when they are multilateral, and that is what we have seen with Iran as 

well. 

All of this is taking place in the context of global transition. Europe is concerned 

about its economic situation and the vision of a united continent. Among the P5+1, 

Russia has parliamentary elections in December and Presidential elections in 

March, with Prime Minister Putin expected to return to the Presidential office. 

France has Presidential elections later in the spring. China is looking inward as it 

manages its own succession politics. Meanwhile, governments in the region continue 

to have grave concerns about Iran’s nuclear intentions: not only Israel, but also 

Saudi Arabia and other Gulf States watch with intensity what Iran does and what 

we do in response. These factors pull in often divergent directions regarding our approach to Iran, but we continue to coordinate robust actions with our partners to 

prevent Iran from acquiring nuclear weapons. 

It is clear that, as a result of the measures we have already taken in lock step 

with the international community, the Iranian regime feels isolated and vulnerable, 

not emboldened. This is true, not just in the case of our European allies but in 

Iran’s own backyard. Iran has failed to co-opt the Arab uprisings, despite its efforts 

to take advantage of them, and alienated itself by supporting Bashar al-Assad’s 

brutal repression of Syrian citizens. While we, the Arab League, Turkey, the EU, 

and others support the legitimate demands of the Syrian people, Iran occupies a 

lonely and indefensible position as Assad’s ally. The burning of Iranian flags in the 

streets confirms that Syrians know Iran is not on their side. We will continue to 

support Syrians’ desire for a government that reflects their aspirations, not Iran’s. 

Once Assad finally does go, Iran will be alone in the region, more isolated than 

ever—a fact that cannot have escaped either regime’s leadership. Iran also hopes 

to project its negative influence into Iraq after our withdrawal. However, Prime 

Minister Maliki said he will not tolerate violence by militant groups, including those 

backed by Iran, and we will continue to work to strengthen Iraqi security forces’ 

capabilities. 

Beyond the international community’s concerns with Iran’s nuclear program, we 

continue to expose Iran’s egregious human rights situation, which serves to deepen 

Iran’s isolation from the world community. On November 21, for the ninth year in 

a row, the U.N. General Assembly’s human rights committee rebuked Iran for its 

serious human rights abuses, by the largest margin ever. We welcome the U.N. 

Special Rapporteur for Human Rights for Iran highlighting the regime’s systematic 

repression of its citizens’ freedoms. We continue to collaborate with world leaders, 

religious groups, and NGOs to address violations of religious freedom. 

We assist those Iranians who want to hold their government accountable by offering training, media access, and exchange programs. We will be opening Virtual 

Embassy Tehran to provide Iranians with accurate information about our policy, 

visas, and U.S. educational opportunities.We also engage Iranians through social 

media, including a Farsi Facebook page and a Twitter account, and through our 

broadcasting tools, Voice of America Persian and Radio Farda. We are taking measures to prevent Iran from jamming satellite signals, and to approve software 

licenses that facilitate the free flow of information. These actions make clear our 

sincere desire to engage the Iranian people and further expand the internal debates 

among the Iranian leadership. 

We share the Congress’ concern about Iranian behavior and we will work with 

you. Working with allies to strengthen implementation of existing sanctions and to 

8

expand sanctions to exploit new regime vulnerabilities, and maintaining P5+1 consensus offers our best way forward to pressure Iran. We want to work with you to 

ensure we have the means and the flexibility to accomplish this while avoiding unforeseen consequences and sustaining the unprecedented multilateral coalition we 

have assembled in opposition to Iran’s nuclear ambitions. Within that framework, 

we welcome your ideas to help us continue to increase the pressure for a change 

in Iranian behavior. 

Thank you, and I look forward to your questions.

The CHAIRMAN. Thank you, Madam Secretary. 

Secretary Cohen. 

STATEMENT OF HON. DAVID S. COHEN, UNDER SECRETARY 

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

Mr. COHEN. Chairman Kerry, Ranking Member Lugar, and distinguished members of the committee, thank you for the opportunity to appear before you today, along with my friend and 

colleague, Under Secretary Sherman, to discuss the Treasury 

Department’s contribution to the Obama administration’s integrated strategy to address the threat posed by Iran’s nuclear activity and its extensive support for terrorism. 

As recent events have made clear, we are at a critical crossroad 

in our effort to bring consequential pressure to bear on Iran. The 

IAEA’s recent stark report about Iran’s nuclear weapons-related 

activities, the foiled plot by the IRGC Quds Force to assassinate 

the Saudi Arabian Ambassador to the United States, and the attack on the British Embassy in Tehran are only the most recent 

reminders of the grave and multifaceted threat we face from Iran. 

It is more important than ever that we work together with the 

international community to increase the financial pressure on Iran, 

including through an effective, well-designed, and well-targeted 

strategy to further isolate the CBI, the Central Bank of Iran, an 

institution that has long been cut off from the United States. 

Before turning specifically to potential action against the CBI, I 

want to take a moment to explain our recent action identifying 

Iran as a primary money laundering concern under section 311 of 

the USA PATRIOT Act. This action builds on the work we have 

been doing for several years to address the full spectrum of Iranian 

illicit conduct, including nuclear and missile proliferation, human 

rights abuses, misuse of the international financial system, and 

support for terrorist groups worldwide. A critical element in these 

efforts has been the imposition of sanctions on approximately two 

dozen Iranian Government-owned banks for facilitating Iranian 

illicit conduct. But the depth and breadth of Iranian financial 

institutions’ involvement in illicit activities extends beyond this 

group of designated banks. 

And so on November 21, we took the virtually unprecedented 

step of identifying the entire Iranian financial sector, including the 

Iranian Central Bank, as posing a risk to the global financial 

system. This action under section 311 also provides new information about the role of Iran’s Central Bank in facilitating illicit conduct and sanctions evasion by supporting Iran’s designated banks. 

By presenting an unambiguous public record of the broad scope

of Iran’s illicit conduct across all of Iran’s financial system, we

are sending a clear message to the world’s banks: any financial 

9

institution that transacts with any Iranian bank, including the 

Central Bank of Iran, runs a grave risk of facilitating Iran’s illicit 

activities. 

The United States is not acting alone. The U.K. and Canada took 

similarly strong actions on November 21 to protect their respective 

financial sectors from the Iranian threat. The result is that Iran is 

now cut off entirely from three of the world’s largest financial sectors. And our efforts are paying off. Iran is now facing unprecedented levels of financial and commercial isolation. The number 

and quality of foreign banks willing to transact with designated 

Iranian financial institutions has dropped precipitously over the 

last year. Iran has been increasingly unable to attract foreign 

investment, especially in its oil fields, leading to a projected loss of 

$14 billion a year in oil revenues through 2016. 

Iran’s economy today is struggling more than at any time since 

the 1979 revolution. One powerful illustration of this is found in 

the chart appended to my written testimony which shows the 

steady erosion in the market value of the rial, an erosion that 

Iran’s Central Bank has been unable to halt. Recently President 

Ahmadinejad was forced to admit the impact of sanctions. Observing that the West imposed the most extensive sanctions ever, he 

lamented that, ‘‘every day our banking and trade activities and our 

agreements are being monitored and blocked.’’

While the impact of our efforts has never been clearer, we are 

resolved to build and sustain as much pressure as necessary to 

bring Iran to meet its international obligations. To that end, we are 

keenly focused on applying additional pressure on the Central 

Bank of Iran. We welcomed French President Sarkozy’s call last 

week for a multilateral asset freeze on the CBI, as we recognize 

that coordinated and focused action against the CBI could have a 

particularly powerful impact on Iran’s access to the international 

financial system and its ability to access the hard currency it earns 

from oil sales. And we welcome the opportunity to continue to work 

with Congress on a workable and effective approach to targeting 

the CBI. 

We share the same goal. We must act in a way that has the 

greatest impact on Iran’s bottom line. As we have learned from our 

sanctions efforts to date, the key to achieving this goal is to bring 

together an international coalition to work in concert to reduce 

exposure to the CBI and to Iranian oil exports. Now more than 

ever, it is imperative that we act in a way that does not threaten 

to fracture the international coalition of nations committed to the 

dual track approach, does not inadvertently redound to Iran’s economic benefit, and brings serious and lasting pressure to bear on 

Iran, including through coordinated action on the CBI. 

Finally, it is important to remember that acting against the CBI 

is not the only avenue available to us to bring pressure to bear on 

Iran. We have at our disposal a number of tools, including 

CISADA, to enhance the financial and economic pressure on Iran, 

and we are eager to work with Congress to develop new tools to 

apply additional pressure. Put simply, if Iran continues to choose 

its path of defiance, we will continue to develop new and innovative 

ways to impose new and ever-more costly sanctions on Iran. 

10

I look forward to continuing to work with the Congress on this 

vitally important national security issue. Thank you. 

[The prepared statement of Mr. Cohen follows:]

PREPARED STATEMENT OF HON. DAVID S. COHEN

INTRODUCTION

Chairman Kerry, Ranking Member Lugar, and distinguished members of the committee, thank you for the opportunity to appear before you today, along with my 

friend and colleague Under Secretary Sherman, to discuss the Department of the 

Treasury’s contribution to the Obama administration’s integrated strategy to 

address the threat posed by Iran’s nuclear activities and its extensive support for 

terrorism. 

I will focus my remarks today on our Iran sanctions strategy, with particular 

emphasis on the Treasury Department’s most recent action to expose the extensive 

illicit finance threat that the entire Iranian financial sector—including Iran’s Central Bank—poses to the international financial system. I will also discuss the impact 

that our implementation of the Comprehensive Iran Sanctions, Accountability, and 

Divestment Act of 2010 (CISADA) and other financial sanctions are having on Iran, 

as well as our plans to increase the cost of Iran’s intransigence until Iran agrees 

to curtail its pursuit of nuclear weapons. As I will explain, we are at a critical crossroad today in our effort to bring consequential pressure to bear on Iran. The options 

that we are now considering, including additional sanctions against the CBI, require 

that we work together to ensure that we deliver strong and well-targeted pressure 

on Iran. 

IRAN SANCTIONS STRATEGY

The Treasury Department’s increasingly powerful and disruptive sanctions are 

embedded in the dual-track strategy that the United States and our allies are pursuing to address Iran’s continued failure to meet its international obligations regarding its nuclear program. As Under Secretary Sherman describes in her testimony, the Obama administration has presented Iran with a genuine opportunity for 

dialogue, creating a clear choice for Tehran. Iran’s leadership can choose to meet 

Iran’s international obligations, allowing Iran to deepen its economic and political 

integration with the world and achieve greater security and prosperity for the Iranian people. Or, Tehran can continue to flout its responsibilities and face even 

greater pressure and isolation. Unfortunately, Iran has steadfastly refused to respond meaningfully to the administration’s offer of engagement and has continued 

to pursue technologies and equipment that could only be applied to a nuclear weapons program. Just last month, the International Atomic Energy Agency (IAEA) 

issued a stark report laying out in detail Iran’s past and present nuclear weaponsrelated activities. Shortly thereafter, the IAEA’s Board of Governors adopted a resolution expressing its ‘‘deep and increasing concern’’ about unresolved questions regarding Iran’s nuclear program, including its possible military dimensions. 

Our broad-based pressure strategy is aimed at persuading Iran to change its 

course and to make clear to Iran the consequences of its continued intransigent behavior. Among the most important elements of this strategy are targeted financial 

measures designed to disrupt Iran’s illicit activity and to protect the international 

financial system from Iran’s abuse. We have focused our efforts on exposing Iranian 

entities’ illicit and deceptive activities, an approach that has garnered support 

among foreign governments and led them to take similar actions, enhancing substantially the impact of our actions. Because these actions have highlighted the 

pervasive nature of Iran’s illicit and deceptive conduct and the reputational risks 

associated with Iran-related business, the private sector around the world has taken 

notice and has often taken voluntary steps beyond their strict legal obligations, further amplifying government actions. 

Our ability to implement this pressure strategy was strengthened considerably 

last year when President Obama signed CISADA into law. CISADA has helped us 

make the case to foreign governments and foreign financial institutions that neither 

the Islamic Revolutionary Guard Corps (IRGC) nor Iranian banks designated for 

their involvement in support for proliferation and terrorism should be allowed to 

have access to the international financial system. The results have been dramatic: 

our implementation of CISADA has resulted in a massive disruption of designated 

Iranian banks’ access to the international financial system, impeding their ability 

to facilitate Iran’s illicit activities and creating unprecedented financial and commercial isolation for Iran. 

11

IMPLEMENTING THE PRESSURE STRATEGY

In implementing the pressure strategy, Treasury has focused on developing sanctions actions that expose the Iranian Government’s involvement in a broad range 

of illicit conduct, including nuclear and missile proliferation, support for terrorism, 

human rights abuses, and deceptive financial conduct and evasion of international 

sanctions. Our actions in recent months illustrate that such illicit conduct is indeed 

pervasive in multiple Iranian Government sectors—including Iran’s Governmentowned banks, its government-operated transportation infrastructure, and the IRGC, 

a branch of Iran’s military. Examples of recent actions targeting Iranian illicit conduct include:

• Abuse of the Global Financial System. Treasury actions targeting Iranian banks 

are intended to prevent those banks from using the international financial system to facilitate Iran’s proliferation activity or terrorism support, or from assisting other banks or entities in evading U.S. or international sanctions. We continued these efforts in May by designating Iran’s Bank of Industry and Mine 

(BIM) under E.O. 13382 for providing financial services for other designated 

Iranian banks. BIM is the 22nd Iranian-state owned financial institution to be 

designated by Treasury in the last 5 years. • Use of Transportation Infrastructure to Facilitate Illicit Conduct. Our actions 

against key elements of Iran’s transportation infrastructure are aimed at impeding Iran’s use of ships, airlines, and ports for its proliferation-related or terrorism support activities. This year, we designated Tidewater Middle East Co. 

(Tidewater), an IRGC-owned port operating company that manages the main 

container terminal at Bandar Abbas and has operations at six other Iranian 

ports. We imposed sanctions against Iran Air, the Iranian national airline carrier and its largest airline, because it has been used by the IRGC and Iran’s 

Ministry of Defense for Armed Forces Logistics (MODAFL) to transport military-related equipment. We also designated the second-largest airline in Iran, 

Iranian commercial airline Mahan Air, for providing financial, material, and 

technological support to the IRGC-Qods Force. We sanctioned 46 companies and 

individuals affiliated with Iran’s national maritime carrier, the Islamic Republic 

of Iran Shipping Lines, which is subject to U.S. and international sanctions, and 

three individuals who each play a key role in aiding IRISL’s sanctions evasion 

activities worldwide. • Human Rights Abuses. As the Iranian regime’s abuse of its citizens’ human 

rights has continued, Treasury, working with State, has imposed sanctions 

against 11 senior Iranian officials and three Iranian entities—the IRGC, the 

Basij Resistance Force, and Iran’s Law Enforcement Forces (LEF)—including 

the IRGC’s commander, the LEF chief, and Iran’s Intelligence Minister. Under 

an authority that targets those responsible for or complicit in human rights 

abuses in Syria, Treasury designated the LEF for supporting the Syrian General Intelligence Directorate in its brutal suppression of the Syrian people. 

Treasury also designated LEF’s Chief and Deputy Chief, and two senior IRGCQods Force officers, including IRGC–QF Commander Qasem Soleimani for supporting the brutal suppression of the Syrian people orchestrated by the Syrian 

General Intelligence Directorate. • Support for Terrorism. We designated six members of an al-Qaeda facilitation 

network operating in Iran under an agreement with the Iranian Government, 

thereby degrading this network’s ability to function while exposing Iran’s continued support for terrorism worldwide. Treasury also sanctioned five individuals, including four senior IRGC–QF officers—among them the previously designated IRGC–QF Commander Soleimani—connected to a plot to assassinate 

the Saudi Arabian Ambassador to the United States, Adel al-Jubeir and carry 

out follow-on attacks against other countries’ interests inside the United States 

and in another country. • Proliferation-related Activities: On November 21, the State Department and 

Treasury designated 10 entities and one individual for their links to the Atomic 

Energy Organization of Iran (AEOI), the main Iranian organization responsible 

for research and development activities in the field of nuclear technology, including Iran’s centrifuge enrichment program and experimental laser enrichment of uranium program. 

EXPOSING THE IRANIAN FINANCIAL SECTOR AS AN ILLICIT FINANCE RISK

The depth and breadth of Iranian financial institutions’ illicit activities—from 

direct support for proliferation transactions, to assisting known proliferators’ sanctions evasion efforts, to operating without appropriate regulatory controls—means 

that any financial institution that transacts with any Iranian bank runs a grave 

12

risk of facilitating Iran’s illicit activities. Recognizing this pervasive risk to the U.S. 

and international financial systems, Treasury took regulatory action on November 

21 to identify the entire Iranian financial sector—including not only already designated banks and their branches operating outside of Iran, but also nondesignated 

banks, their foreign affiliates, and the Central Bank of Iran (CBI)—for posing an 

illicit finance risk to the global financial system. We did so by identifying Iran as 

a jurisdiction of ‘‘primary money laundering concern’’ pursuant to section 311 of the 

USA PATRIOT Act. 

The term ‘‘primary money laundering concern’’ covers multiple forms of illicit 

finance of greatest concern, such as terrorist financing and WMD proliferation 

financing. Indeed, the section 311 finding against Iran sets out an unambiguous 

public record of the broad scope of Iran’s illicit conduct. In particular, the finding 

describes Iran’s activities as a state sponsor of terrorism, its longstanding provision 

of financing and support to Hezbollah, Hamas, and other terrorist organizations, 

and more recent Iranian cooperation with al-Qaeda. The finding explains the role 

that the IRGC and the IRGC-Qods Force, in particular, play in facilitating Iran’s 

support for terrorism. The Qods Force involvement in terrorism support has been 

highlighted most recently in the public allegations that the Qods Force was involved 

in an Iranian plot to assassinate the Saudi Ambassador to the United States. The 

finding also explains Iran’s use of its banks, such as Bank Saderat, to provide 

terrorist financing, and describes its lack of sufficient laws to combat terrorist 

financing. 

In addition, the finding makes a full case with respect to Iranian financial sector 

involvement in the financing of WMD proliferation, providing a detailed accounting 

of the many banks in Iran that engage in such activity. The finding explains the 

deceptive financial practices that Iranian banks use to disguise illicit conduct, and 

explains the role that exchange houses and front companies play in this deception, 

and Iran’s involvement in the stripping of identifying information off of international wire transfers, putting the foreign banks that handle such transfers at risk 

for involvement in illicit conduct. 

The section 311 finding also provides new information about the role of Iran’s 

Central Bank in facilitating illicit conduct and sanctions evasion. Since section 311 

was enacted in 2001, Treasury has applied it on a few occasions to other jurisdictions that pose substantial money laundering threats. But in each prior instance 

where special measures were proposed, Treasury explicitly exempted central banks 

from the reach of the so-called ‘‘jurisdiction 311’’ in order to allow the central bank 

to perform those duties that central banks customarily execute. 

Not so this time, and for good reason. Iran presents a unique case. As the November 21 finding explains, the Central Bank of Iran is actively facilitating the evasion 

of international sanctions by supporting Iran’s designated banks. For example, the 

CBI assisted designated Iranian banks, including Bank Saderat, Bank Mellat, the 

Export Development Bank of Iran, and Bank Melli, by transferring billions of 

dollars to them through a variety of payment schemes designed to deceive large 

international banks and take advantage of smaller, perhaps less sophisticated 

intermediaries. Similarly, the CBI also provided financial support directly to the 

U.S.-, EU-, and UNSC-designated engineering arm of the IRGC, Khatam al-Anbiya, 

which has been involved in Iran’s proliferation activities and has been recruited to 

develop Iran’s key energy resources. 

This regulatory action reinforces U.S. and international sanctions already in place 

against Iran and provides greater certainty that the U.S. financial system is protected from Iranian illicit activity. While U.S. financial institutions already are generally prohibited from engaging in both direct and indirect transfers with Iranian 

financial institutions, Treasury’s Financial Crimes Enforcement Network (FinCEN) 

issued a proposed rule alongside the 311 finding that would require U.S. financial 

institutions to implement additional due diligence measures in order to prevent any 

improper indirect access by Iranian banking institutions to U.S. correspondent accounts. Although the section 311 action will have a regulatory impact for U.S. 

banks, we also expect that it will have a broader chilling effect on foreign banks’ 

willingness to do business with Iran, given the risks that are detailed in the finding. 

The U.S. is by no means alone in its assessment of the risks posed by the Iranian 

financial system. The U.K. and Canada also took similar strong actions on November 21 to protect their respective financial sectors from the Iranian threat. Highlighting that ‘‘the Iranian regime’s actions pose a significant threat to the U.K.’s national security and the international community,’’ the U.K. announced that it had 

imposed new financial restrictions against Iran by cutting off Iran’s banking sector 

from access to the U.K. All U.K. credit and financial institutions are now generally 

required to cease business relationships and transactions with all Iranian banks, including the Central Bank of Iran, and their branches and subsidiaries. For its part, 

13

1 ‘‘Heads of Three Government Branches Recount Positions on Bank Corruption Case,’’ Tehran 

Donya-ye Eqtesad Online, November 9, 2011. 

Canada imposed new restrictions under its Special Economic Measures Act in response to the IAEA’s report, prohibiting financial transactions with Iran, sanctioning additional individuals and entities, and expanding the list of prohibited 

goods. 

U.S., U.K. and Canadian concerns about the risks posed by the Iranian financial 

system are only further reinforced by recent reports of a massive embezzlement 

scandal in Iran. The Government of Iran has accused a network of Iranian stateowned and private banks of forging documents and issuing fictitious and fraudulent 

loans with an estimated value of approximately $2.6 billion to politically connected 

individuals for the purchase of stakes in state-owned companies. The scandal has 

thrown into sharp relief the Iranian Government’s abiding weakness in the supervision of its financial sector and echoes the extensive fraud and corruption that exists in many sectors of the Iranian economy. While the regime has tried to distance 

itself from the scandal as much as possible, the Minister of Economy and Finance, 

Shamseddin Hosseini, who narrowly survived an impeachment vote by the Iranian 

Parliament, has publicly conceded that ‘‘we need to have a multilevel oversight system so institutions can control the loans they disburse,’’ acknowledging that had 

such safeguards been in place, ‘‘such a huge fraud could not have happened in the 

banking system.’’ 1 The scandal, implicating the highest levels of the Iranian Government, including the Deputy Governor of the CBI, reinforces persistent doubts 

about the integrity of Iran’s financial sector. 

THE IMPACT OF SANCTIONS ON IRAN’S FINANCIAL SECTOR

During testimony before the Senate Banking Committee in October, I reported 

that Iran’s financial isolation, and the economic impact of that isolation, have continued to grow. Today, I can report that the trend continues to accelerate. 

Due to a combination of factors—including UNSCR 1929, financial sanctions imposed by the U.S., EU, and other like-minded countries, and foreign banks’ interest 

in avoiding CISADA actions or the reputational risk of doing business with Iran—

the number and quality of foreign banks willing to transact with designated Iranian 

financial institutions has dropped precipitously over the last year. Today, Iran’s 

largest state-owned banks—each of which has been sanctioned by the U.S., the EU, 

and several of our allies—are largely unable to access the international financial 

system. Iran’s shrinking access to financial services and trade finance has made it 

more difficult for Iran to attract foreign investment, pay for imports, and receive 

payment for exports. This has exacerbated persistent macroeconomic weakness due 

to the Iranian Government’s mismanagement of its economy. 

One good illustration of the economic pressure resulting from this financial 

squeeze is Iran’s recent difficulty in defending the value of its currency, the rial. 

For nearly a decade, the CBI has supported a single, official exchange rate for the 

rial, using hard currency earned through oil sales to stabilize it. Since the adoption 

of UNSCR 1929 and various U.N. member states’ actions to implement the resolution, however, the CBI has struggled to maintain stability in Iran’s currency markets. Sanctions have increased the cost and difficulty of accessing adequate foreign 

exchange, weakening the CBI’s ability to respond adequately to pressures in currency markets, particularly as accelerating inflation has exerted unusual pressure 

on the rial exchange rate. This has produced a multiple-tier currency market in 

Iran—including an official exchange rate and an even more expensive market rate. 

In September 2010, the spread between the official and the market exchange rate 

widened dramatically. While the rial made a moderate recovery during the fall of 

2010, it rapidly began to lose value again in January 2011. To close this gap, the 

CBI devaluated the rial by 11 percent in June 2011. The CBI’s policy response, however, failed to stabilize the market, and the rial plunged in value against the dollar 

and the euro over the past several weeks. 

Today, the spread between the official and open market rates hovers above 20 

percent, one of the highest levels in recent history, fueling serious inflation, high 

unemployment, and domestic discontent. (A chart depicting the increasing spread 

between the official and market rate is appended to my testimony.) Because of the 

rial’s decline in value, ordinary Iranians are urgently seeking out foreign currency, 

such as dollars or Euros, for safety, yet they are having trouble accessing hard currency, and when they can, they have to pay the unofficial market rate. At the same 

time, senior government officials and preferred businesses, including IRGC-owned 

and controlled operations, are able to access foreign exchange at the official rate, 

essentially engaging in profitable arbitrage on the back of the average Iranian. CenVerDate 0ct 09 2002 14:32 Apr 27, 2012 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 S:\HEARIN~1\112THC~1\2011IS~1\120111~1.TXT BETTY
14

2 ‘‘Heads of Three Government Branches Recount Positions on Bank Corruption Case,’’ Tehran 

Donya-ye Eqtesad Online, November 9, 2011. 3 ‘‘Ahmadinejad Stresses System Unity at Minister’s Impeachment Hearing,’’ Tehran Voice of 

the Islamic Republic of Iran, November 1, 2011. 

tral Bank Governor Bahmani has conceded that the CBI has limited ability to 

respond to volatility in currency markets and blamed U.S. and international sanctions, noting that ‘‘Iran is now facing international restrictions and this has to be 

taken into consideration.’’ 2 Iran’s ability to respond to macroeconomic challenges 

will continue to be hampered by sanctions, at great cost to Iran’s long-term economic growth. 

There is little doubt that our sanctions strategy has markedly reduced Iran’s access to the international financial system and, consequently, has contributed to a 

noticeable weakening of the Iranian economy. In a recent speech to the Iranian Parliament, President Ahmadinejad finally admitted the strong impact that sanctions 

are having on Iran’s economy. He noted that ‘‘the West imposed the most extensive 

. . . sanctions ever’’ and that ‘‘this is the heaviest economic onslaught on a nation 

in history.’’ He went on to acknowledge that ‘‘every day, all our banking and trade 

activities and our agreements are being monitored and blocked.’’ 3 This significant 

admission is a clear sign that U.S. and international sanctions are having a strong 

impact on the Iranian economy and the Iranian regime. 

THE CONTINUING THREAT AND THE WAY FORWARD

In light of the mounting evidence of the impact of sanctions, and in light of Iran’s 

continued refusal to engage meaningfully and substantively with the international 

community, we are committed to applying greater financial and economic pressure 

on Iran. Let me be clear: We are firmly devoted to significantly intensifying the 

pressure on Iran, and doing so in a way that delivers swift, focused and powerful 

pressure on the Iranian leadership to further sharpen their choice between isolation 

and engagement. 

As we explore opportunities to increase pressure on Iran, we are keenly focused—

as is the Congress—on applying additional sanctions on the Central Bank of Iran. 

So we welcome French President Sarkozy’s suggestion last week for a multilateral 

asset freeze on the CBI, as we recognize that coordinated and focused action against 

the CBI could have a particularly powerful impact on Iran’s access to the international financial system and its ability to access the hard currency it earns from 

oil sales. And we welcome the opportunity to continue to work with Congress on an 

effective, well-designed and well-targeted sanction against the CBI. As we prepare 

these steps, it is imperative that we act in a way that does not threaten to fracture 

the international coalition of nations committed to the dual-track approach, does not 

inadvertently redound to Iran’s economic benefit, and brings real and meaningful 

pressure to bear on Iran. 

It is also important to remember that delivering potent pressure on Iran is not 

wholly dependent on how we address the Central Bank. Put simply, a designation 

of the CBI is not the only step, nor would it be the last step, available to bring consequential pressure to bear on Iran. For example, as more and more countries and 

foreign banks refuse to deal with designated Iranian banks, we remain keenly 

focused on the possibility that nondesignated Iranian financial institutions may become involved in proliferation activity or terrorist financing. When we see Iranian 

banks stepping in to pick up business for designated banks, or beginning to process 

proliferation transactions, we will swiftly impose new sanctions, as was the case recently with Bank of Industry and Mine. 

We will continue our intensive efforts to implement CISADA, which, as I noted, 

have been enormously successful in driving down to almost nil the international activity of designated Iranian banks. As we learn of activities that may trigger 

CISADA sanctions, we will continue to either obtain immediate resolution or impose 

CISADA sanctions. 

We will stay ahead of efforts by Iran to develop workarounds to its financial isolation. This means working with our partners around the world to identify the ways—

both overt and deceptive—in which Iran seeks to establish new financial footholds, 

and take action to stop them. 

We will relentlessly pursue IRISL ships, front companies, agents and managers, 

exposing and sanctioning them, and driving IRISL out of operation. And, as evidenced by the Tidewater designation in June, we will aggressively expose the 

IRGC’s expanding role in the Iranian economy and work with our partners in 

Europe and elsewhere to apply sanctions on IRGCcontrolled companies. 

15

CONCLUSION

Although we are making progress to identify Iran’s illicit behavior and pressure 

Iran to comply with its international obligations, there is, of course, significant work 

still before us. The recent IAEA report, which exposes Iran’s activities relevant to 

the development of a nuclear explosive device, coupled with the recently exposed 

plot by which Iran’s IRGC–QF planned to assassinate the Saudi Ambassador to the 

United States, only underscores the importance of not only maintaining, but qualitatively enhancing, the pressure on Iran. 

As Secretary Geithner has said, ‘‘the policies that Iran is pursuing are unacceptable—and until Iran’s leadership agrees to abandon this dangerous course, we will 

continue to use tough and innovative means to impose severe economic and financial 

consequences on Iran’s leadership.’’ We want to work with Congress to broaden and 

strengthen CISADA and other Treasury authorities and to take careful, focused 

steps to address the illicit conduct of the CBI. 

I look forward to continuing our work with this committee as Treasury continues 

to pursue this enormously important strategic objective.

The CHAIRMAN. Thank you very much, Mr. Secretary. 

Let me begin by asking you, if I may. I know you are both aware, 

obviously, of the Menendez-Kirk amendment to the defense authorization bill on the floor now. And this would seek to impose sanctions against entities, including other central banks, that trade 

with the Central Bank of Iran. I know what your position is, and 

I have a letter here from Secretary Geithner to Chairman Levin 

expressing the opposition of the administration, but I think it 

would be helpful to the members of the committee if you could discuss in some detail what the problems are with that amendment 

and how it does or does not supplement what you are trying to do 

and why you think there is a better approach, if you do. 

Mr. COHEN. Yes, Mr. Chairman. Why do I not begin addressing 

that question? 

I think at the outset it is important to emphasize that we 

completely share the goal that animates the Kirk-Menendez 

amendment and are completely committed to delivering real and 


cohen.eps
16

sustained pressure on Iran to bring them to understand the choice 

that is before them. 

The concern that we have with this amendment is that we think 

it risks two things that we want to avoid. One is it risks fracturing 

the international coalition that has been built up over the last several years to bring pressure to bear on Iran. Especially today in the 

aftermath of what has occurred in Tehran over the last several 

days, in the aftermath of the IAEA report, and in the growing 

sense of urgency internationally with respect to Iran’s nuclear program, I think we have an opportunity work cooperatively and collaboratively with our international partners to bring additional 

pressure to bear on Iran. 

The amendment, however, would focus the most powerful sanction that we have: the termination of access to the United States 

on the largest financial institutions and the central banks in some 

of our closest partners. And I think it is our sense that we are more 

likely to achieve the cooperation and the coordinated action to 

bring pressure to bear on the CBI and on Iran more broadly if we 

approach this issue through an effort to coordinate action voluntarily against the CBI and against Iran rather than through the 

threat of coercion that is contained in the amendment. 

The CHAIRMAN. Can you just flesh out a little bit sort of why that 

is so threatening perhaps to some of our friends? What does it wind 

up doing to them? 

Mr. COHEN. Yes. The way this amendment would operate, Mr. 

Chairman, is that it would say to foreign financial institutions—

and in this instance we are talking about the largest financial institutions in our closest partners, as well as central banks in our 

closest partners. It would say to them that if they continue to process oil transactions with the Central Bank of Iran, their access to 

the United States can be terminated. It is a very, very powerful 

threat. It is a threat to the commercial banks to essentially end 

their ability to transact in the dollar and their ability really to 

function as major international financial institutions. That threat 

being focused on our closest allies, as I said, risks a dynamic with 

those governments and with these banks that I think is as likely 

to push them away and to impede the ability to bring together a 

coordinated effort against Iran as to generate that. 

The CHAIRMAN. Well, I suppose a proponent of it might say, well, 

that is because they are not serious about putting pressure on Iran. 

Mr. COHEN. Mr. Chairman, I think what we have seen is just the 

opposite. I mean, we are talking about countries like Japan, countries like South Korea, many of our partners in Europe. These 

countries, over the last several years, have demonstrated a willingness to work us, to work with us very closely to bring real and sustained pressure on Iran. And I think we are seeing in the EU just 

today, as Under Secretary Sherman noted, additional steps being 

taken to bring pressure to bear on Iran. And it is our judgment 

that the best way to proceed is to continue to work with our partners to develop the means and the mechanisms to bring that pressure to bear, including pressure directly on the Central Bank of 

Iran and on Iran’s ability to sell its oil and to earn revenue from 

its oil sales. 

17

I think the way to accomplish that is, in part, to pursue the suggestion of President Sarkozy to bring multilateral freeze on the 

CBI’s assets and as well to work with our partners who have 

already shown a willingness to consider reducing their imports of 

Iranian oil and to do that in an orderly and coordinated fashion. 

That, we think, is better calculated to achieve the ultimate objective here which is to reduce Iran’s access to the very important 

source of revenue for its economy, its oil revenue. 

The CHAIRMAN. So what you are really saying is this is a very 

blunt instrument which risks adverse reaction as opposed to a calculated, carefully orchestrated effort that is currently underway to 

actually accomplish the very same end. Is that correct? 

Mr. COHEN. I think that is exactly right. 

The CHAIRMAN. Secretary Sherman, I think you wanted to add 

to that. You might add also how perhaps even this amendment, 

which we all understand its motivation is legitimate and we all 

agree with, may have the unintended consequence, I believe, of 

even enriching Iran and providing money for the very program that 

we want to stop. Is that not accurate? 

Ms. SHERMAN. Right, absolutely. In fact, that is where I was 

going to start, Mr. Chairman, which is the irony of this amendment—and as you say, we all agree with the impulse, the sentient, 

the objective, which is to really go at the jugular of Iran’s economy. 

Indeed, analysis that we have done—although there are many analytics to this and no one knows for sure, but there is absolutely a 

risk that, in fact, the price of oil would go up, which would mean 

that Iran would, in fact, have more money to fuel its nuclear ambitions, not less. 

And our real objective here is to cut off the economic means that 

Iran has for its nuclear program, and in fact, the sanctions that 

have been imposed, the toughest regime ever in the history of our 

country and in the world, quite frankly, has meant that it is not 

only—those sanctions not only act as a deterrence, but probably 

more importantly in the short run, they act as a way to slow Iran’s 

progress so that it is harder for Iran to finance its program. It is 

harder for Iran to get the technology it needs, and indeed, in a 

speech that National Security Advisor Tom Donilon just gave a few 

days ago, he noted in 2007 the head of Iran’s atomic energy organization boasted that Iran would have 50,000 centrifuges installed 

within 4 years. We are now nearing the end of 2011, and the IAEA 

reports that Iran has installed 8,000 centrifuges with perhaps 

6,000 operating. So Iran’s ambition to really be much further in its 

nuclear program has been undermined by the sanctions that have 

been imposed in a multilateral fashion in a targeted and careful 

way. 

As you mentioned, Mr. Chairman, I have had the honor of being 

in this position now for 2 months. In those 2 months, I have met 

with every political director of the P5+1. I have been to Russia, 

China, Tokyo, Seoul, Brussels, and a variety of other places. In 

every one of those meetings, the first priority is Iran, and the 

response has been amazing. Every day people are willing to take 

another action, and the multilateral phased approach that the 

Under Secretary so well articulated, is crucial to maintaining that 

18

multilateral framework. And we know that sanctions are the most 

powerful when they are multilateralized. 

The CHAIRMAN. Well, thank you, Madam Secretary. 

I am going to place this letter from Secretary Geithner to Chairman Levin written today or dated today into the record. 

[The letter referred to follows:]

SECRETARY OF THE TREASURY, 

DEPARTMENT OF THE TREASURY, 

Washington, DC, December 1, 2011. 

Hon. CARL LEVIN, 

Chairman, Committee on Armed Services, 

U.S. Senate, Washington, DC. 

DEAR CHAIRMAN LEVIN: I am writing to address amendment 1414 to S. 1867, the 

National Defense Authorization Act for Fiscal Year 2012, regarding the imposition 

of sanctions on foreign financial institutions that conduct business with the Central 

Bank of Iran (CBI). 

The Obama Administration’s determination to prevent Iran from acquiring nuclear weapons is unwavering. We are resolved to build and sustain as much pressure as necessary to bring Iran to meet its international obligations and address the 

international community’s grave concerns with its nuclear program. I know that you 

and your colleagues in the Senate share this commitment. 

We understand that this amendment was offered in this spirit. However, I am 

writing to express the Administration’s strong opposition to this amendment because, in its current form, it threatens to undermine the effective, carefully phased, 

and sustainable approach we have undertaken to build strong international pressure against Iran. In addition, the amendment would potentially yield a net economic benefit to the Iranian regime. 

We have steadily increased the pressure on Iran by tightening sanctions, closing 

loopholes, and encouraging other countries to do the same. Congress has been absolutely critical in providing some of the tools that we have used to accomplish that 

goal, and we are seeing genuine results. The collaborative approach the U.S. has 

taken with our international partners has led many to impose sanctions on Iran 

that were not even contemplated three years ago, including on Iran’s energy sector. 

Iran’s greatest economic resource is its oil exports. Sales of crude oil line the regime’s pockets, sustain its human rights abuses, and feed its nuclear ambitions like 

no other sector of the Iranian economy. We are committed to doing as much as possible to reduce Iran’s oil revenue while concurrently working to stabilize global oil 

markets. Today, the United States does not permit the import of Iranian crude. 

Other countries have already begun to reduce their consumption of Iranian crude 

and the Administration is working hard to discourage anyone from taking advantage of the responsible policies of these countries. Our closest allies are seriously 

considering curtailing their own crude purchases altogether in the near future and 

we are doing everything possible to encourage them to make the right decision. 

However, as currently conceived, this amendment threatens severe sanctions 

against any commercial bank or central bank if they engage in certain transactions 

with the CBI. This could negatively affect many of our closest allies and largest 

trading partners. Rather than motivating these countries to join us in increasing 

pressure on Iran, they are more likely to resent our actions and resist following our 

lead—a consequence that would serve the Iranians more than it harms them. Further, there is a substantial likelihood that this amendment, particularly if passed 

into law at this time and in its current form, could have the opposite effect from 

what is intended and increase the Iranian regime’s revenue, literally fueling their 

suspect nuclear ambitions. The Administration is prepared at your convenience to 

share the details of our analysis on this point, in a classified briefing. 

The Obama Administration strongly supports increasing the pressure on Iran significantly, including through properly designed and well-targeted sanctions against 

the CBI. The Administration has several legislative proposals to both enhance and 

expand the Comprehensive Iran Sanctions, Accountability, and Divestment Act 

(CISADA) and to strike at the CBI that we would like to discuss with you and your 

colleagues. We intend to work with our partners to achieve the objectives of this 

amendment, but in a fashion that we believe will have a greater and more sustainable impact on Iran. We ask that you continue to work with us on ways to improve 

this amendment and to consider other, more immediate and more effective steps 

19

that we can take to accomplish our shared goals while we work with our partners 

to bring about the effects this amendment is intended to achieve. 

Sincerely, 

TIMOTHY F. GEITHNER.

The CHAIRMAN. And I would just call the attention of our colleagues to the most relevant paragraphs in which the Secretary 

says, ‘‘as currently conceived, this amendment threatens severe 

sanctions against any commercial bank or central entity if they engage in certain transactions. Rather than motivating these countries to join us in increasing pressure on Iran, they are more likely 

to resent our actions and resist following our lead, a consequence 

that would serve the Iranians more than it harms them. Further, 

there is a substantial likelihood that this amendment, particularly 

if passed into law at this time and in its current form, could have 

the opposite effect from what is intended and increase the Iranian 

regime’s revenue, literally fueling their suspect nuclear ambitions.’’

And then it goes on to describe that it does have an approach expanding Iran’s actions and actually focusing on the CBI working 

with our partners to achieve the objectives of the amendment, but 

in a fashion that, to quote the Secretary, ‘‘we believe will have a 

greater and more sustainable impact on Iran.’’

So I think it is important for members to take note of this as we 

think about what will occur potentially on the floor. 

Senator Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. 

It seems to me that in thinking through the action with regard 

to Iran, we have not mentioned what frequently is in the press. 

That is the thought that Israel might, in fact, decide to attack Iran 

and simply attempt to take out elements of the regime’s nuclear 

program. On several occasions, the United States has given the advice that this would be particularly difficult to do in light of reports 

that most of Iran’s nuclear infrastructure is underground or otherwise difficult to reach. Nevertheless, this matter continues to be 

argued in Israeli politics and cannot be ignored. 

Some would say that if the infrastructure is indeed difficult to 

destroy, it would be preferable for the United States to prosecute 

the attack because we are likely to be more efficient and more 

effective. 

What we are really talking about here is that because of the 

nuclear threat and this particular kind of regime, the potential for 

war, the potential for actual physical attack and retaliation by the 

Iranians is very sizable. As you have made clear, this is not merely 

an academic exercise. 

Let me be very serious about this. We had a very good lecture 

this morning by Karim Sadjapour from the Carnegie Endowment 

for International Peace. You are no doubt familiar with him as he 

is a regular lecturer on these affairs. His focus, first of all, was on 

the Voice of America and its activities in Iran. Now, I would say 

Karim was critical of the Voice of America’s activities, not in the 

sense that we are not spending money, but rather that the effectiveness of our programming is being hampered by a bureaucracy 

that he believes is rendering VOA less effective than it should be. 

I am not a critic of the program. I would just say we believe that 

it should operate as effectively as possible. This imperative is made 

20

clear when one considers that at least two-thirds of the Iranian 

population is below 30 years of age. The potential for improvement 

of our programs is there as, according to some analysts, the British 

programs are drawing a better audience than ours. Thus, I would 

just ask you to take a strong look at these programs because they 

are still an avenue to at least two-thirds of the population. 

On the sanctions business, it would appear to me that although 

there are risks in alienating our allies and others, the Central 

Bank focus really is a deadly problem for Iran if executed 

completely. 

In addition, we ought to thoroughly think through the possibility 

of decreasing Iran’s oil exports. Now, at this point, the Chinese, 

who were thoroughly uncooperative with regard to the banking 

sanctions and would be outraged if their oil imports from Iran were 

disrupted, are a real factor. But they are not taking this very seriously now anyway. Given that we are going to have to either contend with diplomacy with the Chinese or potential warfare with the 

Iranians, I would prefer that we visit with the Saudis and give 

them the opportunity to export to the Chinese in greater measure. 

This could eliminate a great source of funds for the regime, as over 

50 percent of its income is coming right now from oil exports. To 

the extent that you really hit the Central Bank and stop the 

exports, you really do make a very big difference in terms of the 

ability of that government to function, quite apart from the ability 

of the people to tolerate it. 

Again and again, people are saying that the Arab Spring came 

to Egypt largely because of elderly people out in the hustings, not 

in Tahrir Square, but the people out in the hustings who were 

starving and were not getting the subsidies from the government 

because the price of food was going up. That is occurring in Iran 

too and can be accelerated very substantially. 

So I just ask you for your comments on these editorial opinions 

because I think we all feel very strongly about this and are all attempting to act as wisely as possible. 

Ms. SHERMAN. Thank you very much, Senator Lugar. Let me 

make a few comments on the military option you mentioned, communications capabilities, ways to reach the Iranian people, and a 

comment again on CBI, and then turn it to Under Secretary Cohen. 

We agree with you. We think that the broadcasting possibilities, 

the Twitter possibilities, the social media is quite crucial to reaching the Iranian people. And, in fact, our Voice of America Persian 

and Radio Farda reaches as many as 20 million Iranians per week, 

and Web sites receive an estimated 60,000 visits per day. I take 

your point that we should do everything we can to increase our 

capabilities and we are working very hard to do that. 

On Facebook, we have 37,000 fans. We obviously want to increase that decidedly. Twitter, 8,000 fans. YouTube, 270,000 views. 

In May, the Secretary announced the extension of visa validity for 

Iranian students in humanities-related fields, and I think if I remember correctly, the percentage of Iranian students has increased 

20 percent in the last year. In October, the Secretary gave interviews on BBC’s Persian service and on VOA’s Persian satirical 

news show, which is wildly popular. You are quite right. The BBC’s 

Persian is incredibly well penetrating. We work very closely with 

21

the BBC. This is, again, part of our multilateral effort to work with 

others. They have some capabilities in part because they have been 

present, at least until now, in Tehran which gives them capabilities 

that we do not. 

I do have those numbers. According to the International Institute 

of International Education, 5,626 Iranians studied at U.S. universities in 2010, an increase of 895 students since 2009, and we want 

to increase that for all the reasons you well understand. 

So I take your point, and we think this is important. It is why 

we are starting Virtual Embassy Iran, and we will be launching 

that shortly. And we also, as I think you know, use technologies 

worldwide to help people ensure that they have access to the Internet and can get past satellite jamming. Some of that I would be 

glad to have someone brief you about further in a classified setting, 

but it is quite crucial. 

Second, on your concern raised about military action, clearly that 

is nobody’s preferred course of action, but the President has said 

and has repeatedly said that all options remain on the table in the 

situation that we are facing because we do not want to be in a situation—anyone in the world—and there is very strong international 

coalition on this to be in a position where Iran acquires nuclear 

weapons. 

At the same time, we think the dual-track approach that we are 

taking, which is pressure and engagement, though Iran has yet to 

take that hand toward engagement because we expect there to be 

serious conversation about their weapons program without preconditions and they are not quite ready to do that—so we will 

intensify and increase the pressure decidedly on a regular basis. 

On CBI, I take your point that if one has to make a choice between war and the risks with CBI, that is a very tough and compelling calculation. We do not think we have to go there today. 

What we think we need to do is have targeted efforts regarding 

CBI that can be multilateralized. As Under Secretary Cohen mentioned, French President Sarkozy’s suggestion of asset freezes on 

CBI is one thing that we are all looking at and talking with our 

colleagues about around the world. You are quite right that we 

need to be pushing parties around the world tough, harder to take 

action. 

That was really much of what I was doing in China, and China 

has agreed and publicly so today to finally accept Special Envoy 

Bob Einhorn to come to China and to assist them in better applying the sanctions regime to what they are doing. They have slowed 

down their actions. They have not backfilled, but indeed, they need 

to take further action and we would agree with you absolutely in 

that regard. 

Let me turn, if I may, to Under Secretary Cohen——

The CHAIRMAN. I think we are going to have to take that answer 

and thank you. 

Ms. SHERMAN. We will come back, I am sure. 

The CHAIRMAN. I am sure we will. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

You know, Mr. Secretary, I have to be honest with you. I am extremely disappointed. You all did not like the original amendment 

22

offered, and at the request of the administration, we engaged in a 

good faith effort to try to create an amendment that would have 

the maximum effect on Iran’s economy with minimum disruption 

to the oil market of the United States. That original amendment 

had no waivers whatsoever. Maybe we should have allowed that to 

stand. That is the vote we would be having. 

At your request, we engaged in an effort to come to a bipartisan 

agreement that I think is fair and balanced. And now you come 

here and vitiate that very agreement. So that says to me in the 

future that when you come to me and ask me to engage in a good 

faith effort—you should have said we want no amendment, not that 

you did not care for that amendment. 

Now, having said that, let me just say everything that you say 

in your testimony undermines the credibility of your opposition to 

this amendment. The clock is ticking. The published reports say we 

have about a year. Now, when are we going to start our sanctions 

regime robustly? Six months before the clock has been achieved 

before they get a nuclear weapon? 

Now, this amendment was crafted in such a way that it gives the 

President two significant pieces of discretion, No. 1, to determine 

that there is sufficient supply in the oil market that it would not 

create a disruption. And if he finds that is not the case, then the 

actions would not go into effect. And second, notwithstanding that 

he might find that, yes, there is enough oil in the market that 

would not create a disruption, that in fact he has a second opportunity in a national security waiver. 

So I find it pretty amazing that you all come here and say what 

you have said in response to the chairman. And let me just say I 

looked at the Treasury Secretary’s letter. Nowhere does he talk 

about economic disruption to us, very interestingly. I think he 

would have made that case if in fact there was any such disruption. He actually makes two statements here that I think are 

pretty redeeming of our amendment. He says, No. 1, Congress has 

been absolutely critical in providing some of the tools that we have 

used to accomplish the goal of tightening sanctions. 

But for Congress, you would not have had the sanctions, and I 

have never seen this or any other administration come before the 

Congress and say, please, give me a sanctions regime. You have 

rebuffed it every step of the way even though it is the sanctions 

law that we have given you that has allowed you to achieve some 

limited progress. 

Second, he says the sales—referring to Iran—the sales of crude 

oil line the regime’s pockets, sustain its human rights abuses, and 

feeds its nuclear ambitions like no other sector of the Iranian economy. Well, then, if that is the fuel that allows Iran to march to 

nuclear weapons, then you need to cut off the fuel. And that is 

exactly what we are focused on doing. 

I find it amazing that the Europeans are considering doing some 

of this. France, in particular, has been advocating such a measure 

in international reports earlier this month after it was revealed 

that Iran is moving closer to building its own nuclear weapon. The 

European nations are discussing imposing their own embargo. So 

we basically say to financial institutions, do you want to deal with 

23

a $300 billion economy or do you want to deal with a $14 trillion 

economy? I think that choice is pretty easy for them. 

So I find it pretty outrageous that while the clock is ticking and 

you ask us to engage in a more reasoned effort, then we produce 

such an effort in a bipartisan basis, you come here and say what 

you say, which really undermines your relationship with me for the 

future because you are not going to tell me that, please engage 

with us in an effort to find a more refined solution, and then when 

we do that, say you do not care for it. It would have been more 

honest to say we do not want any amendment whatsoever. 

Now, the fact is that several major energy traders continue to 

make prohibited sales of refined petroleum to Iran, and yet our 

response has been to sanction the front companies like the Royal 

Ouster Group rather than the major figures behind the sales. You 

have been reluctant to sanction Chinese companies for energy sanctions when there is ample evidence that they are violating our laws 

and there is precedent for us sanctioning Chinese companies for 

nuclear and weapons proliferation concerns. So even though we 

have given you the tools, you have not shown us the robust effort 

when the clock is ticking to use that which we have given you. 

So that is why 80 Members of the Senate—at a time in which 

it is very difficult to find bipartisan agreement—have joined in our 

Iran, North Korea, Syria Sanctions Act, because they understand 

that just as the Iranians move to circumvent the sanctions regime 

that we have already imposed and to find ways to achieve loopholes, we must remain one step ahead of them and close those loopholes and, at the end of the day, be able to ensure that our sanctions regime is effective. 

Now, had you all embraced that effort, maybe we would not be 

where we are today. If you had used the sanctions regime you already have and been more robust instead of taking the shell 

groups, gotten to the heart of it, we would not be where we are 

today. And if the Europeans are considering an embargo, we should 

not be leading from behind. We should be leading forward. 

I think the amendment that we will hopefully vote upon today 

is reasoned. It is balanced. It gives the President discretion to 

determine both the oil markets and whether there are sufficient 

supplies. And look, Libya is coming back on track. We certainly see 

Iraq producing more. The Saudis have a great ability to produce 

more. So I find it disconcerting, to say the least. 

And I do not really have any questions for you. I just wanted to 

set the record straight here after you vitiated my amendment. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I do not think they vitiated it. I think they 

vilified it. 

Let me just ask you this question. Is there a way, Madam Secretary, to address—in the letter, I noticed that it said in ‘‘its current form.’’ And you have a number of times said ‘‘in its current 

form.’’ Therefore, both to afford you an opportunity to respond but 

also just to try to deal with what is on the table here, is there in 

fact a way? Is it a no amendment situation, or is it this amendment 

in its current form and there is some way, in fact, to address what 

your concern is? 

24

Ms. SHERMAN. Let me, if I may, defer to Under Secretary Cohen 

in a second. 

I think there is a way to target CBI, and David will talk about 

some of those in a moment. What I think is crucial is that we do 

it in a way that is multilateralized. And the one point I would say, 

Senator Menendez, from our perspective at the State Department 

is that it is true that the Europeans are talking about this. And 

we are working diplomatically around the world both David and 

myself to encourage everyone to make the right decision to do what 

the United States has already done. Today we have no interactions 

with CBI. And we would hope others would do that as well and 

make the right decision in a way that works economically for them 

and ensures that Iran does not get more revenue because the price 

of oil spikes. 

And I appreciate that you have tried to address those issues in 

the amendment, but if I may, let me defer to my colleague at 

Treasury. 

Mr. COHEN. Thank you. 

Let me first address the concern about how we have been working with you and your staff with respect to the amendments. I 

think we very much appreciate the opportunity to work with you 

on this issue. We wholeheartedly share the objective of bringing 

real pressure to bear on the CBI. What we were doing working 

with you and with your staff was trying to devise an approach that 

is best calculated to bring that pressure to bear directly on the CBI 

while avoiding potential adverse consequences to our international 

diplomatic efforts, as well as to the economic situation in Iran in 

particular. 

If there was a misunderstanding with respect to whether we 

were supportive of the amendment as it was modified, I apologize 

for that. We had tried to be clear that we wanted to work with you, 

work with your staff to modify the amendment in a way to improve 

it, but I think we tried to be clear throughout that our judgment 

is that the best course to pursue at this time is not to apply a 

mechanism that puts at risk the largest financial institutions, the 

central banks of our closest allies, that the course that we should 

be pursuing to bring real and significant pressure on the CBI and 

to do exactly what you, Senator Menendez, highlighted, which is to 

attack Iran’s ability to get access to the revenue from its oil sales, 

is to work collaboratively and cooperatively with our partners on 

an approach to reduce their importation of Iranian oil, a step that 

the United States has already taken. 

We now import no oil from Iran. We now have no relationship 

with the Central Bank of Iran. What we want to do is to work with 

our international partners in an effort to have them get to that 

same point but in an orderly, cooperative, collaborative fashion. 

That is our sense of the best way to proceed here. 

Just to reiterate, we completely share the objective here of 

addressing the CBI and the CBI’s ability to operate in the international financial system. The issue is how do we go about this in 

a way that is best calculated to achieve the objective that we are 

looking to achieve while minimizing the potential for adverse 

collateral consequences. 

25

The CHAIRMAN. So, bottom line, you are really saying that it is 

not curable. You just oppose the amendment. 

Mr. COHEN. Mr. Chairman, our position is that the right course 

is to not adopt this amendment. We recognize——

The CHAIRMAN. But then it is disingenuous to say ‘‘in its current 

form’’ with all due respect. 

Mr. COHEN. If I could continue. We also recognize that there is 

substantial support for this amendment in the Senate, and if it is 

to be adopted, we do think that there are some important changes 

that should be incorporated to ensure that it achieves the objective 

that we are all looking to achieve. So our preferred course is for 

this amendment to not be included in the Defense Authorization 

Act. If it is included, we do want to continue to work with Senator 

Menendez and the Senate as a whole to bring in a few additional 

changes that we think are critically important to ensure that it 

operates in a way that is as designed. 

The CHAIRMAN. Senator Corker, thanks for your indulgence. 

Senator CORKER. No problem. I understand that we have the 

amendment on the floor and I understand additional time is worthy to talk about that. 

Senator Menendez referred to published reports of Iran having 

the ability to have a weapon in a year. Is that a timeline that you 

all believe is worth at least internalizing? 

Ms. SHERMAN. Senator, there is great debate. 

Senator CORKER. And I do not want a long answer. 

Ms. SHERMAN. Yes. No, I will not give you one. 

There is great debate about the timeframe, and the timeframes 

are at what point they have a breakout capability, at what point 

they will have a weapon. And all of those timeframes are seen differently analytically. 

Senator CORKER. Is it worth thinking about the published reports 

as being generally where things are? 

Ms. SHERMAN. Published reports are one data point. There are 

others who would disagree. I think what our objective is is to—

every country in the world ostensibly has breakout capability and 

the capability of getting a nuclear weapon. Our objective with Iran 

is for them not to have them and to lengthen the period of time 

for as long as possible that it will take them to get there. 

Senator CORKER. We understand that. 

Ms. SHERMAN. Everything we do every day takes any timeframe 

you have seen in a published report and makes it longer. Anything 

we can do to degrade their program will make that timeline longer, 

and that is crucial. 

Senator CORKER. So for what it is worth, I respect the work that 

you all have been doing. I have been to several hearings where you 

all presented both publicly and privately what you are doing, and 

I understand how you do not want Congress to end up with a blunt 

object that does not work for you. At the same time—and I think 

it has been pretty fascinating actually to see the effects that you 

have had in some areas of their economy. 

But it does not look like to me the lines are going to cross,

or at least at the right point. It does not look to me like the sanctions, even though there has been some successes, are going to 

achieve their end prior to the time that Iran actually has a nuclear 

26

weapon. And I think that is what has gotten much of Congress concerned. And so I think you generally are thinking the published 

reports are not way off. I do not think you are going to get there 

personally. I do not think you are going to get there. And so I share 

Senator Menendez’s concerns. 

You know, we have worked with you also on other proposals. I 

have to say that Treasury, generally speaking, has stiff-armed on 

numbers of fronts, and it seems to me that a responsible approach 

to today’s amendment would have been to have laid out what it 

was you wanted to pass. And I am not a cosponsor yet, but I am 

pretty irate that Senator Menendez has worked with you all this 

time. I know they have made changes. We have been meeting with 

his staff, with Kirk’s staff, with others. Why have you not offered 

what ought to be put in place before today’s vote? That seems 

highly irresponsible on your part. 

Mr. COHEN. Senator Corker, we have continued to engage with 

Senator Menendez. 

Senator CORKER. I do not want engagement. Why have you not 

laid out—why does Secretary Geithner not lay out what it is he 

would like to see happen? 

Mr. COHEN. I think Secretary Geithner’s letter, with all respect, 

does lay out what we think should happen with this amendment, 

which is that——

Senator CORKER. That it be defeated. 

Mr. COHEN. Yes, that it not be adopted. 

That being said, there are additional amendments to the amendment that we have provided to Senator Menendez and his staff, 

and so we are eager to continue to work with Senator Menendez 

and the Senate as a whole, if this is going to proceed, to have it 

proceed in a fashion that is more workable. 

If I could just comment on one other of your remarks on the 

timelines. I think both Under Secretary Sherman and I are trying 

to convey that we recognize both the urgency, whether it is a

1-year timeline or whatever it is, that there is a significant urgency 

on the pressure track and if you are thinking about the lines crossing, we agree—the administration agrees—that our line needs to 

accelerate, and we are intent on doing is bringing additional pressure to bear, consequential pressure to bear on Iran in very short 

order. 

The question that I think we are addressing is how best to 

achieve that, and our concern with the amendment is that we think 

that may not be the best way to proceed. It is not that we are coming before the committee and saying everything is fine, leave us 

alone, let us continue on. What we are saying is we recognize that 

we are at a point in time where the right course is to intensify the 

sanctions, and we want to do that and we want to do that in a way 

that is best calculated to work. And we just think that the way to 

do that is to work cooperatively with our international partners in 

a fashion that has, I think, borne substantial fruit over the last 

several years and we think can work going forward. 

Senator CORKER. Let me ask you this. Would it make sense for 

Menendez and Kirk to give you 60 days to make that happen? If 

it does not, this goes into effect. 

27

Mr. COHEN. I think we are interested in continuing to figure out 

how to give us the space to work and we can continue to work——

Senator CORKER. And I appreciate the fact that you are working 

with allies and friends. It does send a signal that we really are 

willing to work on sanctions on everything but that that matters, 

and that is petroleum exports. But I understand that you want to 

work with them, with our friends, in a way that makes most sense. 

And I appreciate the executive branch wanting some flexibility. I 

do think there have been ways probably to make this amendment 

work. 

But, Ms. Sherman, you made a comment that every political candidate has made probably for 8 years, and that is all options ought 

to be on the table. And it is what every candidate on both sides 

of the aisle running for any office other than city council has said 

for years. And yet, I guess I would ask the question, are we making 

plans with our friends toward military action, not doing it, but are 

we making those kinds of plans that are known and send signals 

to Iran that if these sanctions do not work, we really are prepared 

to use that option? Is that taking place at present? 

Ms. SHERMAN. I would say briefly two things, Senator. 

One, the President of the United States has said publicly on several occasions that all options are on the table, and I——

Senator CORKER. Like I said, every candidate has said that. 

Ms. SHERMAN. But from Iran’s point of view, when the President 

of the United States says that, whoever the President of the United 

States is, whatever party, it is a serious and fundamental statement. 

Senator CORKER. George Bush said that. George Bush probably 

before him said that. 

Ms. SHERMAN. But Iran understands and they read the newspapers and see what is happening. They understand it is a serious 

possibility, and we have reason to understand that they believe 

that. 

And second, in terms of plans and planning, my experience—

I am sure yours as well—is that the Department of Defense plans 

for virtually every hypothetical situation there is in the world. 

Senator CORKER. Thank you, Mr. Chairman. Thank you all for 

your work, and thank you, Senator Menendez, for focusing on this 

issue. 

The CHAIRMAN. Thanks, Senator Corker. 

Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. 

Let me thank both of our witnesses. 

There may be some disagreement on the timeline as to when 

Iran will have a nuclear capacity for a weapon, but there is no disagreement on the timeline on the vote on the Menendez-Kirk 

amendment. That is going to take place momentarily, certainly 

within the next 24 hours. So I would just urge you with the sense 

of urgency as it relates not just to this amendment but to this 

issue. 

Now, we have all talked about Iran, and let me put it in context. 

Iran is an extremely dangerous country. They are supporting 

terrorism, and we have known what cost that has been to the 

American people. They are abusing their own people. They are supVerDate 0ct 09 2002 14:32 Apr 27, 2012 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 S:\HEARIN~1\112THC~1\2011IS~1\120111~1.TXT BETTY
28

porting Syria’s efforts on the abuse of the people of Syria. And the 

list goes on and on. 

As you pointed out, Secretary Cohen, the international referee on 

nuclear nonproliferation has judged that Iran is proceeding with a 

nuclear weapon. They point out that what they are doing would be 

inconsistent with anything other than a nuclear weapon. So we 

know that we are on a glide path of an extremely dangerous situation, which brings us to timing issues. 

I want to just underscore what Senator Corker said. I think on 

both sides of the aisle we appreciate the leadership of the Obama 

administration in reaching out to the international community and 

getting more international support for sanctions than we have had 

in the past. That is extremely important. But it starts with U.S. 

leadership. We have seen over and over again that without the 

United States stepping forward, the international community is 

slow, in many cases will not act at all. 

So dealing with the Central Bank of Iran, your own reports show 

that they are money laundering. They are assisting the proliferation of nuclear weapons, and they are assisting terrorism. We have 

cut off relations with the Central Bank of Iran. It is a clear signal 

to the international community that we are very serious about drying up the financial capacity of Iran. That is the only way we 

believe that sanctions will effectively change course of Iran on its 

nuclear ambitions for a nuclear weapon. 

That brings me again to the timing issue. If we do not move forward rapidly, then I am not sure it can be effective. And what I 

do not understand, and maybe you can help clarify for me, the 

Menendez amendment gives you 2 months before any action takes 

place. You have another 3 months after that to cool off issues, and 

then after the 5 months, you have the waiver authority. So it 

seems to me it speaks volumes as to ratifying the policy that you 

have already stated. The Central Bank of Iran is money laundering, it is proliferating, and it is supporting terrorism. We had 

nothing to do with it and we want the international community to 

work with us to cut off the Central Bank of Iran. This amendment 

gives you the tools to work with the international community to be 

selective as to what national banks should be sanctioned. You could 

be selective. 

So I am not exactly sure the resistance to the passage of the 

amendment, and maybe you can help clarify this for me because all 

the horrible things you have said I have heard before. Oil supply. 

We know about that issue. We have heard that before. But it seems 

to me this gives us the power to work with the international community to provide the type of unity necessary showing that America is very serious about cutting off the financial capacity of the 

Government of Iran. 

Where am I wrong on the 5 months you have? That gives you 

a lot of time for your diplomacy. I know diplomacy can take time. 

Five months is a long time, particularly when we are looking at a 

glide path for Iran that if action does not take place within the 

next several months on changing their course of action, it may be 

too late. 

Mr. COHEN. Senator Cardin, I think the concern is that in the 

course of that effort, whether it is the 60 days or the 5 months, 

29

before there are aspects of the provision that would kick in, we are 

operating in an environment where we are going to our closest 

allies with a stick rather than with an effort to——

Senator CARDIN. The stick requires the President to make certain findings before it can be used. 

Mr. COHEN. It does. But I think the concern is that from the perspective of the financial institutions involved, the perspective of the 

governments involved, there cannot be any confidence from their 

standpoint that a waiver will be invoked or that a determination 

will be made to obviate the——

Senator CARDIN. But is our objective not to get them not to deal 

with the Central Bank of Iran? 

Mr. COHEN. It absolutely is. And we just have a disagreement in 

the tactics to achieve that. 

Senator CARDIN. But if country A, our close ally, wants to work 

with us and block the Central Bank of Iran but country B, our ally, 

does not, is it not helpful for country A to know that there is a reward and punishment issue involved to adhering to the sanctions? 

Does it not help our allies to know that we want all of our allies 

to cut off the financing of Iran through its Central Bank in order 

to be able to avoid a nuclear Iran? 

Mr. COHEN. It will be helpful. At the risk of repeating myself, the 

judgments of the administration—and not just Secretary Geithner, 

but the administration broadly—is that the best way to work with 

our four allies on this is not by threatening our most severe sanction against their largest financial institutions, but to work with 

them and to build on the international consensus that already exists and to take these steps. 

Senator CARDIN. I understand your point, and I think it represents a traditional difference of view between the executive and 

legislative branches, and I think the legislative branch will speak 

today. 

The CHAIRMAN. Thank you very much. 

Senator Risch. 

Senator RISCH. Thank you, Mr. Chairman. 

First of all, let me say that the views expressed here by Senator 

Menendez, Senator Cardin, Senator Corker are all views that are 

very representative of the consensus of the legislative branch of 

Government right now. I have no doubt and I do not think any 

Member of this Congress has any doubt that the goals and objectives of the executive branch are exactly the same as the goals and 

objectives of the legislative branch. 

However, we got a real problem in what I would call an enthusiasm gap or an urgency gap—sense of urgency gap between how 

the legislative branch views this and how the executive branch 

views this. And this frustration that you are seeing here today I 

think is the result of that gap that exists between us, and that 

needs to be resolved and we believe it needs to be resolved 

urgently. 

I would think—and I think many of my fellow Senators believe—

that after the IAEA report, your sense of urgency should have risen 

to our sense of urgency. And we are not seeing that. We hear the 

words. We hear the talk, but we have wanted action for some time 

30

and it just has not happened. And so the result of that is what you 

see in front of you. 

So I would strongly suggest that rather than coming up here 

with a strategy on how you are going to try to torpedo this amendment, you figure out how you are going to make this amendment 

work because this amendment is going to pass. And it is not going 

to pass by a close vote; it is going to pass by a very large vote. I 

think those of us who serve here in the Senate hope that it will 

send the signal that we want to see sent. 

Look, this issue is not a trade issue that we are arguing over. 

It is not some dispute we have on borders or something. When it 

comes to the issues in the world today, this issue ranks right up 

at the top. The United States cannot be wrong on this. The world 

cannot be wrong on this. We cannot make a mistake on this. 

Unfortunately, I think most of us agree with what Senator 

Corker said when he said, well, you know, you are trying to do this 

through sanctions, and to quote Senator Corker, I think he said ‘‘I 

do not think you are going to get there.’’ And I have to tell you that 

I believe that is the consensus view of the Senate up here also. 

Again, that is why you are seeing what you are seeing in the form 

of this amendment. 

So I guess what I would tell you is you probably need to go out 

of here and figure out how you are going to make this work and 

how you are going to raise to the level of urgency that we have and 

that you have seen here today. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Risch. 

Senator Webb. 

Senator WEBB. Thank you, Mr. Chairman. 

And Secretary Cohen and Secretary Sherman, I apologize for 

arriving here late. I am on the Armed Services Committee and 

we’ve got a markup on the floor. But, I was able to watch a good 

portion of your testimony while we were considering amendments 

in my office. 

I want to ask you a couple questions. Again, I apologize if I may 

have missed them already being discussed while I was doing these 

other things and getting over here. 

First of all, I am not a great fan of sanctions in general, and I 

believe if the circumstances require that they take place, that they 

should be clearly targeted. They should have somewhat of—I cannot say a guarantee but somewhat of a certainty that they would 

be effective and also that they would be widely supported in the 

international community. Listening to your testimony, I can hear—

I think—a very sincere concern about the possibility that you may 

end up doing more harm than good if certain types of sanctions are 

put into place here. 

I have not decided how I am going to vote on this amendment. 

I am still thinking this through. 

But, I would like to ask you three questions in the time that I 

have here. The first is—and again, I apologize if you have already 

stated this, but could you compare the sanctions that would be put 

in place under this amendment with the sanctions that the United 

Kingdom put in place earlier? 

31

Mr. COHEN. The sanctions that the United Kingdom put in place 

last week essentially brought the U.K. into line with where the 

United States has been for many years. We, years ago, cut off the 

Iranian financial sector from the United States. The U.K., over the 

past several years, has taken actions against particular institutions. What they did a week ago Monday was to cut off the entire 

Iranian financial sector. So they are now in line with where we are. 

The Canadians as well are in line with where we are and where 

we have been for some time. 

Senator WEBB. Thank you. 

With respect to your concern—and this is a concern also being 

expressed in a letter from the Secretary of the Treasury that our 

closest allies would curtail purchases altogether in the future or 

would cease to cooperate. Do you see a predictable outcome among 

these countries that you are discussing if this amendment were to 

pass? 

Mr. COHEN. Well, Senator, I think what we and what Secretary 

Geithner was driving at is that we see and we are working with 

our partners to have them reduce their reliance on imports from 

Iran, as the United States has done. We import no oil from Iran. 

We are seeing that our partners recognize, in part because of the 

actions that we have taken and the information that we have put 

out into the public domain, the danger involved in purchasing 

Iranian oil and having those revenues flow to the CBI which uses 

those revenues to fuel Iran’s dangerous activities. And so what we 

are doing and have been doing and want to continue to do is to 

work with our partners to draw down, if possible, entirely cease importation of Iranian oil. 

Senator WEBB. You are saying in your testimony that the potential effect of the amendment is to reduce that level of cooperation? 

Mr. COHEN. I think there is a danger that it will result in less 

cooperation because of the reaction to the threat that is being visited on their financial institutions. 

Ms. SHERMAN. If I might, Senator, add a couple of things to that. 

There are very close allies of ours who have very complex commercial relationships with Iran, not in the arenas in which we have 

already imposed sanctions, but in everyday things, selling television sets or just household goods. And our reading of the effort 

by Senator Menendez and Senator Kirk and by so many Senators 

to achieve the same objective that we achieve, which is to cut off 

the lifeblood of Iran’s economy so that they pull back from their 

nuclear weapons program, in fact will see our taking such an action as a blunt instrument that takes away their capabilities of 

dealing with their financial life. 

Senator WEBB. And obviously at this point we would not characterize China as one of our closest allies here or in other places. As 

these other policies have been put into place, China has very 

noticeably not cooperated. They are becoming Iran’s most active 

trading partner. They are still trading oil. What is their reaction 

to this? What would you think would be their reaction to this sort 

of a process like the new legislation or even existing policy? What 

are they doing? 

32

Ms. SHERMAN. Well, let me speak to the broad relationship with 

China in regards to Iran and defer to Under Secretary Cohen on 

the specific CBI reaction. 

We take what China is doing quite seriously. I just returned 

from Beijing and a great deal of the meetings that I held were exactly on this point. As a result of that, they have finally agreed 

that Special Envoy Bob Einhorn can go to China, sit down, and 

help them to better enforce the sanctions regime that is in place. 

They have, in fact, slowed down their actions. They have not, to the 

best of our knowledge, backfilled from others who have pulled out. 

We have, indeed, in INKSNA sanctioned a Chinese individual and 

five Chinese firms are under INKSNA sanctions. There are other 

Chinese companies that are currently under investigation. And I 

was quite candid with China about each of those cases and the 

action that we would expect or otherwise——

Senator WEBB. I apologize for interrupting you. I have got about 

7 seconds, and I do not want to take my colleague’s time. 

Secretary Cohen, do you see China’s economic activity with 

respect to Iran decreasing if this goes forward? 

Mr. COHEN. Senator, I cannot pretend to predict how China 

would react to this. I think it is quite possible that the Chinese, 

if this amendment were adopted, would take the risk essentially 

that we would cut off their financial institutions from the United 

States. But I am just not in a position to predict exactly how the 

Chinese will react for many reasons that Under Secretary Sherman 

described. The relationship between China and Iran is a very complicated one, one that we have been working on——

Senator WEBB. To this point—the bottom line—they have not reduced their economic participation as we have put policies into 

place? I am a minute over so a short answer is better. 

Mr. COHEN. I will answer it very briefly. I think the Chinese 

have essentially remained at the same level of economic engagement with Iran, give or take, over the last several years. 

Senator WEBB. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Webb. 

Senator Isakson. 

Senator ISAKSON. Thank you, Mr. Chairman. 

Under Secretary Sherman, there have been expressions by the 

administration of concern about the consequences on oil prices with 

the passage of this amendment. I have heard the testimony today 

about concerns of what it might do to other countries that have 

banking relationships with Iran that are friends of ours. Are we 

also measuring what the consequences of an Iranian nuclear test 

might do to world stability and to oil prices or what a nuclear incident in the Strait of Hormuz might do? Are we calculating that? 

I know the concern I have, and I really only speak for myself. 

But I think I am speaking for the people of Georgia. It seems like 

the sand in the hourglass is running out. We do not know exactly 

when but there is no question that Ahmadinejad and the Iranians, 

if given the opportunity and with the material, probably would use 

fissionable material in some nefarious way against Israel or 

against somebody in the Middle East. That is a calculation that 

must be in my mind paramount in terms of how we deal with Iran, 

which is why I think it is so important that we send the legislative 

33

message from the Congress of the United States that time is running out on Iran as well. And I would like for you to respond to 

that, if you would. 

Ms. SHERMAN. Senator, as you have said, as others have said 

this morning and as I want to reiterate, we absolutely share the 

sense of urgency of the Congress. We were not surprised by the 

Amano report which said that up until 2003, there was a structured program in Iran to develop nuclear weapons and since then, 

there clearly have been ongoing activities. And there are possible 

military dimensions because there are activities, for which there is 

no plausible explanation except military use, and certainly Iran 

has not offered us a plausible explanation. We were not surprised 

because we were one of the 10 countries that supplied information 

to Director General Amano to produce that report. So we quite understandably know what is happening in Iran, where it is headed. 

We have successfully, through this multilateral and phased and 

cooperative sanctions approach that has been helped with tools 

that Congress has given to us, as well as Executive orders and our 

IEPA authority, have indeed slowed down Iran’s capability, have 

extended that timeline not only from enrichment, from their hoping 

to have 50,000 centrifuges to only having 6,000 or 7,000 centrifuges. We have slowed down their program. We have degraded their 

program. We have not ended it, and we have not ended our sense 

of urgency. So we quite agree with you. 

And I think that is why, when the Amano report came out—and 

that was virtually a unanimous vote at the IAEA Board of Governors, and that did not happen by accident. That happened by a 

concerted diplomatic effort to make that occur. We took action, 

along with the U.K. and Canada, to add additional sectors, additional sanctions to our arsenal to try to deal with Iran’s nuclear 

program. 

So we are completely where the Congress is in terms of the sense 

of urgency. As Secretary Cohen said earlier, what we are talking 

about today is tactics of getting there. In that, we have some disagreements and we should continue this debate. And as Secretary 

Cohen said, we are well aware of the strong support for this 

amendment today, and we understand the impulse for that amendment because we share the objective. We just think there is a better way to go about it. 

Senator ISAKSON. Thank you. 

Under Secretary Cohen, as I understand it, Treasury in 311 findings had some pretty astounding revelations about the Central 

Bank of Iran, A, in terms of them funding other banks that are 

sanctioned by the United States, and B—what is their name—the 

IRGC construction firm that is under sanction. What do those findings alone tell us about why we have not sanctioned the Central 

Bank yet? Because those are clear findings of the Treasury of what 

I think are clear violations of our sanctions already. 

Mr. COHEN. Well, Senator, we in our 311 finding broadly described the Iranian financial system’s involvement in Iranian illicit 

activity and specifically included information about the Central 

Bank of Iran’s deceptive practices that you identified. 

We are using the foundation of that finding with our partners as 

a way to further highlight the risk of doing business with Iran, any 

34

of the financial institutions in Iran and with the Central Bank of 

Iran in particular. It has allowed us to have in one place the comprehensive presentation of the risks involved in doing business 

with Iran, including the Central Bank. 

The question of how we then take the next step is something 

that is left for us to continue to work on and work on with the Congress and work on within the administration. The findings in the 

311 do not predetermine any particular action, but we have at our 

disposal a range of possible next steps with respect to Iran. And 

I think this gets back to the comment that Under Secretary Sherman said. What we are looking to do is to bring to bear on Iran 

and on the Central Bank of Iran, but more generally on Iran overall, substantial additional pressure. And if the right step is to bring 

a sanction onto the Central Bank of Iran, we are prepared to take 

that step. 

We think that, as we sit here today, the right thing to do is to 

proceed with a multilateral effort to isolate the Central Bank of 

Iran, to work with our partners to reduce their import of Iranian 

oil, and to take an action to freeze the assets of the Central Bank 

of Iran. That would be, in essence, the steps that we would want 

to pursue with respect to the CBI with a real sense of urgency with 

a notion that the clock is ticking and we have got to ramp up our 

efforts here. But that is where we are looking to proceed. 

Senator ISAKSON. I respect the fact that both of you have a very 

difficult job and that diplomacy under any circumstances is tough, 

particularly when you are dealing with a dishonest broker like the 

Iranians have been. But I think Menendez-Kirk does reflect the 

sentiment of the majority of the people of Georgia and, I would suspect, the United States, and I think urgency is something all of 

must consider in dealing with the Central Bank and with the 

nation of Iran. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Isakson. 

Senator Shaheen, I do not think it is an award, but I think you 

get special recognition for greatest price paid trying to get to a 

meeting of the Foreign Relations Committee. 

Senator SHAHEEN. Thank you, Mr. Chairman. I hope you will acknowledge that in the future when I have legislation pending 

before this committee. 

The CHAIRMAN. Absolutely. We owe you. 

Senator SHAHEEN. You should have seen the other guy. 

[Laughter.] 

Let me begin first by thanking both of you for the efforts that 

you all have been making to address Iran’s move toward achieving 

a nuclear weapon. 

I do want to, though, share the sentiment that has already been 

expressed by my colleagues on this committee, that I believe 

Menendez-Kirk amendment is going to pass. And so I would hope 

that if there are suggestions that the administration has about 

things you would like to see different in that amendment, that you 

would share those with us because I do think, as you have heard, 

we are going to act on this within the next 24 hours, and so it 

would be helpful to know what else you might like to see happen. 

35

Having said that, I wonder. Both Senator Menendez and Senator 

Webb raised the criticism that the administration is not doing 

enough with the sanctions that have already been designated and 

particularly with respect to some of the Chinese companies. You 

responded to that briefly, Under Secretary Sherman, but is there 

more you can tell us about whether the administration has in your 

opinion been doing enough with the sanctions you already have or 

what else could be done? 

Ms. SHERMAN. Thank you very much, Senator, and thank you for 

the suggestion of bringing to Senator Kirk and Senator Menendez 

any additional suggestions we might have in the short period of 

time that is left, and we will certainly take that back and consider 

that. 

As I said, we understand the concern about China. It was the 

focus of a trip that I made last week to impress upon China the 

reality and the prompt action that was required on their behalf 

regarding a number of situations, my request for Special Envoy 

Bob Einhorn to finally be welcomed to China to help them, in fact, 

follow through on the sanctions regime and the obligations, which 

we have not talked enough about here, under the U.N. Security 

Council resolutions. There are five resolutions that have passed, 

four which have legally binding requirements. And so this is not 

just a United States request. This is a U.N. Security Council obligation of states around the world. 

We have sanctioned 280 individuals and entities over the last 

few years. We, of course, think we should do more and better. In 

fact, when the QDDR was written at Secretary Clinton’s request, 

one of the things that came out of that was to, in fact, increase our 

enforcement capabilities, to increase the number of FTE, to organize the State Department in a better way to, in fact, enforce sanctions. That process is underway. We are trying to not have it constrained by the budget, constraints that we all now face. 

But, yes, we think we should do more. We have accelerated that 

progress, and we expect to be accelerating it even further in 

response to everyone has said here, which is this is an urgent 

problem. 

Senator SHAHEEN. Thank you. 

There is an interesting opinion piece in today’s European edition 

of the Wall Street Journal, which I assume both of you might have 

seen, that highlights the involvement of the Revolutionary Guard 

in not just the nuclear and missile program, but in so many other 

economic areas in the country. And the article quotes you, Mr. 

Cohen, from your October testimony to Congress that the Revolutionary Guard has expanded its reach into so many critical sectors 

of the economy. Can you talk about how difficult it is to draw a 

line between the reach of the Guard and how that affects our 

ability to address through sanctions to bring pressure on Iran? And 

then also, if you would, talk about how we are working with our 

European allies to address the IRGC’s move into legitimate 

businesses. 

Mr. COHEN. I am happy to, Senator, because I think the IRGC 

has been one of our key targets for sanctions over the last several 

years. It is recognized in Security Council resolutions. It is recognized by the EU and certainly recognized in our sanctions as a 

36

target that is very deserving of sanctions. The IRGC is involved in 

the most dangerous activities in Iran, and as it continues to expand 

into the Iranian economy to the detriment of the average Iranian 

citizen, frankly it provides us with additional ways to apply 

pressure on the Iranian regime. 

So earlier this year, for instance, we applied sanctions on an 

entity called Tidewater Middle East Company which is a port operator at seven of the ports in Iran, including the largest container 

terminal at the Bandar Abbas port. The IRGC had come in and 

taken over ownership of that entity several years ago. We have 

applied sanctions to Tidewater. It is now the law of the United 

States that any foreign financial institution that engages in a 

transaction with Tidewater risks having its access to the United 

States terminated. 

We are continuing to press our allies in Europe to add Tidewater 

to the list of sanctioned entities in Europe as well because Europe 

has taken a number of steps to sanction IRGC-related entities 

including, I think most importantly, an entity called Khatam

al-Anbiya, which is a major construction firm in Iran that has been 

subject to sanctions. 

Senator SHAHEEN. And have we been successful at persuading 

them on Tidewater? 

Mr. COHEN. To be candid, Senator, I am waiting to see if it is 

included in the list of 180 new sanctioned entities that the EU has 

announced today. But if we are not successful today, I can assure 

you that we will continue to press the Europeans to add Tidewater 

to the list of sanctioned entities on the EU list. 

But the IRGC—I see my time has expired. Just one final comment. The IRGC, as it continues to expand into the Iranian economy, as more and more average Iranian citizens are moved out of 

the economy and the government and its most dangerous entities 

expand their economic reach, we will continue to take action and 

to designate those entities and work with our partners to do the 

same. 

Senator SHAHEEN. Thank you. 

The CHAIRMAN. Senator Coons. 

Senator COONS. Thank you, Chairman Kerry, and thank you for 

holding this hearing. 

I am simply going to renew comments I know you have heard 

from literally every single member, I believe, of this panel so far 

about how rapidly Iran is making progress toward the acquisition 

of a nuclear weapon, about how gravely the people I represent are 

concerned about this, and about a real lack of clarity about the 

communication with Senator Menendez about an amendment, of 

which I am a cosponsor and for which I intend to vote today in the 

absence of some better clarification or understanding of why the 

timing and the waiver provisions are insufficient. It is rare that I 

do not—I take very seriously the letter of the Secretary and your 

input and respect your efforts. 

But I think August 9 a letter went to the President from 92 Senators urging prompt engagement and action on sanctioning the 

Central Bank of Iran, urging more progress toward exactly the sort 

of multilateral effective sanctions regime that we have been discussing at great length here. And I think what you are hearing, 

37

just speaking for myself, is a steadily increasing level of grave concern bordering on alarm. 

Since August, the IAEA report has come out, allegations of an 

assassination plot against a Saudi diplomat, the assault on the 

British Embassy. There is no doubt in my mind that Iran is the 

most dangerous nation in the world at this point and that this 

situation, as it steadily moves in a bad direction, is going to push 

us toward some tough decisions. The ranking minority member 

started by asking you about planning for a potential military action. I wonder what we are doing to prepare the American people 

for the possibility of necessary action by either our close ally Israel 

or the United States. 

And I think the level of engagement you are hearing from this 

panel simply reflects that, a concern that 6 months on—that letter 

was in August. It is December—you are pushing back very hard on 

an amendment by Senator Menendez that, by its structure, gives 

months more for diplomacy. I think the Iranians by their actions 

have finally made abundantly clear to the international community 

what they are doing and their intentions. And the statements certainly of Ahmadinejad are appalling, gravely concerning, and a 

clear source of concern, legitimate concern, by the people of Israel, 

the United States, and all of our allies. 

So I hope you take this very seriously, and in the absence of any 

clear input from you on what is insufficient about the Menendez 

amendment, I intend to vote for it today. So there is not a lot of 

time for back-channel communication. This is an active issue, and 

I mean that both between our branches and between the United 

States and Iran. 

I am eager to hear from you anything more that would give me 

some confidence that the Chinese, who are still the worst actors in 

this field, with whom we have so many other problems in intellectual property, in currency manipulation, and ongoing—we are in a 

full-on trade war in my view with the Chinese. We just need to 

manage it as appropriately as we can in the interest of the people 

of the United States. 

One of the things I had hoped to hear today was that we are 

making real progress with them in engaging them in an effective 

multilateral sanctions regime that is bearing down on the Iranians, 

and I was encouraged to hear that they are accepting Special 

Envoy Einhorn. But under CISADA, I do not see that we have 

aggressively and effectively sanctioned Chinese actors in this area, 

and given the hourglass that has been referred to by Senator 

Menendez and others, I am really concerned that we are not being 

aggressive enough in this field. 

Please, if you would, Under Secretary Sherman. 

Senator MENENDEZ. Would my colleagues, before the Secretary 

answers, give me 30 seconds before I have to leave to respond to 

something? 

Senator COONS. Certainly. 

Senator MENENDEZ. Two things. No. 1 is the Secretary mentioned that there are many nations that have complicated relationships with Iran. But our section E specifically only focuses on sale 

or purchase of petroleum and petroleum products. So it is not going 

after all of those other complicated relationships. 

38

And No. 2 and pursuant to your question and your concern, 

which I appreciate your support of the amendment, is that, you 

know, the Chinese have already taken the risk. Under the existing 

sanctions regime, the Chinese have not moved. So the answer to 

that question is pretty clear. 

And I thank the gentleman for giving me some time. 

Senator COONS. Thank you, Senator. 

Under Secretary. 

Ms. SHERMAN. Thank you. I thank both of you, Senators. 

On China, I would reiterate what I said earlier, which is I agree. 

We want more action out of China. They have taken some action 

to slow down their activity, not to backfill from others who have 

pulled out of the Iranian oil sector in particular. We have sanctioned one individual and five or six entities in China. We have 

others that we are looking at that was the subject of some of my 

discussion with them last week. So I would agree with you. They 

should take more action. 

I will say this, that they have stuck with the international coalition. They did cosponsor the resolution at the IAEA. They did vote 

in the U.N. General Assembly for the resolution condemning the 

actions on the Saudi Ambassador. It is important to have them inside the tent as opposed to outside the tent, but there is no doubt 

in any of our minds that they need to take far more action than 

they have. And we are quite aggressively engaged with them. This 

was the subject of some of the President’s discussions in Honolulu, 

and in Bali just 2 weeks ago, Secretary Clinton’s with Counselor 

Dai, so at every level, with Vice President Biden’s with Xi Jinping, 

who is set to be the next leader of China. So we share the focus, 

the urgency, the attention and the obligation that China has under 

the U.N. Security Council resolutions to, in fact, follow through. So 

we share that and I take your message that we need to pursue it 

even more urgently than we already are. 

Again, on the Kirk-Menendez, we appreciate, as Under Secretary 

Cohen said initially, that this will pass. We obviously would appreciate more discretion than even exists in the current draft of the 

amendment. We think tactically that it may both increase the price 

of oil, which will give Iran a windfall. That is not the objective, I 

know, of the legislation, but may in fact have that effect. 

And second, we are concerned—and may even create that windfall during this 5-month period of extensions that exist in the legislation because of the anticipation of the markets. 

So I think no one knows exactly what will happen, but there is 

most definitely a risk that Iran could get a windfall from this, let 

alone complicate our relations with very close friends and allies. 

Senator COONS. Thank you. 

Seeing that I have run out of time, I will submit some additional 

questions for the record. I just urge the Under Secretary to use his 

great skills to convey effectively to the markets things that might 

avoid that sudden spike. I think the reality is that Members of the 

Senate are concerned that we send a clear and strong message 

about our determination to prevent Iran from making any further 

progress in acquiring potential weapons. 

Thank you. 

The CHAIRMAN. Thank you, Senator Coons. 

39

Senator Casey. 

Senator CASEY. Thank you, Mr. Chairman. 

Under Secretary Sherman, Under Secretary Cohen, we are grateful for your testimony and your public service. 

I think what you are hearing in this discussion today is a real 

concern about a sense of urgency or what some would assert, a lack 

thereof. Like a lot of us, we get the chance to travel in places like 

the Middle East. When I was there last in the summer of 2010, 

Senator Shaheen was on the trip as well. We had a visit to about 

seven countries in 9 days, if my math is right. And at that time, 

months before the Arab Spring and at a time when there was a 

real consensus about the threat posed by Iranian regime, whether 

you were in Israel or Saudi Arabia, whether you were in Egypt or 

some other place, a real sense of not just consensus but real worry. 

That was the summer of 2010. 

If anything, it has become not only more apparent but I think 

more urgent. And I think it is finally more apparent to people 

across our own country because of the assassination plot, because 

of what the IAEA reported recently. 

I do not want to walk through all of it, but I mean, the language 

is pretty compelling when the IAEA says they have credible information that Iran has carried out activities ‘‘relevant to the development of a nuclear explosive device.’’ And then, of course, they outline it further. 

So there is a sense of urgency here or there is, I think, a greater 

sense of urgency that a lot of people feel in our country, and perception is very important in these situations, as you know. But 

there does not seem to be an administration policy or set of actions 

that is commensurate with that sense of urgency. 

Look, I am a cosponsor of what Senator Menendez and Senator 

Kirk are trying to do, and I have long labored in this vineyard. But 

when we read letters that talk—like the one from Secretary 

Geithner—continue to work with, negatively affect many of our 

closest allies, likely to have allies resent our actions or resist following our lead—and we all want to have collaboration. We all 

want to have a steady effort here. But this is a move way beyond 

where we were in 2010. 

Let us assume for a second that there was no nuclear threat, if 

we could magically remove that threat. Just the impact this 

Central Bank has on being the banker for a lot of bad guys in that 

region, Hamas, Hezbollah, so many bad guys that they provide resources for—that is another reason for the sense of urgency. So I 

think that is what you are hearing here. 

And I guess my question is very simple. If not this, what should 

we do right now in the next month or 2, and if not this now, how 

long will the strategy that you want to put in place or continue—

how long will that take? 

Mr. COHEN. Senator, on the sense of urgency, I can assure you 

that on my own behalf and on behalf of the entire administration, 

there is not an issue that focuses the attention of the administration more than the threat of Iran and as it is laid out in the IAEA 

report. We feel that sense of urgency every day. 

I have just returned, just yesterday morning, from a short trip 

to Israel and the UAE which is the most recent of my journeys both 

40

to consult with our allies who are working on this issue and to 

learn about their perspective on the threat and to bring that back 

and to feed that into our process. 

We are working on this issue every day and have taken steps to 

bring to bear more financial, commercial, and diplomatic isolation 

on Iran today than it has ever seen before. It is, I think, fair to 

say that we have applied a substantial degree of pressure on Iran, 

and at the same time, we recognize that there is more to do. And 

so the steps that we are prepared to take in the short term, assuming the Kirk-Menendez amendment is not adopted, which I recognize may not be a valid assumption—we are committed to taking 

action against the CBI to freeze its assets, to work with our allies 

to have them take a similar action and to work with our allies to 

encourage them to take the steps that they have already indicated 

a willingness to consider, which is to ramp down their involvement 

with the CBI and their purchases of Iranian oil. That will constrict 

Iran’s access to the hard currency and to the revenue that it needs 

to fuel the activities that you address, Senator. That is the course 

that we want to proceed on while, at the same time, continuing to 

apply the sanctions that we have across a range of areas. 

The new Executive order from just 10 days ago on the petrochemical sector and on the production of oil in Iran is a very significant new step that goes after anyone providing goods or services 

to either of those industries. The petrochemical industry is the second most important source of export revenue to Iran. The petroleum industry is the first. Those sanctions directly target Iran’s 

ability to continue to develop both of those sectors. 

So we have been pursuing and are intent on continuing to pursue 

a range of significant and powerful sanctions on Iran. 

The issue—you know, I think we have been discussing it this 

morning. The issue is how best to achieve that while minimizing 

the potential of an adverse consequence of this backfiring. And as 

Under Secretary Sherman alluded to and as Secretary Geithner 

notes, we have real concern that the amendment, as it is currently 

drafted, even with the phase-in and even with the potential for 

waivers, has the potential to actually increase revenues to Iran, 

and that is obviously something that we all want assiduously to 

avoid. 

Senator CASEY. I know I am out of time. Under Secretary Sherman, I do not know if you have anything you want to add. 

Ms. SHERMAN. The only thing I would add that we have not discussed here this morning is that the international environment is 

changing on a daily basis and probably one of the most significant 

things that will happen sometime in the near future is a change 

in Syria. Iran has really only two allies left: Syria and Hezbollah. 

And when, indeed, Bashir al-Assad steps aside, which he most undoubtedly will do—it is just a matter of when, not if—Iran will lose 

one of its last proxies in the world. And it will further focus the 

attention of the international community on what has to occur here 

and create some different political circumstances that I think will 

help us to further isolate Iran and to make it pay a price for its 

illicit activities. 

Senator CASEY. Thank you. 

The CHAIRMAN. Senator Casey, thank you. 

41

Let me just say I think we in the Congress have a difference of 

opinion about a particular step, but I want to assure my friend and 

colleague that on the issue of urgency, I can attest that I cannot 

think of any issue that is concentrating the minds of the administration more than this right now or at any other time. Yesterday 

I was at the White House in a meeting about this particular topic. 

I know that the Secretary of State and the State Department are 

as focused on it as can be. I do not think anybody has any illusions 

about the timeframe or the urgency. There may be some differences 

about timing on a particular step or a particular methodology, but 

I would not view this amendment or the discussion this morning 

as somehow some great departure. And I think it is important for 

everybody, particularly outside of here, to understand that. There 

is a universal understanding amongst our allies also. This is the 

topic of conversation right now, and I think everybody needs to be 

aware of that. 

Senator Udall. 

Senator UDALL. Thank you, Chairman Kerry, and thank you for 

holding this hearing at this very appropriate time. 

And I appreciate you all being here and your service to the 

country. 

Under Secretary Cohen, I do not know if you can answer this, 

but I thought publicly I wanted to at least try to explore it a little 

bit with you. It has been reported that A.Q. Khan’s designs and 

plans have been widely copied by the Iranians. Do you know if 

Pakistan or elements of Khan’s black market network are currently 

supporting Iran’s program? And then what tools do we have to deal 

with black market nuclear materials? The whole discussion here 

has been about our allies and working with our allies, but we have 

some other very dangerous situations to deal with here. 

And Secretary Sherman, if you want to start, please go ahead. 

Mr. COHEN. So I do want to be mindful of the setting in how I 

respond. 

Senator UDALL. Yes. 

Mr. COHEN. So let me just say this. We are focused very carefully 

on who is supplying material to Iran and in particular to Iran’s 

nuclear program. We have, obviously, a range of sanctions already 

in place against entities in Iran, as well as entities outside Iran 

that have been supportive of their nuclear proliferation activities, 

and we continue to track very closely the individuals and entities 

involved in supplying Iran’s nuclear program, the material for its 

program. 

So I do not want to get into any greater specificity on that in this 

setting. You know, we are happy to brief you in a different setting 

with additional information. But we spend an enormous amount of 

time trying to understand who it is that is supplying Iran and then 

taking action to try and isolate them from the international economic and the commercial and financial systems so that they are 

not able to do so. 

Ms. SHERMAN. I would only add, Senator—and would be glad to 

go into further detail in a classified setting—that A.Q. Khan’s tentacles throughout the world have been much discussed, much absorbed, and much tracked, and that the State Department and the 

entire administration pays close attention to sort of the trading 

42

routes of nuclear materials. One of the great experts in this regard 

is the ranking member of this committee who probably understands the trade of materials and technology as well as any of us 

do. 

I would note as well we do this not only for Iran, but North 

Korea and other would-be nuclear powers, and Secretary Clinton, 

in her meetings in Burma in efforts to not only encourage the 

democratic trends that are taking place, but also is being very 

quite clear with the leadership in Burma that ties to North Korea 

and potential shipments need to stop. So the tracking of these 

routes that might increase nuclear proliferation are something that 

is quite well attended to. 

Senator UDALL. Thank you for that answer, and we may have an 

opportunity to explore this in other settings. 

But the amendment that has been discussed here today is targeting the sale of Iranian oil. And I had a couple of questions, and 

I am just going to throw them all out and have you try to answer 

them. 

In light of the widely reported pullout of major energy firms from 

Iran’s energy sector, what is your assessment of the Iranian oil and 

gas industry at this point? If that sector is declining, how will 

world energy prices be affected going forward? Who is purchasing 

Iranian oil? Who are the big purchasers? What are the percentages 

there? Are those numbers going up or down. For example, with the 

Chinese, how major of a purchaser are they, and from what you 

have described, Secretary Sherman, is that going down? And then 

is there any indication that Iran cannot sell any of its oil on the 

world oil market? 

Ms. SHERMAN. Thank you. The data on all of this fluctuates, and 

in this setting, I can discuss open-source reports. 

Iran is still doing relatively well because the price of oil is quite 

high, and that actually has been the nature of a lot of our discussions and concerns about the Kirk-Menendez amendment, which is 

that it may increase the price of oil which would only accrue to the 

benefit of Iran. 

In terms of monthly deliveries of refined petroleum to Iran, 

which is quite crucial to their economy, whether they are lower 

today than they have been in the past, although month-to-month 

numbers fluctuate, it is our view that they are significantly lower 

than before CISADA was passed and that in fact CISADA has had 

an impact. And furthermore, the price for these products is reportedly higher, that is, the refined petroleum coming in. As most people know on this committee, but the public may not know, although 

Iran has a lot of oil, it does not have the capacity to refine that 

oil for its domestic use. So it has to send out the oil, get it refined 

elsewhere, and have it come back in. And the prices for that 

refined oil has increased 10 to 25 percent since CISADA. 

So again, the sanctions that we have are biting. Yes, Iran is deploying some deceptive practices to circumvent these sanctions, but 

we are, I think, working very hard to stay ahead of those tactics. 

Mr. COHEN. And Senator, just to respond to your question about 

who is purchasing Iranian oil today, there are purchasers in the 

EU, Greece, Italy, the Netherlands. Outside of the EU, China is obviously a big purchaser, as is Japan, South Korea, India, Turkey; 

43

Sri Lanka, I think, gets all of its oil from Iran. But those are the 

major purchasers of Iranian oil today. 

Senator UDALL. Do you have any sense on percentages? I mean, 

is China the biggest purchaser? Do they purchase 50 percent of——

Mr. COHEN. Excuse me. I am sorry. 

Senator UDALL. Yes. Go ahead. 

Mr. COHEN. China purchases about 20 percent of Iranian output. 

Why don’t I give to you—these are unclassified figures. I can give 

you a chart that sets out exactly how much each of these countries 

imports from Iran and what percentage it makes up of their 

imports. 

Senator UDALL. And is your sense because of our activities, the 

things that you have been describing—are any of those going down 

at this point? Or which countries would be impacted or taking 

action or doing something that is putting a crunch on the Iranian 

situation? 

Mr. COHEN. Senator, I think what we are looking to do is to work 

with our closest allies, particularly in the EU, in Asia, in India 

potentially to try and have them reduce their importation of Iranian oil. I think we have not seen to date that occur, but I do think 

we see the potential for a coordinated effort to bring that about. 

Senator UDALL. Thank you very much. 

Sorry, Mr. Chairman, for going over a little bit. 

The CHAIRMAN. No, no. Thanks a lot. 

Senator UDALL. I appreciate you doing this today. 

The CHAIRMAN. Thanks, Senator Udall. I appreciate your participation and everybody’s. 

I think, Under Secretaries, you can see from the broad presence 

here today and the number of questions the intensity of the concern and the focus here. And I know you knew that before you 

came. We are very, very appreciative of your presence here today. 

I think this hearing has helped to underscore, for the public certainly and for all interested parties, the deep concerns that exist 

right now, and hopefully in the next weeks and early months here, 

everybody will be able to come together in a sensible way to avoid 

the potential, very dangerous alternatives and options that are facing everybody in this. 

Almost certainly we will have another hearing on broad policy 

aspects regarding this, I would say in early February, depending 

again on the return schedule and what happens in the next few 

days here. And we will sort of start to lay the plans for that. 

We know you are focused on it, and as I said a moment ago, I 

am confident about the intensity of the efforts and the breadth of 

the options that are being considered here. 

So thanks for contributing to this. We are very, very appreciative 

of your presence today and we look forward to continuing a good 

dialogue with you. 

We stand adjourned. Thank you. 

[Whereupon, at 12:10 p.m., the hearing was adjourned.] 

44

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

RESPONSES OF UNDER SECRETARY OF STATE WENDY SHERMAN TO QUESTIONS

SUBMITTED BY SENATOR JOHN KERRY

Question. Some analyses indicate that not all of Iran’s actions in Afghanistan and 

Iraq are contrary to U.S. interests. For example, the aid and reconstruction work 

Iran has done in both countries may complement U.S. efforts, and Iran has supported President Karzai of Afghanistan and Prime Minister Maliki in Iraq.

• What are the risks as the U.S. withdraws its troops—first from Iraq, later from 

Afghanistan—that Iran’s presence in the region will expand? 

• What areas of common interest do the United States and Iran share on other 

issues or with respect to other countries in the region?

Answer. Iraqis have repeatedly demonstrated their desire to develop a strong, 

independent state and their resistance to Iran’s meddling. Prime Minister Maliki 

has said he will not tolerate violence by militant groups, including those backed by 

Iran, and Iraqi leaders confronted Iranian-backed militias operating in Iraq in 2008 

and again this year after violence against our troops spiked in January. All significant Iraqi political groups, with the exception of the Sadrist bloc, support a longterm partnership with the United States, and we have made it clear to Iraq—and 

Iran—that we remain committed to being a strong and enduring partner to the 

Iraqis. 

The Government of Iraq’s recent decision to purchase F–16s demonstrates its commitment to build its external defense capabilities and maintain a lasting strategic 

relationship with us, a commitment we will reaffirm during Prime Minister Maliki’s 

upcoming visit to the United States. 

We are working with Middle East allies to encourage Iraq’s reintegration into the 

region and bolster defenses against shared regional threats, such as those coming 

from Iran. Last, we are encouraged that Iraq is strengthening its relations with EU 

countries and key regional players like Turkey to diversify its foreign relations. 

With regard to Afghanistan, we recognize the Afghan Government’s need to build 

productive relationships with all its neighbors, including Iran, which hosts roughly 

1 million registered Afghan refugees and maintains significant economic ties in 

western Afghanistan. Iran was a signatory to the Istanbul Declaration, which calls 

for supporting ‘‘stability and peace in Afghanistan, as well as respect for Afghanistan’s sovereignty, unity, and territorial integrity’’ and ‘‘resolutely combating and 

eliminating terrorism in all its forms.’’ Iran should share some of our interests in 

the region, such as reducing the production and trafficking of drugs from Afghanistan and preventing the return of radical groups like al-Qaeda and the Taliban. 

Unfortunately, most of its actions in the region have contributed to greater instability. Iran has interfered in both countries’ internal politics, particularly in Iraq, 

and funneled lethal aid to terrorist groups in both Iraq and Afghanistan, as well 

as to Hezbollah and Hamas. It has provided material support to the Syrian regime, 

not only in opposition to our interests, but those of regional players like Turkey and 

Saudi Arabia. 

We remain vigilant regarding Iran’s motives and actions in the region, and we 

are committed to maintaining strong relationships with Iraq and Afghanistan.

Question. The State Department launched its virtual embassy in Iran this week.

• What does the United States Government hope to achieve through the Virtual 

Embassy? How does this measure fit into broader efforts to connect with the 

Iranian people? 

• What steps is the United States Government taking to protect Iranians who 

access the Virtual Embassy Web site, given that their activities may well be 

closely monitored by the Government of Iran?

Answer. The Government of Iran is extremely adept at monitoring and filtering 

information, and we are launching Virtual Embassy Tehran as a cornerstone effort 

to bring down the government’s ‘‘electronic curtain.’’ The Web site’s content is available in English and Persian and operates like any other U.S. Embassy Web site, 

which will allow us to engage directly with the people of Iran and provide accurate 

information on visas, U.S. educational opportunities, American culture and society, 

and U.S. policy on Iran and other issues. 

Initiatives like Virtual Embassy Tehran are part of a broader strategy to promote 

mutual understanding, respect, and dialogue between the American and Iranian 

people. The Web site will complement our use of social media and traditional broadcasting tools. For example, we have a Farsi page on Facebook with over 45,000 fans 

45

and a Twitter account with nearly 8,000 followers, as well as our more powerful 

broadcasting tools, VOA Persian and Radio Farda. 

We are also working to help those who wish to bring down Iran’s electronic curtain. While circumvention software is outlawed in Iran, we know that it is widely 

used by the Iranian people. It is not risk free, however, and we have urged all individuals operating in closed societies like Iran to use caution when utilizing these 

tools. The Department and USAID have also supported a range of digital safety 

training and awareness-raising efforts to educate activists around the world about 

the risks they face and how to protect themselves online. Such programs involve 

‘‘train the trainers’’ approaches; online interactive trainings and outreach; and traditional, low-tech efforts to distribute high-tech knowledge.

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