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S. HRG. 112–332 

ADDRESSING POTENTIAL THREATS FROM IRAN: 

ADMINISTRATION PERSPECTIVES ON IMPLEMENTING NEW ECONOMIC SANCTIONS ONE 

YEAR LATER 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING THE GLOBAL IMPACT OF THE IRAN REGIME SANCTIONS 

AND EVALUATE THE EFFECTIVENESS OF THE COMPREHENSIVE IRAN 

SANCTIONS, ACCOUNTABILITY, AND DIVESTMENT ACT 

OCTOBER 13, 2011 

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

( 

Available at: http://www.fdsys.gov/ 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

HERB KOHL, Wisconsin 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

MICHAEL F. BENNET, Colorado 

KAY HAGAN, North Carolina 

RICHARD C. SHELBY, Alabama 

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

ROGER F. WICKER, Mississippi 

DWIGHT FETTIG, Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director 

CHARLES YI, Chief Counsel 

PATRICK GRANT, Counsel 

COLIN MCGINNIS, Professional Staff Member 

JOHN O’HARA, Republican Senior Investigative Counsel 

ANDREW OLMEM, Republican Chief Counsel 

DAWN RATLIFF, Chief Clerk 

RIKER VERMILYE, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)
C O N T E N T S 

THURSDAY, OCTOBER 13, 2011 

Page 

Opening statement of Chairman Johnson ............................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Shelby .................................................................................................. 2 

Senator Menendez ............................................................................................ 4 

Senator Kirk ..................................................................................................... 5 

Prepared statement ................................................................................... 33 

Senator Brown .................................................................................................. 6 

Senator Moran .................................................................................................. 7 

Senator Tester .................................................................................................. 9 

Senator Bennet 

Prepared statement ................................................................................... 33 

WITNESSES 

Wendy Sherman, Under Secretary for Political Affairs, Department of State ... 9 

Prepared statement .......................................................................................... 34 

Response to written questions of: 

Chairman Johnson .................................................................................... 47 

Senator Schumer ....................................................................................... 48 

Senator Menendez ..................................................................................... 50 

Senator Toomey ......................................................................................... 53 

Senator Moran ........................................................................................... 54 

David S. Cohen, Under Secretary for Terrorism and Financial Intelligence, 

Department of the Treasury ................................................................................ 12 

Prepared statement .......................................................................................... 38 

Response to written questions of: 

Chairman Johnson .................................................................................... 57 

Senator Schumer ....................................................................................... 58 

Senator Menendez ..................................................................................... 61 

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

Senator Toomey ......................................................................................... 66 

Senator Moran ........................................................................................... 67 

David W. Mills, Assistant Secretary for Export Enforcement, Department 

of Commerce ......................................................................................................... 13 

Prepared statement .......................................................................................... 43 

Response to written questions of: 

Chairman Johnson .................................................................................... 70 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

2011 IMF Article IV Consultation Report Comparisons: U.S. and Iran, submitted by Senator Kirk ........................................................................................ 73 

Cumulative LEU Production at Natanz Chart, submitted by Senator Kirk ...... 74 

International Monetary Fund Iran Economy Chart, submitted by Senator 

Kirk ....................................................................................................................... 74 

(III)

(1) 

ADDRESSING POTENTIAL THREATS FROM 

IRAN: ADMINISTRATION PERSPECTIVES ON 

IMPLEMENTING NEW ECONOMIC SANCTIONS ONE YEAR LATER 

THURSDAY, OCTOBER 13, 2011 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 10:03 a.m. in room 538, Dirksen Senate 

Office Building, Hon. Tim Johnson, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. Good morning. I call this hearing to order, 

and I welcome my colleagues and our witnesses. 

In the wake of the alarming announcement this week of an Iranian Government-linked plot to assassinate the Ambassador of 

Saudi Arabia to the United States and U.S. announcements of 

criminal prosecutions coupled with the Treasury sanctions against 

key plotters, we are reminded once again of Iran’s continuing support for terrorism, which has now reached our own shores. 

Today, we will hear from key Administration officials implementing U.S. policy to minimize potential threats from Iran, including through vigorous enforcement of the Comprehensive Iran 

Sanctions, Accountability, and Divestment Act, or CISADA, developed by this Committee and enacted last year. That bill broadened 

and strengthened current U.S. sanctions law with respect to Iran, 

provided for voluntary divestment from firms active in Iran’s energy sector, and strengthened limitations and penalties on illegal 

diversion of sensitive technologies to Iran. 

When he took office, President Obama took an aggressive dualtrack approach to Iran, offering high-level engagement coupled 

with sustained pressure through economic sanctions. Since then, 

Iran has continued to defy the demands of the international community to halt its illegitimate nuclear activities or even to answer 

questions about them. And, it has continued to support terrorist activity throughout the world. In response, the President has refocused U.S. policy to intensify pressure on Iran’s Government 

through new U.S. sanctions, and multilateral sanctions adopted by 

the U.N. Security Council. 

Iran’s leaders confront the same choice today that they have 

faced for some time. They can agree to end Iran’s illegitimate nuclear program and stop supporting terrorists around the world, or 
2 

they can continue on their present course, ignoring the legitimate 

demands of the international community on their nuclear program, 

repressing their people, and supporting terrorists, deepening Iran’s 

isolation and further threatening their economy. 

Today, we are fortunate to have before the Committee Under 

Secretary of State for Political Affairs Wendy Sherman, Under Secretary of Treasury for Terrorism and Financial Intelligence David 

Cohen, and Assistant Secretary of Commerce for Export Enforcement David Mills. Under Secretary Sherman will elaborate on ongoing diplomatic efforts, assess our chances for success, and survey 

policy options. Under Secretary Cohen will discuss the targeted financial measures employed against Iran and explore with us other 

pressure points in the global financial system that could be employed against Iran. Assistant Secretary Mills will update us on 

progress in efforts to combat black market networks throughout 

Asia and the Middle East which help to illegally supply Iran with 

sensitive technologies. 

With enactment of new Iran sanctions last year, Congress 

equipped the Administration with new tools to confront the threats 

posed by Iran. It is clear that U.S. sanctions, as well as those imposed by the United Nations, European Union, and others have 

further isolated Iran and had some impact on its economy, though 

that has been mitigated by continuing high oil prices. But it is also 

clear that the sanctions imposed so far have not deterred Iran from 

pursuing its nuclear ambitions. 

I am eager to hear a description of the full range of U.S. efforts 

to pressure Iran. I hope our witnesses will also discuss any challenges in implementing the new law, the status of ongoing consultations with allies on these issues, and any additional legislative 

tools they believe will help to increase the pressure on the Government of Iran. 

Our approach must continue to be targeted and strategic, maximizing the economic leverage of the United States and our allies, 

and U.S. and international investors. But make no mistake. If Iran 

were to acquire nuclear weapons capability, it would pose a significant threat to peace and security in the Middle East and especially 

to our close ally, Israel. We must continue to do all we can to avoid 

that result. If new tools are needed, and I think they are, then we 

will provide them. 

We must not let up until the Government of Iran comes clean on 

its nuclear program and stops its support for terrorism. 

Finally, I want to thank all of our Committee Members for their 

interest and commitment on this issue, and especially Senators 

Menendez, Brown, Moran, Schumer, and my Appropriations Subcommittee partner, Senator Kirk. I look forward to working with 

all Members of the Committee on a way forward. 

Chairman JOHNSON. I recognize Senator Shelby for an opening 

statement. 

STATEMENT OF SENATOR RICHARD C. SHELBY 

Senator SHELBY. Thank you, Mr. Chairman. 

Two days ago, the Department of Justice disclosed that Iran has 

been plotting to carry out an assassination, an embassy bombing 

against Saudi Arabian and Israeli targets on American soil. This 
3 

plot, which is the latest in a long series of violent actions attempted by Iran around the globe, underscores Iran’s role as the 

leading state sponsor of terrorism. 

It is against this backdrop that the Committee will examine this 

morning the global impact of the Iran sanctions regime and evaluate the effectiveness of the Comprehensive Iran Sanctions, Accountability, and Divestment Act enacted by Congress last year. 

Despite 30 years of progressively more stringent economic sanctions, Iran remains one of the more serious threats to the national 

security of the United States and our allies. Iran continues to support authoritarian regimes, terrorist organizations, and radical militias in Iran and in Afghanistan. For allies such as Israel, this 

week’s revelation shows why Iran’s threat to its very existence is 

real, continues unabated, and, I believe, cannot be ignored. 

More than 1 year has passed since Congress, the United Nations, 

and many of our allies levied the most recent round of sanctions 

against Iran in an attempt to derail Iran’s efforts to obtain nuclear 

weapons. Unfortunately, the heightened sanctions have not yet produced any significant change in Iran’s behavior regarding its nuclear program, international terror, or its record on human rights. 

One problem is that the White House and the State Department 

have carefully, I believe, managed to avoid labeling any major Russian, Chinese, or other U.S. trading partner’s companies as violators of U.S. mandated sanctions. China, Russia, and others are expanding trade with Iran, continue to provide it with banking assistance, and invest in its energy sector. Additionally, China and Russia have further undermined U.S. sanctions by supporting Iran’s 

military programs. For sanctions against Iran to be as effective as 

possible, I believe the Administration needs to do a better job at 

securing the cooperation of the global community. 

Another growing problem is the Islamic Revolutionary Guard 

Corps, which has developed a global financial and terror network. 

The Islamic Revolutionary Guard is not just an elite military unit 

within Iran. As we have seen this week, it can operate even here 

in the United States. It has hundreds of companies, front companies and affiliates spread throughout Iran and the world to facilitate general trade and its oil export. It can finance operations anywhere in the world while adding to the coffers of the Iranian treasury. Accordingly, the Islamic Revolutionary Guard has become the 

primary means by which Iran can avoid the global sanctions regime. The question now, I believe, is what else can be done to further enhance the effectiveness of the Iran sanctions regime, especially with regard to the Islamic Revolutionary Guard and its nuclear aspirations. 

Although sanctions have helped to limit Iran’s military capabilities, the events of this week demonstrate, I believe, that Iran remains determined to find new avenues to carry out actions of terrorism. Moreover, because Iran continues its efforts to develop nuclear weapons, failure to effectively enforce sanctions against Iran 

could have catastrophic results in just a few years. I believe we 

cannot afford to be one step behind Iran. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Shelby. 
4 

Are there any other Members who wish to make an opening 

statement? Senator Menendez. 

STATEMENT OF SENATOR ROBERT MENENDEZ 

Senator MENENDEZ. Thank you, Mr. Chairman. Mr. Chairman, 

first of all, I want to thank you personally. I had asked you to consider a hearing on the effect of our sanctions policy and you told 

me you would and I appreciate you calling this hearing today, so 

thank you very much. And you called this hearing well before the 

incidents of the last few days, so this was obviously in response to 

a broader issue of our sanctions policy, but certainly ends up being 

far more timely. 

We meet on the heels of a foiled plot to assassinate the Saudi 

Ambassador to the United States and to attack the Embassy of 

Israel in Washington, DC, a plot believed to be traced back to the 

highest levels of the Iranian regime. The revelation of the foiled attacks, one which reportedly was to take place at a popular restaurant less than 5 miles from this very building, points to the impact and importance of this hearing to ensure that the United 

States is doing all it can to enforce existing legislation, to fill the 

loopholes that exist in current legislation, to work with our European allies and others to ensure that they step up and aggressively 

enforce their own sanctions, and to use all possible mechanisms to 

put pressure on those countries and companies which are providing 

revenue, directly or indirectly, to the Iranian regime and its Islamic Revolutionary Guard Corps, or for that fact, refined petroleum products. 

I applaud the White House for its quick action this week in imposing new sanctions against Iranian elements responsible for the 

planned assassination, including Iran’s Mahan Air, which reportedly carried members of the military force accused of plotting to 

kill the Saudi Ambassador. And while I believe there is more that 

we can and must do, we should also recognize that this Administration has done more to isolate Iran than any prior Administration, Republican or Democratic alike. 

Iran has a history of exporting terrorism against coalition forces 

in Iraq, in Afghanistan, in Lebanon, and this week in Washington. 

This week’s events underscore that Iran will not hesitate to advance its interests regardless of the political costs. Iran’s drive to 

advance its nuclear weapons program has been slowed by U.S. and 

international sanctions, but remains undeterred. The IAEA recently confirmed that Iranian program is moving ahead and that 

they are loading P–2 centrifuges at Qom. These centrifuges will 

allow Iran to significantly enhance its uranium enrichment capacity. 

It is time to take the next step, to further isolate Iran politically 

and financially. I look forward to working with the Administration 

to achieve this goal and to advance the legislation that I, along 

with others in a bipartisan effort, introduced earlier this year, the 

Iran, North Korea, and Syria Sanctions Consolidation Act, which 

has 76 bipartisan cosponsors. 

Our efforts to date have been transformative, but as Iran has 

adapted to the sanctions, unanticipated loopholes have allowed the 

regime to adjust and circumvent the sanctions and drive forward 
5 

its effort to achieve a robust nuclear program. We have to be just 

as prepared to adjust and adapt by closing each loophole that 

arises. That is why I believe the Iran, North Korea, and Syria 

Sanctions Consolidation Act is a perfecting legislation of CISADA, 

not simply an additional set of sanctions, and that is why I am 

looking forward to asking the witness about both China and an oilfree Iranian zone that I think is crucial to our national interests 

and national security goals. 

Thank you again, Mr. Chairman, for holding this hearing. 

Chairman JOHNSON. Are there any other Members who wish to 

be recognized? Senator Kirk. 

STATEMENT OF SENATOR MARK KIRK 

Senator KIRK. Thank you, Mr. Chairman. I really want to applaud the leadership of Senator Menendez on his legislation because it is well timed, I think, as is this hearing. When we look 

at Iran, we see an accelerating nuclear program, an expanding ballistic missile program, Iran being the first space-faring nation of 

the 21st century, and wholesale disregard for human rights. 

I read with interest Attorney General Holder’s announcement on 

this plot and would note page 12 of the complaint from the Justice 

Department, which reads, ‘‘If not, restaurant, hit it, it’s OK,’’ by 

which I understand Arbabsiar meant that if Confidential Source 1 

could not assess the Ambassador outside the restaurant, he should 

hit or bomb the restaurant. In response, Confidential Source 1 then 

noted that there were from 100 to 150 people in the restaurant and 

buildings on the side and Senators, U.S. Senators, dined there, all 

of which Arbabsiar dismissed as no problem and no big deal, meaning the potential for such casualties should not dissuade Confidential Source 1 from killing the Ambassador. 

I note David Cohen, who I respect very much, has worked designated Suliman, the head of the Iranian Revolutionary Guard 

Corps. It does not almost get any higher than that, for the Government of Iran seeking to kill American citizens on top of foreign targets that we see. 

Earlier this summer, Senator Schumer and I bonded together 92 

Senators. It does not even get more unified than that on bipartisan 

cooperation in this chamber, to call for the United States to collapse the Central Bank of Iran, the paymaster and financial source 

of funding for the Iranian Revolutionary Guard Corps and for the 

MOIS, the Intelligence Service of Iran. And since you have now 

publicly identified the leaders of those organizations as 

sanctionable activity, I think it is necessary now to cutoff their 

funding source. It should be the policy, as this letter outlines in 

overwhelming bipartisan terms, to collapse the currency of Iran. 

I am worried that there is some talk inside the Administration— 

not David, but others—who said that we should have a multilateral 

limit on our policy. But this was not a multilateral attack on the 

United States. It was an attack by the Government of Iran on the 

people of the United States, and so the United States should act 

unilaterally when necessary and multilaterally when possible. But 

this was in no means a multilateral attack on the United States. 

We should accelerate the current designations under the law, 

and specifically we should reference the August 3 Government Ac-
6 

countability Office report which designated 14 companies as continuing to conduct activities in Iran in potential violation of U.S. 

law, including the China National Offshore Oil Corporation, the 

China National Petroleum Corporation, Sinopec of China, Daelim 

of South Korea, Edison of Italy, Hyundai Heavy Industries of South 

Korea, INA of Croatia, the Indian Oil Corporation Limited, the 

Natural Gas Corporation of India, Oil India Limited, OMV Austria, 

ONGC Videsh Limited from India, Sasol of South Africa, and 

Sonangol of Angola. I would hope that you would make the commitment to investigate these entities as clearly identified by the Government Accountability Office. 

Also, I think we need to accelerate sanctions with regard to individuals who are systemic abusers of human rights, including, first 

and foremost, the President of Iran, Ahmadinejad, and especially 

his Chief of Staff, Esfandier Rahim Mashaei. Under Executive 

Order 13553, the Obama administration has so far designated only 

11 Iranian officials for human rights violations since September 

2010. In comparison, the European Union has designated 61 such 

individuals as systemic violators of human rights, including 29 additional ones on October 5. There are over 100 members of the 

Baha’i community now imprisoned in Iran, including seven Baha’i 

members called the Yaran, imprisoned since 2008. And just this 

week, Iranian actress Marzieh Vafamehr was sentenced to not just 

a year in jail, but 90 lashes because of her appearance in an Australian film without the covering of headgear. 

I think as we see the struggle of the Iranian people for their 

human rights, we need to remember that there were many people, 

especially in the State Department, that wanted to pull back on 

fundamental U.S. values with regard to the ‘‘refuseniks’’ of the Soviet Union. Luckily, President Reagan did not. In fact, he reached 

out to them. And it was one of our proudest moments where the 

refuseniks survived the Soviet Union and it collapsed. It should be 

our objective here. 

So I commend you, Mr. Chairman, for holding the hearing and 

look forward to the questions. 

Senator BROWN. Mr. Chairman? 

Chairman JOHNSON. Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman, and I echo Senator 

Menendez’s words in thanking you for responding to his request 

and others to hold this hearing. 

The Government of Iran, as we know and as has been said, must 

not be permitted to obtain weapons of mass destruction, period. Recent allegations about Iran’s efforts to assassinate the Saudi Ambassador only underscore the threat that Iran poses to not only our 

security, not only the security of Israel, but also the security of 

Iran’s neighbors. We have heard from many of the Members of this 

Committee about the dangers a nuclear-armed Iran would pose to 

the United States, to Israel, and to the global community. 

Preventing this threat requires an all hands on deck approach. 

We have worked on pressuring. We have worked on persuading 

Iran. We have approached the issue politically, diplomatically, and 

through sanctions and other ways economically. I have agreed with 
7 

this pressure and persuade approach first because it is a responsible way to carry out diplomacy. In short, there are no good options if our efforts to pressure and persuade fail. That is why it is 

so important we speak with one voice in the U.S. Senate when it 

comes to Iran. 

For years, this Committee has been at the forefront of sanctions. 

Last year, we passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act. This Act requires that sanctions be 

imposed on companies that are determined to have made certain 

investments in Iran’s energy sector. Its repressive government relies on the energy sector for more than half of its revenue, as we 

know. That was last year. Today, we know Iran’s march toward nuclear weapon production capability continues. 

That is why this hearing is so important, Mr. Chairman. We 

need to hear from the Administration, and thank you for joining 

us, what you are doing to implement the sanctions, how effective 

they have been, what additional tools, resources, and support you 

need from us. We only have the opportunity to get this right once. 

Thanks. 

Chairman JOHNSON. Senator Moran. 

STATEMENT OF SENATOR JERRY MORAN 

Senator MORAN. Chairman Johnson, thank you for leading this 

important hearing to review the Administration’s implementation 

of sanctions on Iran. 

In July, I and others requested this opportunity to exercise this 

Committee’s oversight responsibilities and I thank you for giving 

us the chance to review U.S. policy toward Iran. I know that you 

and the Ranking Member recognize the gravity of this issue and 

understand what is at stake. 

More than a year ago, Congress passed and President Obama 

signed into law the Comprehensive Iran Sanctions, Accountability, 

and Divestment Act of 2010. I certainly welcomed this legislation 

as I believe Iran’s pursuit of nuclear weapons is one of the greatest 

dangers to global stability and the security of our country that we 

face today. However, when President Obama signed the bill, I stated clearly and have continued to say that its success will depend 

upon enforcement. 

Since the enactment of CISADA almost 15 months ago, 10 firms 

have been sanctioned under the Iran Sanctions Act. These sanctions and the threat of others have yet to achieve the fundamental 

goal, which is to compel Iran to change its behavior and abandon 

its pursuit of nuclear weapons. 

On September 2, the International Atomic Energy Agency released its latest report on Iran’s nuclear program. Like similar reports before it, the September report shows that Iran is continuing 

to buildup a stockpile of low enriched uranium. Since the May 

IAEA report, Iran has produced additional low enriched uranium, 

bringing its total stockpile to more than 4,500 kilograms. On top 

of that, Iran continues to increase the amount of uranium enriched 

to a level of 20 percent. Enriching uranium to a level of 20 percent 

represents 85 to 90 percent of the work needed to reach weaponsgrade fuel. All told, Iran possesses enough enriched uranium that 

upon further processing could fuel three nuclear bombs. 
8 

Last month, IAEA’s report also indicates that Iran is moving production of uranium enriched to a level of 20 percent to a military 

facility buried underneath a mountain. And in June, Iran said it 

would triple its production of higher enriched uranium. If all of this 

was not alarming enough, concerns about the possibility of military 

dimensions of a nuclear program, including activities related to the 

development of a nuclear payload for a missile remain unresolved 

according to IAEA. Clearly, more must be done to pressure Iran to 

change course and we cannot afford further delay. 

On September 30 of 2010, the United States made its first sanction determination under the Iran Sanctions Act. While one firm 

was sanctioned that day, four energy companies were deemed eligible by the Administration to avoid sanctions by pledging to end 

their business in Iran. In total, the Administration has used the 

special rule to waive sanctions against five companies. I would expect the witnesses to present evidence that those firms have, indeed, done what they said they were going to do, ended all business 

in Iran. 

I also remain concerned about the activity of Indian and Chinese 

firms in Iran. I have expressed my concern about specific Indian 

and Chinese firms to Secretary Clinton in letters in November 

2010 and March 2011. If Indian and Chinese firms are violating 

U.S. law, the Administration must penalize them. 

As important as it is for the Administration to fully enforce U.S. 

law to keep foreign companies from doing illegal business with 

Iran, we could greatly impair Iran’s ability to do business with 

these and other companies by tightening financial sanctions on 

Tehran. In August, I joined many of my colleagues in this room, 

91 of us, in asking the President to impose sanctions on the Central Bank of Iran, and I would like to hear what steps the Administration is taking in regard to that bank. 

I would also like for Under Secretary Cohen to address the final 

rule, the Financial Crimes Enforcement Network, delivered to the 

Federal Register last week to implement Section 104(e). I am hopeful that Under Secretary Cohen will explain how this provision will 

work in practice and inform the Committee about the number of 

foreign banks he believes may be engaged in sanctionable activity. 

This Administration has said the United States will not allow 

Iran to acquire nuclear capability. Saying we will prevent Iran 

from acquiring a nuclear weapon is good, but it is not enough. Only 

our actions can stop Iran. Sanctions have been the primary tool 

that the United States has used to try to convince Iran to change 

its behavior. Any assessment of our success or failure must be 

judged against that goal. When held to this metric, it is most certain that we have not yet succeeded. 

I look forward to hearing from the witnesses. I thank them for 

their work and endeavors in regard to making our country safe and 

working with them and my colleagues to see that this Administration has every tool it needs to stop Iran from all the tools that Congress has given it from being implemented fully, and I thank the 

Chairman. 

Chairman JOHNSON. Senator Tester. 
9 

STATEMENT OF SENATOR JON TESTER 

Senator TESTER. Yes, thank you, Chairman Johnson. I will be as 

brief as I possibly can. I want to thank you and Senator Shelby for 

convening the hearing. I want to thank the witnesses for being 

here. 

Simply put, the regime in Iran represents an incredible threat to 

American interests and not in a good way, and to the stability in 

an already volatile part of the world. There are state-sponsored terrorists who, by thumbing their nose at the international community, inch closer and closer to nuclear weapons capabilities. They 

supply weapons to our enemies in Iraq and Afghanistan and they 

are directly responsible for attacks on our troops. They incite violence in Israel and Lebanon through their support of Hamas and 

Hezbollah and they help prop up murderous dictators like Assad in 

Syria. They are a flagrant violator of international law and human 

rights and religious freedom and now they are trying to kill foreign 

diplomats on our soil. 

Now, we have taken a number of steps to crack down on this regime, but it is clear we need to tighten the screws. It boggles the 

mind that we continue to see businesses, American businesses, 

supporting Iran’s economy by actively circumventing imposed sanctions. It is outrageous and we need to put a stop to it immediately. 

Business as usual is not going to cut it. There has to be a greater 

sense of urgency here and I hope you all agree, and I think you 

do. 

I look forward to the hearing, your recommendations, and how 

we move forward most effectively. Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you all. 

I want to remind my colleagues that the record will be open for 

the next 7 days for opening statements and any other materials 

you would like to submit. 

Now, I would like to welcome the witnesses for our panel today. 

Our first witness is Wendy Sherman, the Under Secretary for Political Affairs at the State Department. Our next witness is David 

Cohen, the Under Secretary for Terrorism and Financial Intelligence at the Department of Treasury. Our final witness is David 

Mills, Assistant Secretary for Export Enforcement at the U.S. Department of Commerce’s Bureau of Industry and Security. 

I thank all of you again for being here today and I look forward 

to your testimony. I will ask the witnesses to limit your remarks 

to five to 7 minutes. Your written statements will be submitted for 

the record. 

Under Secretary Sherman, please proceed. 

STATEMENT OF WENDY SHERMAN, UNDER SECRETARY FOR 

POLITICAL AFFAIRS, DEPARTMENT OF STATE 

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

Johnson, Ranking Member Senator Shelby, distinguished Members 

of the Committee, thank you very much for inviting me to appear 

before you today to discuss the Obama administration’s strategy to 

address the continued threat posed by the Iranian regime, its support for international terrorism, its nuclear weapons and ambitions, its destabilizing activities in the region, and its human rights 

abuses at home. 
10 

This hearing could not be more timely. But before I address this 

week’s news and the broader sanctions discussion, I would like to 

say a word about a dear colleague. I want to dedicate this testimony to Philo Dibble, Deputy Assistant Secretary for Near East Affairs, who passed away unexpectedly 2 weeks ago. Philo was an exceptionally well respected career member of the Foreign Service 

who devoted most of his career to the Middle East. For the past 

year, he has dedicated his deep regional expertise and knowledge 

to advancing our policy on Iran. The loss of his wisdom and leadership is a profound one for the Department and for our country. 

Before I get to the substance of this hearing, prior to the events 

of the last couple of days, I would like to address the conspiracy 

to assassinate the Saudi Ambassador in Washington that was directed by elements of the Iranian Government. As the Secretary of 

State and the President of the United States have said, this plot 

was a flagrant violation of international law and a dangerous escalation of the Iranian Government’s longstanding use of political violence and sponsorship of terrorism. This conspiracy also violates 

the Convention on Internationally Protected Persons, including diplomatic agents, which Iran has agreed to, as well as U.N. Security 

Council resolutions. Iran must be held accountable for its actions. 

Under Secretary Cohen will discuss Treasury’s swift actions with 

you. We are taking robust diplomatic action to hold Iran accountable for this plot, isolate them internationally, and increase pressure on the regime. The law enforcement and intelligence professionals who worked on this case deserve our highest praise. Their 

dedication and professionalism likely saved not only the life of a 

foreign diplomat, but as Senator Kirk has said, but scores of bystanders who would have been killed or injured if the plot was successful. 

With the case now public, there is much work to be done. Within 

the last less than 48 hours, we have instructed every one of our 

Ambassadors to demarche the highest levels of their host governments to inform them about the facts behind this plot. In contrast 

with the Iranian regime’s rapid and unsurprising denials, we are 

meticulously and rationally laying out the facts of this plot. The 21- 

page-long charging document is remarkably comprehensive and I 

have encouraged my foreign counterparts, many of whom I have 

talked to on the phone, to read it for themselves. Where appropriate, we are following up with additional face-to-face briefings to 

lay out the facts of this case. Ambassador Rice in New York is hard 

at work engaging her colleagues. 

This plot, though focused on one diplomat, was, in fact, a plot 

against all diplomats and we will be asking all countries to consider appropriate actions, including denying Qods Force officers 

any platform to operate within their countries. Working closely 

with both domestic and international partners is fundamental to 

addressing all of the challenges we face with the Iranian regime. 

I am grateful that I am seated today beside my colleague from 

the Department of Treasury, David Cohen, and from the Department of Commerce, David Mills. State, Treasury, and Commerce, 

along with other executive branch agencies, work hand in hand to 

formulate and implement a whole of Government approach to address continued threats from the Iranian regime. 
11 

The world today is unified to an unprecedented degree in its concern that a nuclear armed Iran would undermine the stability of 

the Gulf Region, the broader Middle East, and the global economy. 

In defiance of U.N. Security Council and IAEA Board of Governors 

resolutions, Iran has continued to expand its sensitive nuclear activities and refuses to cooperate with the IAEA, raising strong legitimate concerns about the purpose of the nuclear program. And 

as I already discussed, Iran continues its longstanding support of 

terrorism through the IRGC Qods Force and terrorist organizations 

such as Hezbollah, Hamas, and Palestinian Islamic Jihad, as well 

as by its support to newer proxy militia groups in Iraq. 

American policy regarding Iran remains unambiguous. First and 

foremost, we must prevent Iran from acquiring nuclear weapons. 

Its illicit nuclear activity is one of the greatest global concerns we 

face, and we will continue to increase the pressure until the Iran 

regime engages the international community with seriousness and 

sincerity and resolves its concerns. 

Let me talk very briefly about the toughest sanctions package in 

three decades and what it looks like. Since the passage of CISADA, 

we have imposed sanctions on a growing list of individuals and entities responsible for Iran’s expanding scope of unauthorized activities. These sanctions have raised the cost, time, and energy required for Iran to pursue its current course and provided a platform upon which the European Union, Norway, Australia, Canada, 

South Korea, Switzerland, and Japan implemented strict bilateral 

measures of their own. 

CISADA’s special rule has worked exactly as intended. It gave us 

the flexibility and leverage to persuade multinational energy firms 

Shell, State Oil, ENI, Total, and INPEX to withdraw from all significant activity in Iran. Under CISADA and other measures, Iran 

is increasingly isolated from the international financial system, as 

Under Secretary of Treasury Cohen will detail. 

Sanctions are doing more than raising the cost of continuing illicit nuclear activity. They are finally shining a spotlight on some 

of the individuals and entities perpetrating egregious human rights 

abuses against Iranian citizens. Using CISADA, we have designated 11 individuals and 3 entities for human rights violations, 

and we continue to compile more information and evidence that 

will allow us to identify more murderers, torturers, and religious 

persecutors. We have taken a firm stand on the Iranian regime’s 

violation of human rights, including the repression of religious minorities, as exemplified by the horrific death sentence handed down 

by the Iranian courts against Pastor Youcef Nadarkhani, simply for 

following his own religious beliefs. And had it not been for the immediate condemnation from world leaders, from the U.S. Senate, 

religious groups, and NGO’s, there would not be any hesitation on 

the part of Iran. 

In my very new role as Under Secretary for Political Affairs, I 

look forward to working closely and as transparently as possible 

with Members of Congress to prevent Iran from acquiring nuclear 

weapons, curtail its support for terrorism, make it more difficult for 

Iran to interfere in the region, and deter the regime from committing human rights abuses against its own people. I have included 
12 

a long written detailed testimony. I look forward to your questions 

and thank you for this opportunity. 

Chairman JOHNSON. Thank you. 

Mr. Cohen, please proceed. 

STATEMENT OF DAVID S. COHEN, UNDER SECRETARY FOR 

TERRORISM AND FINANCIAL INTELLIGENCE, DEPARTMENT 

OF THE TREASURY 

Mr. COHEN. Thank you, Chairman Johnson, Ranking Member 

Shelby, and distinguished Members of the Committee. Thank you 

for the opportunity to appear before you today to discuss the Treasury Department’s contribution to the Obama administration’s strategy to address the threat posed by Iran’s nuclear program and its 

support for terrorism. 

The focus of my testimony today will be the progress we are 

making in our financial strategy to pressure and isolate Iran, and 

in particular the steps we are taking to implement the financial 

provisions of CISADA. But first, I would like to say a few words 

about this week’s revelation that we disrupted an Iran Qods Force 

plot to assassinate the Saudi Ambassador here in Washington. 

This is a dramatic reminder that the urgent and serious threat 

we face from Iran is not limited to Iran’s nuclear ambitions. We 

have been working 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. This week is 

no different. 

On Tuesday, Treasury imposed financial sanctions against five 

individuals, including the commander of the Qods Force and three 

other senior Qods Force officers connected to the assassination plot. 

In taking this action, Treasury exposed the Iranian Government’s 

involvement in the plot through the Qods Force, Iran’s primary 

arm for exporting terror. 

And just yesterday, we took another action targeting Qods Force 

involvement in terrorist activities, this time by imposing sanctions 

on Mahan Air, Iran’s second largest airline, which was secretly 

ferrying operatives, weapons, and funds on its flights for the Qods 

Force. 

This week’s actions follow on a series of recent steps taken by the 

Treasury Department to expose Iranian illicit behavior and ratchet 

up the pressure on Tehran. In the last few months, we have imposed sanctions on Tidewater, a major Iranian port operator owned 

by the IRGC; Iran Air, Iran’s national airline, for supporting the 

IRGC; and al Qaeda network operating in Iran under an agreement 

with the Iranian Government; and individuals and entities involved in human rights abuses both within Iran and supporting the 

Syrian Government’s repression of the Syrian people. 

Actions like these, along with international sanctions, have put 

increasing financial pressure on Iran, and CISADA has markedly 

amplified this effect. CISADA has helped us deepen and broaden 

Iran’s isolation from the international financial system. Since 

President Obama signed CISADA into law last July, my colleagues 

in the Treasury Department and I have worked aggressively to implement it. We have met with foreign banks, regulators, and gov-
13 

ernment officials in nearly 50 countries. We explained to these 

banks and government officials that CISADA offers a clear choice. 

A foreign bank can have access to the largest and most important 

financial sector in the world, the United States, or it can do business with sanctioned Iranian banks, but it cannot do both. For the 

overwhelming majority of foreign banks, the choice has been a simple one. Those with potentially sanctionable relationships quickly 

elected to stop that business, and where we learned of potentially 

sanctionable activity under CISADA, we have actively investigated 

it, engaging in particular with foreign banks’ regulators and their 

home government. 

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’s 

shrinking access to financial services and trade finance has made 

it extremely difficult for Iran to pay for imports and receive payment for exports. Iran’s Central Bank has been unable to halt the 

steady erosion in the value of its currency. And Iran has been increasingly unable to attract foreign investments, especially in its 

oil fields, leading to a projected loss of $14 billion a year in oil revenues through 2016. 

We are making progress, but there is still much to be done to 

prevent Iran from evading sanctions already in place and to apply 

sufficient additional pressure on Iran. In this regard, we continue 

to focus on the Central Bank of Iran, the CBI. Although U.S. financial institutions are already generally prohibited from doing business with any bank in Iran, including the CBI, further U.S. action 

against the CBI, if it attained multilateral support, could further 

isolate the CBI with a potentially powerful impact on Iran. 

I can assure the Committee, as Secretary Geithner said in his 

letter to Congress of August 29, that all options to increase the financial pressure on Iran are on the table, including the possibility 

of imposing additional sanctions against the CBI. If Iran continues 

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

innovative ways to impose additional costs on Iran. 

I look forward to continuing to work with Congress and this 

Committee to advance our national interests. Thank you. 

Chairman JOHNSON. Thank you. 

Mr. Mills, please proceed. 

STATEMENT OF DAVID W. MILLS, ASSISTANT SECRETARY FOR 

EXPORT ENFORCEMENT, DEPARTMENT OF COMMERCE 

Mr. MILLS. Thank you, Mr. Chairman, Senator Shelby, distinguished Members of the Committee. I welcome the opportunity to 

appear before the Committee today and to discuss the Department 

of Commerce’s role in implementing the Comprehensive Iran Sanctions, Accountability, and Divestment Act, CISADA, as well as the 

wider issue of enforcing sanctions on Iran. 

My Department has a key role in administering and enforcing 

U.S. dual-use export control policies toward Iran, and under the 

leadership of Under Secretary Eric L. Hirschhorn, the Bureau of 

Industry and Security has aggressively pursued this objective. We 

also work closely with our colleagues at the Departments of State, 
14 

Homeland Security, and the Treasury, as well as other agencies, to 

implement and enforce our sanctions effectively. 

I wish to extend my heartfelt thanks to Congress for conferring 

permanent law enforcement authority on our agents last year as 

part of CISADA. The Office of Export Enforcement in our Bureau 

of Industry and Security, or BIS, is the only Federal law enforcement agency solely constituted to conduct dual-use export investigations. 

Over the course of the last year, our agents have been utilizing 

this authority to investigate a variety of export violations, but Iranian violations continue to be a primary area of focus, accounting 

for about 37 percent of our investigations, and the number of cases 

we have open now against Iran is approximately about 300. Iran 

continues to engage in widespread efforts to illegally acquire U.S.- 

origin commodities and technology. In fact, the majority of our 

criminal investigations now involve Iran, as I said, as the ultimate 

recipient of diverted items. Much of our enforcement activity and 

analysis is focused on stopping the diversion of such items to Iran 

through transportation hubs in the Middle East, South, and East 

Asia. 

BIS also employs a variety of criminal and administrative tools 

against these illicit Iranian procurement activities. I want to share 

with you some illustrative examples of these enforcement efforts. 

Just last month, we imposed a civil penalty totaling $2.5 million 

against Flowserve Corporation of Irving, Texas, and 10 of its foreign affiliates to settle 288 charges related to unlicensed exports 

and re-exports of pumps, valves, and related components to Iran, 

Syria, and other countries. BIS pursued these administrative 

charges in concert with the Department of Treasury’s Office of Foreign Assets Control, OFAC. Cooperation between BIS and OFAC on 

Iranian cases has been critical to maximizing the impact of U.S. 

laws against violators. 

In recent years, export enforcement at BIS has also made extensive use of the BIS Entity List to disrupt a range of overseas procurement networks, most importantly involving investigations of 

the procurement of components for improvised explosive devices, or 

IEDs, by Mayrow General Trading and related entities, resulting 

in the addition of over 190 new foreign entities to the Entity List. 

Four of our agents received the Attorney General’s Award for Excellence in Furthering the Interests of U.S. National Security for 

this investigation. 

The use of the Entity List highlights our focus not only on sanctions directed at listed enterprises, but also the prevention of violations and the public naming of individuals and entities that are involved in or that pose a significant risk of engaging in illicit export 

activity. Given my 18-year tenure at OFAC and the Department of 

Treasury working with the SDN list, I feel very at home with this 

approach to enforcement. It discourages resellers and other parties 

here and abroad from doing business with targeted entities and the 

procurement networks they represent and prevents resellers and 

other parties in the United States and overseas from doing business with them. 

BIS has also made effective use of its authority to issue Temporary Denial Orders, TDOs, to prevent imminent violations of the 
15 

Export Administration regulations. On August 21, 2011, BIS renewed a TDO against Mahan Air of Iran and related parties. The 

TDO issued against Iran Air originally included the Balli Group in 

the United Kingdom. That TDO was critical in preventing additional violations of the regulations and furthering our investigation 

into Balli Group’s involvement in obtaining Boeing 747 aircraft for 

Mahan Air. On May 11, 2010, Balli was sentenced to a $2 million 

criminal fine and corporate probation of 5 years. On February 4, 

2010, Balli Group PLC and Balli Aviation entered into a civil settlement with BIS and OFAC pursuant to which Balli ultimately 

paid a $15 million civil penalty, the largest civil penalty imposed 

under the regulations to date. 

Iran is a top enforcement priority and we fully intend to press 

forward with our efforts to combat illegal diversion of sensitive 

products and technology to that country. We stand ready to work 

with the Committee and the Congress to maintain an aggressive 

and effective export enforcement program. Thank you very much. 

Chairman JOHNSON. Thank you for your testimony. 

As we begin the questions, I will ask the Clerk to put 5 minutes 

on the clock for each Member. 

Under Secretary Sherman, while new U.S. and U.N. sanctions 

and other efforts to isolate Iran have had real impact and slowed 

Iran’s progress on their nuclear program, they have not yet forced 

Iran to suspend it. Similarly, Iran seems to be trying to outlast the 

West’s appetite for sanctions and weaken the international community’s resolve to maintain sanctions pressure. What is your current 

assessment of Iran’s nuclear program, including their time line, 

and does it jibe with those of our major allies? How is the United 

States working with our international partners to ensure that the 

commitment to sanctioning Iran is strengthened rather than weakened over time? 

Ms. SHERMAN. Thank you very much, Mr. Chairman. You have 

raised the fundamental question which has been laid out by some 

of your colleagues, as well, which is how do we move forward both 

to pressure and persuade Iran to give up its nuclear ambition and 

its nuclear weapons program? How do we get them to stop their 

terrorism, their state-sponsored terrorism? How do we get them to 

recognize human rights, and how do we get them to stop destabilizing regions throughout the world? That is a very tall order. 

One prong of that two-prong approach are the sanctions that we 

are discussing today, and those sanctions must be thought about in 

three dimensions: The severity of the sanctions, the enforcement of 

the sanctions, and the internationalization of the sanctions, because sanctions are most effective and they are strongest when 

they are internationalized and people throughout the world and 

governments throughout the world are enforcing those sanctions. 

We saw that in the change in apartheid in South Africa. When 

they finally became internationalized, we got effective action and 

we got change within the Government of South Africa. 

It is the same with Iran, and I must say, since coming back into 

Government, I have been incredibly impressed by the whole of Government approach, by the very close cooperation that we have within the Government to not only work with the terrific legislation 

that you have placed before us and the President signed, but to en-
16 

force that and to work throughout the world with all of our interlocutors to increase that enforcement. 

Over the last 48 hours, both at the United Nations, in every single capital in the world, and by many, many phone calls made by 

the President, the Secretary of State, the National Security Advisor, the Deputy Secretary of State, myself, every assistant secretary in every one of our departments here, we have talked to 

every capital and we have encouraged them to enforce the sanctions that are on the books, to look at their own bilateral sanctions, 

to look at the designations that Treasury has made and make them 

themselves. We have encouraged them to make sure that the Qods 

Force stops doing business in their countries, to look at high-level 

visits that might be coming from Iranians to their country, and to 

consider, let us say, postponing if not canceling outright those visits. 

So we have worked very hard and will continue to work very 

hard to internationalize this so that it is most effective, and as 

David can detail, it has had a real impact on the financial wellbeing of Iran and created some of the splintering that we are seeing within the Iranian regime. 

The second prong is our ability to work with our partners in the 

P5+1 to increase the pressure on Iran and to say to Iran, if you 

are, in fact, sincere in discussing your nuclear weapons program, 

which we have not seen to date, we would be open to having a discussion with you so that you, in fact, fulfill the U.N. Security Council resolutions that you stop your nuclear weapons program, that 

you, in fact, submit to all the IAEA has put on the table. Iran to 

date has not agreed to do that. 

Recently in New York, on the margins of the U.N. General Assembly, I participated in a meeting of the P5+1. EU High Representative, Katherine Ashton, put out a statement after that 

meeting, and what was notable about that meeting was the very, 

very strong consensus among the P5+1, including China and Russia, to stay, as I quote from the statement: 

We discussed the recent developments of the Iranian nuclear program as 

reflected in the latest IAEA report. In particular, we noted with grave concern Iran’s installation of centrifuges in its facility near Qom as part of 

plans to increase the capacity to enrich uranium to near 20 percent and the 

IAEA’s increasing concern about the possible military dimensions to Iran’s 

nuclear program. 

We have very strong P5 consensus—plus one—that is very crucial for maintaining the most robust sanctions regime we have ever 

had. It has not yet deterred Iran’s nuclear program, but we believe 

that it is making progress to do exactly that. 

Chairman JOHNSON. Thank you. 

Mr. Cohen, you and I have discussed that the threat of U.S. 

sanctions has led many financial institutions to cease doing business with Iran. Can you give the Committee a better sense of how 

this process works, the scale of Treasury’s efforts, and the role of 

new 104(e) regulations required by CISADA—and roughly how 

many major banks have held off activity in Iran or have withdrawn 

in the past couple years? Can you also explain how Treasury will 

pursue investigations using 104(e) tools and how you verify that 
17 

banks that have voluntarily withdrawn from Iran do not reverse 

course? 

Mr. COHEN. Thank you, Mr. Chairman. Let me begin by describing the effort that we have been undertaking and how that has resulted in what we have seen as a dramatic reduction in Iran’s access to the international financial system. Dating back before 

CISADA, the Treasury Department was very active in going out to 

the international financial community, the private sector, as well 

as government officials around the world and explaining the case 

for why they should voluntarily withdraw from the Iranian financial sector broadly, but in particular the designated Iranian banks, 

those banks that had been sanctioned for involvement in Iran’s proliferation activities or its support for terrorism. 

We were making good progress in isolating Iran and limiting the 

number of banks around the world that were willing to do business, particularly with designated Iranian banks. The numbers of 

banks, particularly in Europe, that were willing to continue to do 

business with Iran were reducing Iran’s overall ability to access the 

international financial system was being impaired. 

With the enactment of CISADA last July, that provided us a 

powerful new tool to go back to those countries, back to those financial institutions, in particular to the ones that had not been yet 

persuade and to say to them, as I said in my testimony, you have 

a choice to make. You can continue to do business with the United 

States or you can continue to do business with designated Iranian 

banks, but you cannot do both. It has been tremendously effective. 

Where we had seen the steady decline in the access of these designated Iranian banks to the international financial sector before 

CISADA, after CISADA, the line dropped straight down. 

We have continued to go around the world—I was in China just 

2 weeks ago meeting in Hong Kong with major banks, including 

major Chinese banks, in Beijing meeting with government officials 

to continue the conversation about CISADA, continue to make the 

points that we have been making, and it has been, as I said, remarkably effective. We are going to continue to pursue this issue, 

and the newly issued 104(e) issue will help us. That rule became 

effective early this week and immediately upon the effectiveness 

date of that rule—the effect of that rule—we issued a series of information requests to U.S. financial institutions asking about behavior of some of their correspondents. 

This rule, and this follows up on a question that Senator Moran 

asked, or an issue that he raised in his opening statement, this 

rule allows us to go out to U.S. financial institutions where we 

have reason to believe that there may be a potential CISADA violation. It is a very low threshold. It is not a conclusion that there is 

a violation, but a very low threshold where we have some reason 

to believe that there might be a CISADA issue and to seek this information. 

So we have begun that process immediately upon the effect of 

that rule. That will complement other sources of information that 

we have and we will continue to pursue those investigations. 

Chairman JOHNSON. Senator Shelby. 

Senator SHELBY. Thank you, Mr. Chairman. 
18 

Secretary Cohen, just tell us, who is doing business with Iran? 

Who are they selling their oil to and who are they buying from in 

the world, basically, just for the record. 

Mr. COHEN. Well, Iran sells its oil to a number of different jurisdictions around the world. They sell into the European Union. 

Spain is a major purchaser—— 

Senator SHELBY. Spain is a major purchaser. OK. 

Mr. COHEN. Turkey buys oil from Iran. 

Senator SHELBY. OK. 

Mr. COHEN. Some of our closest allies—— 

Senator SHELBY. Is Japan a major purchaser? 

Mr. COHEN. Japan, South Korea are major purchasers. 

Senator SHELBY. Who are the largest purchasers, Japan? 

Mr. COHEN. Uh, if you will allow me to look at my—— 

Senator SHELBY. Yes, you go ahead. 

Mr. COHEN. I actually have a—well, I do not know where my 

cheat sheet is on this, but China is a major purchaser, South 

Korea, Japan major purchasers, as I said, the European Union, 

Turkey, India are all major purchasers of Iran. They are not—none 

of them are wholly dependent on Iran. They all purchase oil from 

a variety of producers. But each of those jurisdictions that I just 

listed buy between sort of 7 and 15 percent of their oil, give or 

take, from Iran in a given year. 

Senator SHELBY. Are the Chinese investing in exploration of 

more oil and gas in Iran, directly or indirectly? 

Mr. COHEN. I will give you an answer to that question, but I 

think Under Secretary Sherman also has information on that. I 

think the basic dynamic that we see in China is that, clearly, before the most recent round of sanctions, including the Security 

Council Resolution 1929 from last June, China was involved in exploration in Iran’s oil fields, was certainly helping them to develop 

their oil fields. We across the Administration have made very clear 

to the Chinese that we expect restraint, not just the United States 

but the international community as a whole, and the response has 

been, by and large, that China has exercised restraint. I would invite Secretary Sherman—— 

Senator SHELBY. Go ahead. 

Mr. COHEN.——to elaborate on that, but that has been the basic 

dynamic. 

Senator SHELBY. Go ahead. 

Ms. SHERMAN. Senator, we share your concern. President Obama 

has raised this personally with President Hu. Vice President Biden 

raised these issues on his trip. Secretary Clinton has raised the 

issue that you have raised. We have stressed with the Chinese the 

need for restraint in Iran’s energy sector by not only slowing down 

but stopping their activities, not concluding any new deals, and, to 

your point, not backfilling the business of other firms that have responsibly departed Iran. We all know that sometimes China goes 

looking for those opportunities when others leave the field. 

We recently have seen reports that that has had an effect. It is 

our belief from what we know that, in fact, Chinese companies 

have not finalized any new upstream investments or refinery construction projects since the enactment of CISADA. We will continue 

to monitor this as closely as we can in as many ways as we can 
19 

because we quite agree with you that there is concern in this regard. 

I will add one thing about the Chinese, which is that they have 

been, certainly in the P5+1, much more closely lashed up with us, 

the European Union, and even Russia in this regard over the last 

several months, understanding the increased threat that Iran 

places. And, in fact, as you know, there was a January 19 U.S.- 

China joint statement that called for full implementation of all 

U.N. sanctions. 

So we share your concern. We are staying in top of and in front 

of this at the very highest levels. We do think there has been a 

slow-down. We do not think there have been new refinery projects, 

but we will not stop our vigilance nor our pressure on China in this 

regard. 

Senator SHELBY. Mr. Cohen, it is obvious to most people, especially to a lot of us that have followed this for a long time, that 

China and Russia are obstructing through their various ways of 

really pushing the sanctions regime like we wanted to do it. Explain to the Committee Russia’s relationship with Iran as best you 

can here in open forum and our uphill fight to bring them along 

on real sanctions against Iran, and China, too. 

Mr. COHEN. Well, Senator Shelby, let me focus in particular on 

the Russian-Iranian financial relationship—— 

Senator SHELBY. OK. 

Mr. COHEN.——and again, I will invite Secretary Sherman to 

talk more broadly about Russia’s role, particularly in the Security 

Council and in bilateral relations. 

The reality is that Russia does not have a particularly deep or 

extensive relationship with Iranian financial institutions. We do 

not see Russia providing a significant access point for Iranian financial institutions. 

That being said, Iran is under increasing pressure. The isolation 

that it is facing is unprecedented. They have never been under the 

pressure they feel today and with their financial channels narrowed to the extent that they are today. And so we are being very 

watchful to see where Iran may try to go to develop additional financial connections. Russia is a potential point for Iran to look and 

we are going to stay on top of that very aggressively. But as we 

sit here today, I cannot say that Russia is a significant problem 

with respect to Iran’s financial access. 

Senator SHELBY. But you are not saying that they are not a significant problem overall politically, though, in this area, are you? 

You are not weighing in on that, are you? 

Mr. COHEN. I am focusing on the financial relationship between 

Iran—— 

Senator SHELBY. You are tiptoeing around the political ramifications, which is probably—— 

Mr. COHEN. I am mindful that to my immediate right is Secretary Sherman, who I think has the responsibility for that issue. 

Senator SHELBY. Secretary Sherman, why has the State Department declined so far to designate the Islamic Revolutionary Guard 

as a terrorist organization? 

Ms. SHERMAN. Senator, we have considerable sanctions on the Islamic Revolution Guard Corps, as you know, through Treasury’s 
20 

designation of IRGC and also designation for their part in human 

rights abuses, which are quite egregious. Generally, foreign terrorist organization designations are used for non-state actors, and 

I cannot think of any state actor for which an FTO designation has 

been used. 

Senator SHELBY. That does not mean it should not be though—— 

Ms. SHERMAN. I appreciate that, and we will—— 

Senator SHELBY. I mean, you have got to follow the facts—— 

Ms. SHERMAN. Absolutely, and we will certainly, as we go forward and as we ratchet up the pressure, consider any option that 

we have to deal with Iran’s ambitions and its terrorist activity. So, 

I think, however, if you look at the full array of the sanctions that 

we have in place, the IRGC is quite prominent in many of them, 

and as David outlined in his testimony, we have already cut off 

some of their economic wherewithal, both financially and in terms 

of some of the companies that they operate since they are becoming 

a greater and greater economic force in Iran. 

Senator SHELBY. Do you believe that you will reach the point— 

are you moving down the road to designate them as a terrorist organization, which they are? 

Ms. SHERMAN. Well, I never really speak to specific designations 

until they occur. And as I said, we have never used the FTO option 

for state organizations. 

Senator SHELBY. You are not going to look the other way on this, 

though, are you? 

Ms. SHERMAN. There is no way we are looking the other way. 

Senator SHELBY. I hope not. 

Ms. SHERMAN. With your help, Senator, we have the toughest 

sanctions of any Administration on Iran. 

Senator SHELBY. Thank you. Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman, and I am going 

to ask both Secretary Cohen and Sherman to work with me, and 

hopefully the Chairman will be a little lenient since I am one of 

the prime sponsors of the legislation here, but in terms of the conciseness of your answers, because there is a lot of ground I want 

to cover. 

Secretary Cohen, let me ask you this. Is it fair to say, and maybe 

you can give me just a yes or a no, that, in fact, CISADA, i.e., sanctions, have worked to diminish dramatically commercial banking 

transactions for Iran? 

Mr. COHEN. Yes. 

Senator MENENDEZ. And, therefore, has also hurt them significantly financially, as well? 

Mr. COHEN. Yes, it has. 

Senator MENENDEZ. All right. So, then, sanctions work? 

Mr. COHEN. No question. 

Senator MENENDEZ. And that is the point that I want to first 

drive here, that sanctions work. And the reality is that we have 

never seen an Administration, Republican or Democrat, that has 

said, please give me a sanctions law. They have always said, ‘‘No, 

no, no, we would rather have the flexibility.’’ So I hope my colleagues, as they consider the legislation that we have been advocating that has 76 cosponsors, understand that no Administration, 
21 

Republican or Democrat, has ever appealed to the Congress to give 

them a sanctions law. But the fact is that sanctions work. 

In that regard, Madam Secretary, I listened to your statement 

and read it very carefully, and I must say, when you say American 

policy regarding Iran remains unambiguous, first and foremost, we 

must prevent Iran from acquiring nuclear weapons, its illicit nuclear activity is one of the greatest global concerns we face, that is 

a pretty significant statement, which means to me that we must 

do everything that we can to ensure that its illicit nuclear activity, 

one of the greatest global concerns we face, does not take place. 

If that is the case, can you explain to me why the Administration 

has been reluctant to sanction China’s state-run energy firm 

Zhuhai Zhenrong, which has been reportedly shipping refined petroleum products to Iran monthly for the last year. Despite abundant information about this trade, the United States has not sanctioned Zhuhai Zhenrong, and why has the Administration been reluctant to sanction this type of a Chinese company for energy violations when there is ample evidence that they are violating our laws 

and there is precedent for us sanctioning them, particularly Chinese companies for nuclear and weapons proliferation concerns? 

That is my first question. 

My second question is, in response to Senator Shelby, you talked 

a lot about the energy sector in Iran. Investing in Iran’s energy sector is a CISADA violation. Selling refined petroleum products to 

Iran is also a violation. But buying crude oil is not a prohibited activity, which goes to my second question. 

The United States passed all of these sanctions laws to put pressure on investments in Iran’s energy sector, which have reduced 

Iran’s oil and natural gas production. The Iranian regime, however, 

continues to sell 2.3 million barrels per day of crude oil, which generates over $80 billion annually for the Iranian treasury. The sale 

of Iranian crude represents between 50 to 75 percent of the Iranian 

regime’s budget, literally fueling the regime’s ability to export terrorism, build a nuclear weapons program, and repress its own population. 

It is clear to me that if this is one of the greatest global concerns 

we face, it is clear that we must find a way to target this lifeblood 

of the Iranian regime. One major loophole in our law permits Iran 

to sell oil to Europe, where it is refined and sold to the United 

States. Today, when Americans fill up their cars with gasoline, it 

is possible and legal for this gasoline to be derived from Iranian 

crude oil. I think most Americans would be appalled to learn that 

they are putting Iranian gasoline in their vehicles. 

Now, I have been working with industry experts on closing this 

loophole to ensure that the United States is an Iranian oil-free 

zone. We can do this without imposing an oil embargo on the sale 

of Iranian crude, which would drive up the price of oil and inadvertently enrich the Iranian regime. The solution is simple. European refiners that are interested in selling to the United States 

would have to replace their purchases of Iranian crude with supplies from elsewhere. This would redirect sales of Iranian crude to 

a small group of buyers who, with less competition for the price of 

Iranian oil, would be able to negotiate significant price discounts 
22 

from Iran on the sale of every barrel of oil. These discounts would 

deny the Iranian regime billions of dollars in hard currency. 

Can you tell me whether you are open to closing this loophole, 

establishing the United States as an Iranian oil-free zone and ending the practice of Americans buying gasoline from Iran and in 

doing so effectively paying an Iranian regime which commits violence against Americans and our allies, against our troops in Iraq, 

and—and—for which you yourself have said is our greatest global 

concern? 

Ms. SHERMAN. Thank you very much, Senator. First, regarding 

your question about Chinese entities, the Administration is not reluctant to sanction and to designate companies when we have gone 

through the data, the investigation, meet the evidentiary standards, and, indeed, designate and sanction. In fact, under INKSA, 

the Iran-North Korea-Syria Act, we have designated guidelines on 

the industries of China. So this is not about us never designating 

or never sanctioning a Chinese entity or any other entity from any 

country. It is really a matter of doing the thorough investigation, 

making sure we have met the evidentiary standard. 

And I can assure you, Senator, whether it is the company of 

which you spoke or the list from the GAO, we look at all of the 

data that is incoming and really look through everything that is in 

front of us to decide along the lines of the standards that have been 

set out by the law to meet the standards of those laws. So you have 

my assurance that we look at each one of these situations with tremendous care because we quite agree with you. Nothing should be 

off limits. We should look at every single situation, and those that 

meet the standards should be designated and sanctioned. 

Senator MENENDEZ. On that point, but a year later—a year later 

of public reports—this is not even intelligence reports, you can 

imagine what intelligence would tell us—a year later of public reports of this company selling refined petroleum products clearly 

within the definition of an illicit activity under CISADA, we have 

not sanctioned them. 

Ms. SHERMAN. I hear—— 

Senator MENENDEZ. How long do we have to wait before that 

happens? 

Ms. SHERMAN. I hear your concern and I will take it back with 

me, Senator. 

Regarding your legislation and buying crude oil, I certainly understand your concern. This is one where I am sure Secretary 

Cohen will have much to add on it. You have raised the issue that 

has been the concern of some, but does not mean we should not 

take a close look at what you are suggesting, and that is that Iran 

is the fourth largest producer of crude oil. There has been much debate and discussion, and obviously you have done incredibly careful 

study about the impact of such an even targeted embargo on the 

world’s economy, the price of oil, what that would mean for American consumers and so forth. 

I am going to let Secretary Cohen take up the financial implications and the world global implications of this, but I completely appreciate your desire to close this loophole and we look forward to 

seeing if we can find a way forward. 
23 

Senator MENENDEZ. Well, let me just, very quickly—I thank the 

Chairman for his leniency here—I am not suggesting an oil embargo on Iran. That would drive up prices and give them greater assistance. I am saying that we should not permit refined petroleum 

products made from Iranian crude to come to the United States. 

That would make the Europeans have to figure out in the world 

market to buy from some other places. A fundamental, big difference, and I do not want to get them confused for the record. 

Mr. COHEN. Senator Menendez, that proposal, to create the Iranian oil-free zone and in particular to implement that by having 

European refiners, if they want to sell into the United States, to 

certify that they are not using any Iranian crude in the refined 

gasoline that they are selling, is something that we have—we have 

seen that proposal. We are looking at that proposal. The economics 

that you described are complicated, and one of the things that I 

think we certainly share is the desire to reduce the revenue that 

Iran is able to earn on its sale of crude without causing collateral 

ill effects to the U.S. or global economy. 

One of the attractive features of this proposal is that it promises 

to do that, which is to reduce Iran’s ability to earn revenue without 

having sort of the knock-on effects on the U.S. and global economy 

by increasing the price of refined petroleum. We are looking at 

that. We have, as I am sure you know, we have economists at the 

Treasury Department who are a heck of a lot smarter than I am 

on this sort of thing, and so we are studying that and I look forward to working with you on this proposal because it does hold 

promise to achieve that objective. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Chairman JOHNSON. I allowed Senator Menendez some leniency 

in time because he has legislation pending, but to others on the 

Committee, I urge you to restrain yourself within the roughly 5 

minutes’ time. 

Senator Kirk. 

Senator KIRK. Thank you, Mr. Chairman, and Secretary Sherman, welcome. I know you are very new to this. You came out of 

the private sector just 3 weeks ago, so I will mainly direct my comments to David Cohen, who has been in this much longer. 

I think it is very important that here at this hearing we not hear 

your concerns, we hear your consequences for what has happened. 

I think it is very important for us not to look at this from Washington’s view looking at Tehran, in which one of your staffers gives 

long reports about how we have cutoff cupcake sales from Luxembourg to Iran and bicycle deliveries from the UAE to Iran. It is important to look at what is happening in Tehran and whether this 

is having an effect. 

And maybe one of you would put up the other chart that you 

have got there. This is Iranian enrichment activities, and you can 

see here that the program is accelerating fairly impressively. And 

so while we have long briefings of a lot of banking activity, we see 

the principal objective of the policy is not yielding a result. As, I 

think, Senator Corker has been very eloquent on, once we get over 

the 20 percent enrichment, the scientific community says, we are 

on our way to a bomb. 
24 

I would say that you probably have no assurance—I would be 

worried if you felt that there was any doubt that the Iranians 

would transfer nuclear weapons to terrorist organizations once they 

had them, and I think that should be a fundamental assumption 

of our policy, that they will. 

I am also worried, when we look at Tehran, if we compare IMF 

statistics of U.S. economic growth to Iranian economic growth, the 

IMF says that the United States economy grew by 2.5 percent last 

year and the Iranian economy grew by 3.2 percent, 22 percent faster. We have got another chart that shows—maybe you could put it 

up—this is Iranian economic growth, and the point of this policy 

is also to cripple their economy. But their economic growth rate has 

also expanded by four times. 

When you look at debt held by the public, according to the IMF, 

and I know some people would say we should not believe the IMF, 

but it is absolutely the best data set, and almost every other Administration decision with regard to international economics is 

based on IMF data, the United States has 70 percent of its GDP 

in debt to the public, whereas Iran has 5.4 percent. 

Now, the IMF said with regard to the U.S. economy, it continues 

to recover at a modest pace but remains vulnerable. However, 

there was a significant growth slowdown in the first half of 2011. 

With regard to Iran, they said growth recovered on the strength of 

international oil prices, a strong rebound in agricultural sector, and 

rapid credit expansion, and inflation was contained while fiscal and 

external positions improved. This is the IMF. 

I am worried that the Iranians seem to be accelerating in their 

aggression toward you. In the very week that Marzieh is convicted 

of 90 lashes for appearing uncovered, that we have now learned 

that the 330,000 Baha’is have been excluded from all public contracting, all of their kids have been kicked out of university, and 

their houses have been registered, I would simply suggest that this 

is a movie we have seen in a different decade wearing different 

uniforms but has all the markings of Kristallnacht in Farsi. 

And now we hear from Under Secretary Cohen—he said in May, 

we remain concerned that the CBI, the Central Bank of Iran, may 

be facilitating transactions for sanctioned Iranian banks. And 92 

Senators wrote to you saying, let us take this action. On top of 

that, you have not even designated the Iranian Revolutionary 

Guard Corps under the law, as you should have. 

Here is my question to David, because you have been—and I very 

much respect the work and all you have done, but press reports indicate you have known about this plot since June. You have known 

about this hearing for a month. And yet we have no significant action on designating the IRGC or on the Central Bank of Iran. And 

you have known about this plot well now on 5 months. 

Mr. COHEN. Well, let me take up with the last point about the 

designation of the IRGC. We have designated the IRGC. It is a designated global terrorist under Executive Order 13224 and has been 

for several years now. And we have also designated a number of 

IRGC affiliates and individuals. So the—— 

Senator KIRK. But, for example, the President of Iran, you have 

not designated as a systemic abuser of human rights, which is fairly obvious. His chief of staff, you have not designated. There are 
25 

dozens of people that the European Union, no paragon of strong 

backbone on almost anything, and yet they are way ahead of you. 

And you knew about the plot in June. 

Mr. COHEN. Well, with respect to the plot and when the United 

States became aware of it, I am going to—I am not going to comment on that. I am not going to comment on what we were doing 

between when we learned about the plot and when it was revealed 

in unsealing the indictment—the complaint, rather—two days ago. 

But as you know, we did respond the same day that the Justice 

Department unsealed the complaint with a series of designations 

of individuals who were associated with the plot, including—— 

Senator KIRK. Right. The head of the IRGC Qods Force—you cannot get closer to Ahmadinejad than that. 

Mr. COHEN. Qasem Soleimani, the head of the Qods Force, is a 

very senior official in Iran, no question about it, and he was designated on Tuesday for his involvement in terrorist activity, and he 

had previously been designated twice before by the Treasury Department, once about 2 months ago for providing material support 

to the Syrian GID, which was involved in repression in Syria. So 

under an authority that allows us to designate individuals who are 

involved in human rights violations in Syria or provide support, individuals who are abusing human rights—— 

Senator KIRK. With 92 Senators—— 

Chairman JOHNSON. Could the Senator begin to wrap it up? 

Senator KIRK. Yes. With 92 Senators writing you on the Iranian 

Central Bank, is it impossible for you in response to a plot to kill 

100 Americans to not say anyone who does business with the Central Bank of Iran cannot do any business with the United States 

and cripple their—you look at their economic growth. You look at 

the acceleration of their nuclear program. You look at a prominent 

actress with 90 lashes. Can you get moving? 

Mr. COHEN. Well, Senator, we are moving and we are looking 

very actively at the possibility of designating the Central Bank of 

Iran as well as taking other actions in response to this plot, and 

more generally in response to Iran’s continued defiance of the 

international community with respect to its nuclear program. 

There is a lot of work underway and we are looking quite intensively at how to ratchet up the pressure. 

If I—with the Chairman’s indulgence, I would like to take a second to address the point about GDP growth, if I could. 

Chairman JOHNSON. Yes, go ahead. 

Mr. COHEN. It is, I think, actually quite difficult to compare Iranian GDP growth with U.S. GDP growth. The Iranian economy is 

about $800 billion in GDP. The United States is $14.6 trillion. So 

Iran is about 5 percent the size of the United States. It is heavily 

dependent, as you noted, Senator, on the oil sector. So when oil 

prices increase, as they have in the last year or so, that has a disproportionate effect on the GDP growth in Iran. 

The IMF, and so—— 

Senator KIRK. I will just correct you. The Iranian GDP was $338 billion in 2008 and $357 billion in 2010, so it is about a 5.5 percent 

growth over that time. 

Mr. COHEN. The IMF, and without quibbling about whether the 

IMF’s numbers are accurate or not, but the IMF projects GDP 
26 

growth not just for Iran and the United States, but for other countries in the Middle East who are oil producers. Looking at just the 

countries in the Middle East that are oil producers, Iran is the lowest of all of those countries in projected GDP growth. Its projected 

GDP growth by the IMF is less than half of the average projected 

GDP growth of other Middle Eastern oil exporting countries. 

So I think that is the apt comparison. It is Iran versus other 

Middle Eastern countries that are dependent on the exportation of 

oil for their GDP, and if you look at that, Iran is doing quite badly 

compared to its peers, which I think is a reflection, in part, of the 

effectiveness of sanctions. 

Chairman JOHNSON. Senator Bennet. 

Senator BENNET. Thank you, Mr. Chairman, and thank you to 

the panelists for your testimony today. 

I want to pick up on what Senator Kirk’s line of questioning. You 

know, this week, as you have testified and as we have read in the 

paper, we learned that there was a plot to assassinate the Saudi 

Ambassador in Washington, DC, on American soil, and if 100 or 

150 Americans were killed as a result of it, that that was OK. And 

I guess the question that I have is, sitting here, I am wondering 

what the testimony would be had that plot succeeded, you know, 

had law enforcement failed—and I am very glad, obviously, that 

our law enforcement did not—had that plot succeeded, and the Iranians had every intention that it would succeed, what your testimony would be today about what our response would be. 

And the reason I ask it that way is that for months—years, really—this Committee has been saying, we need to do absolutely everything that we can do to make sure that Iran does not support 

terrorist organizations and that Iran never develops a nuclear 

weapon. So what if this plot had succeeded and what would the implication be for the internationalization of the sanctions, Madam 

Secretary, as you describe? What more can we ask of the rest of 

the world to protect the United States and our allies from Iran? 

Ms. SHERMAN. Senator, I actually, without knowing it, stole your 

talking point in my telephone conversations with my counterparts 

around the world, one very long one with one of the countries that 

we were discussing this morning, just this morning, and I basically 

said to him, think about what your country needs to do and think 

about it in terms of what you would have done and what the international community would have done if, indeed, this had been successful. It would have been catastrophic in so many ways that I 

think we cannot even begin to imagine. 

So I quite agree with you about the seriousness of what occurred 

here, and I, too, agree with you that our law enforcement officials 

just did a truly superb job. And if I may say, Senator, as did the 

Government of Mexico, which cooperated very closely with the U.S. 

Government in a really excellent law enforcement effort between 

our two countries, which I think is quite important going forward. 

So I agree with you, and it is why we are saying to those who 

have hesitated in enforcing the sanctions that are on the table, 

there are many tools on the table—many tools on the table—and 

all countries have to do is pick them up and make them real. And 

that is our effort. We showed by example with Treasury’s actions 

that one can move speedily to designate. We are encouraging every 
27 

country to do likewise, to look at those designations and see if they 

are appropriate under the laws of their own country and clearly 

under the multilateral sanctions that exist from the U.N. And I 

think we have to do everything we can to follow through on those 

enforcement actions to look at additional sanctions and additional 

opportunities, which David and I have discussed this morning, including legislation that has been suggested by Members of this 

Committee and further designations, all of which are on the table. 

Senator BENNET. Mr. Cohen, do you—— 

Mr. COHEN. I think Secretary Sherman put it exactly right. The 

right way to look at this plot is that it was a plot that was intended 

to assassinate the Saudi Ambassador here in Washington with, if 

there was—if others were killed in the execution of the plot, the 

IRGC Qods Force was obviously fine with that, as well. And so the 

right response to this is to look at this plot as further confirmation, 

really, of what we already know about the Qods Force, the Qods 

Force obviously being a very significant component of the Iranian 

Government, and that is that the Qods Force is involved in the exportation of terrorist activity around the world. They are active in 

the region. The fact that they are active here has crossed a red 

line, as the Secretary of State has said. But we have known that 

the Qods Force is a terrorist organization and we have acted 

against it with that knowledge in the past. 

Senator BENNET. It would seem to me, Mr. Chairman, and my 

time has expired, but it would seem to me that there is no need 

for any other evidence than what we saw this week to inspire those 

who have hesitated from joining us in the work that you have been 

trying to do in getting off the fence and making sure that an action 

like this actually cannot be carried out and even more horrific 

things cannot be carried out. So I hope you are doing absolutely everything you can do and we will do everything we can do to push 

the international community in the direction it needs to move. 

Chairman JOHNSON. Senator Corker. 

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

the secure hearing we had yesterday. I know we had a lot more 

time, actually, to ask a lot of questions at a whole different level 

and I appreciate the responses and the work that you are doing. 

I think it is interesting, following Senator Bennet and Senator 

Kirk, I mean, if you look at American previous responses to things 

like this, I mean, if you really boil it down, they were willing to 

do something here in our country that likely would have created 

a war, and that has been our response to these kind of things in 

the past. So if you really just take A to B to C, it is very evident 

that the Iranian Government was willing to conduct an act of terrorism on our soil, knowing the history of the way Americans have 

responded to that, they were willing, it appears to me, to provoke 

war, which is, I think, what this most recent incident points out 

to us. 

So let me—you gave us some great statistics yesterday, and I 

know all of this is hard work and I really do appreciate what you 

have been able to accomplish as far as the effects on the banking 

system. I know that, again, most of that was classified, but let me 

ask this question. So Iran is on a trajectory as far as enrichment. 

We know that where they are today, and I do not know how much 
28 

of this is classified and how much is not, so I will not—but we 

know that where they are today, very quickly, they could get to a 

point where they have bomb-grade material. 

So as I listen to you, I mean, all these things that you are doing 

have had the effect of freezing various activities, but I guess what 

I would like to ask you is the trajectory that we are on, a trajectory 

that will alter their behavior prior to the time they are able to 

produce a bomb, I mean, that is the only reason we are doing this. 

All these other things are nice, and economic growth compared to 

other countries, that is nice, but that is really not our point. Our 

point is to keep them from producing a bomb, and I would like for 

you to tell me whether we, in fact, are on a trajectory that is going 

to keep that from happening. 

Mr. COHEN. Senator, I do not know the answer to that question. 

What I know is that we are doing everything we can to increase 

the pressure as extensively as we possibly can so that we are able 

to persuade the Iranians as part of the dual-track strategy that 

Secretary Sherman described in her testimony, persuade the Iranians to engage meaningfully and seriously with the international 

community before we get to that point that you describe. 

What we are doing on our part, and it is part of a broader Government effort, is to develop the pressure on Iran to try and induce 

them as soon as possible to engage meaningfully. That means continuing to take the steps we have taken to isolate Iranian financial 

institutions from the international financial sector, particularly the 

institutions that are involved in Iran’s proliferation activity. It 

serves a dual purpose. It builds the overall pressure on Iran in 

service of the desire to have them engage meaningfully. It also impedes Iranians’ ability to—Iran’s ability to develop its nuclear program. The more difficult we make it—— 

Senator CORKER. So, and just for what it is worth, we went into 

great depth with this yesterday and all of this was shared. What 

I think we never got to was whether we think we are on a trajectory that is going to be the appropriate trajectory, and again, you 

have shared all this with me and I think you all are doing some 

great work. I just want your judgment as to whether our trajectory 

is steep enough. 

Mr. COHEN. What I can say is that we remain persuaded ourselves that this is the right course, that we, by applying pressure 

across the board on Iran, that this can be an effective approach. 

So—— 

Senator CORKER. So—— 

Mr. COHEN. I do not have a crystal ball. I cannot tell you for 

sure, but—— 

Senator CORKER. And again, thank you, and we welcome you and 

Wendy and thank you for your call. 

Let me just close with this question. I know the Chairman is 

wanting to stay on time. Let me reiterate, I guess, the question. 

Senators Menendez and Kirk have developed some legislation that 

gives you additional tools, and you all basically are saying to us, 

please do not give us these additional tools. So we are on a trajectory, and I think all of us want to make sure that we have done 

everything we can to enhance your ability, and I know we have met 

directly with the State Department to understand the reason the 
29 

State Department does not want these tools, but just one more 

time, I think you are saying to us today, all of us who want to help 

you get on a steeper trajectory, you are saying you do not really 

want the help we are trying to provide. 

Mr. COHEN. I would not say that, and I do not think the Administration, broadly, feels that way. I think our view is the tools that 

have been provided are enormously effective and we are making 

good use of them. As Senator Menendez described it earlier, legislation to perfect CISADA, I think we would welcome. I think the 

question is, as always, will this enhance our ability to pursue the 

objectives we are pursuing, and I think we are very much willing 

to work with Congress to perfect CISADA and perfect the overall 

sanctions regime. 

Senator CORKER. Thank you, and I thank all of you for your efforts. I appreciate it. 

Chairman JOHNSON. Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman, and I want to echo 

the statements by many of the folks here thanking you all for your 

work. We very much appreciate it. You have got a very difficult job, 

but thank you for what you do. 

We have heard folks talk about investments in oil fields from foreign companies. We have heard Wendy talk about the fact that you 

have had conversations, with all of you, with foreign governments, 

about making sure that whatever sanctions are out there are real. 

I want to talk about a little bit closer to home, and just tell me 

if I have got good or bad information here, but recently, I heard 

one of America’s largest companies, Koch Industries, was in the 

business of supporting Iran through energy development. If they 

are doing it, there are probably others that are doing it. I have got 

some concerns with this. 

Number one, I think that any time you can manipulate loopholes 

and be able to do this, that is a concern. So what they did might 

be, in fact, legal. 

The second one is the concern that American companies would 

exploit loopholes and give Iran the tools they need to be a more 

powerful player in the world. I think that is all we do not want to 

see happen, more of a security threat, more of a threat to everybody in the world. 

So the real question is, since obviously with some companies you 

cannot enforce common sense or the sense of patriotism, should we 

be allowing subsidiaries of American companies to be able to do 

business in Iran, or should we be, as I said in my opening, putting 

the screws to these companies, because, quite frankly, it is one 

thing for a Chinese company to do it. That is unacceptable. It is 

really unacceptable for an American subsidiary to be able to do it. 

Could I get your comments on that. 

Mr. COHEN. Senator Tester, I think I saw the same article about 

Koch Industries that you saw, and I will not speak specifically 

about Koch Industries, but I will address the issue broadly of subsidiaries of U.S. companies—— 

Senator TESTER. Yes. 

Mr. COHEN.——doing business in Iran. It is a violation of U.S. 

law for a U.S. company to do business in Iran via a subsidiary. 

Senator TESTER. OK. 
30 

Mr. COHEN. What that means is if the U.S. parent is acting 

through its subsidiary, directing its activity, that violates U.S. law. 

If the subsidiary is acting wholly independently of the parent, U.S. 

law does not reach that subsidiary, with the exception of, and I 

think Secretary Mills can elaborate on this, the reexportation of 

controlled items from the United States. 

Senator TESTER. Yes. 

Mr. COHEN. The balance that has been struck in the law thus far 

is that we direct our law to U.S. companies and what U.S. companies do. Subsidiaries are not, by definition, U.S. persons. They are 

foreign persons. And so the basic theory is, we will look at what 

U.S. persons do and U.S. companies do. If they are acting through 

a foreign person, then the law prohibits that. But if the foreign person is acting independently—— 

Senator TESTER. Should it be changed? 

Mr. COHEN. Well, I think there is—for subsidiaries of U.S. companies, I think it is fair to look at that very carefully. 

Senator TESTER. Should we be doing things like requiring American companies to disclose to their investors their subsidiaries and 

what kind of business they are into? 

Mr. COHEN. I think that is an interesting idea. I think we are— 

we are working on some other ideas in the Treasury Department 

on how to more effectively limit what subsidiaries can do and the 

benefit of the subsidiaries to their parent. I think there are ways 

to go about this without crossing that line of saying, look, we are 

going to try to directly regulate a foreign person. There are ways, 

I think, to focus on the U.S. parent that will have an effect on 

whether a foreign subsidiary would be willing to do business with 

Iran. 

Senator TESTER. I agree. David Mills, would you like to comment 

on the whole point about American companies’ subsidiaries and if 

there is anything we could or should do, if you need any more flexibility from a Commerce perspective. 

Mr. MILLS. I would defer on the overall policy issue to my colleagues here, but I will say that there was one additional nuance, 

that if there is a U.S. national working at a foreign company, 

whether it is a U.S. subsidiary or not, that national remains subject to U.S. jurisdiction and may not participate in any transactions 

with a proscribed party. 

But we did just put the screws to a company, Flowserve Corporation, for illegally—the subsidiaries of which illegally sourced goods 

from the United States, where the U.S. exporter had no knowledge 

or reason to know that these goods were going to be transshipped 

to Iran, and so we did hold them accountable in that regard to the 

fullest extent that we can under the current law. 

Senator TESTER. Just real quickly, in closing, I would just say 

this. I think Senator Corker was right in some of his potential crystal ball stuff he was doing, as if that attack would have been successful. I have got to tell you, I think any company that has a subsidiary that is doing business with Iran, we need to shine some 

sunlight on that because, quite frankly, I do not think the American people would accept that very well, and quite frankly, I think 

that would take care of the problem. So thank you. 

Chairman JOHNSON. Senator Merkley. 
31 

Senator MERKLEY. Thank you very much, Mr. Chair. 

Secretary Sherman, Libya gave up its nuclear ambitions, nuclear 

weapon ambitions when it reached out to the world some time ago. 

Did our choice of supporting the invasion of Libya undermine our 

core foreign policy interests in Iran? 

Ms. SHERMAN. I missed the first part of your question. I am 

sorry, Senator. I missed the first part of your question. 

Senator MERKLEY. Libya was one of the few nations in the world 

that gave up its nuclear weapons program to rejoin the international community. Did our support of basically the dislocation or 

removal of the government there undermine our foreign policy objectives in Iran? 

Ms. SHERMAN. Actually, I think quite the opposite, Senator. I 

think that our support for the people of Libya to wage the battle 

that they have won with the support of NATO, with America having provided some support to that effort but having it be a NATOled effort in support of the opposition in Libya, says that people in 

a given country can, at obviously great cost to many of the Libyan 

people, get a government and a future that will better support 

their rights to existence, to dignity, to prosperity and hope that we 

all take for granted. 

And I think to that extent, if you are suggesting that Iran might 

look at that and say, we had better not give up our nuclear weapons because we will end up like Libya, the regime will be gone, 

that may be some thinking on behalf of leaders of Libya, just as 

it may be of other states like North Korea, that they had better 

hold on to their nuclear weapons as a deterrence to the rest of the 

world. But at the end of the day, as we saw in the beginnings of 

the Green Movement in Iran, it is not sustainable over time. We 

live in a 24/7 Internet and media-connected world and the Iranian 

people understand that there are better and different ways to live 

their lives. 

So I think the real question here, which goes to what Senator 

Corker raised, is the time line, and that is our strategy of both intense pressure internationalized and persuasion, will it achieve the 

deterrence that we all seek, the ultimate elimination of Iran’s nuclear weapons ambitions, in time—— 

Senator MERKLEY. I am going to cut you off here because you are 

taking my whole 5 minutes. 

Ms. SHERMAN. Oh, I apologize, sir. 

Senator MERKLEY. I must say, your answer is exactly the answer 

I have heard every time, but I think you would find, if you really 

pondered it, that many leaders around the world have looked at 

North Korea and Pakistan and said, we would rather be in their 

shoes than in Libya’s shoes. And so I think it is a nice, tight argument, but I would say the world is more complicated than that 

when you are looking to the psychology of foreign leaders. 

One of the concerns in terms of the ability of resistance to organized—to the Iranian Government that has been raised by various 

groups is whether we are in a position to, if you will, assist with 

the cell phone and Internet technology access in ways that might 

help resistance organize in Iran and that occasionally—well, just in 

that term, and again, succinct, because I only have a short time, 

is there more we can do to assist in the communications that have 
32 

proved so effective for groups around the world, for grassroots 

groups? 

Ms. SHERMAN. We, in fact, have a fairly robust program to train 

people how to use technologies and how to reach through to the 

media in the way that you suggest, and given the repression that 

exists in Iran, this is probably not the best forum in which to discuss some of what we are able to do. 

Senator MERKLEY. Very good. Thank you. 

And finally, it is quite likely that very high Iranian leaders approved or were involved in approving the plan to put a bomb off 

on U.S. territory. Is it time to try something far more aggressive, 

and I realize there are huge downsides, but I just pose it as a question, such as saying, you want to export oil tankers out of the Persian Gulf? You can do that when you end your nuclear program. 

Ms. SHERMAN. Senator, I certainly understand, we all have the 

same impulse, which is what can we do to really make Iran understand how grievous such an action was, and had it occurred, how 

horrific it would have been for them and for the entire international community. I think that one of the things we have tried 

to do, as the Secretary would say, is use smart power and be very 

careful about the responses we make to any individual circumstance so we do not escalate it beyond the point at which it is. 

But I understand the concern, and we are certainly looking at all 

of the options that might be available to us. 

Senator MERKLEY. Thank you. 

Chairman JOHNSON. I want to thank the witnesses for the testimony on this important issue. I think that today’s hearing provided 

us useful information as we consider this issue going forward. 

Thanks again to my colleagues and our panelists for being here 

today. 

This hearing is adjourned. 

[Whereupon, at 11:57 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 
33 

PREPARED STATEMENT OF SENATOR MICHAEL F. BENNET 

Thank you, Chairman Johnson and Ranking Member Shelby, for holding this important hearing. I’d also like to acknowledge Senator Menendez and Senator Kirk 

for the tremendous work they’ve done in this area. 

We meet here today—roughly 2 years after the Banking Committee first passed 

the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) 

and over a year after it became law—to discuss progress made toward successfully 

sanctioning illicit activities in Iran and stopping Iran’s march toward obtaining a 

nuclear weapon. 

Our goal in passing CISADA was clear: to change Iran’s cost-benefit analysis and 

compel the country to alter behavior regarding its nuclear weapons program. 

Since its passage, CISADA has empowered the Administration to sanction more 

firms doing business with Iran than any previous one and to crack down on the 

Ahmadinejad regime; the Islamic Revolutionary Guard Corps (IRGC); its external 

arm, the Qods Force; and the Iran Shipping Lines. 

CISADA’s targeted sanctions on Iran’s energy sector have compelled several energy firms to exit the Iranian market, even before sanctions had been levied. As a 

partial result, Iran oil production has fallen from 4.1 million barrels per day several 

years ago to about 3.9 million barrels per day. These sanctions have put the squeeze 

on the Iranian regime and made it nearly impossible for Iran work through any 

internationally recognized banking entity. We’ve pushed the Iranians to the margins 

of the financial sector, and we must push them out of business. 

At the same time, our current sanctions framework has not fully achieved the core 

goal of preventing Iran from continuing to pursue a nuclear weapon. A recent International Atomic Energy Agency (IAEA) report indicates that Iran continues to increase its holdings of 20 percent enriched uranium and expresses concern about the 

military applications of its nuclear program. 

Even more troubling, however, were revelations this week that Iranian officials 

and members of the Qods Force were involved in an audacious scheme to assassinate Saudi Arabia’s Ambassador to the United States, right here in Washington, 

DC. In the face of these unprecedented events, I can’t help but think, what would 

have happened if they had succeeded? Where would the United States be today, if 

the Iranian regime had perpetrated such a brazen attack on U.S. soil? 

This week that possibility crystallized, and it is in that context that we should 

be discussing future sanctions on Iran. It is in that context that we should be engaging the international community to prevent Iran-supported terrorism and the country’s progress toward a nuclear weapon. 

I look forward to the testimony here today and to answering these important 

questions. 

Thank you. 

PREPARED STATEMENT OF SENATOR MARK KIRK 

I would like to thank Chairman Johnson and Ranking Member Shelby for holding 

this important hearing today. 

When we look at Iran today, we see an accelerating nuclear program, an expanding ballistic missile program, and a wholesale disregard for human rights. 

The Iranian regime continues to sponsor terror around the world, including now 

on U.S. soil. On Tuesday, October 11, Attorney General Holder announced that the 

Department of Justice charged two members of Iran’s elite Qods Force, a special operations unit of the Iranian Islamic Revolutionary Guard Corps (IRGC), in connection with a plot to conduct bombings in Washington, DC, which included targeting 

U.S. Senators at a popular DC restaurant. 

In response, I call on the Administration to move quickly to implement the most 

effective nonmilitary response currently pending on our docket—cutting off the Central Bank of Iran and collapsing the Iranian currency. On August 9, 92 Senators 

signed a letter to President Obama, asking to impose crippling sanctions on the 

CBI. 

President Obama signed the Comprehensive Iran Sanctions, Accountability, and 

Divestment Act (CISADA) into law on July 1, 2010, or over 15 months ago. 

Yet, as evidenced by the latest report from the International Atomic Energy Agency (IAEA), Iran has accelerated nuclear enrichment. 

According to the International Monetary Fund (IMF), Iran’s economic growth 

more than quadrupled between 2009 and 2011. Last year, the Iranian economy actually grew faster than the U.S. economy. Iran’s GDP grew from $338.1 billion in 

2008 to $357.2 billion in 2010, or a 5.6 percent increase. 
34 

We must accelerate the pace of designations under current U.S. law. I remain perplexed as to why the Administration has failed to sanction a single bank or a financial institution under Section 104 of CISADA. 

On August 3, 2011, the Government Accountability Office (GAO) also identified 

14 non-designated companies as continuing to conduct activities in Iran potentially 

in violation of U.S. law, including: 

• China National Offshore Oil Corporation, 

• China National Petroleum Corporation, 

• Sinopec (China), 

• Daelim (South Korea), 

• Edison (Italy), 

• Hyundai Heavy Industries (South Korea), 

• INA (Croatia), 

• Indian Oil Corporation Ltd., Oil 

• Natural Gas Corporation (India), 

• Oil India Ltd., 

• OMV (Austria), 

• ONGC Videsh Ltd. (India), 

• Sasol (South Africa), and 

• Sonangol (Angola). 

I ask the Administration to immediately investigate these entities and report back 

to Congress on whether they should be sanctioned under CISADA. 

We also know the Government of Iran continues a systematic campaign of violence, intimidation, and repression against its own people. 

In response, we must accelerate the pace of sanctions against individuals that 

commit human rights gross violations against Iranians, including first and foremost, 

President Ahmadinejad and his Chief of Staff, Esfandiar Rahim Mashaei. 

Under Executive Order 13553, the Obama administration has so far designed 11 

Iranian officials for human rights violations since September 2010. That is far too 

few. During the same timeframe, the European Union has designated 61 individuals 

under EU laws, including 29 on October 5, 2011. 

Today, there are over 100 members of the Baha’i community imprisoned in Iran, 

including the seven Baha’i leaders (‘‘the Yaran’’), imprisoned since 2008. 

This week, Iranian actress Marzieh Vafamehr was sentenced to 1 year in jail and 

90 lashes after starring in an Australian film with a shaved head and no hijab. 

As the Iranian people struggle under Ahmadinejad’s repressive regime, America 

cannot stay silent. 

During the cold war, President Reagan made Soviet human rights abuses a key 

tenet of our foreign policy. In this spirit, I launched the Iranian Dissident Awareness Program (IDAP) to champion Iranians who have been arrested by the regime 

because of their work to bring a free and democratic Iran. Every Member of Congress now has the ability to show support for the men and women on the front lines 

of the struggle for human rights and democracy in Iran—just as we did for the ‘‘refuseniks’’ facing persecution in the Soviet Union. 

By standing in solidarity, we can give hope to the dissidents and put pressure on 

the Iranian regime. 

In closing, I look forward to working with the Administration to bring the full 

weight of economic sanctions to bear on the Iranian regime to stem the growing 

threat we face from Tehran. 

PREPARED STATEMENT OF WENDY SHERMAN 

UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS, DEPARTMENT OF STATE

OCTOBER 13, 2011 

Chairman Johnson, Ranking Member Senator Shelby, Distinguished Members of 

the Committee: thank you for inviting me to appear before you today to discuss the 

Obama administration’s strategy to address the continued threat posed by the Iranian regime’s nuclear ambitions, its support for international terrorism, its destabilizing activities in the region, and its human rights abuses at home. 

I would like to begin by dedicating this testimony to Philo Dibble, Deputy Assistant Secretary for Near East Affairs, who passed away unexpectedly 2 weeks ago. 

Philo was an exceptionally well-respected career member of the Foreign Service who 
35 

devoted most of his career to the Middle East. For the past year, he dedicated his 

deep regional expertise and knowledge to advancing our policy on Iran. The loss of 

his wisdom and leadership is a profound one for the Department and for our country. 

The world today is unified to an unprecedented degree in its concern that a nuclear-armed Iran would undermine the stability of the Gulf region, the broader Middle East, and the global economy. In defiance of U.N. Security Council and IAEA 

Board of Governors resolutions, Iran has continued to expand its sensitive nuclear 

activities, and refuses to cooperate with the IAEA, raising strong, legitimate concerns about the purpose of the nuclear program. Beyond the nuclear issue, Iran continues its longstanding support to terrorist organizations such as Hizballah, Hamas, 

and Palestine Islamic Jihad (PIJ), as well as by its support to newer proxy militia 

groups in Iraq. 

But, these efforts belie a regime that is actually far more vulnerable and weakened than it would like to project. 2011 has been a harsh wake-up for the Islamic 

Republic of Iran. Iran’s Government has failed in its efforts to co-opt uprisings in 

the Arab world and claim its 1979 revolution as inspiration. No popular movement 

in the region has looked to Iran as a model for change; the only entity that turned 

to Iran was another autocratic regime in Syria trying desperately to hang on to 

power. Iran has further undermined its standing among Muslims and further 

strained its bilateral relations in the region by helping the failing regime of Bashar 

al-Asad to brutally crack down against Syrian citizens. Misreading the stark warning message from the Arab Awakening, Iran’s Government continues to arrest, imprison, and persecute Iranians who dare to ask for accountability and transparency 

from their government, as well as just and fair treatment for ethnic and religious 

minorities. 

To address the multifaceted challenges posed by Iran’s regime—its flouting of its 

nuclear obligations, its nuclear weapons ambitions, its support for terrorism, its destabilizing activities in the region, and its human rights abuses at home—the 

United States has led a sustained and broad international campaign to exact steep 

costs for the regime and to complicate its ability to pursue these policies. Iran today 

faces tough economic sanctions and broad diplomatic pressure, and though it aspires 

to regional and even global leadership, its current policies have made it an outcast 

among nations. 

American policy regarding Iran remains unambiguous. First and foremost, we 

must prevent Iran from acquiring nuclear weapons. Its illicit nuclear activity is one 

of the greatest global concerns we face, and we will continue to increase the pressure until the Iranian regime engages the international community with seriousness 

and sincerity and resolves its concerns. But pressure is not an end unto itself. It 

may provide the impetus to Iranian action, but does not prescribe the measures that 

are necessary to build international confidence in Iranian nuclear intent. To that 

end, we have offered to meet with Iran and have proposed confidence-building and 

transparency arrangements that offered practical incentives. Unfortunately, Iran 

has failed time and again to reciprocate and to take advantage of these opportunities. As a consequence, more than ever, world pressure is mounting on Iran. Last 

year, the United States led a successful effort in the U.N. Security Council to adopt 

Resolution 1929, which led to the toughest multilateral sanctions regime Iran has 

ever faced. The resolution strengthened previous U.N. resolutions and provided a 

platform upon which the European Union, Norway, Australia, Canada, South Korea, 

Switzerland, and Japan implemented strict domestic measures to bolster the measures of UNSCR 1929. 

The efforts made by the Congress, by all of you, have also effectively sharpened 

American sanctions, particularly against Iran’s energy sector and the regime’s 

human rights abuses. When President Obama signed into law the Comprehensive 

Iran Sanctions, Accountability, and Divestment Act (CISADA, which amended the 

Iran Sanctions Act of 1996) in early July, 2010, the Administration and the Congress sent an unmistakable signal of American resolve and purpose, expanding significantly the scope of our domestic sanctions and maximizing the impact of new 

multilateral measures. Since then, the Administration has imposed sanctions on a 

growing list of individuals and entities responsible for Iran’s expanding scope of unauthorized activities, and these sanctions are raising the cost, time, and energy required for Iran to pursue its current policies. 

In September 2010, Secretary Clinton imposed the first sanctions any Administration had ever imposed under the Iran Sanctions Act. To date, the State Department 

has sanctioned 10 foreign companies for doing business with Iran’s energy sector. 

Further, CISADA’s ‘‘special rule’’ has worked exactly as intended: it gave us the 

flexibility and leverage to persuade multinational energy firms Shell, Statoil, ENI, 

Total and INPEX to withdraw from all significant activity in Iran. The companies 
36 

also provided clear assurances that they would not undertake any sanctionable activities in Iran’s energy sector in the future, and in doing so, forfeited billions of 

dollars of investments. In addition, Repsol abandoned negotiations over several 

phases of the South Pars gas field. 

Other successes under CISADA include the fact that major energy traders like 

Russia’s Lukoil, India’s Reliance, Switzerland’s Vitol, Glencore, and Trafigura, Kuwait’s Independent Petroleum Group (IPG), Turkey’s Tupras, France’s Total, and 

Royal Dutch Shell have stopped sales of refined petroleum products to Iran. Iran 

has had to redirect production facilities from valuable petrochemical export production in order to manufacture refined petroleum for domestic sale. Furthermore, Reliance, India’s largest private refiner, announced in 2010 it would not import Iranian 

crude. 

Investment in Iran’s upstream oil and gas sector has dropped dramatically, forcing Iran to abandon liquefied natural gas projects for lack of foreign investment and 

technical expertise, after Germany’s Linde, the only supplier of gas liquefaction 

technology to Iran, stopped all business with it. South Korea’s GS Engineering and 

Construction canceled a $1.2 billion gas processing project in Iran. Outside of Iran, 

British Petroleum chose to shut down production from a North Sea platform coowned with the Iranian Oil Company, to ensure compliance with EU sanctions. 

Trans-Adriatic Pipeline (TAP) partners announced that the pipeline, once constructed, would not be used to transport gas from Iran. 

Iran’s national airline, Iran Air, is also paying the price for having its aircraft 

misused for proliferation purposes, and providing services to the IRGC. Most major 

fuel providers have terminated some or all of their Iran Air contracts, including 

British Petroleum, Royal Dutch Shell, Total, OMV, and Q8. Iran Air is finding it 

difficult to find sources to replace these suppliers, not to mention places to land. 

Iran is increasingly isolated from the international financial system, as Under 

Secretary of Treasury Cohen’s testimony describes in detail. Virtually all of the 

world’s first-tier banks have concluded that the Iranian market is not worth the 

reputational risk posed by deceptive Iranian practices. They understand the consequences of both willfully and inadvertently facilitating an illicit transaction, and 

have severely curtailed their interactions with Iranian banks. The Administration 

is looking very closely at further measures that will drive home the message that 

any bank doing business with banks that do business with terrorists puts its own 

reputation at risk of international sanction and condemnation. 

Iran’s shipping is also under international pressure. Large shipping companies 

such as Hong Kong-based NYK are withdrawing from the Iranian market, and reputable insurers and reinsurers such as Lloyd’s of London, no longer insure Iranian 

shipping. Iran’s shipping line IRISL, has been exposed for its complicity in the shipment of goods in violation of Security Council resolutions, as noted by the U.N.’s 

Iran Sanctions Committee. IRISL has been sanctioned by the United States, the 

EU, Japan, South Korea, and others. Difficulty in repaying loans and maintaining 

insurance coverage has led to the detention of at least seven IRISL ships. Major 

shipbuilding companies are refusing to build ships for IRISL. As a direct result of 

the international pressure we helped build, IRISL ships have a harder time finding 

ports of call, particularly in Europe. 

Other major companies have voluntarily opted out of the Iranian market, including automotive firms Daimler (German), Toyota (Japanese), and Kia (South Korea), 

as well as Germany’s ThyssenKrupp. Caterpillar prohibited its non-U.S. subsidiaries 

from exporting to Iran. Switzerland’s ABB Ltd., Ingersoll-Rand Plc, and Huntsman 

Corp. have ended business with Iran. 

The result of our strategy is an Iran that is isolated economically and finding 

dwindling options for doing business internationally. But, importantly, Iran is facing 

these problems because of targeted sanctions and the voluntary decision by international firms to exit the Iranian market. Our sanctions approach continues to seek 

to undermine Iran’s ability to engage in illicit conduct, with measures against Iran’s 

energy sector removing an invaluable source of funding that Iran could apply to that 

conduct. In spite of the high price of Iranian crude on world markets, Iran’s aggregate economy also seems to be weakening. These effects will increase as sanctions 

implementation continues to improve, especially if the recent decline in the price of 

crude oil continues. 

These efforts are directed toward achieving our goals of persuading Iran to comply 

with its international obligations to prove the exclusively peaceful nature of its nuclear program and to engage constructively with the P5+1. On September 21, I participated in a meeting of the P5+1 countries in New York, where we and our partners, including Russia and China, reiterated longstanding and grave concerns about 

Iran’s installation of centrifuges at the formerly covert enrichment plant at Qom, 

about its stepped up production of 20 percent enriched uranium, and about the pos-
37 

sible military dimension of Iran’s program (a concern notably shared by the IAEA). 

We also reconfirmed the dual-track strategy of engagement and pressure. It was a 

strong and unified statement. It concluded that the P5+1 would be willing to hold 

another meeting with Iran, but only ‘‘if Iran is prepared to engage more seriously 

in concrete discussions aimed at resolving international concerns about its nuclear 

program.’’ If, however, Iran simply seeks to buy time to make further progress in 

its nuclear program, it will face ever-stronger pressures and ever-increasing international isolation. 

We will continue to work with Congress as we implement both tracks of the dualtrack policy. We believe that, in the short term, further improvements in international implementation, based on our current authorities, offer the best way to increase pressure on Iran. As Congress considers additional authorities, we would like 

to work with you to ensure that any additional steps we take will strengthen the 

international consensus and global pressure against Iran’s nuclear program. The 

most effective sanctions are those taken by a large portion of the international community, which requires close coordination with friends and allies, as well as a targeted approach. Convincing them to take action will require us to carefully calibrate 

our outreach to the individual circumstances of specific countries and sectors. It will 

also require flexibility to find creative and proactive tools to convince Iran that it 

cannot continue to pursue its nuclear ambitions. 

Sanctions are doing more than raising the cost of continuing illicit nuclear activity; they are finally shining a spotlight on some of the individuals and entities perpetrating egregious human rights abuses against Iranian citizens. Using CISADA, 

we have designated 11 individuals and 3 entities for human rights violations, and 

we continue to compile more information and evidence that will allow us to identify 

more murderers, torturers, and religious persecutors. We have taken a firm stand 

on the Iranian regime’s violations of human rights, including the repression of religious minorities as exemplified by the death sentence that might have been imposed 

on Pastor Youcef Nadarkhani simply for following his own chosen religion had it not 

been for the immediate condemnation from world leaders, religious groups, and 

NGO’s. At the same time, we are offering capacity-building training programs, 

media access, and exchanges to help Iranian civil society strengthen their calls for 

accountability, transparency, and rule of law. The Iranian opposition’s desire to operate without financial or other support from the United States is clear. We are 

committed to using available and effective diplomatic tools to assist those who want 

our assistance in speaking out and defending fundamental rights and freedoms. The 

United States will always support the Iranian people’s efforts to stop governmentsanctioned harassment, detention, torture, imprisonment, and execution of anyone 

who dares express ideological, religious, or political differences from the regime’s repressive, totalitarian vision. 

We engage regularly with like-minded countries to develop shared approaches to 

increase the pressure for a change in the Iranian Government’s behavior. In July, 

the United States and United Kingdom, with the support of Canada, imposed visa 

restrictions on Iranian Government officials and other individuals who were responsible for or participated in human rights abuses, including government ministers, 

military and law enforcement officers, and judiciary and prison officials. We welcome the European Union’s announcement this week of more than two dozen additional travel bans. There is absolutely no cause for allowing petty tyrants to trot 

around the globe while suffering and repression continues unabated inside Iran. 

International pressure and condemnation on this point is growing: We worked with 

Canada to pass a U.N. General Assembly resolution last year condemning Iran’s 

human rights abuses. This condemnation attracted a larger margin than any similar 

resolution in the past 8 years. It may seem small, but every pro-regime vote we 

strip away on resolutions like this is one fewer fig leaf for the Iranian regime to 

hide behind as they murder and torture their own people, and we will continue to 

press measures large and small at every opportunity. 

We were leaders in an effort in the U.N. Human Rights Council in March to create a Special Rapporteur on Iran, the first country-specific human rights rapporteur 

since the Council’s creation. Special Rapporteur Ahmed Shaheed, a former foreign 

minister of the Maldives and respected human rights advocate, will serve as an 

independent and credible voice to highlight human rights violations by the Government of Iran. All of these multilateral efforts reinforce our strong domestic actions 

that prove that Iran’s attempts to undermine universal rights and deceive the world 

only further isolate it from the global community. 

In my new role as Under Secretary for Political Affairs, I look forward to working 

closely and transparently with Members of Congress to prevent Iran from acquiring 

nuclear weapons, curtail its support for terrorism, make it more difficult for Iran 
38 

to interfere in the region, and deter the regime from committing human rights 

abuses against its own people. 

PREPARED STATEMENT OF DAVID S. COHEN 

UNDER SECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE

DEPARTMENT OF THE TREASURY

OCTOBER 13, 2011 

INTRODUCTION 

Chairman Johnson, Ranking Member Shelby, and distinguished Members of the 

Committee: 

Thank you for the opportunity to appear before you today 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 program and its extensive support 

for terrorism. I am pleased to be here with Under Secretary Sherman and Assistant 

Secretary Mills, as the approach the Administration has taken, and the progress we 

have achieved, have been marked by a robust, interagency collaboration to confront 

the threat we face from Iran. 

I will focus my remarks today on our sanctions strategy, paying particular attention to the Treasury Department’s vigorous implementation of the Comprehensive 

Iran Sanctions, Accountability, and Divestment Act (CISADA), the impact CISADA 

and other sanctions are having on Iran, and our plans to increase the pressure on 

Iran going forward. 

Iran Sanctions Strategy 

The Treasury Department’s sanctions efforts 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. 

Notwithstanding the sincere offer of engagement extended to the Iranian Government by the United States since the outset of this Administration, Iran has refused 

to respond meaningfully. In order to compel Iran to change its approach and to 

make clear to Iran the consequences of its existing approach, the United States is 

implementing a broad-based pressure strategy. One of the most important elements 

of which are targeted financial measures designed both to disrupt Iran’s illicit activity and to protect the international financial sector from Iran’s abuse. Our actions 

have focused on key government entities involved in Iran’s illicit conduct, including 

nearly two dozen Iranian state-owned banks; the Islamic Revolutionary Guard 

Corps (IRGC) and its external arm, the IRGC-Qods Force; and, Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines (IRISL), its affiliates. 

This strategy has yielded significant results. We have imposed costs directly on 

the entities we sanctioned, and by focusing our efforts on exposing Iranian entities’ 

illicit and deceptive activities, we have built support among foreign governments to 

take similar actions. The global private sector also has amplified our actions—often 

taking voluntary steps beyond their legal requirements—because our actions have 

highlighted the pervasive nature of Iran’s illicit and deceptive conduct and the 

reputational risks associated with any Iran-related business. 

Our ability to isolate and disrupt the IRGC and designated Iranian financial institutions 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 the IRGC and Iran’s designated banks should not 

be allowed access to the international financial system. As I will describe in more 

detail, our implementation of CISADA has significantly impaired 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. 

Although we are making progress, there is, of course, still much to be done. Iran 

is feeling the impact of the pressure, but we have yet to achieve the objective of 

our dual-track strategy: concrete action by Iran to comply with its international obligations and to address the international community’s concerns regarding its nuclear 

program. 

Recent Actions and Progress 

Since last May, when I last appeared before this Committee, Treasury has taken 

a number of significant actions that have increased markedly the pressure on Iran. 
39 

Tidewater Middle East Co. and Iran Air 

The IRGC continues to be a primary focus of U.S. and international sanctions 

against Iran because of the central role it plays in all forms of Iran’s illicit conduct, 

including Iran’s nuclear and ballistic missiles programs, its support for terrorism, 

and its involvement in serious human rights abuses. As Iran’s isolation has increased, the IRGC has expanded its reach into critical sectors of Iran’s economy, displacing ordinary Iranians, generating revenue for the IRGC and conducting business 

in support of Iran’s illicit activities. We previously imposed sanctions on several 

IRGC-related entities, and in June we continued the effort to expose the IRGC’s expansive economic reach—this time, into Iran’s maritime and transportation sectors. 

Using our nonproliferation authorities, in June, 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. The Bandar Abbas port handles approximately 90 percent of Iran’s containerized shipping traffic and has been used by Iran to export arms and related materiel 

in violation of several United Nations Security Council Resolutions (UNSCRs). That 

same day, we also imposed sanctions against Iran Air, the Iranian national airline 

carrier, because it has been used by the IRGC and Iran’s Ministry of Defense for 

Armed Forces Logistics (MODAFL) to transport military-related equipment. 

The international private sector responded swiftly to these actions, taking steps 

to ensure that they have no part in dealing with these proliferators. For example, 

several of the world’s largest shipping container firms, Maersk, Hapag Lloyd, and 

NYK Lines, have stopped calling at Bandar Abbas’ Shahid Rejaie terminal and have 

stopped or will stop all shipments of Iran-bound cargo. 

IRISL 

Since IRISL was designated by the United States in 2008, the United Kingdom 

in 2009, and the EU in 2010 for supporting Iran’s WMD proliferation activities, it 

has sought to evade sanctions by changing ships’ names and nominal owners—often 

multiples times—and altering shipping documents to disguise its activities. Treasury, in turn, continues to expose IRISL’s use of these and other deceptive practices 

and has imposed sanctions on more than 150 IRISL-related vessels, companies, entities and persons over the last 3 years. 

In June, we added to this list by designating 10 IRISL front companies, as well 

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

activities worldwide. 

Our actions, coupled with similar sanctions imposed by many of our partners 

around the world, have substantially hindered IRISL’s operations, causing it real financial distress. Because of sanctions imposed by the EU, IRISL today is largely 

shut out of European ports. It is also unable to obtain maritime insurance from any 

of the world’s recognized insurers, including the Lloyd’s market. Instead, IRISL is 

now insured, if at all, by a sanctioned Iranian insurance company with no history 

of writing maritime insurance and no track record of paying maritime claims. Along 

with this change in insurance, which in some cases has run contrary to the terms 

of IRISL’s vessel mortgages, IRISL has had difficulty making payments on its mortgages. This has led to about a half-dozen IRISL ships being arrested in ports around 

the world by creditors seeking payment. 

Iranian Human Rights Abuses 

In response to the Iranian regime’s serious human rights abuses, CISADA required that the President impose sanctions upon Iranian officials, or persons acting 

on behalf of the Iranian Government, who are responsible for or complicit in the 

commission of serious human rights abuses against Iranians. In September 2010, 

President Obama signed E.O. 13553, which authorizes Treasury, in consultation 

with the State Department, to expose serious human rights abuses by the Iranian 

regime, both inside and outside of Iran. As the regime’s abuse of its citizens’ human 

rights has continued, together we have imposed sanctions under E.O. 13553 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. 

Treasury actions with State have also exposed Iran’s support of the Syrian Government’s ongoing violence and repression of the Syrian people. Under E.O. 13572, 

which targets those responsible for, complicit in, or providing material support to 

those engaged in human rights abuses in Syria, Treasury designated the LEF’s 

Chief and Deputy Chief, and two senior IRGC-Qods Force officers—all for supporting the brutal suppression of the Syrian people orchestrated by Syrian General 

Intelligence Directorate. 
40 

Iranian Support for Terrorism 

We have not lost—and must not lose sight of the fact that Iran is the world’s most 

active state sponsor of terrorism. Iran has used its state apparatus—including especially the IRGC-Qods Force—to support a wide range of terrorist organizations, including Hizballah, Hamas, Palestinian Islamic Jihad (PIJ), the Popular Front for 

the Liberation of Palestine-General Command (PFLP-GC) and the Taliban. In addition to providing financial support to these terrorist groups, Iran has allowed alQai’da to use its territory for the movement of money, facilitators, and al-Qa’ida 

operatives. Al-Qa’ida’s core financial pipeline—which runs from Kuwait and Qatar, 

through Iran, to Pakistan—depends upon an agreement between al-Qa’ida and the 

Iranian Government to allow this network to operate within its borders. In July, 

Treasury designated six members of this network headed by an Iran-based individual to further degrade al-Qa’ida and expose Iran’s continued support to terrorist 

groups worldwide. 

Financial Sanctions and Implementation of CISADA 

The key focus of our efforts remains Iranian banks that either directly facilitate 

Iran’s WMD and missile proliferation activity, or that provide material support to 

banks that have been designated for engaging in that activity. These sanctions, coupled with the power of CISADA, have continued to erode designated Iranian banks’ 

access to financial services, protect the international financial system from risks 

posed by designated Iranian banks, and impede Iran’s ability to acquire material 

for its nuclear program. Moreover, because many of Iran’s largest state-owned banks 

have been sanctioned for engaging in, or supporting other banks engaged in illicit 

activity, our sanctions—along with complementary actions by many of our allies— 

have imposed substantial economic pressure on Iran. 

In May, we continued these efforts by designating Iran’s Bank of Industry and 

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

Iranian banks. After the EU acted to implement UNSCR 1929 by prohibiting 18 Iranian banks from conducting transactions in Europe, BIM used one of its accounts 

as a conduit for transactions into Europe by designated banks, including Bank 

Mellat and Bank Saderat. That is, BIM, like Post Bank before it, engaged in a 

scheme to front for designated banks in an effort to evade U.S. sanctions. BIM is 

the 22nd Iranian state-owned financial institution to be designated by Treasury. 

CISADA’s powerful new financial authorities have amplified the impact of our 

designations of Iranian banks. Under CISADA, the Secretary of the Treasury is empowered to cutoff from the U.S. financial system any foreign bank that facilitates 

the activity of individuals and entities sanctioned by the U.N. Security Council in 

its recent Iran resolutions, as well as any foreign financial institution that facilitates a significant transaction, or provides significant financial services, for any Iranian bank designated by the United States or for the IRGC and any of its designated agents or affiliates. 

Since President Obama signed CISADA into law, my colleagues in the Treasury 

Department and I have aggressively implemented it in close coordination with the 

State Department. We issued the Iran Financial Transaction Regulations just over 

a month after the law was passed, describing in detail the activity that could lead 

to action by the Treasury Department against a foreign financial institution. And 

we have embarked on a worldwide tour to spread the word of the serious consequences that could befall a financial institution that engages in CISADAsanctionable activity. This has involved outreach to foreign financial institutions, 

regulators, and government agencies in nearly 50 countries across five continents. 

Just 2 weeks ago, for instance, I traveled to China to speak with government officials in Beijing and Hong Kong, and with the private sector in Hong Kong, about 

CISADA. 

As we explain in these engagements, CISADA offers a clear choice: a foreign financial institution can have access the largest and most important financial sector 

in the world—the United States—or it can do business with the IRGC or Iranian 

banks sanctioned for facilitating 

Iran’s illicit activity, but it cannot do both. For the overwhelming majority of foreign banks, the choice has been a simple one, and those that had potentially 

sanctionable relationships discontinued that business. The result is exactly what 

Congress intended: CISADA has helped us deepen and broaden Iran’s isolation from 

the international financial system. 

We continue to be vigilant to uncover and investigate activity that may lead to 

action under CISADA. And we remain ready and willing to utilize the tools provided 

by CISADA whenever and wherever necessary. 
41 

The Impact of Sanctions on Iran 

Last December, in testimony to the House of Representatives Committee on Foreign Affairs, my predecessor described the impact of sanctions on Iran this way: 

‘‘Iran has become increasingly isolated from the international financial system, with 

limited access to financial services . . . Iran has been relegated to the margins of 

the international financial system, and is finding it increasingly difficult to access 

the large-scale, sophisticated financial services necessary to run a modern economy 

efficiently.’’ I can report that Iran’s financial isolation, and the economic impact of 

that isolation, have both continued to grow. 

Due to a combination of factors—including UNSCR 1929, financial sanctions imposed by the United States, 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. Iran’s 

shrinking access to financial services and trade finance has made it extremely difficult for Iran to attract foreign investment, pay for imports, or receive payment for 

exports. This has led to a number of significant macroeconomic effects in Iran, exacerbating persistent economic weakness due to the Iranian Government’s mismanagement of its economy. 

Sanctions have increased the cost and difficulty of accessing adequate foreign exchange, including the dollar, which has contributed to major instabilities in Iran’s 

currency. (See chart 1) Last fall, following the adoption of UNSCR 1929 and various 

member states’ actions to implement the Resolution, the spread between the official 

and the private-market exchange rates for the Iranian rial widened dramatically. 

In September 2010, the rial depreciated by up to 20 percent in 1 week alone. It recovered, but earlier this year, the spread between the official and the market exchange rate again began to widen. Iran’s Central Bank intervened in early June, 

devaluing the rial by 11 percent in an effort to close the gap, but it has only grown 

wider since. 

The Central Bank of Iran has so far been unable to contain volatility in the rial 

market exchange rate. There are a number of theories to explain this phenomenon, 

but it is surely driven by Iranians seeking to convert their rial into foreign currency, 

underscoring the extent to which Iranians lack confidence in their economy. 

Dwindling direct foreign investment in Iran also reflects, in part, the impact of 

our targeted sanctions. At a time when Iran could badly use an infusion of international capital, foreign investment in Iran remains low in comparison to other developing economies. (See chart 2) The International Monetary Fund has attributed 

this trend to international sanctions and Iran’s difficult business environment. Iran 

continues to struggle to attract investment in key sectors, particularly oil and gas. 

Many international and national oil companies have effectively withdrawn from 

Iran, depriving the country of large-scale foreign investments and technology. As a 

result, the International Energy Agency projects that Iranian oil production will decline by about 800,000 barrels per day (bpd) by 2016, a roughly 20 percent decline 

in production capacity. At current oil prices, such a decline will cost Iran on average 

about $14 billion (about 3 percent of Iran’s GDP) in annual oil revenues through 

2016. 
42 

1http://www.businessweek.com/ap/financialnews/D9OSLUI80.htm. 

2http://af.reuters.com/article/idAFTRE67716B20100808. 

Sanctions have also led to the IRGC taking over key aspects of Iran’s economy, 

exacerbating the cronyism and corruption that pervades the Iranian regime. We 

have seen this in a number of areas. Khatam al-Anbiya, the U.S.-, EU-, and UNSCdesignated engineering arm of the IRGC, has been recruited to develop key energy 

resources. The IRGC, through its sanctioned affiliates Bonyad Tavon Sepah and 

Mehr Bank, took over Tidewater, a port operator that until a few years ago had 

been privately owned. And President Ahmadinejad recently appointed Rostam 

Ghasemi, a U.S.- and EU-designated IRGC commander and former leader of 

Khatam al-Anbiya, as Minister of Oil. This appointment was applauded by the 

IRGC, which characterized Ghasemi’s new role as a ‘‘meaningful and critical response to the attacks against the guards from the west’s media empire.’’ However, 

even members of Iran’s Government have publicly questioned the wisdom of this decision. One member of Iran’s parliament observed that ‘‘the integration of the guard, 

as a military force, in political and economic power is not in the interests of the system . . . In neighboring countries, military officials are distancing themselves from 

politics and power, while it’s the opposite in Iran.’’1 Furthermore, the inclusion of 

the IRGC throughout the Iranian economy has opened up Iran to greater pressure 

through sanctions. 

Altogether, 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 in the Iranian economy. 

The Continuing Threat and the Way Forward 

The Governor of the Central Bank of Iran, Mahmoud Bahmani, commenting on 

the financial sanctions, said recently that Iran should ‘‘fight back, and that’s for 

sure,’’ asking, ‘‘But how?’’2 It is clear that Iran has chosen to ‘‘fight back’’ against 

sanctions by using increasingly deceptive tactics in an effort to evade the scrutiny 

of governments, regulators, and banks around the world. As Iran has lost access to 

global banking and financial services, and suffered disruptions in its ability to conduct trade worldwide, Iran is trying to preserve the limited access its designated 

banks have to the international financial system while simultaneously seeking to secretly establish new footholds. To do so, Iran is targeting vulnerable jurisdictions 

and financial institutions that may willingly or unwittingly allow designated Iranian banks to operate. 

For example, some branches and subsidiaries of designated Iranian banks continue to operate in jurisdictions outside of Iran. Although many foreign banks would 

prefer not to do business with these branches and subsidiaries, Iranian bank 

branches exploit legal systems that allow them to continue to operate, jeopardizing 

the integrity of their host countries’ financial sectors. We have been working with 

these host countries to shut down the operations of overseas affiliates of designated 

Iranian banks. We have achieved some success, but there is more work to do. 

We also know that Iran has attempted to purchase banks in other countries, relying upon third-party associates or firms to facilitate these purchases in order to 

mask Iranian involvement and ownership. Preventing these attempts to circumvent 

multilateral sanctions remains a key focus of our strategy. Where we have informa-
43 

tion about these potential purchases, we work to alert our foreign partners and urge 

them to prevent Iran from gaining access to their financial sector in this manner. 

We are also continuing our intense efforts to implement CISADA. Last week, we 

issued a final rule to implement Section 104(e) of CISADA, establishing a reporting 

requirement for U.S. banks that will complement our efforts to identify CISADAsanctionable activity by foreign banks. We have already begun to utilize this regulation by issuing this week information requests to a number of U.S. banks regarding 

several foreign banks that we have reason to believe may be involved in activity 

sanctionable under CISADA. If we become aware of possible CISADA violations— 

through this or other investigative efforts under way—we will seek prompt resolution, either by insisting on confirmation from the foreign bank that it has ended its 

relationship with designated Iranian banks or by imposing CISADA sanctions. 

As more and more countries and foreign banks refuse to deal with designated Iranian banks, we also remain keenly focused on the possibility that non-designated 

Iranian financial institutions may become involved in proliferation activity or terrorist financing, or may begin to provide material support to banks that are designated for doing so. And we continue to consider the case of the Central Bank of 

Iran (CBI). At this time, because of our country-wide sanctions program, U.S. financial institutions are already generally prohibited, with only limited exceptions, from 

doing business with any bank in Iran, including the CBI. Treasury has also consistently communicated to our foreign partners the risks of doing business with the 

CBI, as highlighted in UNSCR 1929. Further U.S. action against CBI, if it engenders multilateral support, could further isolate the CBI. I can assure the Committee 

that the Administration will continue to carefully weigh the legal bases and policy 

ramifications of further action against the CBI, and we are committed to continuing 

to work with the Congress on this crucially important issue. 

Conclusion 

As Iran continues to choose the path of defiance, Treasury, working with our colleagues across the Administration and in Congress, will continue to develop new 

and innovative ways to impose additional costs on Iran to create crucial leverage 

for our diplomacy. I look forward to continuing our work with this Committee as 

Treasury continues to pursue this important strategic objective. 

PREPARED STATEMENT OF DAVID W. MILLS 

ASSISTANT SECRETARY OF COMMERCE FOR EXPORT ENFORCEMENT

DEPARTMENT OF COMMERCE

OCTOBER 13, 2011 

Mr. Chairman, Senator Shelby, Members of the Committee: 

I welcome the opportunity to appear before the Committee today to discuss the 

Department of Commerce’s role in implementing the Comprehensive Iran Sanctions, 

Accountability, and Divestment Act (CISADA), as well as the wider issue of enforcing United States’ sanctions on Iran. My Department has a key role in administering and enforcing U.S. dual-use export control policies toward Iran. We also 

work closely with our colleagues at the Departments of State, Homeland Security, 

and the Treasury, as well as other agencies, to implement and enforce our sanctions 

regime effectively. 

I wish to extend my thanks to the Congress for conferring permanent law enforcement authority on our agents last year as part of CISADA. The Office of Export Enforcement in our Bureau of Industry and Security (BIS) is the only Federal law enforcement agency solely constituted to conduct dual-use export investigations. Permanent authority allows our agents to focus on their law enforcement mission without the necessity of annual renewal of their authority as Special Deputies of the 

U.S. Marshals Service, and removes the potential that their authority may be questioned in a courtroom. It was one of many steps we are taking to strengthen our 

export control system as part of the Administration’s export control reform initiative. 

Over the course of the last year, our agents have been utilizing this authority to 

investigate a variety of export violations, but Iranian violations continue to be a primary area of focus. Iran continues to engage in widespread efforts to illegally acquire U.S.-origin commodities and technology. In fact, the majority of our criminal 

investigations now involve Iran as the ultimate recipient of diverted items. Much 

of our enforcement activity and analysis is focused on stopping the diversion of such 

items to Iran via transshipment hubs in the Middle East, South and East Asia. 
44 

The Bureau of Industry and Security employs a variety of criminal and administrative tools against these illicit Iranian procurement activities. I want to share with 

you some illustrative examples of these enforcement efforts. 

BIS aggressively investigates U.S. companies doing business with Iran directly 

and through their foreign subsidiaries, as demonstrated by the following recent case. 

Just last month, we imposed a civil penalty totaling $2.5 million against Flowserve 

Corporation and 10 of its foreign affiliates to settle 288 charges related to unlicensed exports and reexports of pumps, valves and related components subject to 

the Export Administration Regulations (EAR) to Iran, Syria and other countries. 

Flowserve is headquartered in Irving, Texas, and is a supplier of goods and services 

to the oil, gas, chemical, and other industries. Six of Flowserve’s foreign affiliates 

caused the transshipment of items to Iran and/or the reexport of items to Syria 

without the required U.S. Government authorization. Flowserve and a number of its 

foreign affiliates also exported or reexported items controlled for reasons of chemical 

and biological weapons proliferation to China, Malaysia, Singapore, Venezuela and 

other countries. In addition to the civil penalty, Flowserve and a number of the 

Flowserve affiliates will be required to conduct external audits of their compliance 

programs and submit the results to BIS. BIS pursued these administrative charges 

in concert with the Department of the Treasury’s Office of Foreign Assets Control 

(OFAC). Flowserve also agreed to pay a $502,408 civil penalty to resolve related 

OFAC charges. Cooperation between BIS and OFAC on Iranian cases has been critical to maximizing the impact of U.S. laws against violators. 

In recent years, export enforcement at BIS has also made extensive use of the BIS 

Entity List to disrupt a range of overseas procurement networks, most importantly 

involving investigations of the procurement of components for improvised explosive 

devices by Mayrow General Trading and related entities, resulting in the addition 

of over 190 new foreign entities to the Entity List. Most recently, on August 15, 

2011, BIS added 15 persons, including aircraft leasing operations in Ukraine and 

Greece, to the Entity List for involvement in the lease, transfer, and operation of 

commercial aircraft subject to the EAR, without requisite licenses, for use in Syria 

and Iran. 

The use of the Entity List highlights our focus not only on sanctions directed at 

the listed enterprises, but also the prevention of violations, and the public naming 

of individuals and entities that are involved in or that pose a significant risk of engaging in illicit export activity. This widely used list of parties of concern takes advantage of the automated name screening infrastructure that exists in banks, trading companies and manufacturing enterprises worldwide. This approach discourages 

resellers and other parties here and abroad from doing business with targeted entities and the procurement networks they represent, and prevents resellers and other 

parties in the United States and overseas from doing business with them. 

BIS has also made effective use of its authority to issue Temporary Denial Orders, 

or TDOs, to prevent imminent violations of the Export Administration Regulations. 

A significant recent case involved Anvik Technologies of Malaysia and Hong Kong. 

Anvik used a worldwide network of ‘‘virtual offices’’ to procure items for ultimate 

shipment to Iran. ‘‘Virtual Offices’’ are organizations that provide a variety of services to clients which create the impression that the entity is operating from a particular facility when in fact it is somewhere else. In this case, one of the ‘‘virtual 

offices’’ was in Chicago, which provided the impression to U.S. vendors that they 

were shipping to a U.S. entity, when in fact the items would be forwarded outside 

the country, and ultimately to Iran. 

This case demonstrates an important trend in international trade: the development of a global order management, payment, and delivery infrastructure that can 

be easily accessed and used for a very wide range of items. The problem is that it 

can be exploited by bad actors to divert items in violation of the law. We continue 

to seek creative ways to attack this sort of illicit activity. 

On August 21, 2011, IBIS renewed a TDO against Mahan Air of Iran and related 

parties. This TDO, originally issued in March 2008, has been used to successfully 

block several attempts by Mahan to acquire or use U.S.-origin commercial aircraft. 

In its efforts to obtain access to additional capacity, Mahan has employed a variety 

of front companies, complex lease arrangements and proxies. BIS special agents continue to identify and unravel these transactions, denying Iran unauthorized access 

to U.S.-origin goods and technology. In the most recent renewal and modification of 

this order, BIS named two European companies that Mahan was using to register 

Airbus aircraft with U.S.-origin engines or other components and fly them into and 

out of Iran using European tail numbers. 

Administrative tools such as the TDO have been critical in furthering our criminal investigations into Iranian procurement activities. The TDO issued against 

Mahan Air originally included Bali Group in the United Kingdom. That TDO was 
45 

critical in preventing additional violations of the EAR and furthering our investigation into Balli Group’s involvement in obtaining Boeing 747 aircraft for Mahan Air. 

On May 11, 2010, Balli Aviation was sentenced to a $2 million criminal fine and 

corporate probation for 5 years. On February 4, 2010, Balli Group PLC and Balli 

Aviation entered a civil settlement with BIS and OFAC, under which Balli agreed 

to pay a $13 million civil penalty over the course of approximately 2 years, coupled 

with an additional $2 million suspended civil penalty designed to deter future violations by Balli and to encourage its timely payment of the underlying $13 million. 

BIS takes the conditions of these suspensions very seriously, and when Balli did not 

make a timely penalty payment, we revoked the suspension of the $2 million civil 

penalty. This total civil penalty of $15 million—the largest civil penalty imposed 

under the EAR to date—has been collected in full. 

I would now like to say a few words about the Administration’s efforts on Export 

Control Reform, and how that will affect enforcement activity. Last November, the 

President signed an Executive Order creating a central element of reform as it applies to export enforcement, the Export Enforcement Coordination Center (EECC). 

The EECC will be a permanent center with dedicated staff intended to ensure 

that BIS, the State Department, the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement and other relevant agencies more efficiently coordinate their activities. It will enable U.S. agencies to better leverage their resources 

without duplicating or undermining each other’s efforts in the field, and will allow 

all relevant agencies to approach investigations as full partners. 

No element of the export control reform initiative is intended to impede or weaken 

strict enforcement of the U.S. embargo on Iran. The exact opposite is true. I have 

already spoken about the Entity List. This is but one list administered by the three 

departments represented here today against which exporters are required to screen 

transactions. Most of these lists include Iranian entities or entities involved with 

Iran. The U.S. Government has created a single, consolidated electronic list that exporters can download and easily search. It includes almost 24,000 entries. This enhances the effectiveness of the various lists and facilitates compliance, especially for 

small- and medium-sized companies who may not have the resources to stay current 

with all the various lists. 

As part of CISADA, the Administration and Congress also harmonized our crimi- nal export control penalties to a standardized maximum of up to $1 million per violation and up to 20 years in prison, or both. In one of the statutes used by my colleagues at the Treasury, the criminal penalty for convictions for Iran was only up 

to $10,000 and no jail time. No longer are criminal export control violations merely 

the cost of doing business. 

The licensing mechanisms we are putting in place for close U.S. allies and our 

multilateral export control partners will improve the interoperability with these allies by liberalizing some licensing requirements but at the same time adding more 

robust compliance and enforcement provisions that will help ensure that products 

and technology are not diverted to Iran or elsewhere. 

As an example, the notification and certification requirements of the new license 

exception, the Strategic Trade Authorization, not only ensures that information on 

the control status of U.S.-origin items is passed along to resellers and customers, 

but that an auditable chain of custody is established. 

In the final or Phase III of Export Control Reform, we envision the creation of 

a single licensing agency that would include the administrative enforcement functions of BIS and the Department of State. The Administration also plans to seek 

legislation to consolidate BIS’s criminal enforcement functions into U.S. Immigration and Customs Enforcement, which has a separate unit dedicated to enforcement 

of the export control and embargo laws. This consolidation plan will ensure that the 

fully synchronized export control system stays that way, and it is good government. 

As Iran is a top enforcement priority, we fully intend to press forward with our 

efforts to combat illegal diversion of sensitive products and technology there. Likewise, our success at filling more than 50 enforcement positions, as well as our initiative to prosecute culpable individuals as well as companies, while not restricted to 

Iran, will greatly assist in our enforcement efforts involving Iran. 

We stand ready to work with the Committee and the Senate to maintain an aggressive and effective export enforcement program. 

Summaries of Recent Commerce Enforcement Cases involving Exports or 

Reexports to Iran 

• On August 12, 2011, Davoud Baniameri, an Iranian national who maintained 

a residence and business in California, was sentenced to 51 months in Federal 

prison after pleading guilty in May to two felony charges stemming from his 
46 

efforts to illegally export missile components and radio test sets from the 

United States to Iran, via the United Arab Emirates. Codefendant Andro 

Telemi, a naturalized U.S. citizen from Iran, is awaiting trial in Chicago. A 

third defendant, Majid Mousavi, an Iranian citizen living in Iran, remains a fugitive and is believed to be in Iran. 

• On July 20, 2011, six overseas companies were added to the BIS Entity List. 

Biznest Ltd. and Yeraz Ltd. in Hong Kong, and Micro Power Engineering 

Group, Narinco Micro Sarl, Serop Elmayan and Sons Lebanon, and Serpico Offshore Sarl, all located in Lebanon, were placed on the Entity List based on evidence that they have engaged in actions that are contrary to the national security or foreign policy interests of the United States. The companies purchased 

electronic components from foreign subsidiaries of U.S. firms and then resold 

the components to persons in Iran and Iraq. The same components were later 

found in Iraq in unexploded improvised explosive devices and related materials. 

• On June 24, 2011, Hamid Seifi was sentenced to nearly 5 years in prison for 

his role in a conspiracy to illegally export military components for fighter jets 

and attack helicopters from the United States to Iran, via the United Arab 

Emirates and France. Another defendant and his company have admitted their 

illegal conduct and also pleaded guilty in the investigation. A total of seven individuals and five corporate entities based in the United States, France, the 

United Arab Emirates, and Iran have been indicted for their alleged roles in 

the conspiracy. On June 23, 2011, based on evidence that they have engaged 

in actions that could enhance the military capability of Iran, eight of the defendants were added to the BIS Entity List. 

• On April 21, 2011, Jeng Shih and his company Sunrise Technologies and Trading Corporation, as well as Massoud Habibion and Mohsen Motamedian and 

their company Online Micro LLC, were indicted on charges of illegally exporting 

computer-related equipment worth millions of dollars from the United States to 

Iran via the United Arab Emirates. The indictment charges Shih and his company with one count of conspiracy; 13 counts of violating the International 

Emergency Economic Powers Act (IEEPA); and 13 counts of making or causing 

to be made false statements to the United States. If convicted, Shih faces a 

maximum sentence of 20 years in prison and a $1 million fine for each of the 

IEEPA counts and 5 years for each false statement count. 
(47) 

RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON 

FROM WENDY SHERMAN 

Q.1. Under CISADA, countries should be designated Destinations 

of Diversion Concern if they allow ‘‘substantial diversion’’ of certain 

goods, services, or technologies through the country to Iranian end 

users or Iranian intermediaries. No country has yet been designated a Destination of Diversion Concern, even though it’s clear 

that some of this activity continues. Why haven’t any countries 

been designated, and where are you generally in the process of assessing the major diversion countries—their export control laws, 

ports and other transportation hubs, and control regimes—in Asia 

and the Middle East? 

A.1. I defer specific questions on country assessments to the Intelligence Community. The Director of National Intelligence submitted to Congress a report pursuant to CISADA Section 302, entitled ‘‘Identification of Countries of Concern with Respect to the Diversion of Certain Goods, Services, and Technologies to or through 

Iran’’ in December 2010. CISADA Section 302 requires the President to designate a country as a Destination of Diversion Concern 

if he determines that the government of the country allows substantial diversion to Iranian end users or intermediaries of certain 

goods, services, or technology. I would be happy to offer a classified 

briefing on the State Department role in this process; however, I 

defer any questions on the specifics of the 2010 Section 302 report 

to the Intelligence Community. 

Q.1. Can you describe the current level of U.S. international cooperation, or lack thereof, with the international community in 

working to ensure that sensitive materials do not end up in Iran? 

A.1. Iranian efforts to procure sensitive materials and technology 

for their proscribed programs through a variety of means are well 

documented. We continually work with foreign governments bilaterally and in multilateral fora to ensure that proliferation-sensitive 

materials, equipment, and technology do not end up in Iran. 

We regularly engage with states that have uranium resources 

and other sensitive items to eliminate the proliferation risk of 

these materials. U.S. collaboration with other countries has made 

Iran’s illicit procurement of sensitive materials more difficult, costly, and time-consuming. While we have had some successes in 

working to ensure that sensitive materials do not end up in Iran, 

we remain vigilant on this risk and maintain attention to this issue 

in engagement with other states. 

We seek to lead by example and have worked to fully implement 

our U.N. obligations. Our efforts highlight that states must meet 

their obligations under binding U.N. Security Council Resolutions 

that prohibit the transfer of specific sensitive items as well as any 
48 

other items a state determines would contribute to Iran’s proliferation-sensitive activities. 

We also engage with partners to ensure that they robustly enforce their export controls, encourage the extensive use of end-user 

checks to confirm proper export, work with private enterprise to 

‘‘know their customer’’, and remain vigilant to the risk of doing 

business with Iran. In addition to implementing our U.N. and domestic measures, we encourage all states to take similar steps and 

routinely discuss with them, as well as with industry, the risks of 

transferring sensitive items to Iran. 

Q.3. As you work to ensure that goods services or other technologies do not end up in Iran, what do you see as the greatest 

areas of concern? What additional tools or resources do you think 

would be most useful for the Commerce Department as it seeks to 

enforce CISADA and other laws in this area? 

A.3. I defer to the Intelligence Community to address our principal 

concerns with respect to the diversion of sensitive items. I also 

defer to the Commerce Department regarding U.S. export and reexport controls. The State Department continues to work closely 

with other countries to prevent the transfer of proliferation-sensitive technology and equipment as called for under relevant U.N. 

Security Council Resolutions (UNSCRs) and consistent with international nonproliferation commitments. UNSCR 1540 makes clear 

that all parties associated to a transaction share the responsibility 

for stopping proliferation, and we work with both supplier and 

transshipment countries to ensure that proscribed goods, services 

and technologies do not end up in Iran. Through the Proliferation 

Security Initiative, the United States works to enhance international tools to interdict and prevent trade in sensitive technologies. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SCHUMER 

FROM WENDY SHERMAN 

Q.1. A major component of CISADA was the new sanction on foreign companies that provide refined petroleum products to Iran. 

The provision was initially successful in that it dramatically reduced Iran’s ability to import gasoline. However, despite Iran’s 

claims to be fully self-sufficient in gasoline production, the volume 

of gasoline imports to Iran has gone back up. In fact, Reuters reported on September 7 that, ‘‘Iran has been importing four to five 

cargoes of gasoline per month, with most of it supplied by China 

as the Islamic Republic finds ways to get around the U.S.-led sanctions, three industry sources familiar with the matter said.’’ 

This represents a clear violation of U.S. law, yet no action has 

been taken against any Chinese companies. Why? 

A.1. We are aware of and looking carefully into these reports. We 

have repeatedly and regularly engaged with China in our determined efforts to impede Iran’s ability to procure refined petroleum 

products. In fact, earlier this year, we sanctioned two of Iran’s largest suppliers of refined products, Royal Oyster Group and SPD. We 

made note of these sanctions to China and have urged that Chinese 

companies not engage in the supply of refined petroleum to Iran. 
49 

We have pressed China at the highest levels not to ‘‘backfill’’ the 

business of other firms that have taken the responsible course and 

departed Iran’s energy sector. We urge Chinese companies to discontinue activities in Iran’s energy sector. 

We have seen progress in some areas. Based on all available information, we assess that Chinese companies have not finalized 

any agreements on new upstream investments or new refinery construction projects since the passage of the Comprehensive Iran 

Sanctions, Accountability, and Divestment Act (CISADA). Recent 

press and industry reports indicate that Chinese firms have taken 

a ‘‘go slow’’ approach to their existing projects in Iran. In fact, Iran 

publicly threatened to hand over the rights to develop some fields 

to ‘‘other’’ (i.e., presumably non-Chinese) companies if Chinese entities did not progress more rapidly. We note as well that Iranian 

Foreign Minister Ali Akbar Salehi has acknowledged in his public 

statements that some Chinese projects have slowed down. 

Q.2. Has the State Department investigated Chinese companies including SINOPEC and the China National Petroleum Corporation 

for violations of ISA? 

A.2. We would be happy to brief you or your staff on this issue in 

a classified setting. 

Q.3. What is the United States doing to respond to this latest action by Iran against the United States? 

A.3. As soon as the United States made public the Iranian plot, we 

briefed our international partners and asked them to join us in 

condemning Iran’s flagrant violation of international law and in increasing Iran’s isolation. In addition, we sent interagency teams to 

New York to brief U.N. Security Council members and key governments and to respond to questions regarding the plot. We also 

briefed the Washington Diplomatic Corps. 

In light of the gravity of the charges, the United States also 

reached out directly through diplomatic channels to the Iranian 

Government to condemn its actions. 

On October 11, the Treasury Department designated the five individuals involved in the plot—four members of the IRGC-Qods 

Force and the plot’s main suspect, a U.S.-Iranian citizen who had 

acted as an agent for the Qods Force. The European Union, the 

United Kingdom, and Canada immediately followed with their own 

designations. 

In addition, dozens of countries and many regional organizations 

stood by the United States and issued their own statements condemning the regime. 

The Administration will continue to pursue a variety of diplomatic, law enforcement, and economic measures in response to this 

unacceptable act. 

Q.4. How will we make clear to Iran that we will not stand by and 

allow them to act against our interests, kill Americans or acquire 

a nuclear weapons capability? 

A.4. The Administration is committed to preventing Iran from developing a nuclear weapon capability. Our dual-track policy of pressure to encourage engagement is aimed at convincing Iran to comply with the demands of the U.N. Security Council and to engage 
50 

with the P5+1 on its nuclear program. The Administration will increase economic pressure on Iran. Options under consideration include new sanctions, new designations under the existing sanctions 

regime, and improved implementation of existing sanctions. 

Iran continues to aid terrorist organizations like Hezbollah and 

Hamas, and it supports terrorism throughout the region and beyond. The United States will not permit Iran to endanger U.S. 

troops from Iran-sponsored attacks in Iraq. We will continue to 

shut off Iran’s support to terrorist groups through diplomatic, economic and law enforcement measures. 

Q.5. How will we get the Iranian Government to understand that 

there will be serious consequences for this latest act? 

A.5. The Administration is reviewing diplomatic, law enforcement 

and economic options to hold Iran accountable. As soon as the 

United States made public the assassination plot, we immediately 

informed the international community and called on countries 

around the world to join us in condemnation. The U.S. Government 

also reached out directly through diplomatic channels to the Iranian Government to condemn its actions. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM WENDY SHERMAN 

Q.1. China continues to be a major Iranian trading partner and has agreements with Iran for nearly $40 billion in investments to 

develop Iranian oil fields. China has reportedly directed the China 

National Offshore Oil Company and the National Petroleum Company to slow their work in Iran, presumably so that it can make 

the argument to Washington to hold off on sanctions. Can you comment on China’s continued engagement with Iran and what level 

of confidence you have that the Chinese will slow-walk these deals? 

What would you consider to be a trigger for sanctions against these 

entities? 

Why has the Administration 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? 

A.1. Based on all available information, we assess that Chinese 

companies have not finalized any agreements on new upstream investments or new refinery construction projects since the passage 

of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA). The State Department continues to monitor 

closely China’s activities in Iran’s energy sector. We have pressed 

China at the highest levels not to ‘‘backfill’’ the business of other 

firms that have taken the responsible course and departed Iran’s 

energy sector. We urge Chinese companies to discontinue activities 

in Iran’s energy sector. 

Recent press and industry reports indicate that Chinese companies have adopted a ‘‘go slow’’ approach to their projects in Iran. 

In fact, Iran has publicly threatened to hand over the rights to develop some fields to ‘‘other’’ (i.e., presumably non-Chinese) companies if Chinese entities do not progress more rapidly. We note as 
51 

well that Iranian Foreign Minister Ali Akbar Salehi acknowledged 

in his public statements that some Chinese projects have slowed 

down. 

Q.2. China’s state-run energy firm, Zhuhai Zhenrong has reportedly been shipping refined petroleum to Iran monthly for the last 

year. Despite abundant information about this trade, the United 

States has not sanctioned Zhuhai Zhenrong. Is the Department of 

State investigating these sales? 

A.2. We have seen these reports of shipments of refined petroleum 

by Zhuhai Zhenrong. We are concerned about these reports and 

have raised the issue as we regularly voice our concerns to China 

as part of our substantial efforts to impede Iran’s ability to procure 

refined petroleum. In fact, earlier this year, we sanctioned two of 

Iran’s largest suppliers of refined products, Royal Oyster Group 

and SPD. We made note of these sanctions to China and have 

urged that Chinese companies not engage in the supply of refined 

petroleum to Iran. We have engaged China at the highest levels to 

urge its companies to discontinue their activities in Iran’s energy 

sector, and we have seen positive signs in some areas. Nonetheless, 

we are carefully evaluating these reports. 

Q.3. Do you consider sanctions on the sale of refined petroleum to 

be a focus of your efforts? While I appreciate the steps the Administration has taken to sanction several front companies, such the 

Royal Oyster Group in the UAE, it would seem that we are missing 

the big targets—the major energy traders that are playing a shell 

game using front-companies to make sales of refined petroleum to 

Iran. Trafigura, for example, claims that it has ceased selling refined petroleum to Iran, yet there are reports that it merely 

changed front companies and continues to sell to Iran? Can you 

comment on your efforts to verify that major energy traders, like 

Trafigura, have in fact exited the market and ceased sales of refined petroleum to Iran? 

A.3. The Administration has focused intently on Iran’s energy sector and has vigorously enforced sanctions on suppliers of Iran’s refined petroleum products. To date, this Administration, the first to 

impose sanctions under the Iran Sanctions Act, has sanctioned 10 

companies under the Act, eight of them for the supply of refined 

petroleum products or related goods or services. Two of the latter, 

Royal Oyster Group and SPD, were Iran’s largest suppliers of refined petroleum. 

We have seen the reports that major energy traders are using 

front companies to supply refined petroleum. We are looking into 

these reports, but to date have been unable to corroborate many of 

them. Further, we have found that the major energy traders of the 

world have discontinued their activities with Iran altogether. We 

continue to monitor activities in Iran’s energy sector and will ensure the law is implemented fully. 

Q.4. Iran’s Revolutionary Guard Corps has its fingers in all of the 

revenue pies and is known to play a key role in the crude oil export 

supply chain. Do you believe that designating more IRGC persons 

and entities and eliminating the IRGC’s ability to profit from Iran’s 

energy exports by prohibiting any person from knowingly export-
52 

ing, refining and shipping Iran’s energy resources if the IRGC or 

its affiliates are involved in the development, extraction, production, transportation, or sale of such resources would be an effective 

way to limit the IRGC’s revenue stream? 

A.4. The IRGC is a primary focus of U.S. sanctions against Iran because of its central role in Iran’s nuclear and ballistic missile programs, its support for terrorism, and its involvement in serious 

human rights abuses. As Iran’s isolation has increased, the IRGC 

has expanded its reach into critical sectors of Iran’s economic infrastructure—at the expense of the Iranian private sector—to generate revenue and conduct business in support of Iran’s illicit activities. 

The Administration uses all the tools at its disposal to uncover 

and spotlight this illicit conduct. In the last few months, the Administration designated Tidewater Middle East Co., an Iranian 

port operator owned by the IRGC, and sanctioned two Iranian airlines, Iran Air and Mahan Air, for supporting the IRGC. 

We continue to research, update and expand the U.S. designation 

list based on developments in Iran and as additional information 

and evidence become available. Together with our international 

partners, the United States is working to identify and close gaps 

where Iran is trying to circumvent sanctions, including sanctions 

and designations targeting the Iranian Revolutionary Guard Corps 

(IRGC). 

Q.5. One of the barriers to the imposition of sanctions seems to be 

the narrow definition of ‘‘credible information’’ that the Department 

uses when determining whether to issue sanctions. My legislation, 

S. 1048, would expand that definition to provide greater latitude to 

the Department to find actionable activity. It would expand the 

definition to include public announcements by the person that the 

person has engaged in a sanctionable activity; announcements by 

the Government of Iran that the person has engaged in such an activity; as well as other credible information, such as report to stockholders of the person and reports by GAO, the Energy Information 

Administration, and the Congressional Research Service. What 

sources of credible information does the Department rely on presently when making sanction determinations? Does the Administration support broadening the definition of credible information? 

A.5. The current definition of ‘‘credible information’’ enables us to 

investigate thoroughly and effectively all reports of possible 

sanctionable behavior and to make sanctions determinations. This 

Administration reviews every report of potentially sanctionable activity, regardless of whether an investigation is open or required to 

be opened, and the Secretary can impose sanctions whenever she 

makes a determination that a company has engaged in the activities described in the Iran Sanctions Act. We draw upon a range of 

sources to validate information we receive, including intelligence, 

the media, industry and other non-government sources, and foreign 

governments. We also reach out to firms directly to express our 

concerns about their reported activities, to inquire about the accuracy of such reports, and to discourage sanctionable activities. 

Broadening the definition of ‘‘credible information’’ would not improve our ability to render accurate judgments about sanctionable 
53 

activity. However, such a broader definition could impute credibility to information of questionable veracity. Press reports sourced 

from Iranian public statements, for instance, are often inaccurate. 

Q.6. Is the Department continuing to investigate whether defense 

contractor, Kuwait and Gulf Link Transport (KGL), may be secretly 

doing business with Iranian front companies, including IRISL? If 

not, have you cleared KGL as a potential violator of U.S. sanctions? 

A.6. Unfortunately, this matter is not within the Department of 

State’s purview. Questions on this matter should be referred to the 

Department of the Treasury. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM WENDY SHERMAN 

Q.1. With regard to energy investments, in June 2010 your predecessor and current Deputy Secretary of State William Burns, told 

the Senate Foreign Relations Committee, ‘‘ . . . there are a number 

of cases, less than 10, in which it appears that there may have 

been violations of the [Iran Sanctions Act] ISA.’’ We have now 

sanctioned two companies and used the special rule to waive sanctions against five other companies. 

• How many investigations for violations of the Iran Sanctions 

Act (ISA) are currently open? 

• Due to the State Department’s failure to complete investigations under ISA, Congress in CISADA enacted a statutory 180- 

day period in which investigations of sanctions violations must 

be completed. Has the State Department complied with this 

statutory deadline? If not, why not? 

A.1. This Administration, the first to impose sanctions under the 

ISA, has to date sanctioned 10 companies for their activities supporting Iran’s energy sector, including 8 for activities related to the 

sale or provision of refined petroleum products to Iran. The State 

Department constantly and closely monitors all activities in Iran’s 

energy sector. There are currently numerous cases under review for 

which we have information of varying levels of credibility regarding 

potentially sanctionable activities. We have enforced U.S. law and 

will continue to do so aggressively. The Department is in full compliance with its obligations under the Iran Sanctions Act, including 

the requirement to complete investigations into investments in 

Iran’s energy sector within 180 days. 

Q.2. Has the State Department investigated Chinese companies, 

including SINOPEC and the China National Petroleum Corporation, for violations of ISA? 

A.2. We would be happy to brief you or your staff on this issue in 

a classified setting. 

Q.3. If so, why has the State Department delayed issuing sanctions 

on Chinese companies? 

A.3. Based on the available information, we assess that Chinese 

companies have not finalized any agreements on new upstream investments or new refinery construction projects since the passage 

of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA). The State Department continues to monitor 
54 

closely China’s activities in Iran’s energy sector. We have pressed 

China at the highest levels not to ‘‘backfill’’ the business of other 

firms that have taken the responsible course and departed Iran’s 

energy sector. We urge Chinese companies to discontinue their activities in Iran’s energy sector. 

Recent press and industry reports indicate that Chinese companies have adopted a ‘‘go slow’’ approach to their projects in Iran. 

In fact, Iran publicly threatened to hand over the rights to develop 

some fields to ‘‘other’’ (i.e., presumably non-Chinese) companies if 

Chinese entities did not progress more rapidly. We note as well 

that Iranian Foreign Minister Ali Akbar Salehi has acknowledged 

in his public statements that some Chinese projects have slowed 

down. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM WENDY SHERMAN 

Q.1. Ten companies have been sanctioned under the Iran Sanctions 

Act. Five companies have been exempted from sanctions by the Administration through use of the ‘‘special rule.’’ In your written testimony, you said the Administration persuaded these five companies 

to ‘‘withdraw from all significant activity in Iran.’’ Do any of these 

companies continue to engage in some activity in Iran? If these 

companies, who promised to stop doing business with Iran, still do 

business with Iran, when do you expect them to stop? 

A.1. The ‘‘special rule’’ has given the State Department significant 

leverage to convince major international firms to withdraw from 

their activities in Iran. We have used this provision on five occasions to convince Total, Royal Dutch Shell, ENI, Statoil, and 

INPEX to exit Iran. All of the firms that received consideration 

under the ‘‘special rule’’ committed to the Secretary of State that 

they are no longer engaging in sanctionable activity in Iran or have 

taken significant verifiable steps toward stopping such activity and 

will not engage in any energy-related sanctionable activity in Iran 

in the future. We continue to monitor them very closely to ensure 

that they are living up to this commitment. All five firms have discontinued development activities within Iran’s energy sector and 

handed over their respective projects to the Iranians. In some 

cases, the companies are still owed significant sums of money from 

Iran and we support their efforts to have Iran pay its debts. In the 

case of ENI, the company was obligated under its contract to provide certain technical services after the handover of the field. ENI 

has minimal staff in Iran to carry out these functions. Should ENI 

breach these contractual obligations, it could result in a windfall 

payment to Iran, possibly exceeding $1 billion. 

The impact of these withdrawals on Iran’s energy sector has been 

significant. For example, as part of our engagement with Royal 

Dutch Shell, we convinced them to discontinue negotiations over a 

$10 billion gas development project. Similarly, in order to receive 

consideration under the Special Rule, ENI opted not to develop a 

$1.5 billion phase of an oilfield project. Iran has yet to find foreign 

investors willing to take on these projects. 
55 

Q.2. What is the Administration doing to ensure that those companies for which it waives sanctions keep their word and end their 

illegal business in Iran? 

A.2. To date, the Secretary of State has not waived sanctions on 

any entity under the amended Iran Sanctions Act. The State Department has utilized the Special Rule as intended under the law, 

in cases where firms have shown that they are withdrawing from 

Iran and have committed not to engage in energy-related 

sanctionable activity in the future. The Department is closely monitoring the activities of the firms that have received consideration 

under the ‘‘special rule’’ to ensure that they are living up to their 

commitments. To date, we have no reason to believe any of these 

companies has acted inconsistently with those commitments. 

Q.3. In November 2010 and March 2011, I wrote Secretary of State 

Clinton about Indian and Chinese companies that may be doing 

business in Iran in violation of U.S. sanctions. In both letters I 

identified specific companies and asked Secretary Clinton to investigate these companies and sanction those that are in violation of 

U.S. law. Yet, no Indian or Chinese companies have been sanctioned. Are there Indian and/or Chinese firms that are doing business in Iran in violation of U.S. law? 

A.3. We share your concerns regarding reported activities of Indian 

and Chinese firms in Iran’s energy sector and of the potential consequences under the amended Iran Sanctions Act. We have raised 

these concerns with both governments at the highest levels and 

urged them to exercise restraint in their energy-related cooperation 

with Iran. 

Both the Indian and Chinese governments have made clear to us 

that they share our goal of ensuring that Iran does not develop a 

nuclear weapon. We have seen the reports of Indian companies 

participating in investments in Iran’s energy sector, however, the 

available information suggests that these deals have not been finalized. Similarly, based on the available information, we assess that 

Chinese companies have not finalized any agreements on new upstream investments or new refinery construction projects since the 

passage of the Comprehensive Iran Sanctions, Accountability, and 

Divestment Act (CISADA). We have pressed China at the highest 

levels not to ‘‘backfill’’ the business of other firms that have taken 

the responsible course and departed Iran’s energy sector. We urge 

Chinese companies to discontinue activities in Iran’s energy sector. 

Recent press and industry reports indicate that Chinese firms 

have taken a ‘‘go slow’’ approach to their existing projects in Iran. 

In fact, Iran publicly threatened to hand over the rights to develop 

some fields to ‘‘other’’ (i.e., presumably non-Chinese) companies if 

Chinese entities did not progress more rapidly. We note as well 

that Iranian Foreign Minister Ali Akbar Salehi has acknowledged 

in his public statements that some Chinese projects have slowed 

down. 

Q.4. What diplomatic efforts is the Administration pursuing with 

India and China to get them to cooperate with U.S. sanctions? 

A.4. We have engaged regularly with China at the highest levels 

regarding the importance of implementing sanctions in order to 

achieve our shared goal of preventing Iran from developing nuclear 
56 

weapons. As a member of the P5+1 process with Iran, China has 

supported that goal. China joined the P5+1 consensus in New York 

in September calling on Iran to resolve the international community’s concerns over the Iranian nuclear program. A U.S.-China 

joint statement in January called for the full implementation of all 

relevant U.N. Security Council resolutions on Iran. 

We engage with the Indian Government, as we do with governments around the world, to encourage them to sever ties with Iran. 

India has taken steps to conform its payments to Iran for crude oil 

with the requirements of U.S. sanctions. During President Obama’s 

November 2010 visit to India, the United States and India in their 

joint statement called on Iran to take immediate steps to meet its 

obligations to the IAEA and the U.N. Security Council. 

We continue to consult with all levels of the Chinese and Indian 

governments on the need to fully enforce sanctions on Iran. 

Q.5. Reuters reported on September 7 that ‘‘Iran has been importing four to five cargoes of gasoline per month, with most of it supplied by China.’’ This appears to be a clear violation of U.S. law. 

Why has action not been taken against these Chinese companies? 

A.5. We are aware of and carefully evaluating these reports. We 

have also expressed our concerns about them to China. 

We regularly voice our concerns to China as part of our determined efforts to impede Iran’s ability to procure refined petroleum. 

In fact, earlier this year, we sanctioned two of Iran’s largest suppliers of refined products, Royal Oyster Group and SPD. We made 

note of these sanctions to China and have urged that Chinese companies not engage in the supply of refined petroleum to Iran. We 

have engaged China at the highest levels to urge its companies to 

discontinue their activities in Iran’s energy sector, and we have 

seen positive signs in some areas. 

Q.6. Despite U.S. and international sanctions, Iran continues to enrich uranium. It now possesses enough enriched uranium that 

upon further processing, it could build three nuclear bombs. In 

your view, why have sanctions not stopped Iran from advancing its 

nuclear program? 

A.6. Sanctions have not only slowed Iran’s ability to procure equipment and technology for its nuclear program, but they have made 

what procurement Iran is able to undertake more expensive, more 

difficult, and more time-consuming. 

Sanctions have also had a negative impact on Iran’s economy. 

Shipping, air transport, energy, and finance are all sectors of the 

Iranian economy targeted and damaged by sanctions. It comes as 

no surprise that President Ahmadi-Nejad recently lamented that 

Iran’s ‘‘banks cannot make international transactions anymore’’ because of U.S. sanctions. In a recent speech, Ahmadi-Nejad said that 

the sanctions against Iran are ‘‘the heaviest economic onslaught on 

a nation in history.’’ 

We will continue to increase the pressure on Iran to respond to 

the international community’s substantial concerns over its nuclear 

program. 

Q.7. What additional steps can the United States and our allies 

take to convince Iran to verifiably end its nuclear program? 
57 

A.7. We can continue to increase the pressure on Iran until we accomplish what we and our P5+1 partners seek to achieve: a resolution to the international community’s concerns about the Iranian 

nuclear program. There is ample room for continuing to pressure 

Iran—through national, multilateral, and international actions. 

This Administration has put in place the toughest sanctions 

package on Iran in three decades. We have imposed sanctions on 

critical sectors of the Iranian economy—from shipping to finance— 

and we have succeeded in building a strong international sanctions 

coalition, with many states implementing national measures of 

their own to increase the pressure on Iran. We are approaching 

like-minded governments following the issuance of the IAEA Director General’s report on Iran to request that they take additional 

steps on the pressure track. 

At the same time, however, when Iran is prepared to engage seriously in discussions about its nuclear program, we will join Iran 

at the negotiating table. This dual-track approach is the best way 

to persuade Iran to resolve the international community’s concerns 

about its nuclear program because it ensures that we will have the 

strong international coalition to pressure Iran when we need to do 

so. 

RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON 

FROM DAVID S. COHEN 

Q.1. Even though many banks have voluntarily ceased operations 

with Iranian financial institutions, it seems clear that some financial institutions continue to violate U.S. sanctions laws. You said 

at your confirmation hearing that you were pursuing banks suspected of being violators, and expected to act on them soon. Can 

you give us an estimate of how many financial institutions and 

banks continue to work with Iran in violation of U.S. laws, and 

where you are in the process of assessing their activity and, as appropriate, imposing sanctions? 

A.1. Consistent with Treasury policy, I cannot comment on possible 

or pending investigations under CISADA. I will note, however, that 

the number of banks anywhere in the world that continue to do 

business of any kind with designated Iranian banks has dropped 

precipitously; to the extent that any bank continues to work with 

sanctioned Iranian banks, or begins to do so, we investigate aggressively and are more than willing to apply the sanctions available 

under CISADA if necessary. 

Q.2. I heard you discuss you recent trip to China, where you focused on the banking and shipping sectors’ activity in Iran. I have 

seen the press clips on your trip in which you made clear that 

while the Chinese were observing the letter of U.N. sanctions, certain Chinese banks active in Iran’s insurance and shipping sectors 

could be violating U.S. sanctions laws. What steps are you taking 

to investigate these banks and, if necessary, to sanction them? 

What diplomatic constraints, if any, are you working under on this 

front? 

A.2. Consistent with Treasury policy, I cannot comment on possible 

or pending investigations. 
58 

During my September 24–28 visit to China and Hong Kong, I 

discussed the provisions of CISADA with both the government and 

private sector. China is one of more than 45 countries on five continents that Treasury has engaged as part of our outreach to regulators and financial institutions regarding CISADA’s authorities, as 

well as the risks associated with doing business with Iran more 

generally. It is important that governments and financial institutions around the world understand CISADA and its potential implications for their business with the United States. 

Treasury works closely with the State Department to implement 

CISADA as part of our dual-track policy of addressing Iran’s efforts 

to expand its nuclear program, and does not face diplomatic constraints in fully implementing our authorities. 

Q.3. I understand that Iran has been working hard to try to circumvent international sanctions by developing ‘‘work-arounds’’ to 

enable them to continue sanctionable activity. Briefly, what are the 

most significant examples of such ‘‘work-arounds,’’ and how are we 

responding to combat them? Are there new statutory tools you need 

to do this—for example, to further limit barter transactions in 

which Iran’s oil is traded for finished goods? 

A.3. One of the most significant ‘‘work-arounds’’ involves the continued operation in jurisdictions outside of Iran by branches of subsidiaries of designated Iranian banks. Although many foreign 

banks would prefer not to do business with these branches and 

subsidiaries, Iranian bank branches exploit third country legal systems that allow them to continue to operate, jeopardizing the integrity of their host countries’ financial sectors. We have been working 

with these host countries to restrict the foreign operations of designated Iranian banks. We have achieved some success, but there 

is more work to do. 

We also know that Iran has attempted to purchase banks in 

other countries, relying upon third-party associates or firms to facilitate these purchases in order to mask Iranian involvement and 

ownership. Preventing such attempts to circumvent multilateral 

sanctions remains a key focus of our strategy. When we have information about potential Iranian efforts to evade sanctions, we strive 

to alert our foreign partners so that they can take appropriate action to prevent Iran from gaining access to their financial sector 

through deceptive means. Treasury has a robust set of tools at our 

disposal that allows us to impose additional measures and enforce 

implementation of existing sanctions as necessary. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SCHUMER 

FROM DAVID S. COHEN 

Central Bank of Iran 

Q.1. This past August, Senator Kirk and I led a bipartisan letter 

to President Obama cosigned by 92 Senators urging the Administration to sanction the Central Bank of Iran (CBI). The Bank has 

been heavily involved in the funding of terrorism and proliferation 

and has assisted numerous sanctioned entities to illegally bypass 

sanctions. Secretary Cohen, in response to our letter, you wrote: 

‘‘All options to increase the financial pressure on Iran are on the 
59 

table, including the possibility of imposing additional sanctions 

against the CBI’’. 

I appreciate your response, but I am hoping you could provide 

some clarification. Specifically: Is there a timetable for making a 

decision regarding the CBI? 

A.1. The Treasury Department remains committed to addressing 

the full range of Iran’s misconduct and increasing the pressure on 

the Iranian leadership and on the CBI. Recent events—including 

the disruption of an Islamic Republic of Iran-Qods Force plot to assassinate the Saudi Arabian ambassador to the United States and 

the IAEA’s November 2011 report on Iran’s nuclear program—coupled with Iran’s continued refusal to meet its international obligations or engage meaningfully and substantively with the United 

States and the broader international community, have only reinforced our conviction that the pressure track of the dual-track policy must continue to be emphasized. We will work with our allies 

and partners to isolate and freeze the assets of the CBI, and to reduce our partners’ imports of Iranian oil. These actions, taken on 

a coordinated basis, will constrict Iran’s access to the hard currency 

and revenue that it needs to fuel its illicit activities. We will also 

implement the new law that, in certain circumstances, imposes financial sanctions on foreign financial institutions that transact 

with the CBI. 

Regarding recent action Treasury has taken to expose the CBI’s 

role in illicit activity, on November 21, 2011 Treasury identified 

Iran as a jurisdiction of ‘‘primary money laundering concern’’ pursuant to Section 311 of the USA PATRIOT Act. This finding identifies the entire Iranian financial sector for posing an illicit finance 

risk to the global financial system, and includes not only already 

designated banks and their branches operating outside of Iran, but 

also non-designated banks, their foreign affiliates, and the CBI. 

Unlike past jurisdictional 311 actions whereby Treasury explicitly 

exempted central banks from the reach of this regulation, the CBI 

was included in the Section 311 finding on Iran because of the support it provides Iran’s designated banks and entities involved in 

Iran’s proliferation activities. 

Q.2. If indeed the CBI is engaged in terrorist funding and proliferation, do you not have an obligation to designate them? 

A.2. As our track-record over the past several years amply demonstrates, Treasury will not hesitate to hold accountable those 

found to be engaged in any identified sanctionable activities, including terrorist funding and proliferation. With respect to the CBI, 

we remain concerned that the CBI may be facilitating transactions 

for sanctioned Iranian banks. For example, we have seen the CBI 

and Iranian commercial banks request that their names be removed from international payment messages to make it more difficult for intermediary financial institutions to determine the true 

parties to the transactions, as well as other forms of evasive behavior detailed in the recent finding under Section 311 of the USA PATRIOT Act to identify the jurisdiction of Iran a primary money 

laundering concern. We are keenly focused on applying additional 

sanctions on the CBI and will work with our partners to isolate 

and freeze the assets of the CBI, and to reduce our partners’ im-
60 

ports of Iranian oil. These actions, taken on a coordinated basis, 

will constrict Iran’s access to the hard currency and revenue that 

it needs to fuel its illicit activities. We will also implement the new 

law that, in certain circumstances, imposes financial sanctions on 

foreign financial institutions that transact with the CBI. 

Q.3. Have you discussed this possibility with our international 

partners that have joined us in imposing meaningful sanctions? If 

so, what have been the responses? 

A.3. We believe that any effort to escalate pressure on Iran going 

forward will have the maximum effect if the United States is able 

to act in concert with our partners in the international community. 

My colleagues in the Administration and I have spoken extensively 

with foreign counterparts on this topic. Our partners take seriously 

Iran’s continued failure to meet its international obligations. There 

is a growing awareness around the world regarding the risks that 

the CBI poses to the international financial system. In response to 

UNSCR 1929, many of our closest partners now require enhanced 

due diligence and scrutiny over transactions with Iran, including 

dealings with the CBI, and some are calling for bold action, including a multilateral asset freeze on the CBI. We will continue to 

work closely with allies to take meaningful and coordinated action 

against CBI. 

Q.4. What particular advice would you give to foreign banks that 

continue to work with the CBI? 

A.4. I would remind those foreign banks and their governments 

that the international community has expressed concern about 

Iran’s abuse of the financial sector and its use of deceptive financial practices to evade sanctions in UNSCR 1929, which highlights 

the need to exercise vigilance over transactions involving Iranian 

banks and noted specifically the Central Bank of Iran. Particularly 

in light of the new legislation addressing transactions with the 

CBI, I would strongly encourage foreign governments and banks, 

especially those processing oil payments through the CBI, to cease 

transactional activity with the CBI and be alert to any attempts by 

Iran and its Central Bank to evade sanctions or facilitate illicit financial activity. And I would urge foreign banks and their regulators to study carefully the information set forth in the recently 

released finding under Section 311 of the USA PATRIOT Act identifying the jurisdiction of Iran a primary money laundering concern. 

Iran’s U.S. Terror Plot 

Q.5. What is the United States doing to respond to this latest action by Iran against the United States? 

A.5. The Department of the Treasury on Tuesday, October 11, imposed sanctions against five individuals, including four senior Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) officers, 

connected to a plot to assassinate the Saudi Arabian ambassador 

to the United States, Adel Al-Jubeir, while he was in the United 

States, and carry out follow-on attacks against other countries’ interests inside the United States and in another country. Included 

in this action was Manssor Arbabsiar, the individual responsible 

for carrying out the assassination plot on behalf of the IRGC-QF, 
61 

who had been arrested by Federal agents in late September. Also 

on October 11, the Justice Department announced the unsealing of 

a complaint in the U.S. District Court for the Southern District of 

New York charging Mr. Arbabsiar and one of the sanctioned IRGCQF officers with a number of criminal offenses in connection with 

the plot. 

We continue to work with our partners, domestically and abroad, 

to explore additional measures that the international community 

can take to increase pressure on, and further isolate Iran, in response to this plot. 

Q.6. How will we make clear to Iran that we will not stand by and 

allow them to act against our interests, kill Americans or acquire 

a nuclear weapons capability? 

A.6. Following the Iranian-backed plot to assassinate the Saudi 

Ambassador to the United States, the U.S. Government has worked 

with key allies to secure assistance in targeting those identified as 

being involved, directly or indirectly, in the plot. To date, the U.K., 

EU, Canada, Australia, and South Korea have taken measures to 

freeze the assets of individuals involved in the plot, building on 

sanctions against the IRGC and Qods Force that have been in place 

for some time. We also continue to work with international allies 

to formulate a coordinated response to Iran’s violations of its international obligations and continued abuse of the international financial system. For example, on November 18, the United Nations 

General Assembly overwhelmingly adopted a resolution that deplored the plot, further isolating Iran and demonstrating international resolve to stand against its illicit behavior. 

Q.7. How can we get the Iranian Government to understand that 

there will be serious consequences for this latest act? 

A.7. We have already seen the Iranian Government, including 

President Ahmadinejad, acknowledge that financial sanctions imposed by the United States are causing serious problems for Iran’s 

banking sector. We believe financial sanctions are having an impact, and Treasury will continue to vigorously employ all of its 

tools and authorities to pressure Iran as part of our broader dualtrack approach. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM DAVID S. COHEN 

Q.1. The United States has passed sanctions laws that put pressure on investments in Iran’s energy sector and which have reduced Iran’s oil and natural gas production. Our Government has 

also passed laws prohibiting companies from helping Iran produce 

and import refined petroleum. 

The Iranian regime, however, continues to sell 2.3 million barrels per day of crude oil which generates over $80 billion annually for 

the Iranian treasury. The sale of Iranian crude literally fuels the 

regime’s ability to export terrorism, build a nuclear weapons program and repress its own population. One major loophole in our 

laws permits Iran to sell crude oil to Europe where it is refined and 

sold to the United States. What effect do you believe prohibiting 
62 

imports of gasoline and diesel with Iranian content would have on 

world oil prices and what effect on the sales price of Iranian crude? 

A.1. We are currently looking carefully at the proposal to prohibit 

the importation of gasoline and diesel with Iranian content. I defer 

to my colleagues at the Energy Department who model global oil 

prices to assess the potential impact that such an action would 

have on world oil prices and the sale price of Iranian crude. 

At the same time, the Administration is currently pursuing a 

multilateral path to affect Iranian exports of crude and thereby the 

revenue it generates as a result. We understand that the EU and 

other partners are considering carefully proposals to ban the import of Iranian crude which would likely address the concern expressed in this question. 

Q.2. Secretary Cohen, I want to thank you for your recent effort 

to uncover the web of Hong Kong-based shell companies being used 

to obscure the Iranian ownership of at least 19 ships. A number of 

these ships have made their way, undiscovered, into the Mexican 

Port of Lazaro Cardenas, which has strong ties to U.S. Port of San 

Antonio—in theory, the Iranians could be shipping anything almost 

directly to the United States. 

IRISIL has close ties to Iran’s Revolutionary Guard Corps and 

has used Iranian ships to import weapons and components for its 

nuclear program. What efforts are you undertaking to ensure uncover this web of ownership leading back to Iran? Would the mandatory inclusion of hull numbers on shipping documents help to 

clarify ownership for unsuspecting shippers? 

A.2. Treasury closely monitors IRISL activity and stands ready to 

notify the public of techniques used by IRISL to conceal Iranian 

ownership. For example, the Office of Foreign Assets Control 

(OFAC) issued an advisory in March alerting shippers, importers/ 

exporters and freight forwarders to practices used by IRISL and 

companies acting on its behalf to evade U.S. and international economic sanctions. OFAC advised that all persons should be alert to 

the presentation of fabricated vessel names in trade documents and 

check the bona fides of unfamiliar entities issuing shipping documents. OFAC also advised that all persons exercise enhanced due 

diligence to ensure that they do not unwittingly process fraudulent 

shipping documents or facilitate prohibited activities. In addition, 

over the past 12 months, we have designated more than 100 IRISL 

vessels, companies, entities, and individuals. On October 27, 2011, 

we designated 6 front companies in Panama and highlighted how 

IRISL moved to Panama earlier this year after we uncovered its 

operations last autumn on the Isle of Man. 

The fact that a single IMO number (hull number) is assigned to 

each vessel for its entire life, and actually etched into the vessel 

itself at the shipbuilding yard, makes it an extremely useful way 

to track ships. We include IMO numbers on the OFAC sanctions 

list and try to encourage others to use and publicize IMO numbers 

as much as possible to combat IRISL’s attempts to obscure its fleet 

by frequently changing vessel names and flags. Treasury will continue its ongoing efforts to uncover deceptive practices used by 

IRISL, or other entities acting on its behalf. 
63 

Q.3. While our focus has been largely on isolating Iran, there is a 

vibrant opposition in Iran, that rejects Iran’s export of terrorism 

and the iron-fisted rule of its clerics and leaders and that is seeking our support. U.S. groups that are interested in supporting indigenous Iranian efforts to cultivate democracy and civil society 

have not been able to do so in a timely manner, to the detriment 

of our foreign policy goals and to the disadvantage of pro-democracy advocates in Iran, because of long waits to get an OFAC license. What is the reason for such delays? My legislation would 

mandate an expedited licensing process for the consideration of requests for human rights and democracy-related activities with regard to the Islamic Republic of Iran. Would you support an expedited processing procedure to ensure that these important programs are not hung up in the bureaucracy? 

A.3. The Administration’s policy is to encourage positive change 

and promote democracy, human rights, and humanitarian activities 

in Iran, while maintaining pressure on Iran for its development of 

nuclear weapons and support of terrorism. In 2006, OFAC published a ‘‘Statement of Licensing Policy on Support of Democracy 

and Human Rights in Iran and Academic and Cultural Exchange 

Programs’’ on its Web site, which sets forth a favorable licensing 

policy under which U.S. persons can request OFAC approval of participation in projects in support of the Iranian people that are otherwise prohibited by OFAC’s Iranian Transactions Regulations. 

OFAC gives careful consideration to license applications submitted pursuant to this policy to make sure that they qualify for 

the favorable licensing policy. In all such cases, OFAC seeks foreign policy guidance from the State Department before making a 

final licensing determination. This interagency process is a critical 

part of our licensing activities and ensures that regulatory decisions support our foreign policy objectives. As such, while OFAC is 

amenable to an expedited process for reviewing and granting licenses relating to human rights or democracy-related activities for 

Iran, the agency is concerned that a proposed hard deadline of 30- 

days could be problematic in some instances, as it would not allow 

sufficient time for interagency consultations. The agency proposes 

that a goal, rather than mandate, of 60 days for such licenses 

would ensure that decisions be rendered quickly and in line with 

U.S. foreign policy. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM DAVID S. COHEN 

Q.1. The United States has been focused on Iran’s nuclear program 

for a long time. When Congress passed the 1996 Iran-Libya Sanctions Act, it did so with the aim to compel foreign companies to diverge from trading with Iran. Yet, over the past 15 years despite 

additional international sanctions and the CISADA being signed 

last year, a failure to enact sanctions has produced an unmistakable message and precedent of allowing foreign companies to do 

business as usual with Iran. Allowing Iran to circumvent current 

laws and become alarming closer to nuclear weapons capability. 

They (Iran) now have much more efficient centrifuges, are enriching more uranium to 20 percent, and continuing work on militarizing their program. 
64 

• What is your agencies assessment of Iran’s current nuclear 

program? 

• Additionally, I have seen reports that Iran circumvents current 

laws by altering the material grade of its gasoline, and continues to use foreign countries that regularly do business with 

the United States. What can be done to better halt this flow? 

A.1. I respectfully defer to the State Department and other agencies that are better positioned than Treasury’s Office of Terrorism 

and Financial Intelligence to provide an assessment of Iran’s nuclear program and to best assess what can be done to halt the flow 

of altered gasoline. 

Q.2.a. Last week, the Financial Crimes Enforcement Network 

(FinCEN) issued a final rule to fulfill Section 104(e) of CISADA. I 

am deeply disappointed in the rule. The rule requires U.S. banks, 

only when asked by Treasury, to inquire of their foreign correspondent banks whether they conduct certain prohibited activities related to Iran. Several Senators (Senators Crapo, Vitter, 

Johanns, Moran, Wicker, and Kirk) on this Committee sent 

FinCEN a letter in May after the rule was first proposed and expressed concerns that it did not go far enough to implement the letter and spirit of law. Unfortunately, FinCEN choose not to take our 

advice. As we stated on our letter, it is ‘‘inexplicable’’ that Treasury 

has interpreted the law to be discretionary. 

Under Secretary Cohen, why shouldn’t U.S. financial institutions 

have to certify on a regular basis that to the best of their knowledge their correspondent banking partners do not conduct business 

with sanctioned Iranian banks or IRGC? 

A.2.a. Treasury does not interpret section 104(e) to be discretionary. To the contrary, we interpret section 104(e) as requiring 

the Secretary of the Treasury to prescribe regulations mandating 

that domestic financial institutions take one or more actions, one 

of which is to provide requested reports to Treasury, and we believe that the final rule reflects this obligation. We have focused 

this reporting requirement on those foreign banks that Treasury 

has some basis to suspect may be engaged in activities that may 

be sanctionable under section 104(c) of CISADA. We considered requiring every U.S. bank to provide periodic reports from every foreign bank for which they maintain correspondent accounts, but 

concluded that we would be better served by a rule that focused on 

those foreign banks that are of interest for purposes of CISADA. 

By requiring reports from those U.S. banks that maintain correspondent accounts that are of interest to Treasury for purposes 

of CISADA implementation, we believe that Treasury will receive 

the information needed without generating a multitude of unnecessary and uninformative reports. 

Moreover, the reporting requirement in the final rule is scalable. 

Based on the circumstances, it permits Treasury to expand the 

number of U.S. banks that would be required to file reports, as well 

as the number of foreign banks from whom information would be 

sought. Therefore, Treasury may ask any number of U.S. banks 

about any number of foreign banks, based on the number of foreign 

banks we determine there is some basis to suspect may be engaged 
65 

in activities that may be sanctionable under section 104(c) of 

CISADA. 

FinCEN’s final rule has provided Treasury with another tool to 

implement and enforce CISADA effectively. In addition to the other 

resources available to Treasury, section 104(e) provides an alternative method of conducting outreach to obtain information from 

foreign financial institutions and jurisdictions. For example, subsequent to FinCEN’s final rule, Treasury issued a number of 104(e) 

requests to foreign financial institutions through their U.S. correspondent banks. We expect that the responses will provide us 

with information about these specific banks and Iranian sanctioned 

banks’ activity in those jurisdictions. Furthermore, the 104(e) requests will provide us with an opportunity to engage these foreign 

financial institutions in the future in the event we become concerned about their activity with Iranian sanctioned banks or the 

IRGC. 

Q.2.b. Under Secretary Cohen, in response to questions for the 

record at your confirmation hearing, you expressed concern that a 

limited number of banks may be continuing to engage in activity 

that could result in findings under CISADA. 

Under Secretary Cohen, do you still believe this to be true? 

A.2.b. CISADA has been enormously effective in curtailing Iran’s 

access to the international financial system. While Treasury cannot 

comment on pending investigations, where activity of concern exists Treasury vigorously engages relevant governments and financial institutions about such activity. The overwhelming majority of 

foreign banks has been responsive to Treasury’s outreach and have 

elected to discontinue their business relationships with sanctioned 

Iranian banks rather than risk losing their relationships with U.S. 

financial institutions. While it may yet be necessary to make a 

finding against an institution under CISADA, an outcome where 

foreign banks voluntarily sever their ties with U.S.-designated, Iranian-linked financial institutions is equally effective, if not preferable. Nevertheless, Treasury remains ready and willing to utilize 

the tools provided by CISADA whenever and wherever necessary. 

Q.2.c. Under Secretary Cohen, can you or someone from your office 

please update the Committee or my office (a classified briefing if 

necessary) on the status of these investigations? Specifically, the 

number of investigations that are ongoing, and whether there are 

banks that are facilitating Iranian financial transactions? 

A.2.c. Treasury cannot comment on possible or pending investigations under CISADA. We are implementing the financial provisions 

of CISADA in a fair and robust manner and will continue to engage 

jurisdictions where financial institutions may be engaged in activity that is sanctionable under CISADA. We would be happy to provide a briefing on our implementation of CISADA. 

Q.3. Earlier this year, following a report from the International 

Atomic Energy Agency on Iran’s nuclear program and recent Iranian missile tests, I along with 91 fellow Senators signed a letter 

to President Obama urging him to sanction the Central Bank of 

Iran (CBI). The Bank appears to have been heavily involved in the 

funding of terrorism and proliferation and has assisted numerous 
66 

sanctioned entities to bypass sanctions. Secretary Geithner, in response to our letter, wrote, ‘‘all options to increase the financial 

pressure on Iran are on the table, including the possibility of imposing additional sanctions against the CBI.’’ We remain seriously 

concerned that Iran continues to accelerate its uranium enrichment 

and ballistic missile programs and that the CBI may be facilitating 

transactions for sanctioned Iranian banks for illicit activities. 

Under Secretary Cohen, Has there been any progress in determining the financial institutions complicitness in the illicit activities? If so, and it is as appears that the CBI is engaged in terrorist 

funding and proliferation, does your agency plan to designate them 

as such? 

A.3. The Treasury Department remains committed to addressing 

the full range of Iran’s misconduct and increasing the pressure on 

the Iranian leadership and on the CBI. Recent events—including 

the disruption of an Islamic Republic of Iran-Qods Force plot to assassinate the Saudi Arabian ambassador to the United States and 

the IAEA’s November 2011 report on Iran’s nuclear program—coupled with Iran’s continued refusal to meet its international obligations or engage meaningfully and substantively with the United 

States and the broader international community, have only reinforced our conviction that the pressure track of the dual-track policy must continue to be emphasized. We will work with our partners to isolate and freeze the assets of the CBI, and to reduce our 

partners’ imports of Iranian oil. These actions, taken on a coordinated basis, will constrict Iran’s access to the hard currency and 

revenue that it needs to fuel its illicit activities. We will also implement the new law that, in certain circumstances, imposes financial 

sanctions on foreign financial institutions that transact with the 

CBI. 

Regarding recent action Treasury has taken to expose the CBI’s 

role in illicit activity, on November 21, 2011 Treasury identified 

Iran as a jurisdiction of ‘‘primary money laundering concern’’ pursuant to Section 311 of the USA PATRIOT Act. This finding identifies the entire Iranian financial sector for posing an illicit finance 

risk to the global financial system, and includes not only already 

designated banks and their branches operating outside of Iran, but 

also non-designated banks, their foreign affiliates, and the CBI. 

Unlike past jurisdictional 311 actions whereby Treasury explicitly 

exempted central banks from the reach of this regulation, the CBI 

was included in the Section 311 finding on Iran because of the support it provides Iran’s designated banks and entities involved in 

Iran’s proliferation activities. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM DAVID S. COHEN 

Q.1.a. Last month, you travelled to China where you reportedly 

warned Chinese financial institutions that they could face sanctions if they do not end certain business with Iran. You were 

quoted as saying that Chinese financial firms were ‘‘as much in 

jeopardy as a bank anywhere else of being the subject of a Comprehensive Iran Sanctions, Accountability and Divestment Act 

(CISADA) action.’’ 
67 

Is there evidence that Chinese financial institutions have carried 

out transactions in violation of CISADA? 

A.1.a. Consistent with Treasury policy, I cannot comment on possible or pending investigations or enforcement actions. 

During my September 24–28 visit to China and Hong Kong, I 

discussed the provisions of CISADA with both the government and 

private sector. China is one of more than 45 countries on five continents that Treasury has engaged as part of our outreach to regulators and financial institutions regarding CISADA’s authorities, as 

well as the risks associated with doing business with Iran more 

generally. It is important that governments and financial institutions around the world understand CISADA and its potential implications for their business with the United States. 

Q.1.b. If so, why have the banks not been sanctioned? 

A.1.b. Consistent with Treasury policy, I cannot comment on possible or pending investigations or enforcement actions. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM DAVID S. COHEN 

Q.1. In response to questioning about the success of sanctions, you 

said ‘‘no question’’ sanctions work. While I acknowledge that the 

sanctions have impacted Iran, they have yet to achieve the fundamental goal, which is to compel Iran to change its behavior and 

abandon its pursuit of nuclear weapons. Against what metric do 

you judge the success or failure of sanctions? 

A.1. Many in the international private sector have responded to the 

risks of doing business not only with sanctioned entities and individuals, but also with Iran in general, by severing ties or restricting their Iranian business relationships. Iran’s access to much 

needed foreign investment, financing, and technology to modernize 

its aging energy infrastructure is declining, which threatens its oil 

and gas production and export capacity. Because of the sanctions, 

particularly the energy-related provisions of CISADA, which 

amended the Iran Sanctions Act, Iran is having difficulty importing 

refined petroleum from previous suppliers. And Iran’s shipping industry, a major conduit for its international trade, has found that 

international insurance companies are refusing to cover its ships 

and shipments. 

The contrast between Iran’s situation in 2005 and today is stark. 

Prior to Treasury’s first action against an Iranian state-owned 

bank in 2006, Iran had access to financial services from the world’s 

largest and most prestigious financial institutions, allowing it to 

conduct business in all corners of the globe. 

Today, Iran’s access to international financial institutions is 

greatly limited. We know that the Iranian Government is very concerned about the sanctions that are being implemented. Indeed, we 

have already seen the Iranian Government, including President 

Ahmadinejad, acknowledge that financial sanctions imposed by the 

United States are causing serious problems for Iran’s banking sector. 

Q.2. In August, 91 senators and I wrote a letter to President 

Obama urging him to sanction the Central Bank of Iran. The Bank 
68 

has been heavily involved in the funding of terrorism and proliferation and has assisted numerous sanctioned entities to bypass sanctions. Secretary Geithner, in response to that August letter, said, 

‘‘all options to increase the financial pressure on Iran are on the 

table, including the possibility of imposing additional sanctions 

against the Central Bank of Iran’’. Before this Committee you said 

Administration officials were ‘‘looking very actively’’ at sanctioning 

the Central Bank of Iran. Is there a timetable for making a decision regarding the Central Bank of Iran? 

A.2. The Treasury Department remains committed to addressing 

the full range of Iran’s misconduct and increasing the pressure on 

the Iranian leadership and on the CBI. Recent events—including 

the disruption of an Islamic Republic of Iran-Qods Force plot to assassinate the Saudi Arabian ambassador to the United States and 

the November 2011 IAEA’s report on Iran’s nuclear program—coupled with Iran’s continued refusal to meet its international obligations or engage meaningfully and substantively with the United 

States and the broader international community, have only reinforced our conviction that the pressure track of the dual-track policy must continue to be emphasized. We will work with our partners to isolate and freeze the assets of the CBI, and to reduce our 

partners’ imports of Iranian oil. These actions, taken on a coordinated basis, will constrict Iran’s access to the hard currency and 

revenue that it needs to fuel its illicit activities. We will also implement the new law that, in certain circumstances, imposes financial 

sanctions on foreign financial institutions that transact with the 

CBI. 

Regarding recent action Treasury has taken to expose the CBI’s 

role in illicit activity, on November 21, 2011 Treasury identified 

Iran as a jurisdiction of ‘‘primary money laundering concern’’ pursuant to Section 311 of the USA PATRIOT Act. This finding identifies the entire Iranian financial sector for posing an illicit finance 

risk to the global financial system, and includes not only already 

designated banks and their branches operating outside of Iran, but 

also non-designated banks, their foreign affiliates, and the CBI. 

Unlike past jurisdictional 311 actions whereby Treasury explicitly 

exempted central banks from the reach of this regulation, the CBI 

was included in the Section 311 finding on Iran because of the support it provides Iran’s designated banks and entities involved in 

Iran’s proliferation activities. 

Q.3. Last week, the Financial Crimes Enforcement Network 

(FinCEN) issued a final rule to fulfill Section 104(e) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 

2010. Several Members of the Senate Banking Committee and I 

had questions about Treasury’s draft rule to implement section 

104(e), including concerns that not all U.S. financial institutions 

would have to certify that their correspondent banking partners 

were not conducting business with sanctioned Iranian entities. 

How will the rules Treasury issued last week in regard to Section 

104(e) of CISADA work in practice? How many foreign banks do 

you believe are engaged in sanctionable activity? How many information requests to U.S. banks will Treasury issue to get more in-
69 

formation on the foreign banks it has reason to believe are engaged 

in sanctionable activity? 

A.3. The frequency of information requests issued under 104(e) authorities is informed by the availability of information relevant for 

targeting what to request. The application of the final rule is scalable, so Treasury can ask any number of U.S. banks about any 

number of foreign banks as is necessary, based on the number of 

foreign banks there is some basis to suspect may be engaged in activities that may be sanctionable under section 104(c) of CISADA. 

Treasury made its first round of inquiries regarding certain foreign 

banks on the date the rule became effective. 

For most foreign banks, the choice compelled by CISADA has 

been a simple one: the clear majority of foreign financial institutions have been extremely responsive to Treasury outreach, and 

have elected to discontinue their business relationships with sanctioned Iranian banks rather than risk losing their relationships 

with U.S. financial institutions. While I cannot comment on specific 

cases, where activity of concern may still exist, Treasury will continue to vigorously engage jurisdictions where financial institutions 

may be engaged in activity that is sanctionable under CISADA. 

Treasury remains ready and willing to utilize the tools provided by 

CISADA whenever and wherever necessary. 

Q.4. On October 3, Bloomberg Markets magazine ran a story titled, 

‘‘Koch Brother Flout Law Getting Richer with Secret Iran Sales.’’ 

The story unfairly singles out Koch Industries for the business a 

foreign-based, independent subsidiary of Koch Industries legally 

engaged in with Iran. Although not required by U.S. law, Koch Industries voluntarily put into place a more stringent policy for business with Iran more than 4 years ago, prohibiting all trade with 

Iran by any of its subsidiaries. Can you tell me how many other 

U.S. companies have instituted a similar policy? How many U.S. 

companies have foreign-based, independent subsidiaries that currently do business with Iran? 

A.4. We do not have information about the specific number of foreign subsidiaries of U.S. firms that continue to do business with 

Iran, but we believe that they are the exception rather than the 

rule. In recent years, many major American corporations have instituted similar policies prohibiting any business with Iran. 

Q.5. Despite U.S. and international sanctions, Iran continues to enrich uranium. It now possesses enough enriched uranium that 

upon further processing, it could build three nuclear bombs. In 

your view, why have sanctions not stopped Iran from advancing its 

nuclear program? 

A.5. This Administration has attempted to address Iran’s continued 

pursuit of a nuclear program through a dual-track strategy that includes both the offer of a diplomatic solution through negotiations 

and pressure through sanctions. We believe that this dual-track 

strategy is necessary to ensure that any future negotiations are 

constructive and enhance the chance of success. 

One of the most important elements of this approach is a broadbased pressure strategy, which includes targeted financial measures designed both to disrupt Iran’s illicit activity and to protect 

the international financial sector from Iran’s abuse. Our actions 
70 

have focused on key government entities involved in Iran’s illicit 

conduct, including the Atomic Energy Organization of Iran (which 

oversees Iran’s nuclear program) and Aerospace Industries Organization (which oversees Iran’s missile industries); nearly two dozen 

Iranian state-owned banks; the Islamic Revolutionary Guard Corps 

(IRGC) and its external arm, the IRGC-Qods Force; and, Iran’s national maritime carrier, the Islamic Republic of Iran Shipping 

Lines (IRISL), and its affiliates. 

Q.6. What additional steps can the United States and our allies 

take to convince Iran to verifiably end its nuclear program? 

A.6. My colleagues in the Treasury Department and I have aggressively exercised our authorities and worked in close coordination 

with the State Department to implement CISADA as part of our 

dual-track policy of addressing Iran’s efforts to expand its nuclear 

program. All options remain on the table as we continue to explore 

and consider ways to implement the pressure track of our policy. 

RESPONSE TO WRITTEN QUESTIONS OF DAVID W. MILLS 

FROM CHAIRMAN JOHNSON 

Q.1. Why haven’t any countries been designated, and where are 

you generally in the process of assessing the major diversion countries—their export control laws, ports and other transportation 

hubs, and control regimes—in Asia and the Middle East? 

A.1. Under the Comprehensive Iran Sanctions, Accountability, and 

Divestment Act of 2010, the State Department has the lead on designating Destinations of Diversion Concern. The Bureau of Industry and Security (BIS) has requested that State respond to this 

question. 

Q.2. Can you describe the current level of U.S. international cooperation, or lack thereof, with the international community in 

working to ensure that sensitive materials do not end up in Iran? 

A.2. BIS engages with a variety of foreign governments on Iranian 

procurement issues, both directly and as part of multi-agency U.S. 

Government delegations. These engagements have generated significant successes in the fight against illicit Iranian procurement: 

Foreign governments have enacted export control laws, cooperated 

in multi-national investigations, brought foreign prosecutions and 

assisted in U.S. prosecutions, including extraditing suspects to the 

United States. Global cooperation to stymie Iranian procurement 

has never been higher. 

BIS has Export Control Officers (ECO) in six foreign locations— 

Abu Dhabi, Beijing, Singapore, Hong Kong, New Delhi, and Moscow. These ECOs are BIS enforcement agents temporarily assigned 

to the International Trade Administration’s U.S. & Foreign Commercial Service. The principal mission of the ECOs is to ensure 

that U.S. dual-use items (commodities, software, and technology) 

entering their region are used in accordance with U.S. export control laws and regulations. Compliance verification is accomplished 

through targeted end-use checks and by working with the host governments and local businesses to ensure that they understand and 

comply with U.S. export control laws and regulations. ECOs also 

work with host governments and local businesses to provide infor-
71 

mation and appropriate training to facilitate better understanding 

of U.S. dual-use export control requirements, and to help develop 

indigenous export control capabilities. 

Other agencies such as the Department of State also work with 

foreign governments to thwart the export of sensitive items to Iran. 

Q.3. As you work to ensure that goods services or other technologies do not end up in Iran, what do you see as the greatest 

areas of concern? 

A.3. The area of greatest concern continues to be deceptive practices used by Iranian front companies to illegally obtain U.S.-origin 

items. Iran employs a large network of procurement agents that set 

up front companies in various countries. These front companies 

feed U.S. exporters a steady stream of orders with false end-use information causing U.S. companies to ship items destined for Iran 

under the mistaken belief that they are destined for legitimate 

businesses in third countries. Identifying and disrupting these networks is a top BIS priority and we have used a variety of tools to 

attack the problem, including bringing criminal and administrative 

charges, placing front companies and related persons on the BIS 

Entity List and imposing Temporary Denial Orders. 

Q.4. What additional tools or resources do you think would be most 

useful for the Commerce Department as it seeks to enforce 

CISADA and other laws in this area? 

A.4. The Administration’s export control reform initiative envisions 

the eventual creation of a single licensing agency as well as a consolidated enforcement unit that would merge the criminal law functions of BIS’s Export Enforcement and U.S. Immigration and Customs Enforcement’s export enforcement unit into a single entity 

within ICE. In advance of this ultimate goal, however, BIS’s Export 

Enforcement would benefit greatly from permanent, independent 

authorities in four key areas. Currently, we must rely on complex 

arrangements with our sister agencies to conduct investigations 

under their authorities in these areas. These areas are: 

• Overseas investigative authority—The BIS Office of Export Enforcement (OEE) currently conducts overseas investigations 

though a complex arrangement with the Department of Homeland Security. Having permanent, independent overseas investigative authority would reduce the bureaucratic steps OEE 

currently has to take, thereby streamlining the investigative 

process. The additional authority to conduct overseas investigation would not require additional appropriations. Having 

permanent, independent overseas investigative authority 

would remove bureaucratic inefficiencies and allow streamlined 

use of BIS’s current resources. 

• Undercover investigative authority—Undercover authority is a 

sophisticated investigative tool that is used against individuals 

and entities that attempt to evade detection and to do harm to 

United States’ interests. BIS is currently dependent on the 

participation and support of other law enforcement agencies in 

undercover operations and is thus limited by the priorities, resources and availability of those agencies. Providing BIS with 

independent undercover investigative authority would remove 
72 

this impediment. This proposed authority also would not require additional appropriations for BIS. BIS currently has 

agents who have gone through undercover certification training. Other agents could be trained on an as-needed basis utilizing current appropriations. The additional undercover authority would allow OEE agents to participate in undercover 

operations as full law enforcement partners. 

• Forfeiture authority and authority to participate in the Treasury Forfeiture Fund—The independent authority to obtain forfeiture of the fruits and proceeds of export violations and to 

participate in the Treasury Forfeiture Fund would provide BIS 

with the practical ability to attack the underlying economic 

motives for export violations, and deprive violators of the profits of their illegal activities. 

• Wiretapping authority—Wiretap authority would give OEE access to the inner workings of export control conspiracies as 

they are occurring, thereby providing invaluable evidence for a 

prosecutor seeking to prove the elements of a conspiracy, including evidence to present to a jury about the intent of the 

parties. 
73 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD
74